Budget Resolutions and Economic Situation

– in the House of Commons at 12:00 am on 23rd March 1972.

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3.48 p.m.

Photo of Mr Peter Walker Mr Peter Walker , Worcester

We have now seen two major Budgets of my right hon. Friend the Chancellor of the Exchequer. Both sides of the House have paid tribute to the extent of the reforms in the fiscal system that my right hon. Friend has introduced. I think it is also the judgment of both sides of the House that we are now likely to enjoy a period of very substantial growth in the economy. In spite of the criticisms made by the Deputy Leader of the Opposition and other hon. Members opposite, none of them so far has questioned the fact that we are likely now to enjoy a period of considerable growth. The extent to which it will be sustained is a matter of controversy between hon. Members. Certainly the indications are that this country is in a position to enjoy a greater degree of commercial success than at any time in the last 20 years.

There are a number of factors which give this country a fundamental advantage in terms of pursuing considerable economic growth at the present time. First, the extension of opportunities created by the wider European Community, and, secondly, within that Community the world wide financial mechanism of the City of London will be able to produce even better results than in the past in terms of our invisible earnings. These are fundamental advantages which we enjoy.

But, alas, as a country we have certain fundamental disadvantages. One is that, due to the advance of history, we have a greater volume of old factories and industrial plant than many of our major competitors, particularly those whose industries were destroyed in the war and have been completely modernised and replaced.

As a matter of geographical fact, we have a number of major regions in the country which, due to old industries going into decline, have serious social, unemployment and economic problems.

We also have difficulties in terms of having a mixed economy. I think that both sides of the House have tended in recent years in the battle of free enter- prise and nationalisation to fail to give sufficient attention to what is needed if we are to have a successful mixed economy. Few hon. Members of the Labour Party advocate the disappearance of free enterprise as an economic system. They accept the importance of having a mixed economy. Certainly we on this side of the House accept that the nationalised industries are here to stay and that it is important to see that they are as successful as possible.

However, I wonder about the degree to which the Opposition have failed to take a fundamental look at the future of a free enterprise system in terms of the relationship between proprietorship and management. I was sorry when the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), a former Chancellor of the Exchequer, in his speech yesterday came out with the quite standard condemnation of things like stock options and the allowance of overdraft interest charges for taxation, because a number of articles which he has written and speeches which he has made over the last two years in Opposition made me feel that he, too, was concerned about the future relationship between management and proprietorship.

One reason why I welcome my right hon. Friend's proposals in these spheres is that these are two instruments which may provide the means of making a considerable shift from the old-fashioned proprietorship to new management. If so, I should have thought that both sides of the House would find it desirable. Unless we find ways whereby the rewards of a successful free enterprise system are not given just to the institutional and wealthy investors, but are more widely spread, I do not believe that we shall succeed in having the vigorous free enterprise system which I pressume both sides of the House would like to see.

There is no doubt that we have the basic background for growth. I was slightly concerned at the new dictum outlined by the former Chancellor of the Exchequer in his television broadcast last night, which seemed to suggest that the only method of getting large tax reductions is first to have economic failure. If that dictum were basically true, six years of the previous Government measured by economic failure should have meant enormous tax reductions throughout. But, alas, that was not the case.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

Does the right hon. Gentleman regard the past year as having been one of economic success?

Photo of Mr Peter Walker Mr Peter Walker , Worcester

Certainly I regard as successful a year in which this country enjoyed the balance of payments position which we enjoyed and in which our export position improved. Certainly as far as economic growth is concerned, not only was it more successful than any year during the right hon. Gentleman's period as Chancellor of the Exchequer, but it was far more akin to forecasts which were made by successive Chancellors.

Concerning future growth, I believe that two potential dangers will become increasing factors in the debates which take place in this House. One is the effect of growth on the environment, on which there is considerable public debate. I believe that future Chancellors will give attention, for example, to the importance of future raw material supplies and the importance of encouraging recycling.

The other concerns the vital question of the objectives of growth. It is in this sphere that I disagree with the tone of the remarks made by the right hon. Member for Birmingham, Stechford both in his speech yesterday and in his television broadcast last night.

I see the importance of growth in the coming decades as the ability it gives this country to improve its social and environmental policies. During six years of Labour Government we had high, increasing taxes with very little benefit in social purpose. Certainly we had a situation where at the end of the Labour Government, as the right hon. Gentleman well knows, their own supporters were very critical indeed of their failure in six years to meet some of the worst problems of poverty. Indeed, the Fabian Society considered it necessary to publish a complete book of essays highly critical of the failure of the last Government to tackle many of the social problems which existed.

In fairness to the speech made by the right hon. Member for Birmingham, Stechford in Lancashire a fortnight ago, described by commentators as a bid for the leadership of his party, if one reads the full text it is clear that it was more an apology for failures of the past than any bid for the leadership of his party.

At the beginning of his speech the right hon. Gentleman said: Just because it could be avoided, the poverty of the old, the widows, the deserted, the low paid, the large families of this country are a greater reproach to Mr. Heath, or indeed to myself, who was a Minister in a recent Government…". I certainly agree with the confession and condemnation of the failure to achieve very much social purpose in the period when the right hon. Gentleman was Chancellor of the Exchequer. He knows—indeed, he cited some in the remainder of his speech—that there were some very bad cases of poverty at the end of his period with which the previous Government took little action to deal.

For example, there was a moving passage in his speech where he described how he visited a constituent, a lady aged about 50 whose husband had left her in 1966 and paid her a maintenance allowance of £5 a week. He then stated that she received an income of £8·42 from outside work, that her tax deduction was £2·20, that her fares were £1 a week and that when she recently had an increase of 55p it was immediately taken off her rent rebate. I hope that the right hon. Gentleman will write a letter to that constituent, because he concluded that passage in his speech by saying how difficult it was to help her. I know how pleased he will be that in his Budget my right hon. Friend has helped that constituent. Perhaps the right hon. Gentleman will write to that lady and say that whereas when he was Chancellor she was taxed at £2·19, now that there is a Conservative Chancellor she will be taxed at only £1·05. There is a considerable difference in the position. Perhaps he will also go on to say that under the rent proposals which we are bringing in there is a national rebate scheme which provides that if she gets an increase in her income only a small proportion of the rebate will be affected.

The right hon. Gentleman has concentrated his attack on the Budget in other spheres. He said that in the Budget changes which have taken place no great benefit will be given to those who do not pay tax. Indeed, a considerable benefit was given to those who do not pay tax compared with what he did as Chancellor. He brought in a whole series of measures which had very adverse effects on people who did not pay any tax. I do not believe that £270 million of extra S.E.T., £310 million of extra purchase tax, £140 million on tobacco, £100 million on beer, and £260 million on petrol tax imposed by the right hon. Gentleman was of particular help to those on low incomes. When the right hon. Gentleman put those penalties on this group of people he did it on the basis of providing nothing for the large family with a low income, contrary to what my right hon. Friend has done with the family income supplement.

When the right hon. Gentleman was Chancellor the Labour Government agreed to 1,200,000 tenants going over to fair rents, but they provided them with no rent rebate scheme. This is indicative of the difference in attitude between the parties.

As for the right hon. Gentleman's remarks yesterday about the pension increases being rather mean, and his demand that more should have been done, he is about the only former Chancellor who has no right to speak on this topic. The increase which he introduced in November, 1969, was the only pension increase of all increases between 1951 and the present day which did not make up for the rise in the cost of living that had taken place before the last increase. His increase averaged 5 per cent. per annum, whereas the increases by my right hon. Friend have been 11 per cent. and 12½ per cent. This contrasts the difference for the pensioner between the two Chancellors.

