I beg to move, at the end of the Question, to add:
But, noting that the rate of growth is falling whilst prices and the trade deficit continue to increase, humbly regret that the Gracious Speech fails to include policies designed to meet the needs of the whole community, increasing democratic accountability of business power by extended public control and ownership, and policies designed to control the price of food and housing and to redress the inequalities of wealth and income which divide the nation.
After three-and-a-half years of deepening disaster the Government now enter their last full term with a Gracious Speech which scrapes the bottom of the barrel but ignores all the major problems which hon. Members know will occupy most of their time in the next 12 months—problems such as the energy crisis which we have just been discussing, the balance of payments and, above all, the problem of inflation.
Last week 332 new price increases were announced, bringing the total since the last General Election to over 30,000. We were told by a Treasury Minister last week that the pound has now sunk to 77p in value compared with its value at the time of the General Election, and is still sinking. Food has risen in price 42 per cent. since the General Election, and fresh food 56 per cent. Food has risen by 19 per cent. since the freeze was introduced last November, and fresh food by 25 per cent.
If we extrapolate the latest available figures from September to October, in the 11 months since the freeze began the retail price index has risen by 8·1 per cent. But, as the Government have at last admitted, the retail price index does not properly represent the cost of living. It does not reflect the exceptional increases in the price of housing, the fact that council rents have gone up by £1 for many council tenants, the fact that mortgages have gone up by £2 a week for the average mortgagor, and it does not reflect the special burden falling on the retired, who spend 42 per cent. of their income on food, which has nearly doubled in price since the time of the last General Election.
The Prime Minister, who makes much of this, will agree with me that the official food survey shows that since the first quarter of 1970 the old-age pensioner's consumption of all meat has fallen by 2 per cent., of fish by 6 per cent., of eggs by 7 per cent., of butter by 20 per cent., and of fruit by 30 per cent. The only substantial increase in consumption, in volume terms, is an increase in the consumption of potatoes, up by 11 per cent. to try to make up for the fall in the consumption of energy-giving foods.
Only the other day we had the Prime Minister once again blaming this inflation entirely upon the movement in world food prices, which he says is beyond his control, resulting from the cold currents in the Antarctic Ocean off Peru, and so on.
The fact is that the country knows as well as the Government that council house rents have been increased by the direct action of the Government, forced through this House, and that mortgage rates have been increased because the Government depend on maintaining almost the highest rates of interest in the world to protect the pound sterling against the consequences of the Chancellor's fiscal profligacy. The House and the country know that land and property prices have risen because in the past 12 months the Government have built fewer houses than at any time in the past 10 years and have given speculators the opportunity to profiteer from the shortage of houses by allowing them tax-free loan interest to bid up the prices.
The House and the country know that it would have been perfectly possible for the Government to subsidise food, as has been done by a non-Socialist Government in Norway, to freeze retail profits on food, as has been done by a non-Socialist Government in France, and even to accept the Spar-Vivo proposal that the big stores should maintain constant levels of food prices and meet the difference out of their profits on other commodities. But the Government have done none of those things. Last year we saw the profit of the Fatstock Marketing Corporation increasing by 100 per cent., so that Sir John Stratton could get an extra £315 a week.
Above all, the Chancellor has financed tax reliefs which have gone mainly to the better off—£4,000 million worth of tax reliefs he is always telling us—but not by cutting public expenditure. We learned only this weekend that last year public expenditure was a higher percentage of our national wealth than at any time in the past 10 years. The Government have financed these reliefs by printing money. As a result the Government have a borrowing requirement of over £4,000 million although there is no spare capacity in the economy. Growth has already fallen this year to the post-war average, and the Government are planning to reduce growth to half of last year's rate in the coming year.
The way in which the Chancellor has handled taxation and public expenditure has two obvious consequences on the increase in the cost of living for ordinary families. One direct consequence, because demand now far outstrips our capacity to produce, is that price increases inevitably follow for the ordinary family. Another indirect consequence, because excessive demand in Britain is sucking in imports and diverting possible exports to home consumption, is that we now have the highest trade deficit in our history. It is caused primarily not by vital imports of food and raw materials but by unnecessary imports of manufactured goods. [Interruption.]
The Prime Minister says "Absolute rot", and so does the Secretary of State for Trade and Industry. Does the Secretary of State for Trade and Industry deny the figures given in his report this month which show that growth in manufactured exports is lagging behind growth in total exports, that the growth in manufactured imports has leapt ahead of growth in total imports—not just in value but in volume—and that the latest figures given by the Department for the second quarter of 1973 show that the volume of exports in manufactured goods is up by 31 per cent. on 1970 and the volume of imports of manufactured goods is up by 60 per cent. on 1970? In other words, consistently under this Government, the rate of increase in the volume of imports of manufactured goods has been twice as high as the rate of increase in exports of manufactured goods. Perhaps the Secretary of State for Trade and Industry disagrees with the figures published by his Department a week ago?
Does not the right hon. Gentleman agree that in the last three months when we have had an adverse balance of £330 million our imports of industrial materials and machinery have been £992 million?
That has nothing to do with the facts I have just quoted. According to the Department's figures the increase in imports of manufactured goods has been twice the increase in exports. I defy the Chancellor of the Exchequer to give any reason for this other than his fiscal profligacy over the last 18 months.
Above all, this increase in imports of manufacturered goods has been most serious in our trade with the Common Market. A year ago we were told by Ministers that entry to the Common Market would transform our balance of payments situation, but the fact is that the deficit in our trade with the Common Market countries this year is likely to be equal to our total balance of payments deficit over the year as a whole, and it is still increasing month by month, on the Department's figures.
With respect, Ministers have no means of denying this fact because it is the reason why the pound has been sinking like a brick over the last 18 months. The reason for that is the appalling balance of payments deficit, created essentially by the Government's handling of the fiscal situation. Since June last year the fall in the value of the £ of between 18 and 20 per cent. must add between 4 and 8 per cent. to the cost of living. At least half—and perhaps more—of the increase in the cost of living as revealed by the Index of Retail Prices is the direct consequence of the way in which the Government have handled the economy.
The Chancellor of the Exchequer is doing nothing whatever to reduce this deficit in his Budget. As was made clear in the White Paper which dealt with phase 3 of the prices and incomes policy, he is relying entirely on the hope that import prices will fall rather than rise over the next 12 months. Even if import prices fall, the only result may be the sucking in of more imports because they are cheaper and the reduction of the volume of our exports because those to whom we hope to export have less money to spend. But there is no evidence that overall our import prices will fall.
It is perfectly true that there have been good harvests in the Soviet Union and the United States. That may reduce the price of grain in Britain some time in the coming year, but we are still being warned by the food trade that by Easter the loaf of bread may cost 15p. The CBI survey which was published last week shows that more firms than ever before since these records were kept expect their costs to rise over the next four months. That CBI survey was taken before the increase in the price of steel comes into effect. If, as the British Steel Corporation intends, that increase is 13 per cent. or 14 per cent., it will add £200 million to our industrial costs. I hope that the Chancellor of the Exchequer will tell us whether it is true that he has been trying to persuade the British Steel Corporation to delay these increases until after the by-elections.
Is the right hon. Gentleman incapable of distinguishing between a Budget deficit on capital account and one on current account? Is not he aware that our current expenditure is fully covered by the Budget and that the deficit is entirely on capital account? Does he wish the Government to reduce expenditure on schools, roads, hospitals and homes? If so, will he please tell the electors before the by-elections?
I am surprised at the hon. Lady. She must know that the Government have decided to cut expenditure on houses and hospitals in their phase 3 policy. As to the general matter which she has mentioned, I suggest that she talks to her saturnine neighbour but one the hon. Member for Oswestry (Mr. Biffen), who will explain to her some of the economic facts of life.
A few moments ago we were discussing increases in oil prices which during his talk-in on the BBC the Prime Minister told the country would add £400 million to our balance of payments deficit. How does he suggest that that will not be reflected in industrial costs unless he proposes to subsidise the sale of oil in this country after paying the money to the Arab producers? [Interruption.] The Prime Minister suggests he will make the oil producers take it out of profits. He must be aware that when he gave this figure of £400 million increase in our balance of payments deficit he was saying the opposite of what the Chancellor of the Exchequer said the day before and the Secretary of State for Trade and Industry said this afternoon—that the figure of £400 million was greater than the final impact on the balance of payments. Perhaps the Prime Minister or the Chancellor of the Exchequer will explain this in more detail.
Perhaps the Chancellor will also explain what he thinks will happen to oil prices during the next 12 months. I am surprised that the Chancellor thinks that this is a matter to snigger about. He must know that during the last 24 hours the Nigerian Government have decided to double the price of oil they sell to the world. That is a substantial increase over the 70 per cent. increase in the price of Arab oil decided on a fortnight ago. He must also know, or at least suspect, that if the Arabs maintain the cuts in their total production that they have announced they are certain to require the consuming countries to pay more for the oil they buy.
This steady increase in industrial costs which is expected by the CBI will be multiplied by the increase in steel prices which is about to be announced and by the already announced increase in oil prices which will add £400 million to our balance of payments. All these enormous increases in industrial costs are certain to lead to a substantial and continuing increase in the cost of living over the next 12 months.
The basis of the Government's economic policy—namely, a substantial fall in import prices—is a basis for which there is no evidence whatever except in the limited area of grain. This is evident from the fact that the Government hope to conceal price rises allowed by the Price Commission as a result of increases in costs by telling the Price Commission not to publish the increases which it allows during the next 12 months. The Government, I suppose, have the right to advise the Price Commission to conceal from the public any price increases it allows.
I assume that Members will be allowed to ask the Minister for Trade and Consumer Affairs for information about price increases permitted by the Price Commission, and that the answers to their Questions will be published in HANSARD as often as the Questions are asked. I hope that the Chancellor of the Exchequer and the Government—this is a matter for the House as a whole—will not suggest that in this area alone essential facts about the operation of a body set up by resolution of this House, under a law passed by this House, are to be refused to hon. Members who ask Questions of the Minister concerned. [An HON. MEMBER: "It will not be the first time."] I hope that my hon. Friend will join me in pressing the Government to apply, in the case of the Price Commission, exactly the same rules as they would apply to the nationalised industries, namely, that if a Member of Parliament, in pursuing constituency duties and duties to the nation, asks for information about the operation of a public body, the information shall be given to him, and to the public, through publication in the OFFICIAL REPORT.
From the facts that I have quoted it is clear that there will be a continuing rise in prices over the next 12 months. Let us look for a moment at earnings. Since the freeze was introduced in November of last year earnings have gone up by an average of 9·8 per cent. in the first 11 months. I am extrapolating the August figures, which are the latest we have, to October. This increase in earnings reflects a 2 per cent. increase in the number of hours worked. Moreover, it reflects an increase of over 16 per cent. in overtime worked in the manufacturing industries.
At first sight, nevertheless, the increase of 9·8 per cent. in earnings might appear to give people an increase in the standard of living compared with the 8·1 per cent. increase in the retail price index. But the House will be aware, as every working man and woman in the country is aware, that up to 30 per cent. of the increase in earnings is taken by the Chancellor of the Exchequer in taxes, and for those people earning between £20 and £30 a week the amount taken by the Chancellor in taxes may well be over 30 per cent. It can be as much as 100 per cent., or even higher, because of loss of benefits.
In claiming that he has reduced taxes for the average worker the Chancellor has been engaged in the biggest confidence trick of all time. The Chancellor knows, because he gave the figures in answer to a recent Question about the phenomenon of fiscal drag, that of the 3½ million people he said he was taking out of tax in the Budget of 1972, 1¼ million have already come back into tax liability during the past financial year, and another 750,000 will come into tax during the current year. This means that a total of 2 million out of the 3¼ million who were relieved of tax are coming back into tax liability during the current financial year.
Taking the whole range of wage and salary earners, we find that, even on the inadequate figures provided so far by the Pay Board, during the coming year wage and salary earners will pay an extra £871 million in tax in order to finance the £310 million which was given away in the last Budget to people who are almost entirely living off investment income or earning over £5,000 a year.
Even if we ignore the inadequate reflection of housing prices in the retail price index, we find that the only people who have gained in real terms during the past 12 months of the prices and incomes freeze are those who were earning less than £20 a week in November 1972—I welcome that—and those earning over £60 a week. Those earning about £40 a week have come out even. Everybody else has lost in the past 12 months.
As this is a by-election week, I should like to take the example of a typical Conservative voter in Hove, Berwick or Edinburgh who in November 1972 was earning a little above the average income—say, £2,000 a year—and who had a £5,000 mortgage. The increases in his tax and mortgage interest over the past 12 months will have reduced his permitted pay increase to £51, a total increase after tax and mortgage payment of 3·5 per cent. But the cost of living has risen by 8·1 per cent. Therefore, the typical Tory voter has suffered a cut of 4·3 per cent. in his real income. In fact, he is £86 a year worse off at the end of the first year of the Government's prices and incomes policy.
The House will remember the balmy days when the Chancellor used to tell us that we should not look at prices or wages but should simply see what is happening to the standard of life. If we take his advice now, at the end of 1973, we find that the standard of life has fallen for a majority of the population.
In reply to a Question that many of us thought was planted last Thursday, the right hon. Gentleman made great play of statistics of relative inflation rates. But the facts were given in detail by a report from the European Commission last week, which showed that in Europe only Holland increased real earnings by less than we did. Some countries which came out worse on the straight retail price index figures came out very well on the real earnings figures. For example, Italy increased real earnings by more than twice the amount by which the retail price index increased. Conservative Members may not realise that although those figures may appear somewhat arcane, for ordinary families in Britain trying to scrape along on what they receive in the face of rising prices, they are facts with which they live every day of their lives, the most important facts to them in the whole political, social and economic situation.
History has produced a number of symbolic instruments, such as Occam's razor and Morton's fork. We can now add Barber's scissors, which snip every extra pound earned by people in Britain into worthless shreds. One blade of the scissors is the higher cost of living which results from paying for tax reliefs to the rich by price increases to the average family. To add insult to injury, the other blade is an increase in tax on money wages which do not reflect any increase in real earnings.
It is not surprising that the Chancellor and some of his hon. Friends spend so much time and energy trying to mobilise the sucker vote against anyone who asks for honesty in money matters. They were doing it a minute or two ago. The Chancellor recently ransacked the thesaurus for phrases beginning with "f". But he knows that if any private individual behaved in the way in which he has behaved during the past three years he would be languishing in gaol, even under the existing company law, not to speak of the changed company law proposed in the Gracious Speech.
During a period when ordinary worker's living standards have been falling, the workers have been producing an increase in wealth which the Government boast is well over 5 per cent. The House and the workers ask where the money has been going. The answer is clear enough: it has been going above all into profits. In the past 12 months profits have been rising at least twice as fast as earnings before tax, and for many firms they have been going up much faster. The October figures show that the pre-tax profits of industrial companies were up by over 42 per cent., twice the average in the first nine months of this year. Wages before tax have been rising by only 9·8 per cent.
Profits have been rising faster to the extent that those concerned have been producing less wealth. For example, bank profits have risen by between 80 per cent. and 100 per cent. during the past 12 months, not because bank managers or bank clerks have been working harder but as a direct and automatic result of the Chancellor's policy on interest rates. For property speculators the sky is still the limit.
The plain fact is that, as the Price Commission report shows, there has been a big shift of national wealth to profits away from earnings in the past 12 months. Profits now take 13 per cent. of the gross national product, as against 11·7 per cent. last year. The Price Com-
mission also reported that it has been unable effectively to control profits because of defects in the code, pointing out that companies which sub-divide their operations have been able, on average, to get 60 per cent. more profits than were justified under the code, and in some cases much more. Yet, although Sir Arthur Cockfield said:
experience shows that any form of subdivision will be exploited in an unacceptable fashion",
the Government insist on maintaining a form of sub-division, though a different form, under phase 3 of the prices and incomes policy. In addition, as every accountant knows, there are innumerable ways in which companies can and do dodge the control on profit margins—by manipulating the value of their stocks, by pulling expenses forward and pushing profits backward, by phony depreciation.
It is true that, as has often been said in the House, the Government have made the biggest U-turn in British political history by breaking their election pledges and instituting the machinery of State control in the economy, which they specifically promised in the General Election not to do. They have reversed their techniques of economic management, but the objectives of their economic management remain the same—to achieve a massive shift of wealth and income from the poor and the average family to the rich [Interruption.] I will give the evidence. That is the one consistent theme that has run through every twist and turn of the Chancellor's fiscal policy.
Let us take tax policy. In the middle of the new prices and incomes policy the Chancellor gives away £310 million to the better-off, which is paid for by price and tax increases for the rest, and he has brought 2 million of the poorest in the land back into tax. That is a fact.
The Chancellor's tax credit policy will operate in a similar way. It will cost as much as the Opposition's undertaking to increase old-age pensions to £10 a week for a single person and £16 a week for a married couple. But the money that the Opposition would give largely to those who form the poorest section of our community, the retired people, will be used under the Government's tax credit policy to extend benefits to everyone, including the very rich.
It is also being used as an excuse to delay for up to five years the payment of increased child benefits to the wife, which would also cover the first child as well as the rest. The Opposition do not oppose the tax credit idea in principle, but I warn the Chancellor that he has no chance whatever of getting the Labour Party's support for a scheme along the lines that he published last year and which was discussed in the Select Committee.
So much for the taxpayer, Let us come to the way in which the Government enlarge the differential between rich and poor on savings policy. We have not yet discussed the Page Report in the House—I hope that we shall have an opportunity of doing so in the near future—but that report makes it absolutely clear that the present rates of inflation make most of the National Savings instruments a confidence trick by which the Chancellor swindles millions of pounds a year from those who are least able to afford it.
Most of the National Savings instruments involve a negative rate of interest for all except the very highest taxpayers who benefit most from the tax reliefs that they offer. Even the Daily Telegraph suggested the other day that National Savings certificates should carry a Government warning: "Saving can damage your wealth." False and misleading advertisements continue to be printed under Government authority for the National Savings movement. I see that the Gracious Speech proposes to ensure that there is "Truth in Lending." I wonder why the Government do not insist on truth in borrowing and start with themselves in the area of National Savings.
It is in savings that the Government's discrimination against the small man is seen at every point. When the Government wanted to throw a sop to the building societies, they limited the interest on deposit accounts to 9·5 per cent. for deposits under £10,000 but specified no limit whatever for deposits above that level. Indeed the rich are allowed tax-free loan interest. They are able—we have seen good examples in recent months—to borrow money tax-free on an overdraft and to lend it short term at rates of up to 100 per cent.
Let us turn to the Government's earnings policy. We had the case earlier this year of Mrs. Dorothy Summerfield, one of tens of thousands of shop assistants whom the Government sought by retrospective legislation to rob of £5 due to her under a previously authorised agreement with her employer. Yet when the Government find that Sir John Stratton has got away with an increase of £16,000 and Sir John Clark of Plesseys has got away with an increase of over £17,000, under a completely analogous agreement, they let them get away with it. All that the Government are prepared to say is that they can keep their ill-gotten gains but that next year they will be allowed an increase of only £7 a week.
