I welcome the Budget, partly because elsewhere some time ago, the Chancellor invited some of his hon. Friends to offer him suggestions in a democratic exercise. In opening the discussions, I made certain suggestions, many of which are in the Budget, which I, as a new Member, find very gratifying. The only difference which we appear to have had is that I suggested the very unpopular course of raising the standard rate of Income Tax on earned income by 3d. and on unearned income by 4d. He has preferred other routes, including an increase in S.E.T. In this course, I believe—I. hope that I do not provoke hon. Members too much—that he was right and I was wrong.
In assessing the present Government's record, any reasonable politician on the other side would concede, I think, that this. Government have had more bad luck than any other in British history, at any rate in this century. One should remember that some people tried last week to imagine whether anything else could possibly happen and concluded that we had exhausted our misfortunes, yet this was followed by the international monetary crisis over the weekend. We have survived the weekend very well. Certain decisions were taken of which I do not wholly approve, but which suggest a modest compromise.
Senator Kennedy might have reflected on this crisis, particularly as it affected the United States, in making his bid for the Democratic nomination. I recall reading about the Democratic nomination of 1896, when an equally good-looking,
equally young aspirant to the nomination, a politician called Bryan, thought of a way to clinch it for himself. His speech then became known as the "cross of gold" speech, when he said:
You shall not press down on the brow of labour this crown of thorns. You shall not cruify mankind on a cross of gold.
Rather than entering the lists for the nomination by using Vietnam and other agonising problems for the United States Government, if Senator Kennedy had said that he would eliminate gold from the United States consideration of future international monetary reform, he might have made sure of winning the nomination easily. He might also have reflected that if he won the nomination and followed Bryan he would lose the election.
I welcome the Budget because it is realistic, although it is bound to have a political backlash. The Chancellor has taken an enormous amount in extra taxation. Whether or not the total is right and he has achieved the right balance between direct and indirect taxation I do not know and only the future will tell. It is ironical, however, that the greatest criticism is likely to come about the extra taxes imposed on the motorist. Of all the status symbols possessed by the average working man, the motor car is probably his greatest, perhaps ranking even higher than his house. Nor will I comment on the incomes policy because I still remain implacably opposed to it, for reasons I have expressed in the House previously.
While I do not wish to lecture the House, the remarks of the hon. Member for Manchester, Withington (Sir R. Cary) call to mind the fashions that have existed in economics over the years. The key to our economic salvation has had more discussion than most other subjects. We start with league tables representing the relationship between investment and gross national product. That fashion was followed by the passion of some people for economies of scale related to the Common Market. Becoming even more fashionable, one might consider the Philips curve and its relationship to unemployment and the economy, and then move on to the ultimate, Paishism, with which the Prime Minister flirted some time ago.
We were told by many people that incomes policy was the only answer to cost inflation, but recently we have discovered that the great problem which we must overcome to become a viable economy is that of personal consumption. Our personal consumption, as a percentage of the G.N.P., exceeds that of all other industrial countries, we are told, but most students of O-level economics have known that for some time. At this stage in our economic destiny this appears to be the nigger in the woodpile.
Hon. Members have not stressed the fact—probably because this is not a vote-catcher—that if one wants to solve one's problems by suppressing consumption, it is easier to suppress public than private consumption. We have, therefore, shifted to the point made in the closing remarks of the hon. Member for Withington; his suggestion that we will not solve our problems until the Government put such a reign on public expenditure that, as a proportion of the G.N.P., it is substantially decreased. A more sophisticated version of this theory of public expenditure as the root of our misfortunes has been provided by a new architect of economic policies on the benches opposite—the right hon. Member for Streatham (Mr. Sandys), who is sometimes referred to as the shadow Leader of the Opposition. Speaking last weekend, he went a stage further. I agree that he was reflecting the doctrine of certain other more prominent right hon. Gentlemen opposite. He said that unless any Government can finance their public expenditure either through tax revenues or borrowing in the market they are on the road to disaster.
There may be something in this. It is a doctrine made fashionable by a well-known Frence politician, M. Rueff. He talked about l'impasse, about this hiatus between expenditure and revenue which led to the necessity for borrowing from the banking system. In this country financial journalists have coined a highly technical phrase for this means of finance to which Governments are occasionally driven. They call it "funny money", not real money or market borrowing, but the sort of borrowing of a last resort which comes in some mysterious way through the money-creating powers of the commercial banking system.
I would concede that a Government must keep their eye on this particular problem because, if they do not, it is quite possible that the creation of this funny money may have serious consequences for another aspect of policy to which the Chancellor referred when he spoke of credit control. We must keep this in mind because it is the failure of the Government to evolve adequate and effective fiscal and monetary policies containing our use of resources within the supply of resources available that has led us to two defeats. One was the need to resort to incomes policy and the other the need to resort to devaluation.
I do not want at this time of night to get involved in technicalities, but I think it undoubtedly true that this Government have tended to follow the doctrine and the policy of hon. Members opposite when they were the Government because, if any part erected Keynesian deficit finance into a way of life when it was intended to be only a temporary expedient to overcome periods of acute unemployment, it was the party of hon. Members opposite. Continuously they added year after year to the National Debt in this way. Now they point an accusing finger at my right hon. Friends, but truth is truth and one must concede it.
We are getting to a stage in which if we are not very careful we shall make the operation of monetary policy difficult. In an article in the October Lloyd's Bank Review, Professor Cramp, after exhaustive investigation of this problem, came to the conclusion that if we have these very large deficits the power of the banking system over the supply of money is very limited indeed. There are other aspects of this problem which if I had time I would discuss. If hon. Members opposite had had the measure of political integrity with which I have always credited them, one of the things they would have done almost immediately through the voice of the Leader of the Opposition would have been to congratulate the Chancellor on achieving what in fact they had asked him to do.
The most important achievement of this Budget, without any doubt, is that what we used to call in the halcyon days before today "the net borrowing requirement" has been cut from well over £1,000 million to £358 million; and if it is not possible for the Chancellor of the Exchequer to find £358 million through the issue of short- or long-term marketable securities then I shall be very surprised indeed. He will certainly do that without having to have recourse to the sterling counterpart of the funds that come from abroad by borrowing or a reduction in reserves which have been a source of so much financial support for Governments in the past. That is the main point I want to make. But the Chancellor of the Exchequer has done what I am sure hon. Gentlemen opposite felt it was quite beyond his capability to do. He has reduced this net borrowing requirement, not only through reducing expenditure, as I would concede, but through raising taxes to such a degree that the finances of this country will be under much greater control in the future than they have been in the past.
In my final point I come back to the general situation. This has been a hard Budget. Without any doubt there will be criticism. Our great problem is whether or not we have the time to show the British people that this policy is going to pay off. If the Chancellor of the Exchequer has to say as General de Gaulle said of the devaluation of 1958 and 1959: "La verite c'est la séverité", let us hope that our devaluation and our fiscal and monetary policies will prove to be as successful for this country as they were for France.