Hon. Gentlemen opposite really failed to tackle the various pockets of poverty. In his Lancashire speech the right hon. Member for Stechford cited one of his constituents. I would like to tell him about a number of others in his constituency who are in a rather different position today compared with when he was Chancellor. For example, in his constituency there are about 300 people over the age of 80 who are now receiving pensions but were refused pensions when he was Chancellor. There are another 600 of his constituents who, when the right hon. Gentleman was Chancellor, although they suffered from chronic sickness, obtained no allowance whatever but are now getting allowances of up to £5 a week.

Another 150 of the right hon. Gentleman's constituents who were seriously disabled when he was Chancellor—at that time there was not even the suggestion that anything would be done to provide them with attendance allowances—are, as a result of measures introduced by the Conservatives, getting £5·40 in attendance allowance because they are seriously disabled.

Another 500 of the right hon. Gentleman's constituents who are less seriously disabled are now getting £3·60, and 200 widows in his constituency between the ages of 40 and 50 who received no pension under Labour are receiving pensions under the Conservatives. About 190 families on low incomes with children who received absolutely nothing under the Labour Government are now getting up to £4 under us.

This catalogue shows that, in total, in the constituency of the right hon. Member for Stechford there are 2,000 aged, disabled and poverty-stricken people whom the Conservatives have helped but whom the right hon. Gentleman refused to help. I hope, therefore, that we shall not have long speeches from the right hon. Gentleman and his colleagues about the social purpose of a future Labour Government, particularly bearing in mind how the last one failed so miserably when they had an opportunity to do something for this group of people.

If our record in terms of helping some of the worst areas of poverty is very much better than anything done during six years of Labour rule, then the same applies to the dramatic change that has taken place as a result of the co-operation that my right hon. Friend the Chancellor has given to my Department in doing far more for the very bad areas of environment in this country.

After two years of Conservative Government we have available for the older industrial areas—the development and new intermediate areas—four major grants which combine to make the biggest impact on bad environment not only that this country but, I believe, any other country has ever witnessed.

At the present time it is possible in any of these areas to obtain a 75 per cent. or 85 per cent. grant for the clearance of derelict land; a 75 per cent. to 85 per cent. grant for the removal of environmental eyesores under Operation Eyesore; a 75 per cent. grant for house improvements; and a 75 per cent. grant for the clearance of slums.

These are four major grants which together result in a massive injection of capital to transform the worst areas of our environment. Of those four grants, two are completely new and have been created by this Government, one has been increased by half as much again over what the Labour Government provided, and the other has been completely reactivated by us. This is a considerable change compared with what was taking place.

Let us consider, first, the whole sphere of derelict land. In 1971 in Lancashire the amount of derelict land being tackled trebled, in Durham it nearly doubled, while in Derbyshire it more than doubled. We shall be clearing twice as much derelict land this year compared with the amount cleared in the last year of the Labour Government.

Operation Eyesore was announced and launched by me as recently as 7th February. This is a scheme under which the Government pay a 75 per cent. to 85 per cent. grant in the development, intermediate and derelict land areas. This grant is designed for land clearance, tree-planting, clearing up ugly eyesores, many of which have existed for decades, and similar activities.

In only six weeks the response has been massive. In the Northern Region 12 schemes have already been approved. More important, 71 schemes are already being processed and are likely to be approved in the future. Countless inquiries have been received, and my regional offices are discussing a substantial programme for Durham and Cumberland County Councils. In Yorkshire and Humberside 68 schemes have already been approved, with 41 under consideration. There are many others, for Leeds, Bradford, Shipley and elsewhere.

In the North-West many inquiries are coming forward, and it was reported last week that Liverpool is contemplating spending nearly £1 million on schemes under this operation. Dirty buildings are being cleaned up, urban landscapes are being improved, derelict canals are being renovated and generally the degree of activity is at a pace we have never before witnessed in this country.

As for the improvement of older houses, the Government's success has been a remarkable achievement. In the second half of last year we were improving twice as many old houses as were being improved in a similar period when the right hon. Member for Stechford was Chancellor. As for the development areas, I remind the House that as a result of the measures announced yesterday by my right hon. Friend the Secretary of State for Trade and Industry many cities such as Manchester and Leeds will now have available to them 75 per cent. grants— the present Government have made these available—and these will mean a further massive increase in the number of homes to be improved.

In the second half of last year, compared with the first half, in the development areas the number of improvement grants approved increased by no less than 75 per cent. The same story is true of slum clearance. Under the right hon. Member for Stechford, with his great interest in social problems and poverty, month by month the slum-clearance programme steadily declined. It is at last beginning to increase again. Many people who are suffering from homelessness will remember that it was the right hon. Gentleman who announced the final ending of the target of the Labour Government to build 500,000 houses a year.

The derelict land subsidy, Operation Eyesore and house improvements are but part of our general achievement. Perhaps even more important in terms of total impact for the coming period has been the decision of the Government to increase infrastructure improvements. When I heard the right hon. Member for Stechford speak yesterday about items of public expenditure to remove urban squalor, I thought that that was remark able coming from him. I remind hon. Members that when he was Chancellor there was rising unemployment in the region—[Interruption.] There was unemployment in the North-East and the North-West, and the situation was deteriorating.

It is true that the right hon. Gentleman brought forward some infrastructure schemes. We have brought forward and approved schemes worth £164 million. In the whole period when the right hon. Gentleman was Chancellor he brought forward schemes to the value of £16 million. In other words, under this Government 10 times as much is being done in terms of extra infrastructure as the right hon. Gentleman considered necessary.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

Would the right hon. Gentleman care to explain what effect that has had on unemployment compared with the position at the time to which he is referring?

Photo of Mr Peter Walker Mr Peter Walker , Worcester

Yes, I will; ten times the effect that £16 million would have.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford

Therefore, as the right hon. Gentleman specifically mentioned Scotland, the North-West and the Northern Region, will he give the unemployment figures for at least one of those areas—in, say, 1969—compared with those of today?

Photo of Mr Peter Walker Mr Peter Walker , Worcester

I will give, for example, the very great increase in today's employment figures. [Interruption.] I will give the fact that the employment figures just published show 3,000 more vacancies for construction workers than at the same time last year. This is an illustration that, whereas the right hon. Gentleman allowed unemployment in the regions to rise and made a pathetic effort to increase infrastructure investment, this Government have made major efforts which will have an effect.

In all this expenditure I believe that further progress can be made in improving the environment. Besides the measures which I have mentioned, the Government have announced a massive programme to clean up rivers, concentrating on great rivers which flow through cities and towns such as the Tyne, the Tees and the Mersey. We have announced a new scheme next year for much more urban landscaping to be done than ever before. I am pleased to tell the House that we have reviewed the situation about general improvement of houses. In the general improvement areas, besides all the grants for improving older houses, there is a grant for environmental improvements which cost up to £100 per house.

If we take a specific area where 500 houses have been designated for im- provement there is available a grant by which the Government meet 50 per cent. of the loan charges, thereby providing in total £50,000 in such a district, for environmental improvement and landscaping of the whole area. Where 2,500 houses are involved, this would mean on the present basis £250,000 for such improvements. I am today publishing an order to double this grant so that in future local authorities which wish to designate improvement areas will be helped on a very substantial scale. We have designated 318 general improvement areas, and additional grants will be made available too for those which have already been improved. I believe that the massive increase in this form of grant will result in very substantial help being given to local government. Here is another way in which the environmental purposes of this Government's strategies are helping in this problem.

In our approach to the environment we have endeavoured in the first two years under the new Department of the Environment to make a switch of resources to bad areas. We have also endeavoured to plan for the future approach to environmental problems. By the end of this Session major legislation concerning local government will have been completed. Reorganisation of housing finance will have been completed. The system of monitoring pollution in all its forms will have reached a considerable degree of accuracy, and a more positive approach to planning will be well on the way. I believe that the next and most important step for my Department is to bring about a total approach to the urban problem.