We know well—this was confirmed by a report by INBUCON in the last week or two—that in addition to their wage and salary increases the rich always get away with a greater range of increases in their standard of life, with free cars, expenses and pension rights. In some cases they are able to benefit from all these methods in terms of real living standards by as much as they earn in salary.
I suspect that Mrs. Dorothy Summerfield's name is inscribed on the right hon. Gentleman's heart because he was caught out by the courts. When this dispute was taken to the courts by USDAW it was proved that the Prime Minister had acted illegally in attempting to rob Mrs. Summerfield and her friends of the £5. So far as I have been able to discover, although the Government huffed and puffed about challenging the court's decision, they have not chosen to do so. I hope that I am right in assuming that the Prime Minister does know about this case—[Interruption.] Yes, he knows all about it: that is exactly what I thought.
We come to the question of land and property. Council house tenants see their rents being increased by up to £1 a week, and mortgage holders see their repayments going up by an average of £2 a week. Yet the only measure taken to deal with this problem of house and land prices in the Gracious Speech is a promise under the new phase 3 price legislation to give up control of office rents altogether. Within four days of this announcement, £150 million was added to the value of the assets of the top eight property companies. I put it to the Chancellor and the Prime Minister again—I hope that the Prime Minister is not going to leave at this point——
The Prime Minister is leaving because he knows that it is impossible to defend the fact that the 20 top property companies in this country, which own over £3,200 million worth of assets, pay on average only £1 million in tax a year. Neither the Chancellor nor the Government as a whole have tried to do anything about this all the time that they have been in power.
But the worst of all areas in which the Government have discriminated in favour of the rich against the poor is in the maintenance of a policy which depends on inflation. The Chancellor knows that his whole economic strategy now depends on inflation continuing in order to cut excessive demand in the economy. The point was well expressed in an article by the London Business School in the Sunday Telegraph yesterday saying that
the effect of inflation will be to mop up surplus funds in the economy.
The Permanent Under-Secretary at the Treasury, Sir Douglas Allen, put it rather more delicately last summer, when he said that the Government were relying on what he called
…the spontaneous effect of the changing wage-price relationship.
The Government now depend for bridging their deficit on tax increases imposed by fiscal drag on those who have seen no increase in their real standard of life.
Meanwhile, of course, we are getting deeper and deeper into debt abroad. The Chancellor has pushed the public authorities into borrowing nearly £1,000 million abroad since last March at rates of interest far above those at which the Labour Government ever borrowed money when they were required to do so, and in many cases at rates of interest far above those paid by anyone else in the world, even at the present time.
Of course, the Government cannot go on like this. Many of us suspect that they are only waiting for the energy crisis to make yet another U-turn. I suspect that my hon. Friends are unfair in suggesting that Thursday's by-elections are the only reason that the Government are doing nothing about the increase in oil prices and the cut in oil production. I suspect that the real reason is that they are waiting for a major oil crisis—promoted in part by their own refusal to act now—to produce a smoke screen under which they can make yet another reversal in their whole style of economic management.
We have learned again and again since the war that there is no chance of solving this problem of inflation unless the people of this country feel that the Government's policy is fair, unless the Government act on prices which can be controlled and unless the Government show honesty in their general management of the economy. That is why we have pressed consistently in the last 12 months for direct action on food and housing costs. We shall be discussing housing in more detail tomorrow. All that I would say now is that there is no way in which we can hope to reduce the price of housing without taking building land in the urban areas into public ownership.
If the Government want any hints or suggestions here, I might quote
One extremely sober and emphatically non-socialist director of a leading property company
who was quoted the other day in the Daily Telegraph as saying
that he was now utterly convinced that the only possible social solution to rising property values was nationalisation of the property industry. As this would require to make it work the conversion of every estate agent and chartered surveyor, to say nothing of property developers themselves, into civil servants or at least State employees.
this sober and non-socialist director said.
it may safely be ruled out during the life of the present Government.
We shall be debating the general management of the economy on another occasion—[Interruption.] I dealt at some length during a debate a fortnight ago, at which I think the hon. Member was present, with the ways in which I would propose to increase taxation and reduce Government expenditure.
The simple problem facing the nation—I think that the Prime Minister would agree with this—is the failure of British industry, in spite of all the incentives that it has had in the form of tax relief, in spite of the substantial increase that it has seen in its profits, to invest its profits in new capacity in time and to carry out the intentions that its members declare from time to time to the DTI or to the Financial Times inquiries.
But behind this central failure lies another question to which the Prime Minister referred in his recent conversation with the Institute of Directors. According to the record of his conversation which was published in The Director, the right hon. Gentleman said:
The whole social structure of this country suffers from divisions which are far greater than those to be found in other free enterprise economies like the United States or Germany.
I believe that this is profoundly true and that it is at the root of all our economic as well as social problems. The recent publication of the pervasiveness of the public schools in the higher ranks of the establishment bears that out. A great deal of this can be put right only by changes in our education system which we shall be discussing on another occasion, but tax policy has a major part to play.
The fact is that this Government—they took credit for it in earlier years—have used their tax policy to widen the gulf between the classes rather than to narrow it. It was possible for the Director of Economic Affairs in the Brookings Institute in the United States to point out last week, without contradiction, that the British tax system is more regressive than even those of the United States and Japan.
I believe that the Prime Minister at least recognises the existence of this problem, although so far he has given us no hint that he has any policy for solving it. But the Chancellor has consistently rejected even the diagnosis. He persists in widening the gulf between rich and poor, the gulf between the classes—and not only in his fiscal policy. Whenever we have any industrial trouble, he can be relied on to make a speech deliberately intended to inflame the atmosphere and to make the situation worse. Everything that he has done in the three years that he has been in that position is calculated to aggravate the central problem which the Prime Minister said lies at the root of our present economic difficulties.
The right hon. Gentleman shows no sign in this field, any more than in the field of economic management, of learning the lessons of his own repeated failures. He knows now that his policy has worn out. His justification for it has worn thin. His whole attitude belongs to a bygone age and it will be swept away with the other relics of Selsdon Man as soon as the British people have a chance to choose their future.
I am sure that the House will wish to join me in congratulating you, Mr. Deputy Speaker, on your appointment.
Of all the legislation which is referred to in the Gracious Speech, by far the most far-reaching, in terms of its impact on the individual and on every family, will be the legislation to give effect to the tax credit scheme. The House will recall—I first announced the new scheme, in my 1972 Budget—that the scheme is designed to bring together our systems of taxation and social security. The Green Paper was published a year ago.
Since then we have had the report of the Select Committee. The majority of that committee endorsed the principle of the scheme. This is an opportunity for me to thank all those who served oil the committee, whatever their views, and in particular to congratulate my hon. Friend the Member for Surrey, East (Mr. William Clark) on the erudite and constructive way in which he carried out his duties as Chairman of that all-important Select Committee. The tax credit scheme was supported by the majority of those who gave evidence to the Select Committee and by the majority of those who have made representations directly to us.
Already in this Parliament we have completed the reform of indirect taxation and company taxation. We have unified income tax and surtax. None of that would have been accomplished without the support of my right hon. and hon. Friends. I do not doubt that they will support the Government's tax credit scheme legislation. That legislation will literally revolutionise our taxation and social security systems. That will be to the benefit of the individual citizen, whether he be a taxpayer or whether his income is below the tax threshold. It is because the new scheme has been widely welcomed that I hope, despite what the right hon. Member for Leeds, East (Mr. Healey) said, that it will receive the support of many Opposition right hon. and hon. Members.
Be that as it may, the legislative provisions will be in the Finance Bill. That legislation will provide for the new scheme to operate as follows. For the great majority of people in full-time employment the employer will apply the basic rate, which is at present 30 per cent., to the whole of the employee's pay. Against that amount he will set the single or the married tax credit. The employee will pay income tax only on the excess.
The radical new development comes when a person's pay is below the break-even point. That is when in any week the basic rate charged is less than the credit entitlement. That will be so, for example, with low wage earners, those whose earnings have been interrupted by sickness or for other reasons, and a great many widows, retirement pensioners and other National Insurance beneficiaries. The employer or the Government Department paying National Insurance benefit will positively add to the take-home pay or to the benefit the amount by which the credit exceeds the charge.
Child credits will replace the present income tax child allowances and the other existing family allowances. The new credit will be payable for all children in the family, including the first child. There are seven-and-a-half million first children who have never qualified for the family allowance. The child credits will be worth more than the existing income tax child allowances and family allowances which they replace. The married rate of credit will be payable not only to the married couple but to the single man or woman, and in particular to the widowed or separate mother who is facing the responsibility of bringing up a child single handed. That, too, will be a great step forward.
The child credits will go to the mother or to whoever has the day-to-day responsibility for bringing up the children. She will get the child credit herself in cash from the Post Office in exactly the same way as she now gets the existing but much less valuable family allowances.
Although legislation will be introduced this Session, such is the radical nature of the new scheme, not to mention the magnitude of the task of transition, that it is inevitable, as we see both from our own studies and from the representations which we have received from industry, that it will take some years before the change can be implemented fully. Among other things, it will mean that we shall be able to sweep away altogether all the complications of the present pay-as-you-earn system, with its 450 separate codes.
The preparations are now being pressed forward urgently. For example, we have sanctioned the provision of buildings in Washington, County Durham, which, if the House approves the scheme, will be available for housing some of the computer and child credit elements of the scheme. I think that the majority of the House will agree that it is right to proceed with the legislation, and to proceed urgently with the administration, because the tax credit scheme will make a major contribution to solving the problem of family poverty. Further, it will provide a new means of help for pensioners, widows and other National Insurance beneficiaries.
The result will be a substantial reduction in the number of pensioners who now need supplementary benefit. For them the present means test will be replaced by automatic benefit. The scheme will bring particular help to the 3 million or 4 million pensioners who, while above supplementary benefit level, have incomes not large enough to pay tax. The new arrangements will replace the family income supplement for everyone within the scheme. It will remove from the so-called poverty trap three out of every four families who may now lose 50p or more out of every pound of increase in income.
The income support provided through the tax credit system will be automatic. There will be no means test and no procedures to discriminate between those who will be net tax payers and those who will receive net income support. There will be no danger, when the scheme comes into operation, of people being hesitant and reluctant to claim what is rightly theirs. That, too, will be a great advantage.
When the details of the legislation are published in the Finance Bill, the House will note that we have ensured that the structure of the scheme will be inherently flexible and will be capable of being developed and refined to meet the new requirements which will be made on it in future.
No. That is the same point which we have had year after year from right hon. and hon. Members opposite—namely, that it was impossible to cut taxation. Just because they could not do so, that is no reason for a Conservative Government being unable to do so.
The right hon. Member for Leeds, East referred to the balance of payments. Our exports now have a substantial price advantage. It is a remarkable and too-1ittle-known fact that, comparing the first eight months of this year with the second half of last year, the actual rate of increase of our exports in volume terms is up by no less than 21 per cent. That is a figure of which the Japanese would not be ashamed. On the same basis the figure for imports is 16 per cent. Furthermore, the rate of increase of the volume of imports for the first eight months of the year has fallen to about 5 per cent., as against 12 per cent. for exports.
One of the biggest increases in the total of imports has been in basic materials. Another large rise has been in machinery. Both basic materials and machinery are needed for production. Whatever the figures for any month may be, it is right to say that in contrast to the sharp increase in exports, the volume increase in imports has shown distinct signs of moderating in recent months.
On 17th October a large rise in oil prices was announced by the Gulf States. The new pricing arrangements are complex and precise details are still not fully clear. But it cannot be doubted that they will mean a further worsening in our terms of trade. This, too, needs to be said. There can be no escaping the fact that this action must inevitably make the British nation and the British people worse off than they otherwise would be.
Nevertheless, the effect on the balance of payments will not simply be a deterioration in the current account. There will be off-setting factors. The rise in the earnings of the oil-producing countries will improve their capacity to import, and United Kingdom exports should benefit particularly because, as I have said, we are now very competitive. Thus the net effect on our visible trade account will be less than the immediate impact on our imports which, as my right hon. Friend the Prime Minister said, will be probably about £400 million.
Are not the Arab countries already earning a very great deal more than they are able to spend and, therefore, is not this increase in their earnings very unlikely to lead to any increase in their spending? This is, after all, the central problem, with which the Chancellor is familiar, of the risk of hundreds of millions of Arab dollars in surplus money slopping around among the foot-loose funds of the world by 1980.
The right hon. Gentleman has misunderstood me. I was talking about the current account and, in particular, about our visible trade account, for which I gave figures. They are different from the capital account, to which I am now coming.
The Chancellor has misunderstood me. The point that I was making is that the Arab countries, for some time, have been earning a great deal more money from oil sales than they are able or willing to spend abroad and that, therefore, any increase in their earnings is unlikely to be reflected by a significant increase in their purchases abroad.
I should have thought that that was self-evident, because obviously any increase in the oil revenues is likely to benefit the capital account and therefore the balance of payments taken as a whole. Obviously, if what the right hon. Gentleman is saying is that only part of the resource cost of the higher oil prices would be represented by an immediate export of goods, whether from the United Kingdom or from other industrialised countries, that is true. But much of the increased revenue of the oil-producing countries will be invested, as the right hon. Gentleman said.
I had not intended to deal with this point because I thought that it was well known by everyone. But we must also remember that the addition to production costs associated with the rise in oil prices will be borne by all industrial countries. However, the United Kingdom is relatively less dependent on imported oil supplies for its total energy needs than are most other Western European countries or Japan. The total effect on our domestic prices of the recent oil price rise is expected to be small. Moreover, our dependence on imported oil will decrease very substantially. Indeed, even taking account of the expected increase in oil consumption by 1980, the latest estimate is that by 1980 about two-thirds of our needs will be met from the North Sea. That will mean a dramatic saving in our foreign exchange.
The British people have been particularly hit by rising world commodity and food prices on a scale hitherto unknown. The latest example, completely outside our control, is the rise in oil prices, to which I have just referred. Obviously these external factors must all be taken into account in assessing the prospects for the balance of payments. But the House, and particularly the right hon. Gentleman, will be pleased to know that I see no reason why we should follow the example of the Labour Government—slam on the brakes and bring expansion to a grinding halt.
Does not the Chancellor agree that at present, when the balance of payments deficit reflects an excess of domestic demand over domestic production, if there were some domestic restraint, given present conditions of world boom, this would not be a stop and would enable production to carry on but would mean an increase in exports?
I shall be dealing with the balance of demand in the economy. But before leaving the question of oil, I remind the House that the right hon. Gentleman the Leader of the Opposition has referred to his party's plans for the nationalisation of North Sea oil. It is certain that if the Labour Party's plans had been implemented five or 10 years ago, there would have been far less energetic exploration and therefore, now, a much gloomier prospect for our economy and for our balance of payments.—[Interruption.] We shall see whether the Opposition Chief Whip says "Absolute rubbish" to what I shall say now. I read recently that the Leader of the Opposition suggested a cut in petrol tax to compensate for the rise in price.—[Interruption.] Did the right hon. Member for Leeds, East say that it was a "silly" proposal?
That was a proposal which neither the Leader of the Opposition nor the right hon. Gentleman this afternoon apparently thought sufficiently important to repeat in this debate. It made headlines at the time, but perhaps it was not meant to be taken seriously. It is hardly a credible posture for an Opposition who are, at the same time, putting forward proposals for vast increases in expenditure.
The truth is that if the right hon. Gentleman and his colleagues ever got the chance, they would increase the petrol tax, as they did before, not once, not twice, not three times and not four times, but by five times, as did the previous Labour Government. That was in addition to a whacking great increase in vehicle excise duty. I doubt whether that suggestion by the Leader of the Opposition will be taken seriously, even by the back-seat driver, the proverbial mother-in-law—which reminds me to welcome the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins) back to the front seat. It is worth noting in passing that at the time when the right hon. Gentleman was making his speech, the right hon. Member for Stechford was sitting on the cross benches.
It is right that at the start of this new Session I should set out the broad economic aims of the Government over the year ahead. The overriding needs are to secure sustained economic expansion and to curb inflation. We shall not succeed in securing continued expansion unless we also take action to counter inflation. But, equally, I do not believe that we shall get the public support for the measures necessary to counter inflation unless we also achieve a reasonable rate of expansion.
The Price and Pay Code will be fully debated on Wednesday. I shall, therefore, say only this: whatever philosophical views hon. Members may hold about the statutory control of pay and prices, it cannot seriously be denied that, with the phenomenal rise in world prices during the past year and now with the increases that we are facing in the cost of oil, without a statutory policy at this time the rise in the cost of living would be far higher.
Since January 1972 world food prices have risen by over 60 per cent. and world commodity prices have risen by over 90 per cent. Beef is up by 40 per cent. to 50 per cent., lamb by 100 per cent., wheat by 150 per cent., and wool by 220 per cent. Yet during the past year the rise in the cost of living in Britain has been kept to under 10 per cent.
Despite the useful talks that we have had with the TUC and the CBI this summer, it is quite clear to me that if for the year ahead we were to abandon all control, then in present circumstances the only result would be a runaway rise in both pay and prices.
We are told that 5 million workers have put in wage claims in the range 24 per cent. to 40 per cent. But we failed to hear from the right hon. Member for Leeds, East any indication of how, in the absence of any control on pay, he believes he could arrive at a level of pay settlements which would be compatible with a strict control on the level of prices.
The truth is that a policy of comprehensive controls on prices, coupled with a free-for-all for pay, is an even bigger joke than most of the proposals of the Labour Party. In any event, we shall wait eagerly to see whether this nonsense is endorsed by the right hon. Member for Stechford, and I suspect that we shall have to wait for a long time.
I have made clear that, in present circumstances, I do not believe that we could control inflation without a statutory pay and prices policy. But, equally, we cannot hope to control inflation unless that statutory policy is matched by a resolute monetary policy. Both are essential, but neither by itself is sufficient.
Before the Chancellor moves from his prices policy to his monetary policy, will he say whether Members of Parliament are to be entitled to hear from the Price Commission the price increases which it licenses? This is of great concern to us because, while all the pay settlements are made public, the price settlements appear to be a matter to be kept quiet.
That point was dealt with by my right hon. and learned Friend when he was asked about it on an earlier occasion. I have nothing to add in this debate to what he said then.
Both a firm monetary policy and in present circumstances a statutory pay and prices policy are essential, but neither by itself would be sufficient. I have given elsewhere the reasons why the broad measurement of money supply called M3 has not been a reliable indicator. It is far too liable to be affected by special factors which are of little or no significance for aggregate money demands—for example, interest arbitrage operations and the transition to VAT.
The narrower measure, Ml, also has its limitations, but at least it is not liable to that kind of aberration. The fact is that, over the last year, M1 has increased by under 9 per cent. It is relevant, I think, to note that, apart from Germany, this is a lower rate of increase than that of any of our other EEC partners. Furthermore, in the past three months Ml has not gone up; it has gone down.
As the economy moves nearer to full employment, it is appropriate that we should tighten the grip on money and credit. This is what we have been doing. During the past year, we called in from the banks £1,000 million of special deposits. Interest rates have risen steeply. We have pursued a vigorous policy of selling Government debt, and we have asked the banks to restrain their lending for non-essential purposes.
