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 William Clark Mr William Clark , East Surrey 12:00 am, 12th March 1973

I agree with my hon. Friend and I am grateful that he has drawn attention to that fact. The top rates of tax in this country are certainly the highest in the Western world.

I was pleased that the Chancellor of the Exchequer referred in the way he did to the Select Committee which examined the question of child credits in the taxation system. There has been a great deal of misrepresentation or ignorance about what is happening concerning child credits in the tax credit system. I wish to emphasise that this was left as an open question in the Green Paper, and it was for the Select Committee to come back with a recommendation. However, there has been pressure in the Press and the media to suggest that the Government have already taken the decision about paying child credits to the father. That is completely wrong because no decision has yet been taken. I am grateful to my right hon. Friend for having cleared that ambiguity.

I welcome the save-as-you-earn scheme because it will mean that a person will be able to invest in the company in which he works. I do not regard this as co-partnership, and under the scheme I presume that one will be able to take out one's money after five or seven years. I should like my right hon. Friend to bear one important point in mind when he seeks to bring forward detailed legislation on this. If a person saves a maximum of £20 a month over seven years, that will give a total investment of £1,680. The shares will be worth a nominal value of £2,400. I should like to know who will pay the 30 per cent. discount. If a company issues shares at 30 per cent. discount, the value of those shares must be 143 to enable the company to receive par value on the shares—unless it is envisaged that the Chancellor will change company law which has operated for many years. If the 30 per cent. is payable by the company, it means that the company will be chargeable to tax—and with corporation tax at 50 per cent. the result will be that the Exchequer is subsidising this form of saving.

I do not object to that for one moment. My arithmetic tells me that there is a 21 per cent. tax remission to all those who join the scheme. If it is right for the scheme to be extended to the people who work in industry and the Exchequer is to give a 21 per cent. tax remission, I do not see the logic of not extending this idea to workers in nationalised industry. There are not many employees in the nationalised industries who would wish to invest in them, because the idea of investing in industry is to get a profit. This will involve local government employees, civil servants and employees in certain private companies in which it is impossible to buy shares. I should like my right hon. Friend to bear these points in mind when formulating detailed legislation with a view to allowing these persons the right to invest in other companies.

There is one omission from the Budget, and the right hon. Member for Stechford, advanced certain strictures on this topic. I, too, slightly regret the fact that £110 million has been given to relieve the cost of crisps, ice-cream and all the rest. I am all for reductions in taxation, but in terms of changes in VAT it is all a question of priorities. I should not regard crisps and ice-cream as being of high priority.

There is one section of the community which has been left out during the last few years. The old-age pensioners have had increases, the workers will be able to invest, but I am worried about the newly-married who are trying to buy houses for the first time. If £110 million was available, it might have been put to better use by helping the newly-married or those purchasing their first house. We could devise a scheme where a second mortgage could be given at advantageous interest rates so as to increase property owning.

A lot has been said about the £4,400 million which is the borrowing requirement. I have never been able to understand why the presentation of our national accounts is so archaic and almost impossible to understand. We have receipts of £27,633 million with expenses of approximately £24,000 million. We have a revenue surplus of £3,223 million and a capital expenditure of £7,700 million, and we are told that £800 million of that is a once-and-for-all exercise because of the swap-over taxation, so our true capital expenditure is £6,930 million. However, it is never clear in the presentation of the accounts how much of that capital expenditure is repayable. If it is not repayable it should appear not under capital expenditure but under revenue expenditure. If it is overseas aid, an overseas loan or grant, or a grant to private industry, we get no return. These categories should be included under revenue expenditure.

I urge my right hon. Friend to sort out what is true capital investment. If a balance sheet shows a surplus of £3,200 million, it is quite acceptable to be able to spend double that one year's profit. But we are not really certain whether we are talking in the same context. I should have thought, given the reforming qualities that my right hon. Friend has shown regarding not only unified tax and tax credits but other matters, that it is high time that we had an independent body to look at the presentation of our annual accounts. It could be done through the procedure of a Royal Commission or in some other way.

Generally I welcome the Budget. My right hon. Friend is taking a risk but one which we are capable of sustaining. Much depends on the success of phase 2. I am certain that moderation will be shown and that the following year will prove my right hon. Friend to be right.