In the past the attitude has been a series of fragmented decisions not properly co-ordinated and not bringing about the improvement of urban areas which is necessary. In the last 12 months my Department has been very busily engaged in looking at this problem world wide to bring a more total approach to it. In addition, I intend in the next few weeks, with the co-operation of local authorities, to designate six towns and inner city areas where a group from my Department and local government will examine the total resources needed completely to transform such areas. The working group in each of these six towns will be headed by one of the Ministers from my Department, including myself. In this way we can bring to the attention of local government and my Department the need for a much more total approach to make really remarkable progress in the areas concerned.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

I am interested in what the right hon. Gentleman is saying, but could he say whether this is an extension of existing schemes in certain towns which are being looked at, or is it a new scheme? Will these towns be additional to what is already being done?

Photo of Mr Peter Walker Mr Peter Walker , Worcester

This will be a new scheme bringing in a whole host of disciplines which I do not think have been available up to now. It will bring in, for example, a total approach to transportation problems. It is a new scheme to find all that is needed.

Photo of Mr Nicholas Scott Mr Nicholas Scott , Paddington South

My right hon. Friend referred to towns. May I express the hope that the claims of inner London will not be forgotten?

Photo of Mr Peter Walker Mr Peter Walker , Worcester

I said towns and inner city areas. We shall make a major approach in big towns and cities on this problem.

On transportation, my right hon. Friend the Secretary of State for Trade and Industry has announced certain actions which we are taking to improve the road system in our drive to enter Europe. A few months ago I announced major road programmes to be undertaken between now and the end of the decade. Next week my right hon. Friend the Minister for Local Government and Development will be outlining principal road schemes in urban areas with a potential of about £600 million expenditure for that programme.

In those schemes it is vital to take a new look at the whole transportation problem. At present there is a whole range of grants. We are spending £200 million on principal roads, £170 million on local roads, £110 million on such things as car parks, infrastructure grants, rural bus services and highway administration, and £30 million on support for services in other areas. Hitherto the practice has been to treat these fields of activity as self-contained and related to specific projects. I believe that such an approach does not satisfy the need to tackle problems of land use and comprehensive planning. I intend to discuss this with the local authority associations so that relevant policies can be weighed in terms of infrastructure and management. The new counties will have to produce comprehensive plans to justify expenditure not only for one scheme or another for road provision and restraint measures, but for infrastructure for public transport. In other words, I want to see how our total expenditure can best be used to solve the problems of movement in a satisfactory way.

These proposals, I believe, indicate that the Department of the Environment possesses the powers and financial resources to lead the world in bringing about a total approach to environmental problems. I look on the great challenge of this Budget not just as a commercial success, which I believe my right hon. Friend will bring about, but as one to enable this country to use its resources for a much better quality of living for all our citizens. In the social policies so successfully pursued by the Secretary of State for the Social Services and the economic policies pursued by the Chancellor in combination with this positive and total approach to the environment, this Budget is an historic one in every sense of the word.

4.19 p.m.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

I hope that the Secretary of State will excuse me if I do not follow him in detail in all he said. We are developing a pattern of debate which allows 24 hours to elapse before a comment is made, so I want to devote much of what I want to say to the speech of the Secretary of State for Trade and Industry yesterday. However, I had expected that the Secretary of State for the Environment would have given the House some supplementary information about the extent to which his own Department would be involved in the new Industrial Development Executive, announced by his right hon. Friend yesterday. This gap will have to be filled in the end. Incidentally, if last year is by the right hon. Gentleman's definition a "successful" year for the Government, I tremble to think what their first failure may be like.

The third day of this debate has been dominated, if the Secretary of State will forgive me, not by his speech but by the unemployment figures published just before lunch, showing an increase of 1,100 in the numbers wholly unemployed, against a normal seasonal expectation of a 13,200 fall. The figure now stands at 3·9 per cent., representing, seasonally adjusted, a further increase of over 14,000 people. Although vacancies have increased this month again, seasonally adjusted, they have increased only by 500.

Anyone looking at the figures and at the traditional regional breakdown between one area and another, with the heavy emphasis on male unemployment and the usual problems about elderly male workers, will realise that, exactly as my right hon. Friend the Leader of the Opposition predicted, the euphoria engendered by the Chancellor on Tuesday has largely evaporated by this afternoon. The announcements of the Secretary of State yesterday can now be tested against the magnitude of the task confronting this country in bringing down unemployment to acceptable levels.

For most people, the key element in their environment is their capacity to find employment and to work so that they can safeguard the interests of their own families. But the figures today confirm the error of judgment made by the Chancellor last year, to which my right hon. Friend the Member for Birmingham, Stechford (Mr. Roy Jenkins) referred yesterday.

Certainly the Secretary of State for Trade and Industry misjudged the gravity of the situation last year. I find in my study of his speeches that last year he rebuked Vic Feather for forecasting that there would be 1 million unemployed at all. Therefore, his own contribution to economic forecasting has not been particularly notable.

Whatever the Budget may do to reduce unemployment, whatever the various forecasts which have been made, no Minister has been able to give a firm forecast of the date by which the figure of unemployment would fall to the level at which it was when they came into office. If general reflation will not do it, then the other measures introduced or announced yesterday by the Secretary of State will, clearly, be necessary.

I would make one additional comment to what the Chancellor said about the Budget and the effect that it might have on trade union wage claims. He tried to suggest that because of his Budget generosity there would be no reason, or no need, for the trade unions to make further wage claims. If most trade unions had their general secretary in the Treasury doing for them what the right hon. Gentleman has done for those sections of the community which are broadly better off, there might not be a need for the trade union movement.

But figures of earnings of manual workers from January, 1971, to January, 1972, showed an increase of only 8·7 per cent. against a price increase of 8·2 per cent. Thus, during this period, particularly if unemployment is added into the equation, manual workers as a whole actually had no overall increase in their standard of living.

However, it is, of course, to the announcement of the Secretary of State yesterday that I want to turn my attention. I am sorry that he is not here for this debate. I told him that I should be referring to his speech, and I wish that he were here to participate. The right hon. Gentleman was evidently rather put out by the reception accorded his speech yesterday afternoon. I assure both the Chancellor and by proxy, his right hon. Friend, that the laughter was directed not against the measures, which we shall study with great care, but, I am afraid, against the right hon. Gentleman himself, who consistently throughout his period in office has denounced measures very similar to the ones that he has now introduced—Interruption.] I will come to that. I would not have said that if I were not in a position entirely to confirm what I said. Indeed, there were moments yesterday, when the right hon. Gentleman talked about rapid economic and industrial change, when I thought that we should hear from him about the white heat of the technological revolution.

It was a speech in which the Secreretary of State tried to persuade the Opposition that the policies which he was producing were in some way novel, when in fact he will be remembered, alas, for having dismantled the apparatus which had been so painfully assembled to deal with problems which he chose to ignore. The right hon. Gentleman has no excuse for this. As Director-General of the Confederation of British Industry, as a member of the National Economic Development Council before the change of Government, he, better than any other member on the Government Front Bench, knew the reality of the problems facing this country, Government and the regions. He has now come forward with a reversal of previous policies.