In the first place, we have to remain competitive with interest rates abroad if we are to avoid an outflow of capital which would endanger the balance of payments. Second, our counter-inflation policies could be seriously prejudiced in the longer term if the banking system and the economy in general were allowed to become too liquid.
To those who say that we should have been even tougher, my reply is that to have gone further would, in my judgment, have put at risk the whole improvement in output and employment.
Economic expansion sustained over a long period of years is something which many other countries have enjoyed but which has always seemed to elude us. Always hitherto we have had boom followed by bust, go followed by stop. Now, however, we are in the process, the difficult process, of transition from a rapid rate of expansion to take up the slack in the economy to a rate which can be sustained over the years ahead. If we can achieve this transition, we shall gain not only the obvious tangible benefits of a steadily growing prosperity but also the more intangible benefit that will come from increasing confidence in industry and the even broader psychological benefit that will come as we, as a nation, begin once again to have confidence in our own ability.
During 1974, I expect our rate of economic growth to be about 3½ per cent. That rate of expansion is in line with the rate of growth of the productive capacity of our economy. I am astonished that the Opposition have the audacity to criticise the Government for the rate of economic growth. The right hon. Member for Leeds, East referred to a growth rate in relation to the post-war average. I wondered why he referred to the growth rate in relation to the postwar average. I pondered why he did not refer to our growth rate in relation to the six years of Labour Government. What rate of growth was achieved during the six years of Labour Government?
The right hon. Gentleman will have to do a little better than that. He is complaining because we have had a growth rate averaging 5 per cent. and because we are now proceeding to a growth rate in line with our rate of increase in productive capacity, which next year will be about 3½ per cent. If the right hon. Gentleman and his colleagues on the Front Bench do not remember the figure, I shall give it to the House. During the six years of the Labour Government, the average growth rate was a miserable 2 per cent.
Two years ago we were suffering from a major recession, largely brought about by the excessively restrictive policies of the previous Government. Those who remember their years in office will recall that they piled on to the British people every conceivable type of taxation, but since then, as a result of our deliberate policy of rapid expansion, there has been a marked improvement. Businessmen no longer complain of shortages of orders and the capital goods industry, whose prosperity is one of the most reliable tests of business confidence, is doing particularly well.
I know that there are those who are concerned that our economy may be overheating. This is a matter of judgment, and I respect their views. In a recent speech which I made at the Mansion House, I dealt in detail with the balance of supply and demand. I made it clear that I had carefully considered the risk of over-heating, and I am always prepared to act, if necessary.
One sector of industry which has been over-strained is the building sector of the construction industry, and it was to deal with that situation that we announced the pause in the letting of certain public sector works contracts. My general conclusion is that our present path of expansion is sustainable, and that it would he wrong now to check it.
Will the right hon. Gentleman please answer the question which I put to him earlier? In view of the balance of payments deficit and the world boom, does not the right hon. Gentleman recognise that if there were some restraint on home demand it would enable exports to expand and would not hold back production?
I dealt a moment ago with the point raised by the hon. and learned Gentleman. I know that the hon. and learned Gentleman and the Leader of the Opposition in particular want to slam on the brakes. [HON. MEMBERS: "No."] It is no good hon. Gentlemen opposite saying "No". Taking into account the factors mentioned by the hon. and learned Gentleman, which I agree are relevant, I believe that our present path of expansion is sustainable, and my conclusion is that it would be wrong now to check it.
During the Recess, both the Leader of the Opposition and the right hon. Member for Leeds, East criticised the borrowing requirement, and the right hon. Gentleman did so again today. The clear implication is that in present circumstances they would increase taxation.
The right hon. Gentleman says "Certainly". It would be interesting to consider by how much, and I should like to give the House some idea of what they have in mind.
Professor Kaldor wrote to The Times on Friday and said specifically that taxation should be increased. The right hon. Gentleman agrees, and of course Professor Kaldor should know what a Labour Government would do. But Transport House has gone even further. It states in an official document that it is its view that taxation should be increased by £1,000 million. Is that what the right hon. Member for Leeds, East meant in his speech when he talked about fiscal profligacy? Is this the policy which he would pursue—an increase of £1,000 million, and this is before we come to public expenditure? We are entitled to know from the right hon. Gentleman whether he agrees with Transport House? This is a document which has been widely circulated, and I have it here.
If the right hon. Gentleman will allow me to answer this question—it will take a paragraph—I believe he should withdraw the £310 million tax concessions he made in his Budget this year; he should have penal taxes on property speculation; he should have penal taxes on profiteering in other areas of the economy, particularly on bank profits, which have risen by £600 million, and he has increased taxes by only £30 million. I believe he should aim at saving £500 million a year on the defence budget. I believe that he should not pay £100 million to the Common Market budget, and he should not press on in this extravagant way with some of the prestige projects to which the Government are committed. A combination of these measures could reduce his borrowing requirement this year by £1,000 million.
The right hon. Gentleman knows perfectly well that what he is saying is nonsense. He should withdraw what he said about the so-called £300 million, in the Budget, because a great proportion of it—a third of it—goes to those living on retirement incomes.
I turn to a subject about which the right hon. Getnleman ought to know something—defence. Is he seriously saying that to deal with the borrowing requirement this year he could cut defence expenditure by £500 million?
The right hon. Gentleman has not even read the Labour Party's own document. The £1,000 million a year increase which is talked about is to deal with the borrowing requirement: it is this year. This is what they say should be done. I suggest to the right hon. Gentleman he ought to read what comes out of Transport House.
The right hon. Gentleman goes on to talk about prestige projects. Take, for example, the Channel Tunnel. The cost on public expenditure this year is £600,000, next year £900,000. The expenditure on another prestige project which no doubt is in his mind—Maplin—is £1½ million this year, and will be £4 million next year. Or is he going to cancel the Concorde, which was pursued by his Government? Perhaps one day we shall get answers to these various questions.
The amendment we are debating today criticises a rate of expansion of 3½ per cent. The policy of the Labour Party, with its increases in taxation, would be to slow it down. There could be no other consquence of the action which they propose.
The Chancellor stated publicly six months ago, when the devaluation of sterling had not reached the level that it has reached today, that sterling was under-valued. He and his colleagues are saying continually that there is an open market for British exports abroad. What we lack is the capacity to meet it. He now says that we are not going to increase our capacity except by 3½ per cent. over the coming year. Far too much of the present demand is taking goods which could have gone into export, and sucking in imports. The right hon. Gentleman has failed totally to deal with the central issue in the criticism we have been making of him over the last 12 months.
That is exactly it. That is what I was saying. The right hon. Gentleman believes in present circumstances in a policy of deflation. The consequence of that would be that our growth rate would be less than 3½ per cent. next year. Perhaps the right hon. Gentleman hankers for a return to the 2 per cent. of which he has had experience.
I put another argument to the right hon. Gentleman. If he cannot answer it, I suggest that he ask his right hon. Friend the Member for Stechford. The right hon. Gentleman criticised the size of our present borrowing requirement; but how would he propose to finance all his plans for more nationalisation? I estimate that the compensation would amount to at least £10,000 million. Will he raise that by more borrowing, so increasing the borrowing requirement? Perhaps he would pay the compensation out of increased taxation. We have not had an answer to that.
I know full well that one of the most difficult tasks of any Government, but one which is essential in present circumstances, is to keep down the rate of growth of public expenditure. That we shall do. It is, of course, a matter for the Government as a whole, but it is a particular responsibility—I nearly said a particularly unpleasant responsibility—of Treasury Ministers. In our present situation I am determined to ensure that the rate of growth of public sector demand is held back so that extra resources may flow to productive investment and to the balance of payments. That is essential for the sustained expansion of the economy.
All the experience of previous Governments has been that it is very difficult indeed to keep public expenditure within the rise in GDP. I know that some people have assumed that public expenditure next year will continue to increase at least as fast as our recent rate of growth of gross domestic product, namely, at a figure around 5 per cent. The difference between past situations and the present one is that we have deliberately shaped our policies to bring down the rate of increase in public expenditure between this year and next year.
The right hon. Gentleman referred—I took down his words—to public expenditure as a percentage of national growth.
All right—GNP. I thought the right hon. Gentleman said national growth. But he gave no figures. Again I wonder why he did not give any figures. It so happens that I have the figures here. In 1965 the growth of public expenditure was 8·1 per cent. In that same year the growth of the economy was 2·9 per cent. In 1966 the growth of public expenditure was 6·2 per cent., but the growth of the economy had fallen to 1·7 per cent. In 1967 the growth of public expenditure was 11·9 per cent. in a year in which the growth of the economy had fallen to 1·8 per cent. In 1968 the growth of the economy was 4·2 per cent., and the rate of growth of public expenditure 5·3 per cent. In 1969 the growth of the economy was 1·6 per cent. and the growth of public expenditure 2·3 per cent.
In last year's White Paper and in my Budget forecast, we showed the rate of growth of public expenditure slowing down in the course of the present financial year, and next year, from the specially high rates which were appropriate at a time of high unemployment. We have taken care as well to ensure not merely that public expenditure in total follows the required course, but that the impact on particular parts of the economy is not excessive. Last month, as I remarked, we rephased certain construction programmes.
For the coming year we have to allow for certain inevitable increases in public expenditure. The large rise in interest rates this summer, for instance, which could not have been forecast, is bound to add substantially to public expenditure compared with the previous forecast. Then there is the 15 per cent. rise in pensions, which is reckoned as an addition to public expenditure despite the fact that it is financed to a substantial extent by increases in contributions. The usual, annual public expenditure exercise is not complete, but, despite these increases, when the White Paper is published next month I think that it will show that the increase in public expenditure in each of the next three years will be much smaller than the sustainable rate of growth of the national income; in fact, it will be less than 2 per cent. in each of the next three years.
This is a responsible policy. What I find hard to understand is the policy of the Opposition. On 8th September, the Leader of the Opposition demanded an autumn Budget with well-judged reductions in Government expenditure; he is entitled to suggest that if he thinks that one should go for slower growth and more unemployment. Yet a few days later an official Labour Party document published by Transport House added up the cost of the various policy changes proposed by the Labour Party. It stated that the,
sum total of all these maximum figures for extra spending is some £6,600 million a year.
It is difficult to be precise, but the document goes on to say:
these global figures do give an indication of the scale of the proposals for increased public spending to which we are committed.
I should also make it plain to the House that this excludes the cost of the proposals for nationalisation.
I hope that the right hon. Member for Leeds, East will explain more fully the Leader of the Opposition's plans for cutting expenditure, because I can assure him that nobody will take seriously the sort of proposals he has just put before the House. The truth is, and they know it, that their plans are totally irresponsible. They would need a vast increase in taxation, and it is time the electorate realised that the election of a Labour Government would mean higher income tax and higher indirect taxation on every man and woman. After all, that is what the last Labour Government meant and that is what they would do again.
If it is the view of the Labour Party that over the next four or five years it is not possible to finance a scheme with all those benefits, I disagree entirely. The same argument has been put forward repeatedly by Labour spokesmen, that it is not possible to reduce taxation. They never thought it could be done, but it has been done.
In his speech to the Labour Party conference, the right hon. Member for Leeds, East did one great service: he alerted the whole nation to the fact that a Labour Government would mean higher taxation not just for the rich but for everyone. The right hon. Gentleman has blown the gaff. He has confirmed the moderates of Britain in their suspicion that Socialism and high taxation are synonymous.
I invite the House to reject this negative and antiquated amendment and to support instead a policy for sustained growth, for low taxation, for the firm contral of inflation and for real social progress.
The Chancellor of the Exchequer has always been the super-optimist of this Government. Those who listen to him today will remember his initial debut as Chancellor when, on a totally different economic policy—a totally different proposition—he was arousing much greater enthusiasm than he has aroused today. In effect, he has been telling the House that he is getting the country accustomed to living with inflation. He refused to deal with the question put by the hon. and learned Member for Lincoln (Mr. Taverne) simply because he is not prepared to deal with it until after a General Election. That is why he avoided it.
I am not the economic spokesman for my party—[Interruption.]—but perhaps I may be allowed to tell the Chancellor my personal view. It is dishonest of any Government, whatever their complexion, to ignore these factors.
It seems to me that the tax credit system put forward by the Chancellor of the Exchequer will receive a general welcome from the House—certainly from the Liberal Party, which has always been in favour of it—but certain problems will arise on the tax credit system unless they are dealt with beforehand. Under this system, there is great danger of a permanent subsidy to low wages unless a minimum national earnings level is built into it.
The Chancellor of the Exchequer said, quite rightly, that the tax credit system will be a great change in our taxation system and it will take a number of years to implement. Unless statutory minimum earnings are introduced, low wages throughout the country will be subsidised, and there will be people with a vested interest on both the employers' and the employees' side willing to see that happen.
The first thing that the Chancellor should do—he should have done it long ago, as should the Labour Government—is to make sure that the present taxation system works. I take estate duty, for example. As the right hon. Gentleman knows, in the Temple and elsewhere it is always referred to as a voluntary tax. People with large capital hardly ever pay their full due of estate duty. All kinds of steps are taken to avoid it, and tax avoidance has become a national industry.
Next, land prices. One of the reasons why land prices are so high is that people are encouraged by the tax system to buy land. For example, estate duty relief, of approximately 45 per cent., occurs if a person owned land only five minutes before he died. The Chancellor of the Exchequer knows that there are firms in this country which keep land available for purchase by representatives of people who are leaving this world, enabling them to change their money into land so that 45 per cent. of death duty is avoided.
The Chancellor knows also that one of the great problems besetting people who want to set up in farming is the enormously high cost of agricultural land. Another reason why that is so is that the tax system encourages people to buy land, not only to avoid death duties, but to avoid taxation. That is bound to happen while losses in agriculture and afforestation can be set against profits and income from other sources, and the Chancellor has done nothing about these matters.
I now turn to the Queen's Speech, one sentence of which reads:
one of My Government's primary concerns will be to sustain the expansion of the economy while achieving the necessary improvement in the balance of payments.
It is misleading to link those aims. It is almost fraudulent to do so. The balance of payments problem is concerned not only with expansion of the quantities produced but also with the prices at which they are sold. Those prices change directly in proportion to the value of our currency, which is critically related to Government activity in other spheres.
The Chancellor referred to confidence. The truth is that the value of our money has been falling because people abroad have no confidence in the management of affairs in this country, and basically it is a question of confidence in Government.
The Chancellor referred to the suggestion of the right hon. Member for Leeds, East (Mr. Healey) to scrap certain of the prestige items in the Government's programme. The right hon. Gentleman was right to point out that the scrapping of Maplin, and so on, would not help in the short term, but those who are judging the performance of our country abroad are looking at the Government's sense of priorities, which is a question of confidence. Those who are judging this country are judging the Government's sense of priorities—whether they are bringing the regions into production, where there is a great deal of industrial decay, or whether they are spending money on projects such as Maplin. It is all a question of the confidence that people have in the Government.
I shall allow another Member of the right hon. Gentleman's party to develop that point.
What is the point in increasing our exports by, say, 10 per cent., if the value of our currency in world markets is reduced by 15 per cent. in the same period? We have run hard to stay in the same position. Over the past 18 months, the performance of our exporters ranks creditably with that of our rivals, but the result of those efforts has been lost and swamped by the reduction in the value of the pound, which is the Government's responsibility, and the Government's alone.
The Chancellor cannot be satisfied with the present rate of investment in industry. At current interest rates, whatever the inducements, because of the rate of inflation, the funds are just not there for investment. The basic incapacity of our economy is that it cannot support a Government who cannot accept our changed rôle in the world.
The second matter to which I wish to refer in the Queen's Speech is the statement that the Government
will so contain public expenditure that the rise in productive investment and export is not put at risk.
A later paragraph says that the Government will introduce legislation on the Channel Tunnel.
This point cannot be divorced from the one which I discussed earlier. What is the rise in investment in this country? What is the true rate of growth? The Chancellor did not deal with that. It is a question of basic underlying growth, not the taking up of slack from a stagnant economy. Has investment kept pace with the rate of inflation? I do not think that it has. The investment expansion which has taken place has been at the expense of other sectors of our activity, notably housing. Therefore the scrapping of these prestige projects is important.
Let me give three examples of adherence to such projects. Maplin has been postponed; it should be scrapped. Concorde is an open-ended project which cannot possibly, even now, have any beneficial result for this country. At this stage Concorde should be scrapped completely. The third project is the Channel Tunnel.
People are asking where the curtailment of Government expenditure will bite. We have heard some suggestions from the Chancellor that the percentage increase in Government expenditure will be limited to less than 2 per cent. But where will it bite? Let us consider an important aspect of the failure of the Government's policy. We still have a considerable percentage of unemployment in many parts of the country. Levels of 3 per cent. and 4 per cent. cannot be regarded with equanimity anywhere.
Yes, 6 per cent. on Merseyside. The percentage rise in unemployment is masked by the raising of the school-leaving age to 16. The improvement of our roads, carrying prosperity to outlying regions, bringing vast quantities of untapped human resources into play, is vastly more important to this country than the Channel Tunnel.
It has been pointed out that if one builds the Channel Tunnel, not only will a vast amount of Government expenditure be required to build it, but there will be a vast amount of expenditure to extend the railway network from the tunnel outlet to the rest of the country. It is a matter of priorities. The Government regard this as one of their top priorities. If they are to spend a great deal of money on it, there will be far less to spend on the regions.
What of the improvement of our industrial areas, which are slowly strangling in their own congestion? What Government expenditure will there be on regional improvement?
Such questions reflect the failure of the Government to get the kind of growth necessary in those areas where growth is possible. They illustrate the complete over-optimism of the Chancellor's approach to the economy.
He has always suffered from this over-optimism. To him every speech is a political speech at the hustings. The speech today was a prelude to General Election year. It is much more important for the Chancellor to score a debating point than to make a serious contribution to the improvement of our economy.
The Gracious Speech continues:
My Government will continue their efforts to counter inflation.
It is time that the claim, always put forward by the Government, that all our inflation troubles are caused by world price rises is proved to be untrue. Of course there have been price rises in the world, but the largest part of the rise in our current payments for foreign goods is due to the reduction in the value of our own currency, for which the Government are responsible. Can the Chancellor deny that? Can he say that the rise is due to the rise in world prices when he knows perfectly well that it is the depreciation in the value of our own currency which accounts for the great rise in the current payments for foreign goods?
It is the failure of the Government to deal with the many speculative-type enterprises that is the measure of their failure to persuade the country that their prices and incomes policy is fair. If the Government rely on a prices and incomes policy which affects wage earners while ignoring wealth holders, the policy will be regarded basically as unfair, and so by and large the country is not prepared to go along with it. In my view the amount of growth in the economy is still relatively small. We have seen the take-up of slack previously created by inflation, but the basic underlying rate of growth is still small.
The Chancellor's speech and his economic forecast are as over-optimistic as his original speech in 1970. We shall see the birds come home to roost with this Chancellor who has changed from one policy to another—[AN HON. MEMBER: "From one bird to another."]—No, the bird still has the same feathers. It is a mistake to think that the bird has changed. One of these days the bird will have flown.
May I at the outset Mr. Deputy Speaker, congratulate you on my being able to call you Mr. Deputy Speaker? I assure you I do not say that because you have called me, the first back-bench Member on this side of the House, but if you remember the precedent, I certainly would not object.
