Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 20th March 1968.

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Photo of Mr Harold Lever Mr Harold Lever , Manchester Cheetham 12:00 am, 20th March 1968

I do not see the immediate relevance or value of that interruption, but I am very happy that my hon. Friend should at least have voiced the thoughts that were immediately in his mind.

I might have been more impressed by the Opposition's demand for cuts in expenditure in a general way were it not for the fact that we have been constantly plagued by them for additions to expenditure in particular ways, notably on defence and other similar subjects.

One general criticism made by the right hon. Member for Enfield, West ought to be answered. He said that public expenditure had run ahead too fast because its expansion had been related to targets for economic growth which had not been achieved. I think that there is some justice in that assertion, but I remind the House that it is the Government's clear intention to reverse that situation—that is, to achieve an economic growth which will be larger than the targets for public expenditure. This is a firm pledge by the Government.

I hope that the right hon. Member for Enfield, West will not think me surly when I say that he does not altogether encourage his old admirers. I read almost everything the right hon. Gentleman writes and not a little of what he says. It is a little unfair, when he is opening his criticism of the Budget, that his speech should consist largely of a compendium of speeches I have already considered. Either I shall be obliged to discontinue my rôle as a devoted reader of his efforts in the Press or discontinue my attendance as a devoted audience in the House of Commons.

The right hon. Gentleman hesitated a criticism of the global sum involved in the Budget, suggesting that there might be an elment of over-kill in it. The House must be clear about this. This is a crucial time for this country, and the Budget decision is crucial in relation to that time. Economics in Government management are not an exact science, and, whichever party has the privilege of conducting our affairs, there is no means by which one can hit a target with precision and exactitude. In a crucial situation such as this, no risks could be taken. If we have erred, we admit that we have erred on the side of caution. But, whereas if one errs on the side of incaution, it is too late to correct that incaution because one is overtaken by a financial crisis, if one errs on the side of caution there are ample monetary and other instruments at the disposal of the Government to put matters right in good time.

The hon. Member for Horsham (Mr. Hordern) suggested that the growth rate of 3 per cent. announced by the Chancellor in some way evidences the diktat of the international monetary authorities because, before it had been issued, he says, we had predicted a 4 per cent. growth rate. The 3 per cent. growth rate is a minimum, a cautious minimum, and there is no reason whatever, if our export trade expands, why we should not have a growth rate faster than 3 per cent., and up to 4 per cent.

I emphasise—this has, apparently, not been clear to all hon. Members opposite or to some of my hon. Friends—that it is not a deflationary Budget. This is a Budget related to an expansion of production, not a deflationary Budget related to either a setting back or a halting of production. The difference between this Budget, in relation to the growth we expect to achieve, and other Budgets is precisely that, this time, we are taking no chances and we shall ensure that the growth which will take place of at least 3 per cert. will take place iron-clad in the export area so as to keep our balance of payments in order. That is the reason for these severe measures. They are not severe with a view to retarding production or retarding growth. They are severe in order to ensure that the growth occurs consistently with a successful balance of payments.

I turn now to my second question. Are the means for raising the global sum fair and reasonable? Here I do not want to descend to details because many of the questions asked will be better considered when the Finance Bill has been published. It would be a waste of the time of the House to argue details of taxes not yet fully stated in statutory form and in respect of which the precise interpretation in legislation will be available for discussion. [HON. MEMBERS: "We have to vote on them."] The general nature of the taxes is indicated sufficiently in the Resolutions. [HON. MEMBERS: "No."] Do hon. Members want me to engage in long and tedious detail? [HON. MEMBERS: "Yes."] Apparently, there are some hon. Members—a minority—who are anxious to hear me in tedious detail. I can arrange that they will be suitably rewarded, but not until I have dealt with the major points in my speech.

For my part, I do not mind going on record as saying that far the most important feature in a Budget is the global sum being raised. The details of how it is raised are a matter for the ingenuity of constituency orators on the back benches and for the tormented Treasury officials who have to make some response to that oratory. But on the whole, if one starts with a system which is tolerably fair and reasonable, any additions to or subtractions from the global sum of taxation are not a fundamental matter.

There are dozens of ways of raising taxation, all of them unsatisfactory. One thing to be said for the particular form of oratory favoured in Budget debates in criticising the taxes proposed is that there is a veritable encyclopaedia of classical allusions along the same line to almost every kind of tax one can think of. It is said that the whisky tax ruins the Scotch whisky industry, that Income Tax destroys incentives, and so we can go on right through the list of taxes. Unhappily, there is no comparable encyclopaedia for constructive suggestions for tax.

All I can say is that this year there has been no serious challenge to the means for raising revenue. We have not seen any real challenge to the main items in the Finance Bill raising the revenue. Surprisingly, we have heard nothing in criticism of the special charge. No doubt when we come to the minutiae of that interesting innovation we shall hear more after the Finance Bill is published. I see that hon. Members have anticipated the advice I have given, at any rate in respect of that charge. There has been no criticism of the Purchase Tax increases and no criticism of the dividend limitation policy, which in itself is a means of curbing demand to make room for exports. There has been no criticism of my right hon. Friend's decision to add not a penny, even at this hour of difficulty, to any tax on anybody's earnings.

There has been a certain amount of critcism of the S.E.T. Unfortunately, this criticism has not been accompanied by any suggestion for an alternative means of raising tax. [Interruption.] It is all right saying "Come off it", but the fact remains that it is the easiest thing in the world to dismiss the tax in a sweeping phrase. I accept that it has many anomalies, but, unhappily, so have most taxes. It may have more than others—[HON. MEMBERS: "Hear, hear."]—but criticisms would be far more valuable if they were accompanied by reasonable suggestions as to how we raise the £500 million that would be needed if it were abolished.