The first example is investment grants. One can choose another word if one finds it embarrassing to use the title "investment grants", but as far back as May 1966, the Secretary of State was criticising investment grants. He produced a White Paper in October, 1970, in which he spelled out the case against investment grants. Now they are to come back—[Interruption.] Of course they are grants for investment—

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

They are entirely different.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The hon. Member may say that, but they are grants paid by the Government to those who invest. We in the Opposition look forward to the continuation of the regional employment premium, which we believe also had a key part to play.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

Before the right hon. Gentleman moves away from grants, would he be prepared to answer this question? Whereas the combined effect of the new incentives in the development areas which were announced on Tuesday and Wednesday is a differential of three times as much between their value to the profitable company and their value to the unprofitable company, would he tell the House what the differential was with his scheme?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The hon. Gentleman is simply not dealing with the point I made. That was that we had a well-established system of investment grants, which could have been adjusted to create any differential that the Government wished, and the Government discontinued them as part of their public expenditure saving in October, 1970. They have reversed that policy. The question that the hon. Member has to answer is how many jobs have been lost in the intervening period as a result of their foolhardy decision to abandon investment grants before they have had a chance to do a survey of regional policy.

Take shipbuilding, for example. No policy of the previous Government of support for any industry was more relentlessly criticised by the right hon. Gentleman than that towards shipbuilding. Indeed, the notorious Ridley Report, which has been published, advised that there should be no more money whatsoever made available to Upper Clyde Shipbuilders. Last summer U.C.S. wanted £6 million. Now, six to eight months later, £35 million is to go into Govan Shipbuilders, and probably—although this is not finalised—another £12 million into Clydebank, making £47 million in all.

Did the Secretary of State, speaking yesterday, seriously expect the House to believe that the policy which he had brought forward was the same policy as that on which he made his reputation? Last December the Shipbuilding Industry Board was wound up. Yesterday the right hon. Gentleman announced £50 million of production grants for British shipbuilding—no supervision, no accountability, a straight subsidy. In fact, this is far less than the industry itself had thought necessary in its own submissions, but it is is still an enormous subsidy to the shipbuilding industry. There were no new facts which had come to light since the Shipbuilding Industry Board was wound up.

The Minister has done the same with machine tools. The last Government developed major programmes to support the machine tool industry, but as a result of the collapse of economic confidence in the past year the machine tool industry suffered a 32 per cent. fall in orders, and, although in the House my hon. Friend the Member for Coventry, North (Mr. Edelman) and others continually came forward and appealed for some help for the machine tool industry, it was only yesterday that the £10 million programme was brought forward. We are now awaiting a programme of between £5 and £50 million for the computer industry. Support of £1½ to £2 million was announced only on Monday of this week for the hovercraft industry.

As far as Rolls-Royce is concerned, this is a story of its own. The Government have ended up by funding the Rolls-Royce company on a basis much more comparable to the funding of the Concorde project, of which the Government have decided to underwrite the whole cost. The Prime Minister abolished the Ministry of Technology which was responsible for supporting shipbuilding, computers and machine tools. Yesterday the right hon. Gentleman announced a Ministry of Industrial Development responsible for supporting shipbuilding, computers and machine tools. There is no doubt that a study of the right hon. Gentleman's speeches over the year and a half that he has been in office indicates that the Government themselves have condemned by their own announcements the policy which they have pursued since they have been in office.

I wish to make two general comments. First, in the intervening period enormous and quite unnecessary damage has been done to the structure of our own industry by the policy pursued by the Government, and far more public money is now necessary in certain projects, two of which I have mentioned, than would have been necessary if the Government had pursued a consistent policy in this matter. My second comment is that in the light of the right hon. Gentleman's own contribution to the debate about relations between Government and industry—his speeches being a treasury of boasts, bluffs, brave words and climbdowns—it is quite reasonable for the Opposition to be sceptical about the meaning of the proposals which he announced yesterday.

I want to move now to some general comments on the announcement that was made. I would say first that I personally believe it is a very good thing for Parliament that Governments change their mind. I think that one of the things that do most damage to Parliament is when people suppose that representations they make to Parliament have no effect at all. This is a comment which is contrary to what one sometimes would be led to believe in reading things in the Press. The Press tend to favour, or to appear to favour, the Minister who can be proved never to have changed his mind, and when people protest or argue with Governments the comment is often made that it is a "futile gesture", a "hopeless mission", the Government will "stand firm". In reality, however, debate and argument do shift opinion, and it is very important that people outside should know that debate and argument shift Government policy.

It is important for the survival of this House that when men come to see a Minister and then sit in the Gallery to watch us they should not feel that their representations are destined to fail. I like to see the argument flow across the Floor of the House one way and the other, and I like to see Ministers responding to real needs. But the Government Front Bench would have a lot more credibility if they recognised that this is the process which came to fruition yesterday instead of pretending that, in fact, they are presenting the same policy they have always pursued. It is as if President Nixon had gone to Peking and had tried to persuade them that John Foster Dulles had always wanted to be friendly with the Chinese. Nobody would have taken him seriously. Thus, we think that Ministers, in the context of parliamentary debate, should respond to the interests of the public amplified by hon. Members in debate.

I also believe that what has happened reveals a weakness of a system of government which allows Oppositions, with maximum energy and minimum knowledge, to develop policies without having had the opportunity of knowing in advance what a very high price would be paid for implementing what they have in mind. I am absolutely certain that if in 1970 the Government had known what they now know about the problems that concern them, these policies would have developed out of policies introduced by the previous Government and we would not have had the break that we had in these past two years. There is no doubt about it that there will be an entire year or two's gap before the new policies can be effective, because one cannot introduce a new policy and new machinery and expect them to have an immediate effect.

I have heard it argued and have been somewhat attracted by the idea that perhaps a department of the Opposition to keep the Opposition informed about the realities of Government would be helpful to the development of some continuity of instruments, if not of policy, which in the case of industry would be most advantageous. It was highly significant that in his speech the Chancellor—a man normally expected to be in purdah before announcing his decisions—felt it necessary to announce decisions which would take effect a year ahead because of the computer implications of those policies. Industry requires some measure of security in knowing with what instruments of government it will be dealing.

I turn now to the proposals themselves. I was interested in the intervention of the Minister a moment ago. I would say first of all that we are anxious to be persuaded that the effects of these new measures are going to be to maintain fully the regional differential.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The hon. Gentleman has intervened already to make his point, which I understood was that the new measures would be three times as effective in their regional differentiation. If I have not understood him correctly, perhaps I could finish my point and then he can intervene again.

With free depreciation nationwide and an expansion of assisted areas, we certainly want to be satisfied that the effect of the Government's measures is not to narrow the differential between the development areas and the rest, given that this will all be done against the very strong pull of Europe, which will make the Midlands and the South-East even more attractive, particularly with the change in the I.D.C. limits, which causes great anxiety.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Wanstead and Woodford

I intervened earlier only very briefly and perhaps the right hon. Gentleman did not quite take my point. I was drawing the distinction between his grant system and ours. His made no differentiation between the profitable and the unprofitable firm, and that was always our main accusation. Ours, with a combination of free depreciation and the new grant, means that the combined system is three times as valuable to the profitable firm in the developed areas as to the unprofitable firm. On the regional point, I can assure the right hon. Gentleman that on a discounted basis, which the hon. Member for Heywood and Royton (Mr. Joel Barnett) is always advising us to use, it is more valuable than anything that existed during the Opposition's six years in office.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The Minister still has not met the point that grants, by definition, are not linked only to profitable enterprises. I was talking not about the combination but about the reintroduction of cash grants. Secondly, the new grants are not related to employment creation, and if there was a criticism of our scheme—Dr. Jeremy Bray, a former Member used to make it in the House—it was that it did not necessarily lead to job creation, and this is even truer of the present scheme.

The second point of substance I want to raise concerns my doubts about the executive being inside government instead of in a separate agency. The Prime Minister today when answering questions said that this was the best way of doing it. Certainly the indications given to the Press before the last election were that this Government intended to hive off agencies of this kind from Government. My own view is—and we shall have debates about this when the Bill comes forward—that the Government machinery is too slow and centralised and it would be better for the Cabinet to decide objectives and Parliament to vote the money, and then to let the execution be done in an environment of rather greater freedom. The accountability of a Government Minister in sensitive areas involving investment in industry is an absolute illusion, because no Minister will describe sensitive commercial arrangements that have been reached with companies, whether that is done by the Shipbuiding Industry Board, by the I.R.C., or by the Minister. But even if that were the agency chosen, the Industrial Expansion Act provided exactly that instrument in which Governments were able to act themselves without going outside.