We have listened to a speech from the right hon. Member for Leeds, East (Mr. Healey) who spoke about fiscal profligacy. How any responsible politician could suggest to the country that the Labour Party, if in control, would spend £5,000 million or £6,000 million a year more and not tax the ordinary working man is beyond my comprehension. If every penny that is earned by anybody over £5,000 per year were taken, it would produce to the Exchequer only approximately £400 million to £500 million; so where would the right hon. Gentleman get the rest of the money without taxing the ordinary man in the street?
I am immensely grateful to the hon. Member because he gives me a chance of correcting him on what is, I am sure, a mistake on his part, whereas when the Chancellor uses that figure he knows that what he is saying does not correspond with the facts. The point of the speech I made at the Labour Party Conference was that it would be impossible to carry out the whole of the programme in one Session without increasing taxation much more than anyone would wish. For that reason I pointed out that we would need to ensure that public expenditure would grow at a much smaller rate than suggested, commensurate with reasonable increases in taxation, which would fall entirely on the better-off.
With the greatest respect, this is where the fallacy arises. If the right hon. Gentleman accepts the premise that by taking everything that is earned over £5,000 per year he will give the Exchequer £400 million a year, how could he increase Government expenditure even over two, three, or four years?
Let me turn to tax credits. I am delighted they were mentioned in the Queen's Speech and I am delighted that my right hon. Friend the Chancellor said that he intended to introduce the necessary legislation in the next Finance Act. Before going on to that, may I say that I think my right hon. Friend and the House will agree that the country, most of all the House, owes a debt of gratitude to Sir Arthur Cockfield whose baby this was and from where the Green Paper emanated. The Chancellor—and I think it is accepted by all parties in the House and in the country—has been the greatest reforming Chancellor that we have had.—[Laughter.] It is all very well right hon. and learned Gentlemen opposite to laugh. The reason they laugh is that they do not think that reform of taxation means anything but increase in taxation. That is the difference between the two sides of the House.
The shortcoming of the present tax system is that whatever any Chancellor does for allowances, child allowance, family allowance, and so on, is fine for taxpayers with incomes sufficient to take up these increased allowances, but it does not help the lower income group because, irrespective of whether the Chancellor increases the marriage allowance from £400 a year to £500 a year, or whatever it may be, if the poorly paid is not in the tax bracket it does not make a scrap of difference.
There is also an anomaly in the present tax system whereby to augment the income of the poorly paid there is what is known as the Family Income Supplement, or supplementary benefit. This is an anomaly which should have been eradicated—and hence there was the Green Paper, and the Select Committee was set up. May I say, in parenthesis, that despite our eventual disagreement at the end it was a fairly happy Select Committee, and I pay my tribute to all the members of it, including the five Conservatives, the four Socialists and the one Liberal.
Our Report recommended the amalgamation of our fiscal system with part of the social security system. It is encumbent on us to remember that we must not try to run before we can walk. All of us would like to see everyone included in the scheme. But it is impossible to devise a scheme which will take every individual into it. No matter which party is in power, we must realise that in our society there will always be some people who cannot look after themselves and who will need special treatment. Consequently some means-tested benefits must remain.
Having said that, the tax credit system will cover 90 per cent. of the population, and those in regular employment who have over 25 per cent. of the national average income will come into the scheme, as will old-age pensioners and those in receipt of national insurance benefits. All income will be taxed at 30 per cent. The idea is to cut out the end-of-year adjustments. This will save between 10,000 and 15,000 civil servants. However, I emphasise that this was not at the backs of our minds when we discussed the various matters that were put to us.
As a member of the Committee, I cannot agree with the hon. Gentleman about one matter and that is that the scheme recommended in the hon. Gentleman's majority report would save between 10,000 and 15,000 civil servants. The tax credit scheme is considerably modified by the decision to recommend that the child allowance should be paid to the mother.
The right hon. Lady will see from the evidence that the increase in the numbers of civil servants resulting from that is fairly minimal. In any event, there is no point in arguing about the figure when the number of civil servants to be saved lies in a bracket of between 10,000 and 15,000.
One of the advantages of the scheme is that a person's tax will be settled from week to week. It will be non-cumulative. Here I think that we shall eradicate the present nonsense where people who are not working can get money which is tax-free. This is quite wrong. It is essential that all income, whether it be from earnings or from unemployment benefit, should be taxed at the same rate. It is ludicrous to perpetuate a system whereby some people are better off if they are not working.
The side effects will affect the owner-occupier. I know that the discussions with the building societies are continuing, though I hope that they are nearly completed. Under the scheme any sum allowable for deduction for tax purposes such as building society interest will also have a 30 per cent. rebate. Taking a mortgage interest rate of 10 per cent., in paying interest the payer will deduct 30 per cent. and consequently will get his mortgage for an effective 7 per cent.
My right hon. Friend the Chancellor of the Exchequer said that the £2 was to be paid for each child to the mother or whoever had care of the child. I am sure that the right hon. Member for Blackburn (Mrs. Castle) will agree that the various women's organisations were vociferous about what should happen to the child allowance. In some cases it will mean a reduction in the take-home pay of the father. However, we as politicians ought to look upon the family as a unit. It is not who gets the money which matters. It is the family income. Under the scheme the lower-paid family will be better off.
With his great knowledge of these matters, I am sure that the hon. and learned Gentleman will agree that the taxation of children's income has nothing whatever to do with tax credits. I do not believe that I should be taken down that path. I shall be happy to discuss it with the hon. and learned Gentleman on some other occasion.
There have been criticisms of the cost. But the House should realise that the £1,300 million is only an illustrative figure based on the £6 married rate, the £4 single rate and the £2 children's rate. It is flexible. The Chancellor of the Exchequer may change the rates. But on the basis of these figures it will cost £1,300 million of which 67 per cent. will go to nearly 30 million people. That is not too bad, though I know that the right hon. Member for Blackburn does not go along with it.
Where there is a reduction in taxation, it should be across the board. The reduction in this case is fair and across the board. However the right hon. Member for Blackburn introduced a minority report, the burden of which was to ask, "If we are to take £1,300 million, why not give it to the poor?" That is the difference in our philosophies. I believe that if there is a reduction in taxation it should be to the benefit, in proportion, of those contributing the tax. Where the right hon. Lady has misled herself or has been misled is that she has not realised that the £2 per child paid universally will help the lower paid far more.
There are still a number of outstanding matters for decision. Married women's earnings must be dealt with on the non-cumulative basis, for example. However, I do not intend to go into those technicalities at the moment. When we set up the computer, I believe that a slot should be left providing room for manoeuvre so that any future Chancellor of the Ex- chequer, if he wishes, can introduce another credit such as a blind or a disability allowance. This should be built into the computer.
There has been some argument about the flexibility of the scheme. The tax credit scheme applies to everyone earning up to £5,000 a year. That is a figure which can be moved up or down, as can the 30 per cent. rate and the £6 and the £4. The £2 child allowance could be subjected to claw-back by a future Chancellor. But there is as much flexibility in this scheme as there is in the present PAYE system.
The hon. Gentleman says that there is as much flexibility in this system as there is in the present one. He will recall that the evidence of the Inland Revenue was that if we tried to make it as flexible as the present system there would be no saving in staff whatever.
The hon. Member for Ashton-under-Lyne (Mr. Sheldon) ought to go on to say that one of the suggestions which he rather liked was that relating to reduced rate bands. The hon. Gentleman is alone in that view. The House will recall that his own party abolished them. Nevertheless it would be possible to introduce reduced rate bands in the tax credit system though it would be expensive and costly in terms of civil servants. I do not think that the hon. Gentleman advocated that seriously. But I was about to suggest that the hon. Member for Ashton-under-Lyne and his constant friend the hon. Member for Heywood and Royton (Mr. Joel Barnett) mislead and misunderstand each other.
I found it interesting to hear the right hon. Member for Leeds, East say that the Labour Party was not against a tax credit system. He could have fooled me! The right hon. Member for Blackburn says in her report that it should be rejected. The hon. Member for Heywood and Royton and his hon. Friend the Member for Ashton-under-Lyne say that we should reject the proposals. They cannot have it both ways. Here are two sections of the Labour Party saying "Reject" while a third section represented by the right hon. Member for Sowerby (Mr. Houghton) voted for the official report. Then the right hon. Member for Leeds, East says that the Labour Party is not in principle against the tax credit scheme. Three members of the Labour Party vote against it and one for it. It is almost as good as the Liberal Party, with four Labour Members voting three ways.
Some people want to bring in all means-tested benefits. I urge the House to remember that with means-tested benefits circumstances can change from month to month. If we were to try to put more and more means-tested benefits within the tax credit scheme it would mean that there would have to be an army of investigators to see that the benefit was justified. In the tax credit scheme it is only the easily identifiable groups of taxpayers who can be included, such as old-age pensioners and the blind. We should begin by keeping the scheme simple. In due course we might make it more sophisticated, as happened with the PAYE system, introduced in 1943.
If we can get this off the ground I am certain that it will present a great opportunity to use taxation as a means of helping the poorly paid. Positive allowances will be given and no one need imagine that they are receiving charity. The scheme will eliminate hardship. What we do not know is how many people who are entitled to present-day benefits do not take them because they are too proud. The tax credit scheme will bring the retired pensioner and anyone receiving national insurance benefits into its ambit. They will automatically, as of right, get their increase through tax credit. It is a unique system and when it is introduced I am sure that it will further prove that the Conservatives do care. I believe that it will be the greatest step since Beveridge.
I can agree with the Chancellor on one thing—and I am sorry that he is leaving the Chamber and running away from my quite unexpected compliment. I agree with the right hon. Gentleman in congratulating the hon. Member for Surrey, East (Mr. William Clark) upon his chairmanship of the Select Committee which studied the tax credit scheme. I was a member of that Committee and the hon. Member was an efficient and fair chairman. I thank him for that. I am afraid I cannot extend equal congratulations to the Chancellor on what has become his cumulative dishonesty
He is the most euphoric Chancellor in our history. Year after year as the the economic clouds thicken he comes to the House, stands at the Dispatch Box and sails through a speech of sunny superficiality, fiddling the facts while Rome burns. We had a very good illustration of this in his references to the tax credit scheme, upon which I will concentrate my remarks. It was supremely and sublimely typical that the Chancellor should tell us once again of his great move forward in tax reform yet give us no figure, no level of credits, no estimate of total cost. In that way he was able completely to dodge the crucial question of how we shall pay for the scheme.
This is part of the economic difference between the two sides. Once again we have heard from the Chancellor that it is perfectly possible to pay for the scheme because this Government have found it possible to cut taxes when the Labour Government found it impossible to do so. But the Chancellor knows, in the heart of his economic honesty, even though he will not admit it politically, that the people have paid for these tax cuts through the record inflation from which they are now suffering. All that he has done is to give tax relief with the one hand and impose a price burden with the other. He knows, or he ought to know, otherwise he is not fit to be Chancellor, that we are teetering on the edge of the collapse of our whole society as inflation becomes increasingly unmanageable.
It is a matter of shock and alarm that once again on this issue of the tax credit scheme we should have the Chancellor trotting out the old fallacies. We have had no figures this afternoon dealing with this estimated cost of £1,300 million. Yet this is crucial to our assessment of the whole scheme. The Chancellor said that there had been widespread support for the scheme. He must know that there has been widespread criticism, too. That has centred to a large extent upon the fact that the Government are not prepared to tell us how this £1,300 million is to be raised.
The Government are once again preparing for an electioneering campaign of unscrupulous dishonesty. On the one hand they say, "Look at us, we cut taxes." On the other hand they say, "Look at us, we have put on the statute book a piece of legislation for solving poverty." They know perfectly well that if they say that the notional cost of £1,300 million will be met in five years' time, when the scheme comes into operation, by natural growth, they will have done nothing but window dressing to deal with the issues of poverty which their own Green Paper admits exist.
We all know that if we say this scheme is to be financed by growth, in other words by fiscal drag, what we mean is that by the time these credits come into operation they will have been devalued to such an extent that the recipients would in many cases be worse off than they are now. The Tax Credit Study Group—and the hon. Member for Surrey, East will admit this—gave us the estimate that if we reckon what the notional credit of say £2 for a child would be worth on a revenue-neutral basis, or in other words if the scheme were financed by fiscal drag, there would be a reduction in the value of the credits of 18 per cent.
The issue over the tax credit scheme is part of the whole debate about the Government's economic dishonesty which is destroying the economic fabric of the country and destroying something else far more serious. It is leading to the disintegration of our whole society. It is leading to what the Financial Times described the other day as "stratoinflation" and to a situation of which no one can forecast the end result.
Much of our inflationary danger arises from the fact that the Government have always dodged the issue of social equality in our national life. The tax credit scheme is just another example of that, another piece of this Chancellor's clever window dressing. He tells us first that the poverty exists and that the Government's heart bleeds for it. Then he says that the Government have produced a plan so elaborate that it cannot be brought into operation for five years.
I accept that this rigid and complicated scheme cannot be brought in before then. That is one reason why I am opposed to it. My second reason for opposing it is that we have con- cluded, by the one unanimous recommendation of the Select Committee, that a tax credit scheme is basically irrelevant to the solution of family poverty. I refer to our unanimous proposal that the child credit should be paid to the mother in the form of a cash allowance through the Post Office. On almost everything else we did not agree, but we did agreed on that. The hon. Member for Surrey, East has not yet realised that he and his majority supporters on the Committee have given the game away. Of course I accept that the recommendations which we made on this point and which the Chancellor of the Exchequer has accepted will do something to relieve family poverty, but only by taking a step altogether outside the tax credit scheme.
By definition, under a tax credit scheme, the child credit would have been payable to the father through his wage packet——
No. I am sure that the right hon. Lady wants to be fair. The Green Paper was quite specific in pointing out three choices—all the child credit to the father, all the child credit to the mother or the child credit split. The Select Committee was specifically asked to make a recommendation.
I do not deny that, but the hon. Gentleman must realise that the Government estimate of the manpower savings from the tax credit scheme of 10,000 to 15,000 civil servants was dependent upon the scheme being run as a tax credit scheme, by definition, should be run.
In the past many people have discussed the desirability of finding a way to merge the system of tax allowances with the system of social allowances. Even the Labour Government considered this but our consideration broke down on the basis that social justice is never simple but is always complicated. A tax credit system must, by definition, be simple. That is why the Government are attracted to it. It provides tax simplicity. The saving in Civil Service manpower matters more to the Government than does any human factor. Therefore, the scheme put to us depends upon the existence of a wide band of income from £0 to £5,000 a year on which a standard and uniform rate of tax is payable. The moment we try to modify that the administrative benefits of a tax credit system are lost.
The right hon. Lady favours an extended system of family allowances, as we have now, with some kind of clawback—the sort of measure which was taken when the Labour Party was in office but I am sure she will appreciate that a system of family allowances with clawback led to a fall in the tax thresh-hold, and that is exactly what would happen again. The lower income groups would, therefore, be brought into the tax bracket by the kind of measure she advocates. That is why we are not in favour of it.
I thought that the Treasury Bench had read the Labour Party documents, since the Chancellor quoted from them earlier.
Our alternative for dealing immediately with family poverty is the introduction of a child endowment scheme, a merger of the child tax allowance with the family allowance, to produce a level of child credit, payable also to the first child, sufficient to tackle the problem of family poverty. We do not need for that this elaborate structure of the tax credit system which takes five years to bring into operation, with everyone earning up to £5,000 a year on a uniform tax rate, with every piece of income taxed. That produces a circular situation. It means that one cannot select and one cannot say that this poor child shall get more than that richer child. The child credit can be increased only if it is increased for all children universally. One cannot select on the basis of income but only on the basis of a group under this simplified structure that is outlined.
I welcome only one part of the Government's scheme, as modified by the proposals which the Chancellor accepted this afternoon, which is to pay a child credit to all children, including the first, as a cash allowance through the Post Office. We do not need all this so-called tax reform to do that. We do not have to wait five years; it can be done now. The Chancellor could do it in next year's Budget just as he could increase the old-age pension to the level to which we shall increase it in the first Session of the next Labour Government—to £10 single and £16 married, adjusted to changes in the level of national average earnings between now and then. That could be done by the simplest procedure. I assure the Government that they would have rapid co-operation in getting through the House an up-rating Bill of that kind.
A child endowment scheme plus an increase in the old-age pension to the level I have suggested would cost more than £1,300 million—a few hundred million more—but it is the minimum amount that we must spend if we are concerned to eliminate poverty. Payment could be made through the present system and financed by varying the rates of income tax far more progressively than is possible under the Government's tax credit scheme.
It is nothing short of a social scandal that we should be told that we must have a tax credit scheme under which, by definition, we cannot give a benefit lower down the income scale without giving that same uncovenanted benefit right the way up to the top. That is why it is impossible to get rid of more means tests under the tax credit scheme. We asked about getting rid of the means test connection with school meals and welfare milk. It could be done by addition to the child credit and it would work out at about 60p a week but, because there can be no income flexibility with this scheme, that increase in credit would be payable to everyone earning up to £5,000 a year, thus raising the cost to £300 million. This country is in too serious an economic and social situation to be able to throw away money like that.
Unless we do, and are seen to be doing, something now to relieve poverty we shall never get a social climate that will help us to hold inflation in check. Equally, unless we recognise that every penny spent counts, inflation will become even more unmanageable.
The figures on page 12 of the majority report show that, although the poor are getting poorer today, only £150 million of the proposed £1,300 million would go to people with incomes of £20 a week and less. Those are official figures. About £425 million of that £1,300 million would go to people on more than average national earnings including £45 million to those on £5,000 a year or more.
It has been said by the hon. Gentleman that this is a small price to pay for yet another tax reform, but it is just one more typical example of how the Chancellor's tax reforms somehow always manage to give another hand out to the rich.
I wish to correct the impression which the right hon. Lady gave about the £150 million. She knows perfectly well that family need, which is what we are concerned about in the tax credit scheme, and which is what she is concerned about, cannot be assessed in terms of earnings in the way in which she has done it. Many people with incomes of less than £1,000 a year are single people and are teenagers, but we are concerned with family needs. To take £150 million in isolation gives a completely misguided impression of the benefits which the scheme will bring to poorer families.
I am quoting the official table from the Tax Credit Study Group. There are many single pensioners and single disabled people with incomes of less than £20 a week with whom we are concerned, just as some of these people with over £5,000 a year who will get another £45 million may be single people.
I am sorry, Mr. Speaker. I will not protract the argument. No one objects in principle to the merger of a system of tax allowances with social benefits, if it is possible to find a way to do this that combines social justice and tax equality, but these proposals do not, and that is why we should reject them.
I trust that the right hon. Member for Blackburn (Mrs. Castle) will forgive me if I do not take up her point about tax credits, but I remind her that there is a good argument that many of our problems today go back to the person who introduced, and then withdrew, "In Place of Strife". Therefore, I do not think that she is in the best place to criticise my right hon. Friend the Chancellor of the Exchequer on the honesty of his approach.
Much as I admire the confidence of my right hon. Friend, he must realise, and I am sure he does, that there are anxieties, even among his most loyal supporters and even among those of us who are more convinced than he is, if that is possible, of the utter irrelevance to the problem of inflation of the Opposition's policies.
