Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 12th March 1973.

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Photo of Mr Roy Jenkins Mr Roy Jenkins , Birmingham Stechford 12:00 am, 12th March 1973

The hon. Member for Wycombe (Mr. John Hall) gave some fairly muted praise to the Chancellor of the Exchequer on the substance of his Budget but more wholehearted praise on his method of presentation.

I listened with great interest to the Chief Secretary to the Treasury. After he had accused me of nodding agreement, and I had denied it, he said, engagingly, that perhaps he would have been a good auctioneer. I said that he would have made a better auctioneer than Chief Secretary. Whether a good auctioneer or a good Chief Secretary, he has the quality of unshakeable complacency. Policies may come and policies may go, Select Committees may come and Select Committees may go, reports may come and reports may go, but so long as he is a Treasury Minister all is for the best of all possible worlds and every policy is presented with that degree of self-satisfaction, skilfully presented, which we always associate with the hon. Gentleman.

I am sorry that the Chancellor has left the Chamber. I know that he is having a worrying time at the moment, but I hope he will return soon because I have a few words to say about his policy. I want first to express my personal sympathy with him in having had to face an international monetary crisis in the weekend before his Budget. No ex-Chancellor and few hon. Members could feel other than sympathy for a Chancellor placed in that position. I suspect that I can perhaps appreciate his difficulties even more than his other predecessors in the House because, although I had not the experience of having to leave the country for an international monetary conference, we lived through the first of the recurring dollar crises in the weekend before the Budget in 1968.

I managed to avoid going to Washington. I asked my right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) to go in my place—and incidentally, I would add, we all very much miss his absence from these debates and very much look forward to his full recovery. As I was saying, on the Sunday before my 1968 Budget I had to live through a day full of crisis, although I did not have to go abroad, as the present Chancellor did. But I did have one experience which even he has escaped—that of having to make, at 3.30 a.m. not 3.30 p.m., a statement about the closing of the exchange markets, with all the delicacy involved in international monetary statements, to a packed House—a House which perhaps it would be unfair to say was febrile but which had something of the nature of febrility, quite naturally, at that stage of the morning.

However, I am somewhat mystified by the Chancellor's decision to open his Budget on 6th March. That does not mean to say that I think it was his own fault that he ran into an international money crisis by his choice of date. The dates of international monetary crises are not wholly predictable, and no doubt, at the present rate, had the Chancellor chosen to present his Budget on a rather more usual date it could easily still have run up against the next international monetary crisis, or the one after that, by the time he got to early April.

Nor am I arguing for the traditional hallowed date as near as possible to 5th April. I have become increasingly sceptical whether the great annual occasion of Budget day any longer makes real sense in parliamentary and economic terms. A Chancellor is always very attracted by it, but looking at it from the slightly broader perspective that one can assume from outside office, I think that it is not wholly attractive and that indeed it is somewhat doubtful whether it is the most sensible way of managing our affairs—whether it is not one of those traditions, like the City of London Police Force, which might be regarded with scepticism at the present time.

I am also doubtful whether a four-day Budget debate makes any sense. We had a lot of empty benches last week—I contributed to them myself to some extent by my own absence. I wonder whether, given the present pressures on parliamentary time, it would not be more sensible to have the same amount of debate but more spread out rather than concentrated in the way that is done at the moment. I am not sure that such constriction of debating time is the sensible way for us now to proceed. But as long as the traditions persist, a very early Budget—which 6th March certainly was—signals something very special. It signals that the Chancellor of the Exchequer believes that he has a special message to give the nation which must be given in March rather than at a later date. I did not find anything very special in the Chancellor's speech. Apart from the announcement of the rate of VAT, which could have been done separately, it was a Budget which could have been just as well presented at the normal time, at any other time, or almost not at all.

I turn to the general Budget effect and, in particular, the impact, which is of crucial importance at present, of the public sector deficit on the economy. The Chancellor is normally very jaunty. It is remarkable how jaunty he is in view of the strains he bears. But I thought that he was a good deal less jaunty than usual when he told us that Government borrowing would rise in the year now beginning from the already very high figure of £2,800 million to £4,423 million. This is greater than any figure at any time in our history, including the war, and a change, if I may remind the right hon. Gentleman in passing, from an overall surplus of £600 million in 1969–70. Therefore, there has been a turnround in four years of £5,000 million in the impact of the public sector requirement on the total of our economic affairs.

That puts the much-vaunted £3,000 million tax remission into perspective. It has been more than paid for by the rise, in the real sense, in Government indebtedness. Let there be no doubt about that. There has been no provident financier, no depositing of sums of money and then distributing them to the public. The Chancellor has done it quite distinctly by increasing the size of the public sector deficit—in that and in no other way.

An increase in public deficit financing might, in certain circumstances, be perfectly desirable and defensible. If not all of us, then at any rate the great majority of us are sufficiently Keynesian to believe that. But in what circumstances? In judging whether the present circumstances are right, it must be said, first, that this treatment of public sector deficit financing—this build-up from minus £600 million to plus £4,400 million—is a most extraordinary performance for a party which spent the whole of its six years in opposition moaning about the size of public expenditure, which at the 1970 General Election pledged itself to reduce it, and which set about doing so in a particularly mean and pettifogging way in its first year of office.

The Chief Secretary said in February 1971, The Government themselves will maintain a restless search not only for greater cost effectiveness in the public sector but for further reductions in the size of the public sector. That is what we promised the country last June, and that is what we are going to carry out."—[OFFICIAL REPORT, 22nd February 1971: Vol. 812, c. 233.] As I have said, the Chief Secretary's complacency is totally unshakeable. The Government have done exactly the reverse. Their policies have been restless—so restless that they have been completely without any discernible direction. They have had the restlessness of men led by the falseness of their election prospectus into a political and economic impasse and have since been trying, without any compass of philosophy or belief, to follow any temporary or deceiving chink of light which seemed to offer them a way out.

I do not think that the Chief Secretary disputes what the Select Committee said about these matters. The Government cut the 1974–75 programme by £950 million, with all the pettifogging decreases—the abolition of the Consumer Council, the stopping of school milk, the imposition of museum admission charges, and a whole range of other things. That was when the Chief Secretary spoke. Of course, there were bigger items than those. They then increased it by £500 million by November 1971. They increased it by a further £1,200 million by the end of 1972. So, having gone down by £900 million—and all these are constant prices, so there is no inflationary effect—they went back up by £1,700 million. The net result was an increase of £750 million on the inherited programme.

Was this violent swing, this oscillation without direction, justified by the need to act against unemployment? Clearly the need for the Government to act against unemployment in 1971 and 1972 was very great. It could be held to have a very high, and perhaps an overwhelming, priority. But there are a number of things to be said here. I understand that the Chief Secretary does not wish to controvert the Select Committee's Report. Only a minute portion of the increase—less than 20 per cent.—was taken up by counter-cyclical measures.

Secondly—and perhaps this is more important—the Government's timing, in relation to unemployment, of their public expenditure changes has been quite appalling. At the very time that they should have been applying the stimulus, they were making the cuts of £900 million.