My third doubt is about the degree of centralisation which is implicit in having it embodied in the Department of Trade and Industry. Regional offices have existed for a very long time, but there is no doubt that the development authorities, as recommended by the T.U.C., which delvolve executive responsibility to certain areas, based rather on the model of the new towns, merit a great deal more consideration than has been given to them in the past.

Another point, which also emerged very clearly from the right hon. Gentleman's speech yesterday, is that as Secretary of State for Trade and Industry he finds himself incapable in any speech he makes of referring to the trade unions as an agency for improving the industry in which they earn their livelihood. Every reference to a trade union, if we have one at all—with one notable exception of a tribute to Dan McGarvey over Govan Shipbuilders—is always to warn them off performing their function of defending their members, and never to see them as part of the industrial scene whose advice needs to be sought and whose help can be so important.

I come now to what is the most central aspect of the Government's new proposals, and that is the rôle of public money for private industry. It is very questionable whether the subsidies which are now to be introduced on such a massive scale represent the right way to handle this problem. When the right hon. Gentleman the Secretary of State for Trade and Industry gave evidence to the Select Committee the other day, I understood him to say that he did not have clear criteria for support. The problems of selectivity are real. There is a genuine conflict between managerial responsibility and public accountability. There is a problem of the public interest, which is not met simply by inviting the Bank of England to get the institutional investors to resuscitate the shareholders to play a larger rôle in management. The shareholders' interest is and must be in the profitability of their company. There is a public interest that has to be safeguarded in this area of co-operation between Government and industry.

When we speak about measures of the kind that the right hon. Gentleman introduced yesterday, we are speaking about social responsibility and about regional and employment policy. It is quite wrong that unlimited subsidy of this kind should be given without looking again at the case for public ownership in this whole area we are discussing. With the Government's nationalisation of Rolls-Royce and the public ownership of Upper Clyde Shipbuilders—for it is clear that there is to be no private shareholding in it; the Secretary of State for Trade and Industry, indeed, urged that and admitted that he would not recommend anyone to invest in Upper Clyde—we are dealing with a situation where the case for public ownership is very strong indeed.

For example, with the amounts of public money now being poured into the shipbuilding industry, £100 million and maybe more later, the case for public ownership of the industry is in my judgment unanswerable, as is that for the aircraft industry, where massive amounts of public money are available and are paid. The case for looking at the ownership of the firms is now urgent.

Finally, I turn to the framework within which the Chancellor set his Budget and the right hon. Gentleman the Secretary of State for Trade and Industry addressed the House. I am speaking now about the framework of European entry, to which both Ministers attached so much importance. Looking at that framework, we find that the policies which were announced by the Chancellor on Tuesday and by the Secretary of State for Trade and Industry yesterday will take effect, if entry is completed against the background of the progressive abolition of tariffs, trade arrangements becoming the responsibility not of the Minister but of the Commission, capital movements becoming progressively freer and regulated by the Commission, regional policy being subject to the Commission's control and a tax policy that will increasingly be harmonised. Indeed, looking back at the words of the Chancellor about variable exchange rates and setting them against the background of the talks between President Pompidou and the Prime Minister at Chequers over the weekend, there is not very much meaning in talking about "unrealistic exchange" rates if Britain's exchange rates are to be harnessed to those of the other Community countries. Far from giving us freedom for manoeuvre, which is what the Chancellor was suggesting, it may well do quite the opposite.

But the most significant comment on the European background to the Budget and the particular policies announced yesterday comes not from the Minister or the Front Bench but from the recent pamphlet published on this subject by Aims of Industry. If the House will bear with me, I should like to convey something of the philosophy of Aims of Industry's comment. It tells us that apart from a few months of "parliamentary scuffles"—that is the phrase—entry is as good as settled. The pamphlet reads: Existing laws here which are at odds with Common Market practices will be scrapped. The article continues: The fundamental difference between the government of the United Kingdom and that of E.E.C. is that while legislation here is in general initiated by Parliament to be carried out by the Civil Service, in the Common Market the officials think up what needs to be done to further the Community's approach, and then submit measures to the politicians, who meet comparatively rarely. That is the comment of Aims of Industry. The article comes to the logical conclusion that: It will always, of course, be necessary for commerce and industry to put their point of view to the U.K.'s political rulers. But when it comes to matters within E.E.C.'s province, any steps taken on the limited, local scale of national politics only are bound to be less effective than if we made our voice heard in Europe. The plain truth is that even the Minister's Bill, which he will present shortly to introduce his new economic policy, will be capable of being modified, scrapped or altered by the Commission, and there will be no effective parliamentary supervision of it.

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

If the hon. Gentleman insists.

Photo of Mr Christopher Tugendhat Mr Christopher Tugendhat , Cities of London and Westminster

The right hon. Gentleman has quoted Aims of Industry as his authority for the thesis he is developing. Has he always hitherto regarded Aims of Industry as a reliable source of information, or is he just taking it on this occasion as the source of truth and authority on the Common Market?

Photo of Mr Tony Benn Mr Tony Benn , Bristol South East

The hon. Gentleman misunderstands the purpose of my quotation. It was to give the House a view of this as seen by industry, not as seen by the Secretary of State for Trade and Industry. The Secretary of State presents one picture to the House, but Aims of Industry, representing the people who subscribe to that organisation, sees the position totally differently. It does not see the Minister's policies as being effective or the laws that he may get through the House as being permanent. It sees the real centre of power now as being Brussels, and sees that, in those circumstances, there is a diminution of political control. The reason I quoted that was that far from achieving greater accountability by the statement made yesterday, the broad overall effect of the Government's policy, taking Europe into account, is greatly to diminish the degree of accountability of Parliament for key economic issues. That is the background against which we see the Government's policies developing.

I would like to reiterate what I said right at the beginning; namely, that yesterday, when we listened to the Secretary of State, we were not mocking his policies because we recognised the magnitude of the task to which they are directed. We find in them at any rate some echo of policies and instruments which we developed, which should never have been scrapped, which are now to be reintroduced, and which we desperately want to succeed.

In our study of the policies, we shall judge them, as indeed the Budget will be judged, by the extent to which they make inroads into the totally unacceptable level of unemployment for which, on the most generous estimate, the Government must bear a major part of the responsibility.

4.52 p.m.

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

It is the salutary if unwritten convention of this House that when it has been announced that an hon. Member will shortly be leaving it to take up an outside appointment he shall not indulge too violently in controversy. Conscious as I am of my own limitations—as Oscar Wilde said of himself, I can resist anything except temptation—I have not sought to catch your eye, Mr. Deputy Speaker, for some time.

At this moment, I feel some sympathy with the remark attributed to the late Lord Curzon. He once said to a friend that when he got up in the morning he got on his knees and offered up a prayer that during the course of the day he should not say anything harsh or unkind to any other person. He added that when he went to bed at night it was astonishing how often he found that this prayer had not been answered. Nonetheless, I have made some small contribution to Budget debates since the days of that much under-rated Chancellor, Dr. Dalton, and as I feel that that which my right hon. Friend introduced on Tuesday is a historic one, I hope that the House will allow me to make a brief contribution. I am quite certain that this Budget will be a historic one in both the respects in which the Budget has to operate—both tax reform.