Like one or two other hon. Members who have spoken, I am concerned with the balance of payments, in terms of monetary values rather than in terms of volume. The trend of these balances over a reasonable period can be the only real test as to whether, as a nation, we are living within our means. In other words, it must follow that only if, taking one year with another, we earn as much as we spend can we maintain our standard of living, let alone improve it.
Similarly, since we are dependent upon imports for many, if not most, of our raw materials, it is difficult to see how, unless our exports earn enough to pay for the imports, we can in the longer term safeguard employment. For a long time I have accepted the logic of the floating pound, but it seems that in practice, or perhaps I should say in presentation, it has removed what was a valuable discipline.
At least fixed parities and the efforts to maintain them produced, when those efforts failed, or looked like failing, a sense of crisis, and therefore a public awareness that something pretty serious was afoot. Yet, since the Government floated the pound we have suffered a greater devaluation than that which was effected in 1967 by the Labour Government, and nobody seems to mind. I find that very odd, because people minded a great deal in 1967, not least my right hon. Friends on the Treasury bench.
I accept what may be termed the Government's "breakthrough theory", based on the logical proposition that we cannot expect development of an export boom until after the requisite raw materials have been imported and paid for, and that in the meantime there are convincing arguments for allowing the pound to float downwards, rather than to put on the brakes. But—and this is the crux—has not the trend of our balance of payments been downwards for long enough for us to have expected the upturn by now?
The plain fact is that our exports, visible and invisible, are still not paying for current imports, let alone making good the backlog. Is not it possible for my right hon. Friend the Chancellor to give, from the various analyses available to the Government, an indication of the proportion of imports that represents industrial raw materials, the proportion of those industrial raw materials likely to end up as part of exports, and the sort of time lag we should expect? Without such information, anxiety is inevitable.
The rise in world commodity prices has been more than a little unfortunate, but it is wrong to think that it alters the facts of the situation in any way. The basic fact of life is that if we wish to maintain our standards of living we must earn more to pay for them, eat less, or cut back in other ways. The rise in world commodity prices does not affect the overall position, other than to make it more difficult.
In the circumstances, it is optimistic to the point of being misleading to talk glibly, as the White Paper on prices and pay does, of safeguarding standards of living, whether by threshold agreements or the overall counter-inflation policy. That policy allows for a rate of inflation at about 10 per cent. a year, if all goes well under stage 3. That surely indicates making available a supply of money over and above what can possibly be justified by the growth in the economy, which the Government put at 3 per cent. to 3½ per cent. I do not see how the standard of living of the nation as a whole can be safeguarded unless we manage to earn more. That should be made clear. Otherwise, the White Paper is misleading.
Even if the rather modest target of no more than 10 per cent. inflation a year is achieved, it is subject to the two provisos of paragraph 9 of the White Paper—that there will be no further surge in world prices and that domestic inflationary elements can be controlled. In the light of the oil situation, for which I do not of course blame the Government, and the industrial relations situation, none of us can be overcome by optimism about either of those provisos.
The alternative, just as with an individual or a firm, is to bridge the gap by using reserves or savings. But that is to jeopardise investment for the future. That is my second anxiety, which leads to my second question. What is happening to the long-predicted investment boom? Whereas gross domestic capital formation rose by 5·9 per cent. in the first quarter of this year compared with the corresponding quarter last year, the comparable figure for the second quarter was only 0·6 per cent. Investment by manufacturing, distributive and service industries increased by 9·2 per cent. in the first quarter—quite healthy—but declined by 0·1 per cent. in the second.
Are we maintaining our standards at the expense of the future? To use a more homely expression, are we living upon our seed corn?
That brings me to two important matters connected with agriculture, albeit something of side issues from my main argument—though a very important one. The first arises from the current pay and prices code. I understand that in manuturing industry increases in raw material costs are "allowable cost increases" for the purpose of arriving at permitted price increases, and therefore profit. But for milk, the production of which involves a much longer investment cycle than most industrial processes, and a great deal of highly skilled labour, much of it at very unsocial hours—many townsmen would describe them as positively anti-social-farmers are told to carry the cost of staggering increases in the price of their essential raw materials, feeding stuffs.
The same applies to producers of pig-meat, poultry and eggs, for, as my right hon. Friend the Leader of the House may know very well—though perhaps he does not, because he comes from the wrong part of the country—in the western part of the country all those enterprises are carried out entirely separately from any form of arable production. Therefore, the farmers concerned do not benefit from the increase in the price of cereals.
Since October 1972 prices of feeding stuffs have risen by 66 per cent. to 70 per cent. Against that, the price that the farmer receives for his milk has risen only from 21·29p to 22·94p a gallon, only marginally over 7 per cent. I have no precise figures for pigs and poultry, as the figures are harder to obtain, but it is clear that in that part of the industry as well prices are not beginning to keep pace with increased costs.
Therefore, my third question arises. How on earth can a refusal to recompense the livestock farmer be justified in the circumstances? What possible ground can there be for treating him so completely differently from anybody else in respect of his raw materials? I fear that there is only one answer: the majority's sensitivity to food prices is to be alleviated at the expense of a minority who, because the welfare of their animals is involved, have no industrial power. I cannot help wondering how that minority would have been treated if it had been of equal size but able and willing to hold the country to ransom.
It is an abuse of the English language to apply the word "fair" to such proposals. It is also very short-sighted. The result is to be seen in every livestock market in the West of England, and probably in the North. Scores of in-calf cows and heifers and of in-pig sows and gilts—the breeding stock of the future—are going for slaughter because that is much more profitable than keeping them on a farm as an investment for the future.
It is to be hoped that the exceptionally good harvests around the world will result in an eventual lowering of the price of feeding stuffs. In the meantime, the livestock farmer is being asked to carry the heavy extra costs and is the only producer being asked to do so. With regard to increased crops we have to ask ourselves, if we are sincere in our constant protestations of our concern for the under-developed countries and particularly those appalling conditions which exist right across Africa, how much of this extra harvest ought to come on to the markets of the developed countries, to relieve our relatively minor difficulties.
These comments on agriculture logically lead me to those that I wish to make on the price of land. Before I leave the subject of the pay and price code however, there is one aspect to which I should like to draw attention. As I understand it—I do not profess to be an expert in these matters—one of the most important purposes and one of the most important effects of a floating currency is to change from time to time the relative advantages of exporting on the one hand, and of import substitution on the other. Our imports must obviously include a great mass of finished goods, a substantial proportion of which can be presumed to have been imported solely because they are cheaper than the corresponding home product. Some will be only marginally cheaper, so that, as the exchange rate falls, they lose their advantage; but when we are dealing with a fall in the exchange rate of 20 per cent. one would imagine that that would cover a very wide range of imported goods.
It does seem very odd to find proposals in the prices code which deliberately seem to run counter to the thoroughly desirable effect of a floating currency by encouraging the export of goods which it would be better in certain circumstances to keep at home. That situation arises because there is no control over the profits on exports, while the price of imports assumes an allowable cost increase for the purpose of fixing the price on the home market. So one can have an absurd situation. Indeed, that absurdity has been reached with certain commodities. I do not know whether my hon. Friend has bought any baths lately, but he might try it. It is an absurd situation where goods are exported only to result in the importation of substitute goods to be sold on the home market at a higher price than would apply to the home product. Both transactions are profitable to the merchant concerned but the overall result is a loss to the nation of foreign exchange. I find it difficult to make much sense of provisions of that kind in any economic circumstances.
I find such provisions remarkably inappropriate to circumstances in which, whatever the Chancellor's statistics may tell him, throughout the country one daily hears of bottlenecks in the most mundane but essential raw materials with much the same situation in labour, whether skilled or unskilled. In my part of the country there is something which can only be called a black market in certain essential supplies, particularly in the building trade. That is on top of an acute shortage of labour, exacerbated by the disruptive interchange between one firm and another by employees, which is induced by the pay code itself. We have had many comments and questions on that and enough has been said without my giving further elaboration. But these shortages and these black market prices and these evasions of the pay code not only add to the direct cost but the disruption they cause probably has an even greater indirect effect.
I do not see how one can avoid the conclusion, simply from keeping one's eyes open, that the economy is overheated. I am afraid that the Chancellor's restrictions on public expenditure and money supply have come too late and have been too little. I strongly suspect that the analogy that Mr. Harold Macmillan used to draw so graphically between the economy and the motor car is a good deal too close for comfort and that, with the economy as with the motor car, the faster one is travelling when the brakes have to be applied the bigger the strain and the risks involved.
However, let me now turn to the question of the price of land, a sphere in which the results of too much purchasing power chasing a fixed or nearly fixed supply are there for everyone to see. This is a result so inevitable—it has no other basic cause—that one can only assume that the Government foresaw it and accepted it as a price of the benefits, as they saw them, of growth through printing money. That is not a proposition that I find easy to accept, because the price of land is basic to almost every form of production, as well as to the cost of living of the ordinary individual. High land prices probably stoke the fires of further inflation to a greater degree than almost any other factor. Because people see land as the best, and perhaps the only safe, hedge against inflation, inflation too increases the demand and thus the pressure.
But there are certain things which can be done which would help marginally. One relates to the special agricultural assessment for death duties. It is imperative that we should confine these special provisions applicable to agricultural land to those who, upon inheritance, intend to and in fact do remain in agriculture for a minimum period. During that period, the difference between the full assessment and the agricultural assessment can remain as a reducing charge on the land and thus be safeguarded. That at least would remove from the market the type of purchaser who by definition does not quibble about the price very much and therefore exerts a demand out of all proportion to the numbers involved.
Second, there should be a good deal of rethinking about the roll-over provisions relating to capital gains tax on agricultural land when sold for development. Every year, tens of thousands of acres of agricultural land are lost in the interests of development. Since this land includes a number of whole farms, and since many of those farms are in owner-occupation, the result is to bring into the market at one and the same time—I nearly said "at a stroke", and thought better of it—a number of farmers with more money to spend on replacement farms than the value of their original holdings.
In most cases, a considerable element of development value has settled on the land that they were holding, and they come on the market with a degree of urgency created by the roll-over provisions to buy at almost any cost and with more money to spend than the true replacement value of their farms. I appreciate that the period of roll-over has been extended from one to three years by administrative action, and that will help, but this is a symptom rather than a cause. The whole problem of the taxation of land in these circumstances needs to be looked at again.
Another aspect of high land prices is of course the fact that people are no longer encouraged to save, and that is another reason why investment in land is such a popular hedge against inflation. It is not only that the interest rates—even the high rates of today—are overtaken by inflation, so that one loses the value of one's savings in real terms year after year. There is a bit more to it than that.
It is forgotten, especially by the party opposite, that a large proportion of capital held by individuals is the result of their own decisions to save rather than to spend money which they have earned. They are sick to death of being told that the result is unearned. They feel that they might just as well enjoy it as leave it to be frittered away by inflation or threatened by the capital gains tax so loved by the Opposition.
The undermining of thrift is probably the most disastrous of all the effects of inflation. The Prime Minister at Blackpool attributed what we have achieved in the past as a nation, as well as what we will achieve in the future, to the character of the British people. I am very glad that he did so, because I often think that we forget how much that we do in this House can affect the character of the next generation of British people.
Were not the characteristics of our forefathers, that outstandingly contributed to the achievements of the past, thrift and the sturdy independence that goes with it? Does anyone think that these qualities are being encouraged or developed today when inflation undermines thrift and we have, under the pay and price code probably more control than we have had in peacetime at any time in our history? Is that encouraging the character on which so much depends?
As I have already said, one does not need to be much of an economist to see that the money supply is at the root of the trouble with agricultural land, and I have yet to hear a convincing argument that it is not very important in regard to other commodities. I am glad that my right hon. Friend has made some encouraging noises about the control of the money supply today. I accept that he accepts that it is one of the weapons available to him. I hope that he accepts that those of us who take a more severe attitude to it and believe that it is the main weapon, do not have all that much of a gap between us. If we are fanatics, that is something that can operate the other way, among those who believe as passionately in growth at any price by printing money.
After all, the control of the money supply was the basis of the manifesto on which we on this side came here at the last election. It was the basis of cutting Government expenditure and putting the nationalised industries on to a commercial footing. I suppose we all have our particular theories about why an election is won or lost, but I believe that a major element in the last election was the appalling contrast between policy and principles on the one hand and performance on the other of the party opposite. I fear that the reason that we find common marketeers and anti-common marketeers, hangers and abolitionists, free traders and protectionists and a host of others with entirely contrasting views stomping the streets of Hove today in support of the Liberal Party is that people have begun to find both major parties lacking in credibility.
My fear—I hope that I am wrong—is that we have created, with the overwhelming support of the Opposition, not an unacceptable face of capitalism but a face of democratic politics which the public are finding unacceptable—and that is very dangerous indeed.
If juggling, sleight of hand, patter and party tricks were the qualities of a great Chancellor, as one hon. Member described the Chancellor, then indeed he would have some claim to eminence. But despite the ingenuity of his tax credits scheme, when he spoke I felt that he was talking in a cloud-cuckoo-land that had no relevance to the great economic questions that we are discussing today.
I find it strange that no one on either side has yet mentioned that, while we are debating the economy, over 1 million people are on strike, the nation is divided as probably it has never been divided before, and that the responsibility for this must be laid squarely on the shoulders of the present Government.
Although the Prime Minister has said that confrontation is not the policy of the present Government, the fact is that we are today still suffering from the malign consequences of the policy which he introduced and for which he used the Industrial Relations Act as an instrument. Everyone except the most self-deluding Tory ideologist knows that a law which does not have the consensus of the people will result in a large section of the public suffering from a grievous sense of injustice.
The result of the introduction of the Industrial Relations Act has been to divide the nation as never before. Half the nation has a burning sense of injustice. Unless the half which feels itself disadvantaged is reconciled and not confronted, as has been the Government's policy, all the growth which has been mentioned in the Queen's Speech or the lack of growth which has been insisted on in the amendment, the hopes of growth and the conquering of inflation, will end in frustration and made to be nothing.
Will the hon. Gentleman say how the policies put forward by his party at its recent conference—which were those of mass appropriation of other people's property and massive increases of taxation—will ever give a sense of justice to the country?
I hope that the hon. Gentleman will follow my argument instead of wandering off on a side track. I shall, with his permission, proceed with the argument which I was developing. The Tory Government have been remarkable in that the heresies of the past have suddenly become the received ideas of today. One of the extraordinary things that happened in the past year—and the right hon. and learned Member for Gloucestershire, South (Sir Frederick Corfield) had some part in it—was that the Tory Government, which was the arch-advocate of laissez-faire, became the party of nationalisation. That is my answer to the hon. Member for Welling-borough (Mr. Fry). Rolls-Royce had to be nationalised because there was no other means of arranging for the company to pursue the public purse. The party of capitalism looked in the looking-glass and saw its unacceptable face. The party of capitalism has suddenly become the party of interventionism. The party of confrontation now talks about participation.
I shall try to show how in one conspicuous case the talk of participation has been completely undermined. Far from pursuing a policy of participation, the Government have pursued a policy of rejection and of arbitrary handicap involving a large section of the public. No wonder the average Tory voter is confused. No wonder there is a sort of political schizophrenia in its ranks. When the Tory voters find themselves supporting Socialist techniques of economic organisation which the Government carry out halfheartedly and extremely badly, it is not surprising that Tory voters become confused.
I shall illustrate the way in which the Government have failed to represent their protestations. The Government have said that they are concerned with reconciliation and participation. By referring to the case of Norton-Villiers-Triumph I shall illustrate the Government's muddle both in principle and in practice. The collapse of BSA and the subsequent tragedy of the closure of the motor-cycle plant at Meriden, which is due to take place in a few days' time, with a loss of 1,700 jobs, illustrates not in a parochial sense but in the most general sense the way in which the Government, while presenting one face to the public, behave in a way which is disadvantageous to the majority of workers.
As is well known, at BSA a combination of bad management—that is acknowledged even by those who are on the side of management—and later of the most furtive inside dealings, resulted in the suspension of the quotation of BSA on the Stock Exchange and eventually brought the famous firm of BSA to its knees. When that happened the Government rightly recognised, despite their ideological position, that only by means of Government intervention could something be salvaged from the collapse.
It is well known that the Government encouraged a merger between the company and Manganese Bronze Holdings Ltd. The result was that a new company was formed—namely, Norton-Villiers-Triumph. It was formed with the Department of Trade and Industry providing £4·8 million of capital for prior-ranking preference shares. It is interesting that that sum fell short of £5 million, which the Industry Act would have required to have been debated in the House before it could have been given.
The purpose of the ministerial intervention demanded the support of both sides of the House. The Minister said that the object was to maintain the company as a viable entity so that it could make a contribution to the export trade of an industry which as a whole was exporting approximately 90 per cent. of its product.
The Government must regard exports as important. Therefore, they put forward a valid reason when they said that they wanted to keep the motor-cycle industry in existence and were prepared to back it with a subsidy. But for Opposition Members—I make this point not only because so many of my constituents work at Meriden—the importance of the transaction was underlined in the cross-examination of the Secretary of State for Trade and Industry. He was questioned about the employment of 6,000 workers, of whom 1,700 were at Meriden. He was asked to ensure that there should be proper public supervision of the public money which was being invested in the firm.
It was equally important that decisions involving the future of the skilled workers at Meriden should not be arbitrary decisions made by a financier arriving late on the scene and deciding to make a financial profit out of the arrangements.
The BSA case was a taste of what the Government call participation and consultation. There was no prior consultation between the bidders for the firm and the workers in the firm. There was no prior consultation between the Government and the trade unions concerned. The workers were presented with a fait accompli. They had hurriedly to try to organise meetings with the Minister, through Members of Parliament, to try to discover what their future would be.
It is true that at the request of local hon. Members the Minister received a deputation. After the facts concerning the merger had been announced, he said that there had been what he called consultation with the trade unions concerned. However, all such consultations had taken place after the major decisions were taken. The process of so-called consultation was merely an endorsement of decisions already taken, which continued to go on and which have continued until the firm is on the threshold of closing down, with so much personal tragedy to so many men and women. The consultation so described was yet another example of the double talk in which the Government are so expert.
When I met the Minister, with some of my hon. Friends and a deputation of shop stewards and trade unionists, after the announcement of the merger, there was no mention of the shut-down of a plant. There was some talk of redundancy that might have followed the merger, and that was accepted by the men. But the question of a complete shut-down of a plant, or of Meriden in particular, was not discussed. If there had been no question of a shut-down when the merger was being organised there must have been duplicity on the part of Mr. Poore, the Chairman of Manganese Bronze, and, I believe, negligence on the part of the Minister. But if, before the meeting with the trade unions, there had been discussions about a shut-down at Meriden, the Minister was guilty of withholding the facts from not only the trade unions but also, later on, the House.
