Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 17th April 1967.

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Photo of Mr Ken Lomas Mr Ken Lomas , Huddersfield West 12:00 am, 17th April 1967

I am sure that the whole of the Committee agrees that the maiden speech of the hon. Member for Glasgow, Pollok (Mr. Wright) was not only very well delivered, extremely fluent and very well argued, but contained just the right amount of humour and sincerity, on which all maiden speeches should be modelled.

If the hon. Member went into controversial issues towards the end of his speech, I am, nevertheless, sure that we all look forward to the contributions which he will undoubtedly be able to make at the various stages of this Budget and the Finance Bill and on other occasions. I will leave his comments on the Budget. It is only fair to leave it to Edinburgh to answer some of the accusations made from Glasgow.

But I was very grateful that the hon. Member referred to his predecessor, Alex Garrow, who was well known to all hon. Members on this side and who had many friends on both sides of the Committee. I remember a trip which I once made with Alex Garrow and other hon. Members from both sides of the House to Iceland, in 1965. During that night, incidentally, the Government were defeated three times. I do not know what conclusion we can draw from that. But as we stepped off the plane in Reykjavik, the hon. Member for Peterborough (Sir Harmar Nicholls) remarked, "Thank goodness this is one country that has not nationalised steel". That is quite true. If you have not got it, you can do nothing with it.

That is precisely the moral of the Budget. The lesson perhaps of Pollok, of London and of the other county councils is that no Government can be popular with the people all the time if they are seeking to work on behalf of the nation as a whole and not on behalf of one narrow section. It would be easy to influence votes and friends by having a give-away Budget, such as we had from the Conservative Government on many occasions before elections. In 1964, we rightly started to act as a Government who were responsible and who had their priorities and targets broadly right, although in many instances the Government have been wrong in timing, tactics and content. Broadly however, they were heading in the right direction and, irrespective of seeking popularity they have been intent on pursuing the right course.

As a result, many hon. Members have rightly called the Budget dull, uninteresting and certainly lacking in the high drama of the Budget which we had in 1966. I agree that it was not a great springboard from which the country would jump into the competitive markets of the world, but it must be remembered that this was the only kind of Budget that we had the right to expect at a time when we were emerging from a period of severe restraint and trying to bring about a much more stable economy. Nevertheless, I agree with some of the critics of the Budget. I feel that the Chancellor had the opportunity of pressing down the accelerator a little, putting a little more into the economy and easing a little off the brake. He could have reflated slightly more.

We must, however, be grateful for some of the things which were done. Selective Employment Tax has at least been partially reformed. It is worth while considering—I do not know whether it is possible—whether the classification list that allows manufacturing industries to obtain the premium should be looked at again very closely to try to differentiate between, on the one hand, the manufacturing industries which are the candy-floss industries and which I do not think should have the premium and, on the other hand, the manufacturing industries which are playing a vital rôle in the economy and the export drive. That is one way in which we could be more selective in this form of tax.

As the Chancellor reminded us, as a nation we should be grateful that our balance of payments situation is in a much better state of health than it ever has been before, that in the last few years there has been an improvement of no less than £633 million, that our exports have risen over the last two years by about 14 per cent., that we increased our exports to the United States by 50 per cent. in 1965 and 1966 and that we have managed to restrict the inflow of goods into the country to well below the average rate of increase, to about 3½ per cent.

To survive, we have had to borrow money from the International Monetary Fund, and this has to be paid back. When this point is made by the Opposition, they should recognise that the money which we borrowed was not to pay for debts incurred by this Government, but to pay for debts which the Conservative Government incurred and which resulted in the appalling balance of payments deficit they left us in 1964. A target has been set by the Chancellor of the Exchequer for a steady and sustained growth of 3 per cent. whereby it is hoped that we shall have a gain of £1,000 million a year.

But this can be achieved only if there is a change in our attitudes—a change in the attitude of management in how they produce and where they produce, a change on the part of the workers on the shop floor in what they do and how they do it. Unless we change our present out-dated and out-moded attitudes, we shall get nowhere. We must be prepared to use modern techniques, modern technological "know how" and modern methods. The Luddite mentality which has applied at both management and shop-floor level must go if we are to succeed as a nation in paying our way.

But if we are to change the economy and get it going, and if we want to see movement of labour from one section of the economy to another so that production can increase, we must be prepared to face the consequences of change. This is where I differ in part from some of my hon. Friends when they raise the question of unemployment. No one wants unemployment, but it must be recognised that if we intend to move people from the service industries or the nonproductive industries, by inducement or any other kind of Government persuasion, into manufacturing industries, there must be a redeployment of labour to make the economy stronger. We must have a movement of labour.

For a period of time we are bound to have a degree of temporary unemployment. But when we speak of a tolerable limit of unemployment, this does not mean a hard core of unemployed. What is far more important, we must concentrate not so much on the volume of unemployment at any given time, but on the hard core of the unemployed. This is a problem with which we must deal. If we want change, this is one of the prices which we must be prepared to pay—it is the price of solving our economic problems.

