Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 15 April 1970.

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Photo of Mr Anthony Grant Mr Anthony Grant , Harrow Central 12:00, 15 April 1970

Those of us who have taken part in Finance Committees in previous years have come to respect the robust independence of the hon. Member for Lewisham, West (Mr. Dickens) and to enjoy his contributions without necessarily agreeing with a single, solitary word. On this occasion, I agree with him in certain respects. I entirely agree with him in his condemnation of the bitter price that the people of this country have had to pay for the balance of payments surplus which we now enjoy. I also agree with him in condemnation of the Budget for not tackling real areas of poverty. As an enthusiastic member of the Wider Share Ownership Council, I agree with him in being against the concentrations of wealth which already exist. I am an egalitarian in wishing to see the greater spread of wealth, but I suspect that where he and I part company is that I maintain that the greatest and most undesirable concentration of wealth lies in the hands of the Government itself; that is what I wish to see spread among people throughout the community; whereas I suspect that the hon. Gentleman, with the greatest will in the world, is driving at the end product of having all wealth concentrated in the Government and doled out into a great egalitarian society, and this fills me with the utmost depression.

There is one other matter on which I agree wholeheartedly with the hon. Member for Lewisham, West, and that is in offering the congratulations of this side of the House to my hon. Friend the Member for Bridgwater (Mr. Tom King) on his splendid speech. It was delivered with great wit, with a brevity which is a model to the Chancellor of the Exchequer, and in a most friendly manner, which recalled in moving terms his predecessor, of whom I was very fond, and whom we all greatly miss. I know that my hon. Friend will have a long and happy career in this House, as long as Bridgwater wants him, and will also make many friends here, as I have. I wish him every success.

Before coming to the main part of my speech, may I refer to Budget Resolution 19,"Estate duty (discretionary trusts)". It is the only Resolution which was not mentioned in the Budget speech, and a number of professional people engaged in this activity have represented to me that they would like to know what it is about. I find it completely confusing and hope that whoever winds up will give a little more explanation of that Resolution.

The Budget, I fear, has come as a complete anti-climax after the exuberant prophecies about it. After five years of misery and squeeze, in which about £3,300 million has been taken by extra taxation, the Chancellor of the Exchequer gives back a mere £200 million. This is equivalent to 16 steps back and one timid, mincing step forward this year by the Chancellor of the Exchequer. This, I suppose, is what the Prime Minister meant in 1964 when he said that he would get us on the move again.

One feature of the Budget which is to be commended is that the Chancellor of the Exchequer has at last decided to make a slight shift from direct taxation to indirect taxation. For years I have advocated that what is necessary in our tax system is a shift from direct to indirect. This enhances the element of choice. People who are taxed indirectly have a choice whether or not they will spend their money. People who work harder for more money have no alternative but to pay tax on the money, and it is to the detriment of the country if they do not do so. The Chancellor of the Exchequer has always recognised this, and I was hopeful that he would shift the burden so that there was a curb on spending and an encouragement to work. I regret to say that his approach has been extraordinarily feeble and wet. He has taken 2 million people out of the range of tax, 2 million people who came into tax only because of inflation. I can see no incentive, looking at the direct tax proposals, for people to work harder and show more enterprise, which is what is wanted. This is a very half-hearted approach.

I was worried by the reference the Chancellor of the Exchequer made to the possible use of the regulator later in the year. If, later this year, for electioneering purposes, he uses the regulator to reduce indirect taxation, the balance will be tilted yet further in favour of spending and against working, which is the very vice which I understand the Chancellor of the Exchequer to have been condemning in recent years. We shall be back to square one, or beyond square one, with all the inflationary problems from which we are suffering aggravated. This may be very good for the Labour Party in electioneering in election year, but it would be thoroughly bad for the economic future of the country. I understand that is how the Chancellor of the Exchequer wishes to be judged by history.

One key to our economic problem lies in savings. Every year since I have been in the House I have dealt with this aspect. Each year I have tried to suggest and encourage an increase in savings. Every year lip-service has been paid to me by Treasury Ministers with the pleasant parrot phrase, "Yes, of course, more savings mean less taxation", and nothing is done about it. I agree with my right hon. Friend the Member for Enfield, West (Mr. lain Macleod) that the record of savings under this Government has been deplorable by any standard. In real terms, savings have fallen by more than £2,000 million since the Government have been in office. We are well at the bottom of the international league in savings. Japan, West Germany, Sweden, France and Canada are all ahead of us in the league. This is a deplorable situation and one to which the Chancellor of the Exchequer paid far too little attention in his Budget.