Since that time there has been a "sit-in" at Meriden. Many of these workers have spent over 20 years in the service of the company. They are skilled people whose lives have been lived in and around the motor-cycle industry. They are not prepared to be arbitrarily dismissed in the way in which the chairman of that company has dismissed them. They are men who have sat in and downed tools in some cases not because they do not want to work. They want to work. They are "sitting in" in the plant because they want continuity of employment in the place in which they have spent their lives. Some of these workers have worked all their working life at BSA. I echo what they say to the Secretary of State for Trade and Industry. What sort of participation is it that the right hon. Gentleman is talking about in the legislation that he proposes? What sort of participation exists where workers are sacked from their life's work with no executive point of reference except for Mr. Poore, a gentleman who happens to be more notable for his skill as a financier than for any contribution that he has made to industry?
I am glad that the Secretary of State for Trade and Industry is present in the Chamber. Why did not the DTI put in a Government director, both to monitor the advance of £4·8 million, to see how that money was being used, and to make sure that the social intention, apart from the financial purpose of this Government hand-out, was protected?
It is urged by the Secretary of State that what the company does with the money given on behalf of the public is a matter for its day-to-day administration. I believe that £4·8 million is a substantial sum, for which there should be democratic responsibility—the kind of democratic responsibility referred to in the amendment.
There is no question that in the past BSA has been a sort of Augean stable that needed cleaning up. It has still not been cleaned up. What has happened to the inquiry into insider dealings which precipitated the collapse of this company? Has the Secretary of State had a report? Has he allowed it to go by default? Were these circumstances taken into account when Mr. Poore decided that this firm at Meriden, where there is so much inherent skill, should be closed down? I hope that the right hon. Gentleman will deal with these matters. They are very relevant to the fact that this great firm has suddenly been closed.
Various ideas have been put forward for keeping the firm open, such as a workers' co-operative. Did the right hon. Gentleman give any advice to those who were concerned in this form of real participation? Did he meet any of the workers concerned? Did he discuss with them the possibilities of such a co-operative as has been promoted by my hon. Friend the Member for Nuneaton (Mr. Leslie Huckfield) and by trade unionists.
I believe that the Meriden plant is a viable entity and should be preserved. It has one fatal defect, however, in that it is an attractive prospect for the asset stripper. That must be borne in mind. We should look at the whole history of those people who have come on the scene lately. They have arrived very much to the dismay of traditional Tory voters, executives and managers, who find that their life's labour has been put into a firm which has been suddenly taken away by some person who comes along and signs a document, taking away their factory and selling it off—as happened or, at any rate, was proposed, in the case of the Shepperton Film Studios, and as has occurred in so many instances elsewhere.
If the factory at Meriden were stripped as an asset, I have no doubt that, with the rise in property values, the site would be worth between £3 million and £4 million before long. If that were to happen we should see a most remarkable situation. On the one hand, the country would have advanced £4·8 million to the company, and then Mr. Poore would have stripped BSA, the new firm, of the Meriden site for between £4 million and £5 million. In the event, because the Government are committed, under the Industry Act, to getting rid of their preference shares or investments as soon as possible, Mr. Poore could get the Government holdings in Norton-Villiers-Triumph for virtually nothing. We must deplore that. This transaction between the Government and Mr. Poore is an ugly transaction and it cannot be condoned by saying that it is in the interest of exports when a factory such as Meriden is closed.
The Minister must take his responsibility. It is his duty to keep the factory at Meriden as a viable entity. I am not sure that Mr. Poore's qualifications should be allowed to permit him to close a factory where so many men with so much skill have made such a great contribution to the motor-cycle industry. Mr. Poore, a financier, is a person who once had a very large stake in a casino. But the motorcycle industry of Britain is not a casino, nor is Meriden one of its branches. It represents the life and work of thousands of people. There is a strong case for the early appointment of a Government director entrusted with the responsibility of keeping this factory open.
I have listened with a certain sympathy to the hon. Gentleman's analysis of the problem at Meriden. It seems that he has dodged the final and clinching point. Can he or anyone else guarantee a market for the production of the Meriden factory if it is kept alive as a workers' co-operative, as he has suggested, or with a Government director?
The hon. and learned Gentleman asked whether I can guarantee a market. Clearly, no one could give such a guarantee. But there is a market. My hon. Friend the Member for Nuneaton has recently been to America and explored the possibilities of such a market, returning with a favourable and most encouraging report.
This factory can be kept open. There is a great and growing market for British motor cycles. The Minister has failed the workers of Coventry and Meriden, and of the country, by simply taking the word of Mr. Poore that this was the way to deal with the matter.
We are now at the onset of winter. Will the right hon. Gentleman allow Mr. Poore to close his factory, with 1,700 workers, at a time when these men are ready and willing to work—to make their contribution to exports and to the future of the country? I ask him to give a pledge that in the light of the Government's large preference shareholding in the company he will insist that the factory be kept open until next July at least, which was the original commitment by Mr. Poore and the Norton-Villiers company.
If that does not happen, I warn the Government that their harsh and intemperate attitude will produce an abiding bitterness among those whom they allow to be injured. I urge the right hon. Gentleman to think again. He can, in part, redeem himself for all the pain and anguish which he has caused the workers of Meriden by obliging the Norton-Villiers company to cancel the dismissal notices. The right hon. Gentleman has a duty of public and social accountability—the democratic accountability referred to in the amendment to the Address. If he fails in that task, there will one day be for him a heavy reckoning.
The hon. Member for Coventry, North (Mr. Edelman) will understand when I say that I regret that I speak following him. He will know why I am unable to comment on much of what he has said. The main reason for my regret is that one can sometimes be provoked too far. I much regretted the attack on the integrity of my right hon. Friend the Minister for Industrial Development and the gentleman concerned in the Norton-Villiers situation. I know the hon. Gentleman and have much respect for him. He is an active and diligent constituency Member, and I have a high appreciation of his intelligence. I listened carefully to his speech and feel sure that he knows much more about the background and history of this event than he suggested to the House.
I can, however, go along with the hon. Gentleman in dwelling on the significance of any company which is active in exports. Hon. Members have talked today on many different subjects, but this is a sphere in which I have, perhaps, more experience than I have in the more general working of the economy, and it is on this that I shall concentrate.
Let us remove the cloud of doom and gloom that seems to spread so frequently and so readily in this Chamber. There are some worrying features about our economy, as there are about the economy of every country, but at this stage, on the export front, there are signs of the greatest opportunity we have ever had. I can say that as somebody who was actively and personally involved in export selling in an earlier incarnation, and as somebody able to take a close view of what is happening now.
Everything that has been said by my right hon. Friends about the competiveness of our currency is true. There are at the moment twin incentives to export. The first is that our prices are extremely competitive. Second—this was referred to by my right hon. and learned Friend for Gloucestershire, South (Sir F. Corfield)—in profit terms, it is more attractive for firms to export than to sell at home. There are no profit controls on export sales and, therefore, at a time when there is the best possibility of getting export orders, there is the maximum encouragement to our exporters to export.
I found this in North America and Japan during the Recess. The opportunities are great. One of our representatives in Japan, asked where the best opportunities lay, gave this general comment: "At present, our goods are so competitive, and, because there are shortages in Japan as well, you can sell practically anything that you can bring here". That underlines just how competitive we are in the present situation. My hon. Friend made a point which is still not widely enough appreciated. It is vital that we do not give away our competitive advantage by doing nothing more than send out standard price lists, or quote prices based on the previous price, marked up only for increased costs. Any sales or managing director who fixes export prices without having in his hand a currency sheet indicating relative currency movements since the last sales were made is failing in his duty to this country.
A wide range of goods are in short supply, markets are extremely good throughout the world, and there is a big risk that many of our companies which are not accustomed to export sales but are accustomed to tough price battles, will sell too cheaply. I say, with personal experience, that there is considerable scope for ensuring that we do not give away our goods. We talk about our currency being under-valued, but many companies often fail to understand the significance of that remark and sell at prices that are too low. All the indications, both within my constituency as well as outside and within the industries that I know, are of an extremely promising and growing export achievement.
Against that, there are three direct threats to that situation continuing, and even improving as the House would like to see. First, there is the worry about inflation. I do not know how many hon. Members read the article by Bernard Levin. We talk in pious terms about inflation being the biggest worry that anybody has, but what he said about the real gut-rotting concern, the fear that people have that their savings are constantly being eroded, came very close to expressing the feelings of many people.
I accept that my right hon. Friends are tackling the problem in the only practical way that it can be tackled at the moment, but one must express great concern about the development of phase 3. My right hon. Friend the Prime Minister has stressed the flexibility of the proposals. I am not sure whether there have been any developments since I have been in the Chamber, but the proposed firemen's award of between 18 per cent. and 20 per cent.—which is founded largely on unsocial hours, but which is basically a description of shift work in industry generally—seems to be a measure of flexibility which runs the risk of imperilling the whole policy. I hope that that aspect will be carefully considered.
The second threat which I see is that of the energy crisis which is facing us. My right hon. Friend the Secretary of State this afternoon gave a clear and frank answer about rationing and said that no countries in Europe—apart from the minor Dutch restriction—were taking any action on rationing. My hon. Friend the Member for Bosworth (Mr. Adam Butler) made the fair point that we must consider not merely the question of supply but also, increasingly, the price that we shall have to pay for the supplies that we get and whether the financial constraint might encourage us to promote even greater economy.
When one looks at the problem it is difficult to separate the short term from the long-term. I have recently been in America, where everybody is talking about the energy crisis. Even without the Middle East problems there was the threat in North America of shut-downs, and of schools and factories being closed, but at the same time Detroit announced the new season's models which average seven miles to the gallon. People were talking about the crisis in energy and electricity supplies, but if, in the middle of the night, one drove through a city and saw all the lights blazing in office blocks and asked why they were never turned out, the reply was, "It wears out the bulbs faster if you turn out all the lights, and on balance it has been found cheaper to leave all the lights on all the time." In fact, I understand that many modern office blocks are built in such a way that one cannot turn out the lights.
In this situation one wonders if the world is serious when talking of an energy crisis. If that is the situation abroad, can we be smug about the situation here? Is there not a case for some precautionary moves? There is no way of telling exactly how the winter may go. I should tell the Minister that there are an enormous number of berries on my holly tree at home. I was told in North America that the beaver is growing even thicker fur this year.
I do not know whether we have to resort to old wives' tales of what a cold winter might be coming, but nobody can tell what the winter will be like, or what will happen with the Arab gentlemen who control our oil supplies, but I would say that there is a case for some anticipatory move perhaps by economy in electricity used in display lighting and other non-essential uses. I get the impression that this country is like the "Titanic" in that we are sailing into waters in which icebergs may be present and, like the "Titanic" on its famous voyage, all our lights are blazing.
The other area of serious risk to sustaining this export achievement is labour shortages. There are two specific measures that my right hon. Friend should consider. I appreciate the Government's efforts in trying to accelerate and increase the amount of industrial training to try to ensure that skilled labour is available where it is needed. The whole structure of apprentice training, however, seems to be woefully inadequate to the present needs.
I was in the printing industry when apprenticeships used to be four or five years and the whole structure was geared to learning a craft that would last one for a lifetime. This situation has drastically changed. We all know the familiar cry that people will need to learn three trades or crafts during their life cycle. It is now palpable nonsense to have long apprenticeship periods when one will need to learn a new craft later. Some measures have been taken and some improvements have been made in this respect, but not nearly enough.
There is a second way we could help the labour shortage. My hon. Friend will be aware of the figure for vacancies, not just in my part of the country, in the South-West, but in the South-East and in other industrial areas. Something more could be done to encourage people nearing retirement or already retired to continue working.
This might be an appropriate moment to consider removing the earnings rule from pensioners. We have previously had the argument during times of unemployment that it would be difficult to make this change when many people of normal working age were seeking employment. In many parts of the country this situation has now dramatically changed and this would be not only a popular move with pensioners, but economic sense.
I should like to reinforce what my hon. Friend is saying because in my part of the world in the South-East if a hundred extra people were employed from that retired population, there would be at least £1 million worth more exports a year.
I know that my hon. Friend has campaigned in this matter and I know the interest he has taken in it. I apologise if I have anticipated a cry that he intended to make.
With those three possible threats, I hope that my right hon. Friend will keep up the effort and the publicity he is giving to opportunities for export. If we are to fight our way out of the present tough situation it will be by export-led growth. I have been trying to use publicity as well to get across this message, which is still too little appreciated in this country, that there is a real opportunity to achieve this. Every businessman who goes abroad now is a positive gain, because he is finding markets that he never believed existed and he will learn the habit. What I was pleased to find both in North America and in Japan was how the tide of businessmen was growing. It is a gain that we shall not lose.
The hon. Member for Bridgwater (Mr. Tom King) did his best to cheer us up, mainly by saying that our export prices today were competitive. That is perfectly true, but it is mainly because the Government have already devalued the pound by approximately 20 per cent. Export prices can always be made competitive in that way.
The right hon. and learned Member for Gloucestershire, South (Sir F. Corfield) told us that a number of strong Government supporters had deep anxieties about the present state of the balance of payments. They are not the only people to have those anxieties. I thought that the Chancellor of the Exchequer was astonishingly complacent today, almost to the point of flippancy, about a balance of payments already on current account in deficit by £1,000 million or £1,200 million a year, before counting in the extra bill, whatever it is, of several hundred million which we shall have to face because of higher oil prices.
I agree that the Chancellor behaved remarkably like the captain of the "Titanic", as was suggested. I hope that we shall have a slightly more serious attitude by the Secretary of State towards these national problems with the country in its present situation.
I do not believe that the Government are justified in imposing all these compulsory income restraints in phase 3 while simultaneously forcing up food prices by imposing a whole number of import taxes on food and relying on a steadily depreciating exchange rate as the only means of correcting the present huge balance of payments deficit. Both difficulties arise largely from the Government's total acceptance of the common agricultural policy of the EEC. In the Prime Minister's famous 1971 EEC White Paper, we were told that EEC membership would somehow miraculously solve all these economic problems. We heard not a word this afternoon about the effects of membership in the Chancellor's economic review.
Let us consider the facts. According to the Government's figures, we now have a current balance of payments deficit running at about £1,200 million a year, a record low value of the pound, a record rise in food prices, and a record budget deficit. As a result of that, we have record high interest rates and mortgage repayments. Most striking of all, we have a record visible trade deficit with other EEC countries.
It is instructive to compare that record with the promises made in the EEC White Paper. We were told—and this was the main burden of the economic argument—that the great home market, as it was called, of the Six would earn us so much in foreign exchange as to offset all the other heavy burdens of membership. The actual words were that the present Government
were confident that this effect
—that is, on the visible balance of trade—would be
positive and substantial.
They are somewhat vague words, but presumably they were intended to mean a large trade surplus.
What has happened in hard facts so far? In the first nine months of 1973—the Secretary of State will no doubt correct my figures if they are wrong—our visible trade with the Six, which was nearly balanced in 1970, actually showed a deficit of £740 million. That is a rate of almost exactly £1,000 million a year. That is a remarkable result to call a "positive and substantial" balance.
Indeed, the deficit with the Six this year is absolutely disastrous, and I am sure that the right hon. Gentleman has noticed that even Lord Stokes is somewhat disappointed. He said:
I do not think that we envisaged that membership of the EEC would result in
the consequences which we are now seeing. What he may not have noticed is that this £1,000 million visible trade deficit with the previous Six almost entirely accounts for the total £1,200 million current account deficit which we are now suffering. If one adds the E90 million budget payment which we make largely for the benefit of the French, and
the rise in import prices of food, one arrives at the £1,200 million deficit at which we are now running.
The rise in food prices is not merely a serious obstacle to any fair incomes policy, it is also an intolerable burden on the balance of payments. The Minister of Agriculture told me as recently as 25th October that the rises in food prices since the summer of 1970 have been 60 per cent. for pork, 60 per cent. to 100 per cent. for lamb, 75 per cent. for cheese and 80 per cent. for beef and bacon—by far the steepest rises that we have known in this century.
Those who told us in 1971 that joining the EEC would have no appreciable effect on food prices now tell us that these extraordinary rises have absolutely nothing to do with the Common Market. Mr. George Thomson said in an oration at Blackpool recently that the rise due to the EEC was only 5 per cent., while Sir Christopher Soames, also at Blackpool, said that it was 1 per cent. If those two expert estimates vary from 1 per cent. to 5 per cent., I do not think that we should take them too seriously.
What are the real facts of the present food price situation?
When dealing with the prices of imported food my right hon. Friend cited a number of different commodities, including lamb which, as he is aware, does not come from the EEC. With regard to some of the other commodities, there has been no noticeable change in the import pattern, and they are still coming from our traditional suppliers. Cannot my right hon. Friend take that into account in weighing up the balance of Common Market entry costs?
I am coming on to various individual commodities. My hon. Friend may not know that there is already an import tax on lamb. It was imposed by the present Government, and it is due to rise still further next January under the Treaty of Accession.
A large part of the rise in food prices is due to the 20 per cent. devaluation of the pound, which is due in turn to the balance of payments deficit caused by all these factors. A falling pound now, because of membership, automatically raises food prices, which it did not do before, and the Government then attribute that effect to world prices. That is a point which the public have not yet realised.
Secondly, Ministers have repeatedly told us that they are raising food prices because they have to comply with EEC rules. The Minister of Agriculture said it about butter in the House on 21st February—so did his Minister of State a little later. The Minister of Agriculture, only 10 days ago in the sugar debate, told us that prices paid by the British public are deliberately to be raised by another 20 per cent.—not for any serious economic reason, but merely to comply with EEC regulations.
Food prices are being forced up by two methods. First, in many cases, by imposing heavy import taxes; secondly, by the Intervention Board's activities in taking food stocks off the market The present import tax on butter is £185 per ton on an essential foodstuff—about 40 per cent. of the world price—and that tax has already excluded butter from Australia. Over the next three years the price of butter is to be forced up, according to the Minister of Agriculture, Fisheries and Food, from the present £400 per ton to £826 per ton, by which time the import tax will be nearly 100 per cent.
On cheese we already have an import tax of £217 per ton, or about 50 per cent., and Canadian supplies have been almost totally excluded from this country. There is no world shortage of cheese, yet the retail price has risen 75 per cent. On bacon, which is 80 per cent. up in price, the tax is £30 per ton, and on canned ham £118 per ton. If anybody thinks that those taxes can have no effect on the price of food, the onus of proof is on him.
The right hon. Gentleman mentioned canned ham, details of which have been published in various leaflets in the most disreputable way. Would he now admit to the House that he is referring to the duty put on canned ham from non-EEC countries? Would he further admit to the House that the bulk of imported canned ham imported comes from EEC countries against which the rate of duty is reducing and not increasing?
The right hon. Gentleman would not wish to mislead the House. Would he tell me the net effect on our imports of canned ham of the duty changes involved in our entry into the EEC? He knows—I know that he does his homework on this subject—that the net effect is a reduction and not an increase in the tax we pay.
The tax on canned ham coming from outside the EEC is the figure I have given. That must have some effect on the price. Beef prices are up 80 per cent. and a new import duty was levied on beef this autumn even though prices were then at record levels.
The cost of producing, transporting and refining Commonwealth cane sugar is £87 per ton. The EEC price, which will doubtless soon rise further, is already £110 per ton, implying a rise of 25 per cent.
Next January, a tax starting at 8 per cent. and rising to 20 per cent. is to be imposed on mutton and lamb even though, as my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) so rightly says, they are hardly produced in the EEC.
