Budget Resolutions and Economic Situation

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

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Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland 12:00 am, 23rd March 1972

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.