Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 4 May 1966.

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Photo of Mr Hugh Fraser Mr Hugh Fraser , Stafford and Stone 12:00, 4 May 1966

I sincerely congratulate the hon. Member for Aberdeen, South (Mr. Dewar) who, in his maiden speech, threw to the winds many of our conventions about being non-controversial. He did it with great success, and attacked equally my hon. Friends and myself and some of his right hon. Friends. I hope that we shall hear him on many occasions making as good a speech as he made this afternoon.

But he does not seem to be aware that some hon. Members on this side have advocated a payroll tax for several years. The burden of my speech this afternoon is that the conversion of hon. and right hon. Gentlemen opposite is late and rather ineffective. It is as though one had been teaching the pure gospel only to find that the first convert one made immediately lapsed into heresy. That is precisely what the Government have done. This is not a pay-roll tax in the proper sense of the word. It is a discriminatory poll tax, and has all the weaknesses of that form of taxation.

Many of the main points have already been made, but I want to make a few concerning the Budget in general and this tax in particular. Hon. Members must admit that there is absolutely no sense of urgency about the Budget in terms of the problems which face us today. Those problems remain. Listening to the Chancellor yesterday and the long speech from the First Secretary this afternoon, one could find no proper sense of urgency in facing the problems which still exist. The Chancellor of the Exchequer has done some juggling with the import flow by abandoning the surcharge.

The first payments under the new type of payroll tax will be a forced loan from a section of industry for the first few months, and what emerges quite clearly is that the Chancellor is pretending that the long-term effort will have swift results in terms of the deployment of labour. As the hon. Member for Aberdeen, South said, however, its effects will be slow, especially in the service industries, where people are very much more entrenched and will take time to move.

Secondly, there is the fact, which is not admitted by hon. Members opposite, that this tax will immediately increase costs and prices in those service industries which are concerned with our invisibles, such as the hotel industry, tourism, insurance, storage and export agencies. Costs in all these industries will immediately rise. Much more important, I suggest, as the right hon. Member for Orkney and Shetland (Mr. Grimond) suggested, is that a great opportunity has been missed by not making this an effective payroll tax. The first objective of such a tax is to ensure the movement of labour, but the second objective must be to see that there is a proper shift in order to make industry more labour-saving and capital-intensive. The third objective must be to use this tax as an instrument to simplify, by regional variation, all the masses of controls, regulations and contortions of the economy into which the Government have got themselves in trying to deal with regional problems.

The opportunity to achieve the last two objectives has been totally thrown away. There has been no effort to use the tax as a regional weapon. Indeed, as the right hon. Member for Orkney and Shetland has shown, this will lead to a positive depopulation, or the threat of depopulation, in certain areas.

As for building up labour-saving and capital-intensive industries, the Government have done precisely the wrong thing. The right thing would have been to put the burden of this tax on manfacturing industry at least to a higher degree than it is on services. It is a good thing that banks and insurance companies should use more computers. There should be some labour saving there. If we could devise schemes for making machines to cut our hair more effectively and at a greater speed, that would be very good, but there can be no saving in the hotel and hairdressing industries. The possibility of making a saving and of providing a new chance for investment where there is a need for investment is in the manufacturing industry. Investment there would be given a real boost if the people in it were also taxed on their over-use of labour. The whole thing is utterly upside down—