There is absolutely no difference between the two sides of the House as to what we want the economic effect of this Budget to be. We want to see an acceleration of growth and a large build-up of investment, so tackling unemployment on the only firm and certain basis. It is a matter of infinitely difficult judgment, but I would submit to the House that this massive addition to purchasing power, with its powerful emphasis on encouragement to investment, is really the best calculated instrument for this purpose that could be devised. There will be a very large additional volume of purchasing power released. There will be great encouragement to those in industry to invest. But I would say to the House, with respect, that there is nonetheless a limit to what a Budget or a Government alone can do. Boards of directors who take the actual decisions on how to invest their shareholders' money will not be lured into doing this—and ought not in their duty to their shareholders to be lured into doing this—by all the investment incentives in the world unless they have confidence that that investment has a reasonable chance of bringing in a substantial profit, a reasonable share of which profit their shareholders will retain. It is, therefore, of great importance—and this is the duty which falls almost equally on all of us on both sides of the House—that we should endeavour to help to build up that atmosphere of confidence without which the most ingeniously-devised incentives to investment will tend to fail in their purpose.

It is really vital that those who, in our still basically free enterprise society, take the multiplicity of commercial and investment decisions—the sum total of which amounts to the investment of the year—should do so against a background that Parliament as a whole is determined that we shall go into an age of growth and expansion and that Parliament is determined to do nothing to kill that rather tender plant of commercial and industrial confidence.

Therefore, I commend the measures to the House as being about the most that any Government can do, but we ought not, as members of this House, to underrate our own responsibility for making sure that they are effective.

I was particularly delighted to hear my right hon. Friend's significant reference to the future, in this context, of exchange rates. To those who have studied the muted techniques which Chancellors of the Exchequer of any party always adopt on any subject which has any relationship whatever to the rate of exchange, I thought my right hon. Friend's comments not only relatively forthright but enormously encouraging.

The right hon. Gentleman opposite rather derided consistency. I will, nonetheless, claim consistency in this matter. In his book, the very much alive, but no longer in this House, Lord Butler of Saffron Warden, disclosed that as long ago as 1953 there was a strong movement in the Treasury to move to free exchange rates. After this lapse of time I do not think that I shall get involved in the Official Secrets Act if I disclose that I was at that time a strong exponent of a measure which I wished had been taken. I was delighted to hear my right hon. Friend go quite a long way in this direction.

One has only to look at the history of this country under all Governments or, indeed, at the history of most of the advanced countries of the free world in the last 25 years, to see how, again and again, industrial growth and rising national prosperity have been checked, industry kept back, and heavy taxation imposed, in order to try to maintain the pretence that a rate of exchange for the national currency which had been fixed many years ago, in totally different circumstances, was still a real one, when anyone who knew anything about the markets of the world knew that this was not its value in the markets of the world.

That pretence—and it goes back to what I have for many years believed to be the foolish decisions of wise men at Bretton Woods—has bedevilled the economic management not only of this country but a great many other countries in the years since the war, and has been a major contribution to the check in the economic growth of this and other countries which modern technological progress has made technically and physically possible.

I regarded those words in my right hon. Friend's speech as being of special significance. I do not want to weary the House with the general argument about a free and floating rate, and my right hon. Friend did not go so far as to indicate that he meant that. But he moved a good deal further in that direction that when he came back from Washington some months ago. In my submission, a free and floating rate is the perfect instrument for maintaining the balance of the national economy. If one exports too little and imports too much, under a free system the value of one's currency goes down, one's exports become cheaper and more competitive, and one's imports become dearer and less attractive. One tends to export more and import less. The currency adjusts and one gets again into equilibrium without all the accompanying and expensive borrowing, which fixed rates, backed, as the right hon. Member for Bristol, South-East (Mr. Benn) said, with enormous emotional devotion to a particular rate of exchange, involve. This has bedevilled economic management over 20 years. My right hon. Friend is the first Chancellor to make a reference to this matter in his speech. That alone would have made this Budget an historic one.

It is an historic one, too, in respect of tax management and tax arrangements. My right hon. Friend seems to have had greater success in making those powerful opponents to change—the revenue departments—more amenable to his will than any Chancellor of the Exchequer in my recollection. Lord Brook of Cumnor once said to me, when he was Chief Secretary to the Treasury, that one of these two Departments—I will not identify which—when he pointed out to them that a certain Measure had the unanimous support of the Cabinet, of the majority party of the day and of the House of Commons, did not only regard that state of affairs as not a conclusive argument, but did not even regard it as a factor to be taken into account. My right hon. Friend has quite plainly, with the aid no doubt of his own former professional training, persuaded them to do things which I would never have believed any Chancellor of the Exchequer could make them do. The result is a really magnificent set of proposals for tax reform.

There is the outline that my right hon. Friend has given us of what is not quite the negative income tax which my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) has advocated with such unfaltering faith for so many years but it is a remarkably constructive proposal. Some of us can imagine the official obstacles which must have had to be overcome to get the scheme as far as it has gone. But I was particularly glad that my right hon. Friend did not carry the proposals to the logical conclusion which some of its exponents do. In particular, he decided to leave in existence the Supplementary Benefits Commission though, as he said, it would have had much less to do. I am sure he is right. This kind of fiscal system is admirable for doing half the job of relieving poverty. It is an excellent and inoffensive method of imposing a means test because it is a means test that the overwhelming majority of people in the country have to undergo anyhow.

The greatest difficulty is in respect of people below the income tax level. My right hon. Friend has just increased that number by 2,750,000, and, of course, the system is quite useless to determine needs. The Supplementary Benefits Commission has to assess both means and needs. I will illustrate it in this way: take the typical, classic recipient of this benefit, the elderly widow. Two elderly widows, one in excellent health living in a well-kept home with younger relatives, and the other in poor health living alone in poor accommodation. The needs of these two ladies are vastly different and unless the devoted staff of the commission are kept in being there will be a system which will mathematically secure that incomes are wisely and fairly allocated but will not take account of the other half of the equation—the varying human needs of our variegated community.

May I also mention a significant proposal in this context? My right hon. Friend said the increases in national insurance benefits given this year would be free of tax for administrative reasons. But he must have appreciated that once having created this precedent it will be singularly difficult to apply tax in future at any rate to future increases. This leads to a very important point. When I was Minister of Pensions and National Insurance I firmly defended the taxation of retirement pensions on the ground that the contributions were allowed against tax. The contributions are no longer allowed against tax, and in this way the argument for taxing the pension has been largely invalidated.

I know there is a classic argument that the person who would benefit most is the retirement pensioner in our universal system who also happens to be a millionaire. But once we get away from that rarified category, an enormous number of people deeply resent the payment of income tax on their national insurance benefits. Once again, I hope that my right hon. Friend has set an encouraging precedent, and I can assure him, though I will not be here to do so, that a number of hon. Members will probably interest themselves in this point in future years.

I want to deal with only two specific points of taxation itself. I am sorry that my right hon. Friend did not tackle what seems to me the evil of the capital gains tax. In an era of inflation a person can pay capital gains tax on selling something, be it a security or a chattel, which in real terms is worth less than he paid for it when he bought it. Because the capital gains tax is based on money values, in an era of inflation it can well be a tax on capital losses and it operates unfairly in this respect. I commend the American technique of phasing it out over a number of years, to try to take care of this inflationary problem. This is almost the only area of tax where my right hon. Friend has not introduced reforms, and I hope that this merely means that he is making an exception in order to have something to give away on the Committee stage of the Finance Bill, He must have something to give away. Having helped to conduct a number of Finance Bills I know that if one has nothing to give away one is in a most appallingly difficult situation!

I am very glad that my right hon. Friend has begun to tackle the problem that I raised on last year's Budget and last year's Finance Bill—that of estate duties. There is no doubt that as a result of inflation, rates of duty which might have been perfectly fair and reasonable when they were instituted have become alarmingly oppressive. This is a tax which hits people almost literally when they are down. It hits particularly hard on the widow, and I am delighted that this year he has made some concession to the widow.

