Amendment of the Law

Part of the debate – in the House of Commons at 12:00 am on 3rd May 1966.

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Photo of Mr Edward Heath Mr Edward Heath , Bexley 12:00 am, 3rd May 1966

Undoubtedly one of the most pleasant and agreeable tasks which fall to the Leader of the Opposition is the opportunity of being the, first to congratulate the Chancellor on his Budget Statement. However ardent we may be in the cause of Parliamentary reform, I hope that nobody will ever alter this very acceptable tradition. Today I can congratulate the Chancellor on the way in which he has delivered his statement, and I congratulate him from this side of the Committee with great sincerity.

He has delivered his statement with immense lucidity and also with a considerable degree of brevity compared with some of those to which we have listened in the past. For both those things we thank him and congratulate him. He has also shown great courtesy to the Committee in the detail with which he explained some of his proposals and the fact that he immediately laid a White Paper on probably the most novel, proposal he put before us today. That we also appreciate. I should like, of course, without committing myself to the contents of his speech—the Prime Minister was always very careful about that when speaking from my place—nevertheless to offer the thanks of the Committee for the way in which he made the statement.

He has demonstrated his antipathy towards Siamese twins in a form that has probably not come to the notice of many of us before. Whether the Budget will be known as the "Siamese Twins Budget" or the "White Handkerchief Budget" remains to be seen. On that the Press will judge. In the early days the signalling was done by a Whip sitting on the Front Bench. Perhaps a return to that tradition might avoid the embarrass ment we have had today. In commenting on the speech, may I also express our warm welcome to the First Secretary of State and Secretary of State for Economic Affairs on his return in good health to the Front Bench? Let us say quite frankly that when he is absent from the Front Bench something is missing.

I propose this afternoon only to make a few brief remarks about the statement to which we have just listened. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) will be speaking tomorrow and commenting upon it in more detail. I was greatly interested in the Triple Objective of the Chancellor to which he gave a great deal of emphasis. He repeated this several times—a strong pound, a movement towards industrial strength, and full employment. It is noticeable that he missed out from his objective the maintenance of stable prices. This presumably was a quite deliberate decision by the Chancellor of the Exchequer. It is a very interesting and important decision to choose those three objectives rather than the objective of the maintenance of stable prices. Looking at his statement as a whole, my first reaction today is that he proposes to achieve these objectives, first, by restraint overseas, albeit as he indicated, voluntary restraint at the moment in the sterling area; secondly, by putting additional burdens on industry, both manufacturing and distributive, at home; and thirdly, by relying on action from all citizens through the prices and incomes policy.

Those seem to be the three ways in which he is trying to achieve his objectives. The question is whether these methods can be successful and whether they are the right methods to be using. We were grateful to him for explaining the proposals of a minor kind which he is putting forward. I was very interested when he used the phrase that he was going to complete the Capital Gains Tax and Corporation Tax. It is obvious from what he said that he proposes to issue a yet further batch of Amendments to the Bill we considered at this time last year. No doubt the Prime Minister will say, "More tomfoolery".

There were other minor things which we welcome. Of course, we welcome any proposals to try to increase National Savings. We were delighted to hear that the last issue is being successful, and further steps forward are welcome. Compared with the Chancellor's problem, they are comparatively small. There is one which arises from them, on which perhaps the Chief Secretary will be able to comment later, and that is that the more successful these new certificates and developments are the more difficult it will be for the building societies to resist raising their rates for investment for savings themselves. Therefore, this will have an effect on mortgages and on the financial consequences of the Government's Bill. It may be that the Chief Secretary can help the Committee on that.

Perhaps the Chancellor's speech was comparatively short because he gave very little by way of an economic assessment. He perhaps left the Committee to rely on the papers which have already been published. I should be rather inclined to doubt the belief that there is now going to be a check in demand, for the reason that I see very little check in the degree of wage increases being granted. This means that the pressure of demand, so far as I can see, is likely to remain very heavy and will be working against the Chancellor's other purposes. I noticed that, from the point of view of achieving the balance of payments, when he was dealing with the economic assessment he said that his objective is to see that there is a trend towards improvement. This is a very considerable movement away from his first objective, which was to have complete balance in 1966. His second objective was to be at a rate of balance by the end of 1966, and the objective now appears to be that there should be a trend towards a balance in 1966. It remains to be seen how successful this is in the view of the Government's creditors and of opinion overseas.

The Chancellor concluded that it was necessary to take further action to strengthen the balance of payments. He made the very interesting and important point that he was not prepared to have unemployment at home in order to have investment or expenditure overseas. He promptly went on to say that the demand on home resources is too great and must be reduced. He therefore wants to reduce demand at home which runs the risk of unemployment unless there are countervailing exports and sales over- seas. Could we not abandon this automatic reflex action, that if any proposal is made for dealing with demand at home automatically people are in favour of large-scale unemployment? It just is not true. On the other hand, it puts us entirely in a straitjacket from the point of view of developing economic policy if we produce an automatic reflex action that any proposal means unemployment at home and is unacceptable. Certainly there must be unemployment which arises in a transitional way, as the Minister of Labour said in his speech on the Address.

We come to the action which the Chancellor of the Exchequer proposes so far as the sterling area is concerned. What he is really saying is that he is prepared to tolerate stagnation at home and, as a result of it, to reduce investment overseas. He is hoping to reduce investment in the sterling area considerably. In fact, as I understand it, he is making the conditions and terms of investment in the sterling area the same as they are at the moment outside the sterling area, but by voluntary means. This means that the sterling area will have no preference over the rest of the world. Is not this an important step to take? Is it not going to raise in the minds of other countries the question, "What is the purpose of belonging to the sterling area if there is no preference to be gained by countries overseas?"

I put these questions in an interrogatory form because they are important and should be considered. Has the right hon. Gentleman had assurances about sterling balances which are kept in this country, on the present form of the sterling area? Obviously, all this has to be taken into the balance of a voluntary action which is a major step for the Chancellor to take. The developing countries have already been affected by the action that we took in the last Budget and, as he knows, investment in countries overseas has fallen to a low level; this includes Commonwealth countries as well as other countries overseas. Now we are withdrawing from overseas because we have stagnation at home, and that is the plain fact of the matter.

I welcome the Chancellor's announcement that he will pay back on half of the I.M.F. loans falling due in 1967. In his speech on 7th March in the House, he put in the qualifying parenthesis that they would be repaid providing no other arrangements were made.