The right hon. Gentleman has referred to the increases in the price of food. I was talking to a fisherman in my constituency who was comparing the price of rag worms, which have gone up by three times in the last two years. These are produced in this country. It is the price of transport as much as anything else that makes them so expensive.
If the hon. Gentleman's argument is that food prices have risen unconnected with Government policy, surely he would agree that it would be sensible in those circumstances for the Government to try to keep them down by not imposing these taxes in addition.
Even in the instance of the most important commodity of all—wheat—while Ministers were this summer complaining about high world prices, the Government themselves were imposing import levies on wheat. It was not until August of this year that world wheat prices, supposed to be extortionately high, rose to the level of the EEC threshold prices. This autumn's wheat prices are what we have to expect indefinitely in future if we accept EEC prices.
In addition, to make certain that prices do not fall below prescribed levels, the Government's Intervention Board is hard at work taking stocks of food off the market and mixing chemicals with good milling wheat to ensure that the price does not come down. In the present year about 1½ million tons of wheat have been denatured in the United Kingdom. In the present world situation where there is a shortage of grain—as I think the hon. Gentleman would agree—it is indefensible to be deliberately rendering good milling wheat unfit for human consumption.
I know that the Minister has tried to insinuate that the purpose of denaturing wheat is not to make it more expensive to the millers but to make it cheaper as feeding stuffs for animals. Unfortunately for him, the Government's Home Grown Cereals Authority has said candidly that the purpose of the denaturing arrangements in the EEC is to sustain the traditionally high-priced market for milling wheat, that is to say, to keep the price up within the EEC if it should unfortunately fall in the world outside.
But from the point of view of the balance of payments of the United Kingdom—which is the serious problem—the worst of these disastrous food policies is the ever-heavier burden that they will lay on the country in future. As our food prices are deliberately forced up over the next three or four years to what the Minister euphemistically calls "Community levels", and as world prices fall back from their present peaks, the crucial gap will widen and the burden of the common agricultural policy on the United Kingdom balance of payments—already many hundreds of millions even at present peak price levels—will grow even heavier.
We have had some naïve apologists who pretend that this does not matter because world prices will never fall from present levels. All economic history is against them there. The United States and Canada have now freed from all restriction millions of acres of fertile land for wheat and maize production and massive grain harvests are, if not certain, highly probable—if not this year, over the next few years. Already this autumn the Soviet Union has announced an all-time record grain crop of 215 million tons.
I would advise anyone who says that cheap grain has gone for ever to heed the words of the Economist of 11th August this year:
Those who use the present grain shortage to forecast a world on the brink of lasting starvation have memories that fail to extend back even three years, when the granaries were full with surpluses stored under the ice cap and America unable even to give its wheat away.
Therefore, all the evidence is that the damage to this country from the common agricultural policy is likely to worsen rather than improve.
When I asked the Chancellor of the Duchy of Lancaster—who should be an authority on these matters—what benefit we were now receiving from the EEC to offset all these burdens, the only answer he could give was to say:
We are launched on an effective international negotiation to regulate world trading conditions.
I should have thought that he would have heard of the Kennedy Round in which as an independent country we took a prominent part in the fight for freer world trade. The only real difference now is that the British voice is muffled and muted. On the one issue of the greatest importance to us—reform of the CAP—the Government have accepted the French insistence that in these crucial GATT talks the negotiating position for the EEC, including us, lays down that neither the principles nor the mechanisms of the CAP are even to be called in question.
In fact, far from being enhanced, our influence, just as in the recent case of the French nuclear tests, has been visibly reduced by membership and by the muffling of our voice in a collective programme. We were told nothing today by the Chancellor, or by the Prime Minister at the beginning of the debate, about what has happened to the reform of the CAP conducted by the EEC, which was supposed to be one of the Prime Minister's great achievements a few months ago. May we be told before the debate is over—perhaps tonight—what has happened to this all-important review that we were promised? Present Press reports suggest that nothing but tinkering is likely to come out of it.
All these damaging policies cannot be allowed to continue much longer, unless this country is to be weakened to a third-rate Power, which need never happen if we are true to our own interests, to ourselves and to our history. But it will if these disastrous economic policies continue. There is clearly only a negligible chance of a major reform of the common agricultural policy in the GATT negotiations, where we could have had, if we had played our cards properly, the United States, Canada, Australia and other countries on our side.
The prospect of any major reform in the EEC, unless we can be told otherwise, now looks negligible. Nothing therefore can arrest our present accelerated slide into greater and greater balance of payments difficulties, except the complete repudiation of the common agricultural policy by this country.
I am sure that the right hon. Member for Battersea, North (Mr. Jay) is right when he suggests that the reform of the common agricultural policy is desired not merely on the experience we have had so far but also because of likely future developments. I am certain that in making that observation he will draw a wide spectrum of support from many of the Government benches and from that fraction of the Liberal Party which sits in the form of the hon. and learned Member for Montgomery (Mr. Hooson). With such powerful and widening support, who knows in which direction the debate will proceed?
However, it would be inappropriate for me to engage in discussion with the right hon. Gentleman, when the hon. Members for Caithness and Sutherland (Mr. Maclennan) and Berwick and East Lothian (Mr. Mackintosh) are only too anxious to tear at the arguments which have been put before the House. Perhaps I may be allowed to move to other fields and leave to them that controversy.
The Queen's Speech has the theme of popular capitalism. There is an attempt, which is overdue and welcome, to try to recast capitalism in a considerably more attractive manner. The promises
major reforms in company law will be laid before you
For the further protection of consumers a Bill will be introduced to reform and extend the law relating to credit
give testimony to the concern of my right hon. Friend on the Treasury Bench that this Session of Parliament will proceed with the constructive task of trying to bring more into the realities and challenges of the twentieth century the techniques of private ownership in the industrial and commercial sector.
I welcome those moves and I congratulate my right hon. Friends on their example of reforming zeal. But may I make a modest request? Much of the private sector must subsist on dividend income. If dividend income is to be the Cinderella of prices and incomes policy, if it is to be the one area which can be more effectively borne upon, not merely will those who draw their incomes from dividends be disadvantaged relative to others—I include here, as I know my hon. Friend the Member for Harwich (Mr. Ridsdale) will immediately concur, a large number of retired people—but one will be creating precisely the potential asset-stripping situation so deplored by my hon. Friend the Member for Stratford-on-Avon (Mr. Maude) which does so much to bring capitalism into disrepute.
In the time at my disposal I want to consider another aspect of current economic debate which has been touched upon by a number of hon. Members this afternoon. I refer to the aspiration, which, I believe, is shared throughout this Chamber, for an ordered society. In the words of the Gracious Speech, it is
to secure a prosperous, fair and orderly society".
The question we must put to ourselves—the Treasury Bench, the Opposition Front Bench and the Liberal Party—is whether a prosperous, fair and orderly society is conceivably consistent with an ongoing rate of inflation of 10 per cent. That is the central question which will occupy us in the months ahead.
My right hon. and learned Friend the Member for Gloucestershire, South (Sir F. Corfield), in a remarkable speech, suggested that the pay code and the price code institutionalised a going rate of inflation of 10 per cent. Is he right? It is a serious accusation and one to which, I am certain, all will be straining to hear the answer at the end of this evening's debate.
When mention is made of the Government's targets and objectives in the period covered by this Session, we are wise, and required, to ask what is the target for the rate of reduction in the level of inflation which this country is now experiencing? Few of us doubt that the social consequences of this level of inflation give rise to political manifestations which make us, if not tremble for a future ordered society, at least be mildly apprehensive. For the major parties, they are today, perhaps, the irritating phenomena of the politics of paving stones, but I should prefer that, disagreeable as it is, to the politics of the streets. There is plenty of evidence in Western society to lead us to believe that the politics of the streets are not that far away from our more conventional and ordered systems of conducting affairs.
My right hon. and learned Friend the Member for Gloucestershire, South approached this subject—and he was the more effective for the manner of his approach—with an almost fastidious diffidence; but he said that he was not overcome with optimism. To what he said I add my own anxieties, which derive from a feeling that we have managed so to arrange affairs—there are few who can claim to be blameless in this matter, so let us desert the pettiness of Fourth Republic politics—that we have arrived at a situation in which we have a massive Budget deficit at a peace-time record level at almost exactly the wrong time by any conventional Keynesian demand economic analysis. We have this evidence now of what I believe to be a seriously overstretched economy.
There are better ways of making a speech than craming it with quotations from the editorial columns of the Financial Times. But I hope that I shall be excused if I draw upon the offering of Friday, 2nd November, which said, with reference to the CBI's October survey:
Unprecedented numbers of firms report shortages of materials, components and skilled labour. For the first time in the history of
the survey the number of firms unable to meet potential demand because of these constraints is substantially larger than the number who would welcome more business.
The Financial Times was surprised and somewhat depressed that the CBI did not draw its own conclusion from what was revealed by the survey. The editorial continued:
Measured against these facts the official commentary reads like the work of three authors instructed to see no overheating, hear no overheating and speak no overheating.
To an extent I share the belief of those of my hon. Friends who suppose that we shall be rescued to a degree from this situation by a kind of self-correcting mechanism, that inflation itself is producing a substantially increased tax revenue. I have seen figures in the Press of between £700 million and £900 million. It will be interesting to know whether these speculations are given any authority or endorsement from the Treasury Bench. But I do not take too much comfort from that factor alone rescuing us from the consequences of Budget deficit financing on the scale that we have now.
I believe that it will be immensely difficult for my right hon. and hon. Friends to hold back the rate of increase in public spending. I have no doubt that the most massive tasks are being conducted and that herculean efforts are being made——
I see that the hon. and learned Member for Lincoln (Mr. Taverne), who has great experience of these affairs, confirms that this is happening. I suspect that it happens every year.
I have no doubt that some successes will be scored. But I do not think that anyone looking at the demographic pattern of the country, at the demands made by the young and the elderly as a balance of the total population and at the challenges for environmental and urban renewal, can be very sanguine about the prospect of holding back public sector spending.
We know the consequences of holding back too rigidly in times of price and income control of the public sector. What we see in London Transport today, which is an anaemic debilitation of standards of service, will be repeated in many other public services to the point where political pressures on that account alone will make it very difficult for the Government to be as successful as they have promised in the rate of increase in public sector spending.
In the figures which my right hon. Friend the Chancellor of the Exchequer mentioned earlier of total public spending for the year in prospect, it would be interesting to hear what judgment was made on the level of incomes in the public sector. Did it assume a fire brigades settlement of the order now in prospect, especially in Glasgow? Was that built into the calculations? If it was, I take note. If it was not, is there a contingency provision?
It is acknowledged on all sides that the rate of growth in the economy is likely to fall back, perhaps substantially, from the remarkable rate recently enjoyed——
As the right hon. Member for Bristol, South-East (Mr. Benn) points out, my right hon. Friend said it. I do not think that anyone having the most arbitrary and pragmatic personal experience of talking round in his constituency can doubt that the rate of increase in activity is coming up against a series of physical constraints.
In earlier days of enthusiasm, my right hon. Friend the Chancellor of the Exchequer said at the Conservative Party Conference in 1970:
On the first day I arrived at the Treasury, I asked for two figures: first, the proportion of our national income taken by public expenditure when we left office in 1964 and second, what it was when we got back six years later. I ask you to remember these figures for they are at the root of our troubles. In 1964 public expenditure took 44 per cent. of our national income…it now takes 50 per cent.…This unprecedented rise in public expenditure has been, far more than nationalisation or direct Government control, the real road to socialism.
I do not quote from that speech in anger or resentment. Much has happened since those days to require the Government to take different views, and we should be pedantic far beyond the limitations of our profession if we objected.
When expenditures persist at these levels there are certain obligations in respect of taxation from which we can- not escape. I say that having taken the protective step at the time of the Budget of calling for an increase in direct taxation. At the time I suggested 5p on the standard rate. Today I am slightly aghast at my moderation. The consequence in the Budget was not an increase in taxation but a reduction. I do not think that that was wise. In today's circumstances, with all the pressures which exist to perpetuate the deficit, I believe that we have again to look at areas of revenue raising.
I take up the point made by my right hon. and learned Friend the Member for Gloucester, South which I know would he endorsed by my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) if she were here and which I know will be endorsed by my hon. Friend the Member for Norfolk, North (Mr. Ralph Howell). In a few weeks we shall see a Christmas spending spree of unprecedented intensity. We shall have figures showing that there have been all-time record sales of wines and spirits. Do we have a correctly aligned sense of balance if, in the circumstances, we are unable to charge for milk a price which is more related to its cost of production? I say that not merely in respect of the very substantial deficit that now attends the milk fund but also in respect of what I believe to be a case in equity which can be made out for an increase in the return to farmers for milk based upon recent cost experiences. Secondly, on a day when, at the prompting of the right hon. Member for Bristol, South-East, we heard a statement on our energy supplies, is it really appropriate at a time when we should be thinking more and more about the continuing demands which will be made upon our energy resources and the hazards which will attend their supply, to persist with the subsidising of electricity generation and distribution? These are fair questions to ask, because it is by the answers that we will be judged in the kind of lead we give to the country.
There must be more to politics than merely blaming those outside this House. As we approach an election, and no one doubts that this Gracious Speech is the prelude to an election, I make this appeal. I hope that we will proceed to have somewhat more conventionally balanced Budgets. I believe that if prices are to be a major factor—and there is more to politics than institutionalising a going rate of 10 per cent. because that is the prelude to the acceptance of a higher rate of inflation—then the least we can do is to have candour in our analysis and resolution in our remedies.
If there is to be a reduction in the going rate of inflation it can only proceed if the public are prepared for and are told about the transient but certainly real inconveniences and hardships that will arise. It is a myth to suppose that there are painless cures for inflation. When I look around for some slogan under which to fight this battle in the time ahead to show that I am not narrow and nationalistic and inward-looking, I am happy to look across the Channel and to recall the phrase verityé et severité. I think it would still be of value to this nation.
It is a privilege to follow the hon. Member for Oswestry (Mr. Biffen) who always makes such a fresh and candid contribution to our debates. His speech matched in thoughtfulness that of the right hon. and learned Member for Gloucestershire, South (Sir F. Corfield), which I thought was also a significant contribution. I was particularly impressed by his point about people walking the streets in the various by-elections now pending, deliberately appealing to the public's quite genuine sense of disaffection with both major parties.
This was something which impressed me in connection with the report of the Kilbrandon Commission published last week. The Commission detected an undercurrent of disaffection with our political system and its institutions, including the major parties. What bothered me about the reception given to the report by the House and by some of the metropolitan Press was the tendency towards cynicism, to brush it aside and laugh at it. The Kilbrandon Commission may have been wrong in saying that the problem of disaffection and distrust could be cured completely by devolution, but it might well be of some help. In any case, it was wrong to brush aside the Commission's diagnosis and not to treat it seriously.
I feel that a great deal of the trouble, as the hon. Member said, is due not so much just to the machinery of Govern- ment but to the fact that both major parties have tried to solve problems and have confidently put up solutions, particularly when in Opposition, but have failed to solve these problems when in office. Nothing would be more utterly disastrous for the political system in this country than that a political party should win the next election and again disappoint the electorate. In fact, in recent years, party after party has won elections not as a result of positive enthusiasm but by default, which in turn has led to greater distrust for the party which then won power. This is a most unsatisfactory situation and a most dangerous one. I feel that we are likely to have this happen again by the way in which we are talking about inflation and the problems it produces.
I will resist the temptation to discuss with my right hon. Friend the Member for Battersea, North (Mr. Jay) his usual anti-Common Market speech. We can leave that for some other occasion. Instead I will concentrate on the issue before us of inflation.
The earlier half of the debate tended to confuse two things. It confused the problem of the disastrous social impact of inflation with overall long-term economic policy. When we consider the impact of inflation on individuals and the enormous redistribution of income which it involves, it is also appreciated that we can tackle it in a number of ways.
We can tackle it by trying to put a halt on prices and subsidising them beyond a certain level. We have had estimates of what this would cost. This is a practical policy, although one with certain bureaucratic and other difficulties. The trouble is that if we spend £1,400 million or whatever on subsidising certain basic food prices, the effect on the social impact of inflation may be considerable but there may be no effect whatever upon inflation itself, because it depends how we obtain the £1,400 million used for the subsidy.
The same is true if we increase the old-age pension and safeguard the incomes of the poorer section of the community. If we do that, by whatever technique, the impact on the social consequences of that year's inflation may be considerable, but it may have no effect whatever on the overall problem which the country is facing if, again, the money comes from sources which do not decrease the total amount of demand in the economy.
We must put aside the mitigation of the social impact and the destructive effect of inflation and turn rather to the overall economic policy of the country, which is a somewhat different matter, and see whether anything can be done to cut the present rate of inflation while maintaining reasonable economic stability and prosperity. That is the most difficult single point. The hon. Member for Oswestry argued, and we would all agree from our experience, that there is overheating in the economy. We all know from our constituency experience that there are bottlenecks and shortages.
What I am not clear about is to what extent we would need to deflate the economy before we would remove these bottlenecks and what damage this degree of disinflation would have upon a whole series of other factors. What bothers me in this situation is that only two years ago we had a considerable degree of inflation with 1 million unemployed and a completely stagnant economy. I fear we have got into a situation, so that whichever way we turn, whether we continue with the present economic policy or not, we will be in difficulties. On the one hand, as the right hon. and learned Member said, we can continue to eat our seed corn by consuming and exporting rather than investing. On the other hand, if we deflate, the first thing we may do is to cut back existing investment plans of businessmen, who thus do not plant the seed corn. I do not want us to be in a position when we would lose in both directions.
What bothers me deeply is the low rate of performance of the British economy over the past 10 years. Hon. Members must appreciate that party by party we have turned this way and that looking for solutions to this problem, some glib, some genuinely intended, but they have all failed to remedy the situation.
We tried a Maudling policy in 1963–64. It was similar to present Government policy, a policy of expanding in the hope of breaking out of a situation of low growth, hoping that heavy expansion would lead to investment and to a growth in productivity, so that in time we would be able to remove the balance of payments deficit. Although we were not then faced with the present rate of inflation, that policy collapsed.
The Labour Party then turned for growth to indicative planning. We had the National Plan which never really collapsed because it never started. That was because we turned to a policy of deflation in July 1966 so that the National Plan targets became meaningless. Then we tried the IRC, "Little Neddies", and productivity conferences which might have had an effect—but not against the background of low growth.
I recall at that time making a speech of this kind during which the then Leader of the Opposition, now the Prime Minister, had the courtesy to interrupt me to tell me that the whole problem was a lack of confidence on the part of British industry in the then Labour Government. He said that if we had a Conservative Government pursuing proper policies of the kind that would appeal to the hon. Member for Oswestry and his friends, policies involving low public expenditure—"Selsdon Man" type policies—then British industry would invest sufficiently and the problem would be self-rectifying. The Prime Minister has discovered now that that was not the case. There have been no more bitter and trenchant attacks on British industry and its low performance than those from the Prime Minister. Nothing has caused more upset in the City than to hear him saying the things he has been saying about the low rate of investment.