Why has the habit of saving fallen away? Why has the habit of thrift disappeared from our community? I believe that it is solely due to a lack of confidence by the people in the ability or will of the Government to control inflation, and also the fear which people have that if they acquire any wealth of any sort it is liable to be under attack by the Government in one fiscal manner or another. People therefore see much greater attraction in spending their surplus earnings on goods and chattels. It is because the Government have so penalised thrift in recent years that the nation has got out of the habit of saving, and people are more content to say, "If I save and build up some capital it will be under attack from the Labour Government; therefore, why should I do it? Why should not I spend it on consumer goods? If I am in difficulty 'they' will do something about it. I will ask the Government to dole out largesse." This is one of the reasons for a fundamental change in our habits which I attribute directly to the Labour Government.

There is obviously a need, as is sometimes recognised by Treasury Ministers, for an incentive to increase savings. Last year the Chancellor filched from my right hon. Friend the title Save-As-You-Earn and brought in his own scheme. At the time I welcomed, and still welcome, the fact that the principle of contractual savings in this country has at last been accepted by the Treasury. But I do not believe the results have been anything like as encouraging as was hoped, and indeed the record of national savings as a whole is unbelievably depressing in recent years.

I welcome the proposal made in the Budget for flexible interest rates. But there are a tremendous number of omissions from the Chancellor's speech. There was nothing to correct the damaging effect of the capital gains tax on savings. Nothing was done to alter the absurd distinction for tax purposes between so-called "earned" and so-called "unearned" income. One could go on citing the number of instances whereby the habit of saving and thrift and the accumulation and building up of wealth and property are under attack in some way or another by legislation introduced by this Government.

I do not wish in my speech to be merely destructive. I should like also to be positive. Although we want a fundamental change in our tax system as a whole in order to alter attitudes to work, spending and thrift, nevertheless in the meanwhile, in conjunction with the Wider Share Ownership Council, of which I am an enthusiastic member—it is an all-party body which is also supported on the other side of the House—we have worked out a scheme which will give an impetus to the existing Save-As-You-Earn scheme.

Last year, I tried in the Finance Committee to introduce what I thought was necessary, which was an equity element of savings into the legislation. I failed, but at least the Financial Secretary then said: I do not want to say that the scheme which is the subject of the Amendments is one we would reject out of hand—certainly not. But in the present climate, and at present, there is a great deal to be said for starting with the Government scheme and not extending it at this stage…".—[OFFICIAL REPORT, Standing Committee F, 26th June, 1969; c. 831.] But he did not rule out the possibility of bringing in an equity element if the S.A.Y.E. scheme did not seem to be moving with the required dynamism.

The scheme which has been devised, and which will be spelt out in detail in the form of a new Clause in the Finance Bill, is as follows. We propose to set up an investment fund within the framework of the National Savings Committee, possibly under the management of the Public Trustee. Any other organisation, if approved by the Board of Trade, could run a similar scheme. The fund under the scheme would be invested in accordance with the provisions of the Trustee (Investments) Act, 1961. Participation in the scheme would be limited to subscribers entering into savings contracts similar to those under the existing S.A.Y.E. scheme.

The fund would be divided into notional shares or units allocated to subscribers on monthly subscription days in accordance with normal unit trust practice. Subscribers who duly complete the payment of not less than 60 monthly contributions would be entitled after a specific interval, be it one or two years, to withdraw a sum equal to the value of their units free of all liability to capital gains tax. The fund would not be liable to corporation tax. That, in outline, is the sort of scheme we have in mind which we will seek to translate into the Finance Bill when the occasion arises.

I believe that the Chancellor has not paid sufficient attention to the whole question of savings and thrift even from a philosophical point of view. The spread of ownership is absolutely necessary in this country if we are to remain free and to grow in the manner we desire. I have always believed this to be necessary for the economic strength of the country.

The Chancellor of the Exchequer says, or we believe he says, that he wants to be judged by historians rather than by the mere electorate. One of the best ways in which he could get a favourable judgment would be if he were able to create an entirely new attitude to personal thrift and wealth, an attitude which would turn more and more earners into owners, which would stimulate the spread of ownership of all property—shares or real property—more widely through the community. But, in this context, I am afraid history will give the Chancellor no credit for the present Budget.