Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 21st March 1968.

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Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames 12:00 am, 21st March 1968

No doubt the sudden and unhappily unexpected resumption of his seat by the hon. Member for Ashfield (Mr. Marquand) results from his sudden reflection that, to use transatlantic phraseology, he has said a mouthful. He has admitted what so many of my right hon. and hon. Friends have often suspected but which his more cagey right hon. Friends have always been concerned to deny.

He said that the purpose of his speech was to engage in a private war with some of his hon. Friends. I would not, therefore, wish to be so tactless as to intrude upon it. I hope that I shall not do the hon. Gentleman any undue harm if I say that I thought that he made an infinitely better defence of the Government's policies than was even attempted by the Secretary of State for Economic Affairs when he opened the debate. If I may say so, that is what those of us who know the hon. Gentleman's very distinguished father would expect.

The speech of the Secretary of State was a shambles. I leave aside his complete ignoring of the conventions of this House and in particular the convention that a Minister speaking from the Dispatch Box, unless he is right up against the time of 10 o'clock, gives way to the right hon. Gentleman sitting opposite. That is a convention which the right hon. Gentleman plainly flouted, and that useful convention could never have been more useful than on this occasion, because, if I understand it aright, we are to have no reply tonight from the Government.

I am not the right hon. Gentleman's most sedulous admirer, but not even his Parliamentary Private Secretary could pretend that he left a position of clarity about the Government's intentions. What he did was to tell us that the Government will intervene and take statutory powers of a far-reaching nature concerned with prices, wages, salaries and rents. Having done that, he left the matter without giving any practical answers to any of the questions which have been put or, as I understand it, will be put in the course of this debate.

That is not merely a matter of treating the House of Commons badly, though it is so. Much more important, it is treating the country badly, because, although the right hon. Gentleman in his ivory tower may not appreciate it, ordinary people on both sides of industry have to get on with their jobs during the next few days. All over the country, sometimes between one or two individuals, sometimes at plant level and sometimes at national level, agreements have to be made. They cannot just be put aside simply because the Secretary of State for Economic Affairs is a Parliamentary incompetent. People have to proceed and, as a result of his shambles of a speech, we are left with all sorts of questions unanswered which, inevitably, will remain unanswered for some days. It is clear that, in the language of mariners, the Department of Economic Affairs is on a lee shore, but I did not realise that it had drifted so far.

Let me put one practical question to the Government which at least the Parliamentary Secretary to the Ministry of Labour will understand. Will an agreement made in the next few days in good faith between a trade union and an employer be one that can be carried out? Or will the Department, if it goes beyond the 3½ per cent., or whatever other criterion the Department wishes to bring forward, intervene to stop it? What is the position of agreements already made? For example, what is the position of an agreement made lawfully and in good faith last week for a 4 or 5 per cent. increase? Can the employer pay it?

The position is made worse by the fact that the Secretary of State—I took down his words—said that this policy is now in operation. It is all the more lamentable and unpardonable that a policy now in operation is apparently not to be explained to the House of Commons or to the country. People are supposed to conduct their affairs in accordance with the policy now in operation, but no one in any quarter of the House can believe that the guidance given a few moments ago by the Secretary of State will be of the slightest help. This is an intolerable' position. I must press the Parliamentary Secretary, who understands these matters, that some guidance be given today in some way or other to those in industry who have negotiated or are negotiating agreements. This is essential.

I should like now to make a criticism which seems to emerge from what I understood the right hon. Gentleman to say about the treatment of rents under this new policy. First, local authority rents. It is well known to the House that many of the new majority parties that have taken over in a great many local authorities, as the result of recent local government elections, have inherited very large and growing deficits on their housing accounts. They have sought, therefore, both responsibly and in accordance with, I think, paragraph 41 of the White Paper issued by the Ministry of Housing and Local Government, to adjust that situation. What are they to do now? Are they to halt those increases because they will be threatened with some form of phasing resulting in the reduction of rents already being paid?

If the Government intervene, with the inevitable consequence, where there is a growing deficit on a housing account, of throwing a substantial additional burden on the rates, will they come to the rescue of those local authorities with an additional rate support grant? Otherwise the Government are pursuing their own policy at the expense of ratepayers who, as a matter of definition, have at recent elections decided in exactly the opposite sense. These are questions which must be answered.

Turning to the sphere of private rents, I must formally declare an interest. As I think the House knows, I am a director of a property company. We have a system of regulation of rents and the assessment of fair rents. I understand that the process will be that all that will go on and, when a fair rent has been determined, someone from the Department of Economic Affairs will decide over and above that how, when and by what stages that is to come into operation. I suggest that will cause the greatest confusion in this sphere. The Government's existing system for fixing rents is now to be interfered with in its operation by further governmental action.

The House will recall that many of the people to whom these rents are paid are not property companies. There are a vast number of people with one or two houses—they are the majority of landlords—who depend for their living upon their rents. Many are widows. We are now told that when a rent officer or Rent Assessment Committee, set up to apply the Government's own criteria in the Rent Act, has assessed what is said to be a fair rent, the landlord, dependent on that rent for his livelihood, is to be told, "You cannot have it, or most of it, for quite a time." This is to be done regardless of the relative means of the tenant and the landlord. This kind of clumsy policy, which would be bad enough if it had been properly and clearly explained, puts everybody again in an intolerable position when we have it dealt with in the way in which the Secretary of State saw fit to deal with it.

Therefore, since we are to be told nothing by the Government, since we have had no explanation and are to have no answer, I turn to the Budget. Whatever complaints one may have about it, no one could conceivably complain about the clarity, the force or the grace of the Chancellor's very long exposition of his financial proposals on Tuesday. These at least we can debate and argue about with a full knowledge.