The two lessons which we have learned as a Government—and I hope that right hon. and hon. Gentlemen on the Front Bench recognise it—are that we cannot get out of debt by further borrowing and that we cannot continue to shoulder burdens which will cripple or stunt the growth of the economy. As my hon. Friend the Member for Birmingham, All Saints (Mr. Walden) said, in a very eloquent speech, it is in the question of defence expenditure that the great majority of us on this side of the Committee say, "Enough is more than enough". When we are spending over £2,000 million a year on defence—£65 a second—that is the moment to decide whether we can continue to pose as a great world Power or whether we should not see how we can economise on our defence expenditure, wherever it might be incurred.

The Government have already, during their period of office, sought through their Budgets and their legislation to alleviate the hardship and poverty which existed when we came to power. They have sought to do this and to provide the revenue with which to do it. Sometimes, hon. Members opposite seem to imagine that the Government can manufacture money, that they have simply to ask for it and it can be produced. It has to be obtained from some source, either a growth of wealth or increased taxation.

We have tried to create and redistribute the wealth in our society not only through the Corporation Tax, the Capital Gains Tax and the curb on the expense account "racket", but in terms of social legislation which, as people should recognise, is quite unique in 2½ years. Among the obvious things which come to mind are the Rent Act, rate rebates, the rate support grant, redundancy payments, earnings-related benefits, increased pensions and the like. If the party opposite are constantly demanding more, either in the social services or in defence, we have the right to ask where they would get the money with which to do it. What taxes would they increase, or what is their solution to the economic crisis? It ill becomes many of my hon. Friends on this side constantly to find fault with what has gone wrong—I agree that many things have gone wrong—and to omit all the great progressive legislation that the Government have introduced and the budgetary measures which they have taken to do it with.

Even so, have we done all that we could and should in the Budget to alleviate poverty and hardship? In a Question, a week or so ago, I asked how much it would cost to restore the purchasing power of family allowances. The 8s. family allowance which was introduced in 1952 would have to be increased by 4s. to give the same purchasing power today. The 10s. allowance, introduced in 1956, would have to be increased by 3s. 7d. to have the same purchasing power today.

I believe that my right hon. Friend the Chancellor should have increased the family allowances in his Budget. This was an opportunity which was staring him in the face, at a time when we were to have a continuance of the prices and incomes policy after 30th June, to help to create a prices and incomes policy based on social justice and, at the same time, give him the right to continue to ask for the co-operation of the trade union movement.

We have talked of the lower-paid workers many times in this debate. During the period ahead, the lower-paid worker with three or four dependent children will, quite rightly, demand an increase in his wage rates. I believe that if we could have increased the family allowances in the Budget and put into the pocket of the lower-paid worker with three or four dependent children a further 7s. 6d. to 11s a week, we could have stood a much better chance of getting his co-operation for some kind of wage restraint in the period following 30th June.

We simply cannot let the dam burst and the full flood of wage claims and everything else go bursting through. We must first have a trickle, then a flow and then the flood. This means that the Government must have reserve powers to control the recalcitrant rebels, either in the trade union movement or at management level. When people speak of the voluntary system in 1967, let them remember that the voluntary system means a free-for-all, in which the lower paid worker has in the past suffered the most. The lower-paid worker stands a chance of a fair crack of the whip under a proper prices and incomes policy. I believe, therefore, that fringe benefits would have been one of the ways in which, in the Budget, the Government could have helped to create the climate for the correct kind of prices and incomes policy.

It must be recognised that as a country we are spending more on cash social security benefits than at any other time in the history of Britain. Some 7·6 per cent. of the gross national product is devoted to cash social security benefits. When the hon. Lady the Member for Finchley (Mrs. Thatcher), from the Opposition Front Bench, drew attention to this today, she should have borne in mind that on 10th April, in a Written Answer, I was informed that the amount of the gross national product which is devoted to cash social security benefits is today 7·6 per cent. and that in 1955 it was only 5·5 per cent. In 1964, it was only 6·8 per cent. In other words, in contrast to what the hon. Lady said this afternoon, we have continued to increase the percentage.

Equally, if we take social security benefits as a percentage of average weekly earnings for every year from 1955 onwards, we find that in every single instance the percentage of social security benefit to the average wage is higher today than ever before. This is a clear recognition that the Government are seeking to alleviate hardship and poverty and to create some kind of social justice.

Thus, the dilemma of the Labour Government and of my right hon. Friend the Chancellor of the Exchequer was the simple one of how to put right the neglect of the past and to find the money with which to do it. If we want more roads, schools and hospitals, as we say we do, we have to find the money from somewhere to pay for them. I have no greater wish than anyone else to have increased taxation on individuals, but I recognise the overriding necessity for these measures so that we can do all the things that we want to do in the future.

Surely, the only way is to work together and try to increase our production by using all the modern methods which are at our command. If I might end with another nautical peroration, it is that we are all in this as one nation. We sink or we swim together. We either go under—and that would be the end of Britain as a competing nation—or we work together, management, unions, workers and the Government, to try to create a society of which we can all be proud, a society based on social justice and on which we can build for the future something better and fairer than we have had in the past.