It still remains a fact that the Inland Revenue has had it both ways in respect of the levy of estate duty on bequests to widows. While a man and wife are alive they are treated for almost all tax purposes as one person, apart from the welcome exception made last year in respect of certain wives' earned incomes and surtax. As soon as one of them dies the Revenue reverses its position and says that there is a passing of the estate from one to other other.

In human terms—and it is the widow rather than the widower who is the normal case—it means that when a woman has just lost her husband's earnings, or the payment of his pension, that is the moment when, if she has a modest capital sum bequeathed to her, the Revenue descends upon it with a claim. There is a very strong case for saying—and I leave this thought with the House—that when the estate passes to a widow or widower it should not be treated as passing for estate duty purposes, but that, in death as in life, they should be treated as one and the liability for duty should arise when the survivor dies.

A Green Paper is being circulated and I have no doubt that it is my right hon. Friend's intention to consider the matter, although it will not help those who die this year. This year he has left a rather curious anomaly. I welcome the concession over bequests to charities—but has the House appreciated that if a man leaves his estate say, to a home for elderly pussy cats he can leave £50,000 free of tax, but if he leaves it to his wife he can leave only £15,000?

Photo of Mr John Boyd-Carpenter Mr John Boyd-Carpenter , Kingston upon Thames

If my right hon. Friend is adding the £15,000 to the £15,000 I must add the £15,000 to the £50,000 and make it £65,000. The comparable figures, taking in the free allowance if my right hon. Friend wishes—I want to be considerate this afternoon—are £30,000 and £65,000.

Our friends in Europe have always regarded our sentimentality about animals as rather comic, but if as a matter of public policy we are seriously to lay down that in social terms it is apparently slightly more than twice as worthy to leave one's property to a cats' home than to one's widow, they will think that we are carrying our eccentricity to extremes. I welcome the help for charities, but I hope that in Committee someone will try to remedy this anomaly.

It is no answer to say that the whole matter will be looked at by a Select Committee on the Green Paper. I know that it will, but every year people are dying, every year the personal problems posed by estate duty on death arise, and I do not think it is very sensible to leave the matter in this quaintly anomalous, if highly British, position.

I do not want to detain the House very long, and therefore I pass over the many matters on which I should like to do nothing but applaud, such as the abolition of the voluntary restraint on investment in the developed countries of the sterling area, which is long overdue and extremely welcome, as are many of the tax changes.

What is most impressive is the grip that my right hon. Friend has taken on our whole system of taxation. This part of the Budget is closely related to the other. We shall always have to carry a substantial burden of taxation, but the way in which we carry the load is crucial to our economic activity. The easy analogy is a soldier's pack. If it is properly adjusted, he can carry with ease a load which, when the straps are badly adjusted, will weigh him down. That is true of the taxpayer. Therefore, my right hon. Friend's tax reform is not separate from but is part of the comprehensive whole of the Budget, modernising our tax structure for the present age.

I have not heard, in my time in the House, a Budget which seemed so ambitious, so comprehensive and so well thought-out an attempt to modernise tax arrangements, many of which, like the estate duty to which I referred, go back many years. So I believe we have before us a historic Budget which will point the way to a considerable advance for this country.

I have known a number of Chancellors. Without exception, they have been people of high ability and great devotion to their duty. But my right hon. Friend, who has, I think, many more good Budgets in him, has produced two quite outstanding ones in the past two years. I hope that I shall be acquitted of presumption if I say that he is on the way to being a very great Chancellor, and that in due course he will achieve what I suppose all of us in public life would admit to be our ambition, in the words of Gray: To scatter plenty o'er a smiling land,And read their history in a nation's eyes.

5.14 p.m.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

Far be it from me to speed prematurely a departing Member. I had hoped the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) would linger into high summer, but I understand from the beginning of his speech that, no doubt owing to the warm spring, he is thinking of leaving his chrysalis on the back benches and spreading his wings for higher spheres, in two senses. If that is true, I must say how sad I am at the prospect of that event. I am sure that in that I speak for the whole House. [Hon. Members: "Hear, hear."]

The right hon. Gentleman has graced many benches in the House in different capacities. He has always adorned them and always enlightened the House, except when he did not want to. He is practically the only Member I can think of who on occasions is deliberately obscure, but never unintentionally.

The right hon. Gentleman lived up to his highest reputation this afternoon. I say that largely because I agree with most of what he said, but apart from that he demonstrated once again what a first-class debater he is. This is a debating Chamber, and we cannot afford to lose too many people of the quality in the House which the right hon. Gentleman has shown for so long. I have never understood why his Government let him go. I cannot believe the capacity of any Government is so great that they can forgo a man who on any subject is always a first-class debater. I wish him well in the stratosphere, or wherever he may be, and I hope his parting remarks will be taken notice of.

I do not think foreigners will be very surprised about the treatment of widows. They will say that that follows from the British view of women in general. But I wholly agree with the right hon. Gentleman's main points.

My right hon. Friend the Leader of the Liberal Party, the Member for Devon, North (Mr. Thorpe) dealt yesterday very effectively with the position of the lower-paid wage-earners and others whose incomes are, in our view, too low, and I do not propose to cover that ground again, though we think it is a matter of the greatest importance.

I want to speak briefly about two matters. The first is general economic policy, particularly with regard to inflation, on which I should like to say something about the speech with which the Secretary of State for the Environment opened today's debate. It was a notable speech. Once we got past the demography of Stechford, I was much impressed by the right hon. Gentleman's plans. Two points in particular that he made are worth underlining. One is that growth is no good unless it is for a good object and the other is that we need a total attack upon the poorer areas. We have failed to close the gap between rich and poor. We have failed to give the children born in the worst areas anything like the chance of those born in the best. I am sure that the way to set about tackling the problem is to make a total attack on the conditions of the worst areas. I would only add that there are some bad rural areas as well as bad industrial areas, and I hope that in the course of time the right hon. Gentleman will consider that problem as well.

It is generally admitted, and it is admitted by the Chancellor, that the greatest danger we face is inflation. How does the Chancellor think he will contain inflation? He hopes for economic growth. As I understand it, he also hopes that by reducing taxation he will induce the trade unions to moderate their wage demands. There are flaws in that argument. First, the Budget is accompanied by a large increase in the supply of money and credit. The Chancellor has apparently abandoned the weapon of trying to control the money supply. As I understand it, he will create money to satisfy whatever demands come out of the economy.

On wages, the Chancellor's policy seems to me to be based on faith rather than reason. He hopes that wage demands will be restrained because taxes are lower. He pointed out that the rate of increase had been halved in 1971, but that was before the coal strike. The situation is quite different today.

This year the Government have shown that they have no consistent economic policy and that they have no answer to really determined groups of people other than to yield to force what they deny to reason. I agree that there is a strong case for Governments changing their mind, but I hope they will do so as a result of reasoned argument and not merely because they find that they cannot carry the day. I do not think we can say that this Government have so far been moved by reason. They have been moved by a stern opposition to their policies.

I notice that the Secretary of State for Industry, that unfortunate man, has now ceased to talk about profitability as the test of businesses which should be kept in being. The new word is "viable".

To this Government a viable business means any business which no businessman will support but which the Government dare not kill off. This is the test of viability. We cannot have very great faith in the Government's chances of avoiding inflation, and the Chancellor seems to accept that there will be inflation because, as everyone has pointed out, he envisages alterations in exchange rates. I agree with the right hon. Member for Kingston-upon-Thames that this is an admirable change of attitude but it is no good blinding ourselves to the fact that if this country is to go in for a series of devaluations, à la South America, this will do us no good at all as a major trading country.