The Secretary of State for Economic Affairs made one extraordinary reference to public expenditure. He said there would be a slight increase in public expenditure. As, on Monday night, the Chief Secretary to the Treasury told the House that the Estimates for 1968–69, after certain adjustments to make them comparable, were going to be up 10 per cent. compared with 1967–68, the use of the word "slight" by the Secretary of State bears a rather odd connotation. I wonder whether someone could tell me what the Secretary of State would regard as a moderate or, indeed, a substantial increase in public expenditure if 10 per cent. is slight?

On this point of the Budget judgment I should like to make a comment. I take first, what the Chancellor said on Tuesday: For this purpose we must check the growth of public expenditure and private consumption which were the main expansionary forces last year, and release the resources necessary to sustain as large an increase in exports and industrial investment as possible."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 259.] I ask the House to note that the right hon. Gentleman bracketed together, as matters which should be restrained, public expenditure and private consumption. He has told us—and I have no reason to doubt his figures—that the effect of his measures on private consumption will be to reduce it by 1 per cent. below the present level or by 2 per cent. below the level it would otherwise have attained. On the other hand, we have heard from the Chief Secretary that the other matter which the Chancellor bracketed with private consumption—public expenditure—is estimated to rise by no less than 10 per cent. in money or 61 per cent. in real terms. It is a curious bracketing of two matters to allow one to rise by 10 per cent. and to reduce the other overall by 2 per cent.

This leads to the criticism I make about the whole basis of the Budget. We know, because the figure has been repeated over and over again, that the Chancellor seeks to take out of consumption in a full year £923 million. The Chief Secretary's figures on Monday night on the other hand, showed that estimated expenditure on estimates would rise by £1,017 million. The figures are of the same order of magnitude. But the increase in the Estimates is somewhat the larger.

Those figures must surely mean that the great increases in taxation now being imposed on our fellow citizens would not have had to be imposed in anything like so sharp a degree if the Government had exercised even a reasonable measure of restraint on public expenditure. It must be clear that if the Chancellor had been faced with an increase in public expenditure of half that with which he was faced, he would not have found it necessary to introduce increases in taxation of the order of those which he has put forward.

Therefore, it is important that the House and people outside should realise that these heavy imposts are not necessitated solely by an economic crisis, by whoever caused, and they are not the inevitable result of world economic disturbances or a flurry in the gold market; they are in substantial measure the bill which has to be paid for the Government's failure to restrain their own expenditure. It is important that this should be realised, and that we should not pass too easily into talking about whether the Chancellor has indulged in an overkill or not, without at the same time having in mind that the whole basis of the figures on which the Chancellor had to operate involved taking into account, as the Chancellor undoubtedly did, the large increase in public expenditure which has resulted from the Government's policy.

The public will take these increases the more sourly because they are so contrary to what we were promised. I shall not weary the House by repeating the oft-quoted statement of the Prime Minister about no general increase in the levels of taxation, but I remind the House of what the Chancellor said in his book "Labour's Case" a few years ago in Chapter VIII: The commitments of the Labour Party's policy,"— and I ask the hon. Member for Ashton-under-Lyne (Mr. Sheldon) to listen to this— provided they are not all pushed through in the first year, which nobody has ever suggested—can be carried out comfortably without any question of an increase in the tax burden. On the contrary, they should leave room for substantial tax reductions. That is the published statement of a leader of the party opposite, and therefore the public have the right to resent it intensely when the largest increase in taxation in time of peace, and the rise of the Estimates to the highest level they have ever known in time of peace, takes place under a Labour Government, under a Government who made promises and gave assurances of that kind. Even assuming that increases of this sort, or of some sort, had to be made, I think that they have been made with extraordinary ineptitude.

Perhaps I might now deal with the collection of imposts which will increase transport costs—on petrol, vehicle licences, and by way of Purchase Tax, all operate on the most sensitive part of the cost structure of industry, all operate to increase the cost of moving components to the final assembly line and the final assembled article to the ports for export. What is the use of the Secretary of State for Economic Affairs saying that he will control prices, that if prices rise too high he will use the power of the law to bring them down, when it is the Government themselves, through these tax increases, who are deliberately inflating the costs of British industry, and taking away at any rate some part of the competitive advantage which was the one gain from devaluation. It is extraordinarily inept to operate in a way which produces so substantial an increase in transport costs.

I come, now, to discuss the effect on invisible exports of the swingeing increase in the S.E.T. Yesterday the President of the Board of Trade praised, and rightly so, these activities which produced £3,000 million of invisible exports. He said that invisible exports, unlike visible ones, turned out last year with a balance on the right side. These activities include banking, insurance, shipbroking, and merchanting, and every one of these activities is caught by the full blast of S.E.T., at a rate of 37s. 6d. for a man. What use is it appealing to these activities to be competitive when the Government want only add to their costs by this large increase in this crazy tax? It is of the nature of the tax that it discriminates, and does so strongly, against those activities which earn us these invisible exports which the President of the Board of Trade went out of his way to praise.

I have one or two questions to ask about the proposal to aggregate the income of children under 21 with that of their parents. How far is this to go? Is it, for example, to cover a child who is living away from his parents, though he is under 21? Is it to apply to a child under 21 who is married? If it is, will it apply also on the ordinary principle of taxation to bring in the earnings of the child's wife? I hope that I shall receive answers to those questions. One reason why minors under 21 sometimes have substantial investment incomes is that they have received awards from the courts in respect of serious, and sometimes terrible, injuries. The classic case at the moment is that of the thalidomide babies who, as a result of a recent settlement, have received, I think, about £40,000, which, curiously enough, invested at present would produce about £3,000 a year income. Is income from such damages, properly invested, to be aggregated with the parents' income? If a child receives heavy damages because of personal injury, will this mean that his parents Income Tax will be increased?