The right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) began his speech by observing how difficult it must be to prepare one's Budget speech in a week of flying off to international monetary crises. I should like to begin by joining with other hon. Members in congratulating my right hon. Friend the Chancellor not only upon his Budget speech, but also upon presenting to the House the third Budget in which he has managed to reduce taxes yet again.
I am particularly glad that the Chancellor chose to ignore the voices, particularly from the Government side of the House, suggesting that taxes should be raised, because surely it is the great unlearned lesson of British economic policy in recent years that in any period when one is trying to appeal for any sort of wage restraint it is purely counter-productive to raise taxes because that in itself can become an inflationary force.
There were two features of the Budget which I particularly welcomed. The first was the save-as-you-earn scheme to enable employees to buy shares in the companies for which they work. I particularly welcome the chance to turn some trade unionists into good capitalists. I notice that some Labour Members, and Mr. Feather, are rather sceptical about whether such middle-class habits as equity investment could be carried into the working classes, although I am glad to see that Mr. Clive Jenkins has taken a rather more positive view. I should have thought that in this desire to spread the ownership of companies around our society, we had something on which both Right and Left could have agreed.
The scheme has been criticised because although it provides safeguards during the period of acquisition there are no guarantees after the shares have been acquired. But I should have thought that, given the favourable tax considerations which are being given, this was entirely right and that once the shares had been acquired it was right that the risks of owning those shares should be borne by those who had purchased them. The only feature of the scheme which I found rather strange was that we should have this introduced at a time when the Green Paper outlining the phase 2 proposals had announced that various types of stock option schemes were to be frozen for the moment and that new schemes of this type were not to be introduced. I hope that the Chancellor will be able to confirm that the Government will now be taking a rather less stringent attitude towards such schemes.
The second aspect of the Budget which I particularly favoured was the help for the elderly, the raising of the age exemption limit, which will particularly help some people who are above the poverty line but form a group of people who perhaps feel that they have been a little neglected in recent years. The effective linking of the age exemption allowance to retirement pensions is welcome and overdue. I hope that the Government will adopt a similar attitude towards the earnings rule and the disregards for national insurance benefits. One has the impression that some of those have not been adjusted to take account of inflation. Surely the earnings rule ought to be adjusted just as much as benefits.
The increases in pension at a time when there were voices, not solely on the Government side of the House, crying out for restraint were increases which most people would regard as generous. Pensions have now kept abreast and ahead of the cost of living and, although not formally linked to national average earnings, have also kept pace with national average earnings. I am glad that the pension increase is to be financed in such a way that it will not be a burden on the lowest-paid. I dare say that the 40p per week reduction will not lead to a march of the lowest-paid down Whitehall. But certainly it relieves them from the sort of burdens placed upon them by successive Labour administrations. The increases are generous. The reactions of organisations such as Age Concern are not only mean but also do not, I believe, represent the views of the elderly generally. One might add that in so far as the pension level is still not high enough, it must reflect the low level of the pension when the present Conservative Government came to office.
Moving on swiftly to the international monetary scene and the remarks made by the Chancellor in his speech on a European approach to international monetary problems, I had intended to urge the Chancellor not to participate in a joint European float. In view of this morning's announcement, I hope I may now regard my need to make such remarks as superfluous. I do not believe that a joint float is likely to be a good solution to either the monetary problems of Europe or to our own problems. That does not mean that Europe should not act together on issues of international monetary reform. We must act together and use our bargaining power together, otherwise Japan will not liberalise its trade and we shall be unable to persuade America to do anything at all. But acting together and a joint float are not the same thing.
There are considerable disadvantages for the United Kingdom in a joint float. It would result in sterling floating upwards with an adverse affect on our balance of payments at a time when we are particularly concerned about it. When a higher proportion of our trade is with the United States than is the case with France or Germany, the joint float against the dollar would act particularly to our disadvantage. I doubt also whether a joint float could be practicable, except on the terms that might be offered by a philanthropist. As the Chancellor asked for the sort of terms that could be given only by a philanthropist, it is not surprising that he was denied them.
When we talk about a joint float, we are talking not just about the pooling of reserves but also about maintaining narrower margins between the European currencies. While such an approach might last while all the European currencies are tending to float in any one direction, once one begins to get a divergence of movement between those currencies the position will be no more maintainable than the snake-in-the-tunnel experiment we had previously.
The third reason why a joint float is the wrong approach to monetary policy was the reason advanced by the hon. Member for Cornwall, North (Mr. Pardoe)—that is, that the harmonising of exchange rates is the last rather than the first thing about which one ought to think if one is concerned to develop a European monetary policy. We are in danger, in trying to harmonise European exchange rates, of attaching the sort of symbolic prestige to them, mistakenly, that people used to attach to particular levels of parities, when Governments refused to change them. We must not fall into the mistake of attaching the same sort of prestige to the harmonisation of parities on a European basis.
It is easy to see the attractions of a joint float to the Germans. It spreads the flow of hot money between several currencies. It lets the Germans off the hook on which they are impailed by Herr Schmidt's determination that his policies shall be distinctly different from those of his predecessor. Herr Schmidt's predecessor would not have allowed so much time to elapse before doing the obvious thing of letting the mark float upwards.
The Chancellor is to be congratulated on allowing sterling to continue to float. He indicated in his speech that there are so many uncertainties ahead of the British economy at present that it is difficult to imagine a time when it could be more difficult to decide at what particular level sterling should be repegged. Anything decided now is likely to be the wrong rate in six months' time. It is not even as though the record of the Bank of England or any other central bank has been a particularly good one in deciding rates at which parities ought to be fixed. I can think of no occasion on which the so-called speculators have been wrong and the central bankers have been right. On each occasion the market has been right, and we ought to let the market make its own judgment again.