I have always felt this difficulty about the Government's defence of their policies. As I understand it, they blame our present troubles on inflation under a Labour Government. They have said again and again that the reason unemployment is so high is that industrialists laid off labour because they could not afford high wage rates. What is their remedy? To inflate still further. There must be some logic lacking. If they simply pump money into the economy they may accelerate the changeover from employment of men to the employment of machines and no doubt that will have some effect on the unemployment rate but it will not be as big as it might have been 20 years ago.

On the other hand, a lot of it might go into consumer demand. I do not think that we can rely on savings being as high as they were last year, and a lot of consumer demand may go on imports so that we will be back with the well-known trouble from which we have suffered since the war of a consumer-led boom and eventually a balance of payments crisis.

There are certain factors in the present situation which are comparatively new. One is the replacement of labour by machinery and another is the strengthening of organised labour. The private sector today cannot afford strikes of great duration and the public sector can afford them only so long as the Government are prepared to stand behind it and make up the resulting deficit. Another feature is that our mixed system of Socialism and free enterprise allows all incentives to acquisitiveness to flourish but has removed a great many of the checks upon them. It has removed the rigid control of monetary supply and the check of universal competition. There is not much in the Budget pointing to any economic policy which will deal with the obvious dangers of inflation.

I agree that the Chancellor has conferred benefits on a wide range of the population, but this is undoubtedly a Budget which gives considerably to those who already have. It is impossible there for to argue that organised labour should not get as much as it can when organised capital is doing so well. It is not only fiscal changes which count here although I do not think that we realise entirely the immensely improved situation of the higher payers of surtax. They have benefited enormously in the last two Budgets. One of the troubles is that this is a Government associated with those who believe that we should run our economy by increasing their wealth and that it is right and fair to give to those comparatively well-off not only higher retained incomes but higher prequisites and better advantages while asking everyone else for restraint. This is not the right approach for making a universal attack upon inflation.

I suggest that the Government might examine one or two other changes in their policies since after all they have already shown themselves so flexible.

First they might repeal the Industrial Relations Act. I cannot see that it would be a bigger mouthful than those which they have already swallowed. I do not blame them for wanting to deal with industrial relations but it is apparent that this Act will not do so and it has bedevilled a great deal of our industrial life. They should bring in legislation which would acknowledge the rights as well as the responsibilities of labour, and they should couple this with some permanent board, such as the Prices and Incomes Board but not with exactly the same terms of reference, which would try to establish the principles upon which wage increases and all sorts of emoluments in the public sector should be based. They should look at the extension of monopoly power by some trade unions.

The Secretary of State for the Environment said that there should be a drastic attack upon our poorer areas. I hope that whoever is to wind up the debate will say more about the figures involved. I think that the right hon. Gentleman mentioned £160 million as being the amount at present earmarked for these schemes. When we think of the immense work done in our cities, let alone that done in the small towns and county districts, I believe that if we want to get employment moving and at the same time fulfil some socially desirable aims then we should put even more money behind a total attack upon our worst areas.

Could we not devise some means by which we offer some attraction for a certain restraint in wages and salaries? At the moment there is every advantage in pressing as hard as you can for higher wages. That is how the capitalist system is supposed to work. Those who do not press their rights to the utmost but show signs of restraint could perhaps be rewarded by some addition to their pension rights or in some other way in the future when additional purchasing power might be acceptable to them.

I turn now to the proposals for regional development. I do not share the enthusiasm of some parts of the Press about these proposals. In some respects this Budget will be damaging to regional development. The Government's policy still treats the whole of Britain outside the South-East as though it was a remote region. The very wording gives one the impression that if one lives north of Watford one lives in the backwoods and camel trains have to be sent out with supplies to see that the natives are kept at subsistence level. The whole attitude is much too centralised.

One of the prime causes of depopulation, which I would rate as being as serious as unemployment in my part of the world, is the present centralised attitude and the lack of centres of power and decision-making outside of London. The result is that the top layer of these areas is constantly removed and the ambitious people leave and go to London because that is where the influence lies and where the jobs are. This is the wrong structure. We should have regional centres for the promotion of industry in the areas. It is bad enough to deal with the North-West or the North-East of England from London, but it is in credible to try to deal with Scotland or Wales from London. The new Minister should be in the Scottish Office.

A great deal of autonomy ought to be given to the offices within the regions because they all differ in their needs. The Government should go much further in moving their own offices out of London. In these Budget discussions I have heard hardly any reference to the discovery of oil off the North-East coast yet this is a major development and if properly exploited it could mean a whole new centre of growth in the north-east of Scotland. We should put there the Government offices which will deal with this matter. We should now be giving massive support to local authorities to develop subsidiary and support industries. I know that the Secretary of State for Scotland has said he will do all he can to assist but that assistance should be given now.

This is the moment when the county councils in my constituency are badly in need of practical help in taking the chances offered to them. This is a new situation. We cannot expect a county council unaided to be able to grasp the opportunities of subsidiary industries which might come in the train of oil. They are already looking for specialist advice which the Government through their regional plans should be supplying. On every matter—housing, harbour development, encouragement to local industrialists—there is need for a structure and for long-term planning.

The White Paper mentions that the Government are putting money into developing communications from the north of England and Scotland to the Continent. If we are going into the Common Market it is absolutely vital that the Government should put a lot of money now into the land bridge across Scotland. The Government do not say how much they are putting into the Scottish east coast ports, but it is vital also to improve not only the ports but the communications to go with them.

I come to the fiscal proposals as they will affect the development areas. Free depreciation will be valuable all over the country but not especially favourable to the development areas. The Financial Secretary said that the proposals offer development areas a greater degree of favourable discrimination than ever before. But a new business coming into a development area often does not make a profit in the first year or two. The arrangements, therefore, are of no assistance for that business's immediate cash flow. All it can get is a 20 or 22 per cent. grant. This is not enough to get new businesses into the development areas.

The Government are raising for the second time the limit for I.D.C.s from 10,000 to 15,000 sq. ft., except in the London area where it is to be raised from 5,000 to 10,000 sq. ft. This hits a type of business which is absolutely vital to some development areas. I cannot believe that this proposal will be of any assistance to those areas.

There has been no change in the petrol and oil duty. If we want to help the development areas one way of doing so would be by bringing down the cost of transport and freight. Will freight be subject to V.A.T.? I understand that passenger fares will not be subject to it but that freight will be. Will that liability be in addition to the existing duties on petrol and oil? If so, this will be a serious handicap to a constituency like mine and to all the remote areas.

I have read today of what is called the employment transfer scheme. I understand that the Government are to offer anyone who leaves a development area £400 to assist in his expenses. This is tied up with training. I do not object to training, but I cannot believe that the Secretary of State for Scotland can approve this scheme. In parts of Scotland it is depopulation which is the scourge. Yet the Government are now inducing people to leave certain areas of Scotland and offering them £400 to settle elsewhere. I have always argued that one should take men to work, not work to men. This new move seems contrary to development area policy, which is that work should be taken to the areas. How do the Government expect this to work?

The problem of regional development is not simple. It is not simply a question of putting in some sort of jobs in the areas and leaving it at that. In Orkney and Shetland, for instance, there is a shortage of housing, a shortage of building resources, a shortage of many skills, particularly those concerned with business, and there is a shortage of variety of employment. To be of real value the development proposals of the Government should cover training and building. Will the new Industrial Development Executive have funds of its own? Will it have discretion in using those funds, or will it be dependent on the normal grants already available? What will be its relationship to the Highlands and Islands Development Board, which I imagine will go on? What about the White Fish Authority and other authorities which are the grant giving bodies.

To sum up, the Budget has considerable merit in many of its fiscal proposals and reforms, but it fails if it is regarded as an instrument of economic management or of regional development. To end on a slightly more optimistic note I think it will fail unless it is coupled with other measures and with a strengthening of the type of proposal which the Secretary of State for the Environment has outlined.