The Labour Party, turning to this problem of the low performance of British industry, as the Tory Party did in Opposition, and not being able to analyse it adequately has, like the Conservative Party, reached into its traditional stock of answers for a set of solutions and policies. I am by no means confident, however desirable this or that measure of public enterprise may be, that such a policy will get to the root of the low performance of the British economy which has as its key feature a low level of investment and a low level of capital provision. On the other hand, if we now return to a policy of deflation, which is what the City calls for, if we now have a massive stop sufficient to remove bottlenecks, overheating and scarcities, it would be yet another proof to the British businessman that expansion and investment is not normal in the British economy.
The disastrous thing is that we have not had stop-go, we have had stop after stop after stop. In the last 10 years there have been roughly seven and a half years of stop to two and a half years of go. No wonder the British businessman is not happy when he is searching for scarce materials and retraining labour—things that are familiar in expanding economies. He seems to have got into a condition in which he is happy only when he is operating against the background of slack activity, unemployment, deflation and low growth. Somehow we have to get out of this situation.
I must also mention the other aspects of going for the City's policy of deflation, the other aspects that would be disastrous to my constituency and to the constituencies of many hon. Members, one of which is that deflation would kill regional policy stone dead. All the techniques we have devised for steering industry to the regions and the relatively backward areas do not operate against a background of low growth because there is no investment and no footloose industry to attract.
In the last eighteen months, for the first time, my constituency has felt the benefit of an overheated economy in the South-East and Midlands. It means that we are in full employment and expanding, and the effect on morale and public activity in the constituency is enormous. We must therefore consider the great disaster to the morale of the business community, to investment plans and to regional policy if we return to a policy of deflation.
It is easy to be wise now. The Government should have stimulated the economy two years ago. They should not have accepted a million unemployed with the equanimity they showed for a long time before turning to the panic distribution of public expenditure to pull us out of the trough. It is easy to say that now, but today I see no alternative that is socially acceptable or likely to be successful in the long run except soldiering on with the present policy. The alternative, heavy deflation, would pro- duce even worse results. Neither choice is satisfactory, but the latter would be clearly the worse of the two. What we can do is to alleviate some of these problems, to cut a few corners, to make the policy work more smoothly and particularly to reduce its socially divisive effect.
On the first of these, the hon. Member for Oswestry is right, if I understand him correctly, that one answer is to increase taxation. There must be an increase in taxation to reduce overheating a little in terms of personal consumption and, as my hon. and learned Friend the Member for Lincoln (Mr. Taverne) said, to release more goods for export so that we can take advantage of the present export situation. Something along these lines could be done, but I hope not a classic deflation of the kind we have so often experienced in recent years.
I am alarmed that anyone should suggest cutting corners by large cuts in public expenditure. Everyone would like to cut some aspects and increase others. The speech of the hon. Member for Oswestry contained an admirable statement of the case that it would be impossible to decrease public expenditure significantly in the years ahead.
I am also alarmed at the suggestion of cutting defence expenditure by £500 million. The events of the last three weeks should have made it blatantly clear to everybody that one of the major dangers in the next year or two is an American withdrawal, or renegotiation with NATO, which will put more burdens on the European members of NATO. We must be clear that the safety of this country and the détente with which the Americans and Russians are so pleased both rest upon the balance of forces in Europe, and that we may have to contribute more. I cannot see that there is any clear opportunity for cuts being promised in this area.
I therefore feel, in this risky situation, that there is nothing to do but to soldier on with the Government's overall economic policy. The only way they can make this even partially acceptable is by showing a much greater concern for the socially damaging effects of continued expansion which the level of inflation must now involve. In this context I am convinced that an incomes policy is essential.
There are only two ways of restraining demand; one is by unemployment and the other by an incomes policy. In present circumstances it is clear that an incomes policy is the only acceptable alternative. That policy must be pursued, to cut back demand but in a way which will help the lower paid by a flat-rate benefits system which brings up the level of earnings of the lower-paid sections of the community. Without such a policy, the social disequilibrium caused by inflation and continued expansion will be disastrous.
I therefore recommend the Government to press ahead with their measures, not merely to smooth over the unacceptable face of capitalism but to redistribute income on behalf of people with fixed and low incomes. Without this, their one option of soldiering on with this policy will be totally unacceptable to the community. If that were so, I should be sad, because I see no better alternative.
It is a pleasure for me to follow the speech of the hon. Member for Berwick and East Lothian (Mr. Mackintosh). I have enjoyed his argument and agree with much of it. He poses the problem of low performance and low investment, and offers a part solution of preventing overheating by a little more taxation. I do not wish to follow that argument, but my theme relates to it.
The debate has had an air of unreality. We have spoken of the problems that face the country and our economic policies, but when one realises that the whole economic future of our country may be influenced by a factor completely outside our control one cannot help wondering whether there is not an atmosphere of unreality. The pending energy crisis could completely distort our planning, our policies and our future. When such a threat overhangs the country there needs to be a little more discussion of it than there has been so far during the debate on the Gracious Speech.
The energy crisis—the shortage of supply—is in the short term an economic and political problem and not a geophysical one. At the best assessment, the current economic problems will be severely aggravated by inflationary pressures resulting from the energy shortage. At the worst it could lead to severe disruption to our industry, transport, commerce and our balance of payments. We naturally hope that the latter will be preventable, but we cannot avoid the severe inflationary effects of the increasing prices we shall have to pay, at least in the short and medium term, for our energy.
I find it rather disappointing that the Gracious Speech did not say more about the Government's policy to secure our energy resources for the short, medium and long terms. I should have liked an announcement that there will be a Minister with overall responsibility for energy. My saying that is not in the least intended as a criticism of my right hon. Friend the Secretary of State for Trade and Industry and his colleagues, who have vast, wide-ranging responsibilities beyond having to accept the responsibility for working out an integrated energy policy, but the point has been reached where we must accept the need for planning our energy supplies, making sure that they are available, finding the best and most economic sources, planning the distribution, and taking account of the effects of the price rise and other economic factors. Above all, there is a need to plan the conservation of our energy resources.
All those important aspects of policy involve the integration and co-operation of more than one Government Department. It is no longer possible to consider the overall energy problems solely from the point of view of the Department of Trade and Industry when nearly every other Department, including the Treasury, the Department of the Environment and the Foreign and Commonwealth Office, is closely involved. Therefore, there is a case for at least suggesting that we should now have a Minister of Cabinet rank with primary responsibility for our energy policy. As an alternative, or in addition, we might consider an energy commissioner.
We are still not facing the problems and it is time to do so. Over the short term, Middle East supplies are being reduced. Even if they are maintained, even if the Arab countries select us as their special friends and continue to supply us while cutting everybody else off, is it acceptable to us to say that we have no responsibility to pool available resources with our European partners? Can we stand by, saying that the Arabs have selected us as their favourites and that we shall continue to receive oil, and watch Holland and perhaps our other European partners struggling, with industry coming to a halt, with all the hardship and inconvenience that will result from their being blackmailed? It is inconceivable that we could adopt such a policy. Even if we continue to receive all the oil we need we still have a responsibility and we shall still be affected by the overall cut in supplies to Western Europe. We should be making adequate preparations and plans.
I am not in a position to say whether we should introduce petrol rationing now, but it should be more seriously considered—not to bring about a major economy, for the petrol saved by rationing the private consumer would not be a substantial percentage of total energy consumption, but to help ensure that our priorities remain right, that industry is not deprived of basic raw materials, the feed stock from oil, that it must continue to have. One of the objects of rationing now would be to preserve supplies for industry. Certain products of the petrochemical industry are in increasingly short supply as a result of the energy shortage. That is a big danger to our whole economy and the export trade. Adequate measures must be taken.
We should know whether a halfhearted plea to turn down the thermostats will produce any savings. Let us not adopt a complacent attitude about the possible dangers to the economy over the short to medium term.
A variable motor tax system, such as the Americans are adopting, should be considered, not to penalise the owner of the large car but to provide an incentive for ownership of smaller cars. The five-star premium grade petrol could comfortably be phased out to provide more of the valuable raw material needed by the plastic and chemical industries, which are already suffering shortages.
Are my right hon. Friends satisfied that the oil we have been promised is on the way from the Middle East? We are told that one month's reserve of our three months' reserve is still on the high seas. I should like to be reassured that a monitoring system exists so that we know whether any of that oil in tankers is being moved elsewhere. We should be sure that what is counted as our reserve will reach us.
There are various other short-term measures that I am sure my right hon. Friends are considering. I hope that we shall prepare the public a little more for what could be a serious situation rather than adopt a too complacent attitude of waiting till the crisis occurs.
There is a temptation to relax, because we know that North Sea oil will be coming in, but that is in the medium term. It would be unforgivable if we relied on that entirely for the longer term and, because we know it is coming, did not adopt more constructive conservation policies now. Although it will make a fundamental contribution to the economy, and, we hope, will make us self-supporting, North Sea oil will not last for ever. It will give us a valuable breathing space to plan longer-term alternative sources of energy when the hydrocarbon fuels run out. We must look that far ahead. Now is the time to adopt positive policies of conservation.
I should like to give one or two examples of things that we are not doing, to our disgrace. First, we do not insulate our buildings sufficiently. Britain has the worst standards of thermal insulation in Western Europe, not because our climate is that much milder but because we have been too slack about the matter. The regulations should be tightened up to enforce proper thermal insulation of all our buildings. Grants and rebates should be given to help meet the cost. It would not be a short-term measure but would help over the longer term, producing a massive saving of energy that is now being completely wasted. We are not receiving a sensible economic return for the capital being invested in heating.
Second, we should get down seriously to the task of getting a better return on the energy that we produce. The conversion of our fuel is so wasteful that future generations will wonder why we allowed it to continue as long as we have. We know that there is no technological problem to prevent a more efficient conversion of energy, particularly into electricity. The CEGB grid system of large power stations was perfectly satisfactory while we had plenty of cheap fuel, but those days have gone and we must seek a higher efficiency rate than 35 per cent. to 40 per cent. in terms of the electricity produced from the fuel consumed. We can no longer afford to have more than half the fuel used go to heat the rivers and pollute the amosphere. We should move to more on-site generation of electricity, produced more efficiently, using the waste heat for district heating and alternative sources of power on site. The total energy concept must now be given greater emphasis, with Government incentives.
I have made one or two suggestions for the short term and one or two for the longer term. However long term the policy may seem, we should make a start now, so that we can follow a policy of greater efficiency of our energy and greater conservation of our resources and so hope to alleviate the balance of payments price that we will undoubtedly have to pay in ever-increasing amounts over the next few years, till we become somewhere near self-sufficient from the North Sea.
It is essential to conserve our indigenous resources and make the best use of them, so that they will give us the breathing space needed to develop alternative energy sources by the 1990s—nuclear, solar and so on. We must follow these policies now to get the greater efficiency that will reduce the inflationary pressures which will result from the higher oil prices that we are having to pay now.
It is somewhat unrealistic to discuss the future of the economy as we have been doing today without bearing in mind the serious effects which will result unless we adopt a far more forthright and constructive policy towards our energy problems here and now. My hon. Friends have heard me make these points before, but not in such an atmosphere of impending crisis as we unfortunately have now. I hope that the situation is not so serious and that policies, when they are adopted, will not prove to be too late.
This is indeed an anxious time. Public anxieties today are such as even to imperil confidence in the workings of the democratic process. Two of the main anxieties of the public concern energy policy—I agreed with much of what the hon. Member for Derbyshire, South-East (Mr. Rost) said on that subject—and the balance of payments situation. I will concentrate on those two topics.
Energy policy is not an issue on which any one party can boast a clean sheet. On the other hand, this Government, with all the benefits of hindsight and the mistakes of the previous administration, still refuse to learn. Let me try to recall some of the lessons of the past. In 1967, I was a member of the Select Committee on Science and Technology which reported on the nuclear energy programme, at the time that Mr. Richard Marsh published his celebrated fuel and power White Paper. It is worth recalling that it contained three supporting pillars—a major cut-back in the coal mining programme, a substantial expansion in the use of oil-fired power stations and a large expansion in nuclear power stations. If everything had come to pass as was planned we should now have an even bigger nuclear power programme than we have.
This programme was based on comparisons in costs of generating which at the time were only marginally disadvantageous to coal: they were disadvantageous perhaps to the first place of decimals. We now know how unrealistic all this forecasting and planning turned out. The Government of the day got the wrong advice, particularly from the CEGB—and what is more, they listened to it. We poured vast sums of money into the nuclear generating programme. As one who represents what was a mining constituency, I know that we must not forget that we also lost vast sums of capital investment through pit closures.
It is said in another context that war is too serious a business to be left to the generals. Energy policy is too important to be left to civil servants and the CEGB. The proposal which was associated with Lord Robens and the Select Committee, for an independent energy board to advise Ministers, is still urgent. In the present situation, there is now a serious danger that, having made all this investment, we could throw away a large part of this precious and hard-won British capital investment in nuclear energy by suddenly buying American reactors without properly evaluating the troubles and costs involved. This is not the time for yet another gamble, uncosted and untested.
I said that the main mistake of this Government is failure to learn from the mistakes of others. It would be salutary for Ministers to look at the appendices to the 1967 Select Committee Report, especially that in which the National Coal Board said:
In view of the technical and economic doubts about the future performance of AGR stations, the NCB think that the proper course is now for an independent technical expert to make a full assessment of the nuclear power programme, supported by an independent financial assessment.
I should like to think that a review and an expert study of this kind could be undertaken and that this could be done before the Secretary of State for Trade and Industry takes the decision which many of us are very much afraid he will take. That would be a costly decision not merely in terms of the research effort but in terms of the whole capital investment which has gone into the AGR programme.
My hon. Friend mentioned Lord Robens and the emphasis which the White Paper in 1967 put on the wrong end. In other words, instead of deciding how much coal we could produce economically and building our energy policy around that, we lifted the crumbs off the table. Does my hon. Friend not agree that Lord Robens' words have unfortunately come true—namely, that the dearest form of energy for any country is that which is not there when it is wanted? Does he agree that Lord Robens' words have been borne out?
Lord Robens was right, my hon. Friend was right and I am on record as having been right. A fat lot of comfort that is now. Some of us have long advocated that the nation should carry a reserve of coal-producing capacity to meet emergencies. That was the view which some of us reached in 1967.
In my constituency, for example, there have been three pit closures in the last nine years. There was one closure only last year. On reflection, I feel that we need not have been so drastic or precipitate. That coal-producing capacity would have come in useful now. The country would be far better off with that capacity. At the very least it seems that the Government must re-examine the closure programme at once.
If we are to have the coal, we must pay the miners more. That is self-evident. We must pay them more even if they become—I say this quite brutally to the Government—an exceptional case under phase 3. It makes no sense in a free society, where there is no direction of labour, to hope that labour can be moved or retained by exhortation. It does not work. Young miners—and this is a fact which my colleagues can confirm—are leaving the pits in Yorkshire and Nottinghamshire because civil engineering contractors pay them more for comparable work. I hope that the Government will consider that aspect of our energy programme.
The other anxiety which is now in the public's mind is the balance of payments. It has been increasingly recognised that the Government's gamble for growth, which many support, could be a gambler's growth if there are not adequate defences. The key defence is the floating pound. It is worth bearing in mind that we are in a pre-election year running a balance of payments deficit which makes the achievements of the right hon. Member for Barnet (Mr. Maudling) in 1964 look like a positive balance of payments achievement.
The former Labour Government did well to build up a strong balance of payments in 1970. The Government could turn out to have been extremely foolish to have thrown it all away. The trouble is that imports have come in all right. We know that from the figures. However, the Government knows that exports have not gone out adequately.
Many hon. Members have said that there has been a devaluation and that that will help things along. That seems to be the view of Ministers. I do not agree. Those who were in the Labour Government will recall that when devaluations take place they are painful things. They need to be reinforced on the fiscal front. That the Government have not done. They have chosen to adopt what might be described as the South American method. I fear that devaluation—Ministers have not yet said this—has further to go.
There is no such thing as a natural level for currency. But I would remind the House that the United Kingdom's rate of exchange against the dollar is probably too high. The present parity rate is higher than it was at the beginning of the year. The crisis of confidence in the United States arising from Watergate may have something to do with that. But it is probable that in the fullness of time the Watergate crisis will pass.
We must recall that the United States dollar is now basically stronger and that the United States balance of payments is fast improving. The time will come when our American imports will cost a lot more and when our exports to the United States will earn us less.
The Government are deluding themselves if they think that our balance of payments will right itself that fast. Devaluation still has some way to go. The October reserve figures which have just been published confirm my view. We are keeping out of the red by borrowing abroad. Election years inevitably lead to greater financial uncertainties. At times like this prudence and not gambling is expected from a Government. The present Government, as the House knows, are down on their luck. However, I fear that they will gamble whatever the danger to the country in future.
I have listened carefully to the hon. Member for Dewsbury (Mr. Ginsburg)—particularly in respect of what he said about energy and nuclear power. With the difficulties that we are having over oil at present it is important that a Minister should be appointed to the Cabinet with responsibility for energy.
I want to deal with one problem that affects all of us—the cost of living and inflation. I welcome the fact that, even though the cost of living has been rising at a very severe rate, at least we have instituted an annual review of pensions, and that generally, particularly in the South-East—this may not be so in the North—earnings are keeping ahead of prices and overtime is being worked. We have today a position of full employment in the South-East and not the kind of very deflationary position that led to the lack of investment from which we suffered for so long.
In the context of the present position of full employment, I wish to make a plea to the Government to do something to improve the position in North-East Essex. In our smaller factories there, we have all the capabilities of exporting not only to America but to Nigeria and many other countries. This applies particularly to clothing. But there is a severe shortage of labour. We could so easily clear shortages of labour if the Government would abolish the earnings rule, at least in those areas where there is a shortage of labour. This could be done without a great deal of extra cost. It would mean 100 extra workers in some of the factories in North-East Essex. It would mean £100 million worth of extra exports. I have questioned my right hon. Friends the Prime Minister and the Chancellor of the Exchequer about this matter but I have had no further indication of Government policy. I hope that we shall hear something about the matter soon.
It is gloomy to find a shortage of labour when one visits the factories in North-East Essex and, particularly, two very enterprising shipbuilding yards. The British Steel Corporation cannot find two amounts of 600 tonnes of steel for two small firms until a date which will mean delaying considerably the export of ships to Africa and to other parts of the world. These ships would be earning foreign exchange. This shortage of steel underlines the fact that the steel industry, like so many other industries, has been a shuttlecock of politics, and has not had the necessary investment.
In Japan steel production is now running at between 120 million and 130 million tonnes a year. When one considers the performance of our steel industry one realises that it is the lack of investment in particular which is causing a great many of the problems that we face. This low rate of performance and investment, not only by the present Government but by previous Governments, is the key factor in our present poor economic performance. One should not necessarily blame private industry alone, because 38 per cent. of fixed investment is Government investment. We must step up our rate of investment even further.
I am sure that the Government were right to go for growth, but not growth at any price. Certainly I am glad to see that deficit financing is making way for a more reasonable rate of growth, which can be sustained. How right my right hon. Friend the Chancellor was today when he said that in order to sustain the rate of growth we had to watch Government spending, because otherwise we should not make way for investment as a whole. But the balance of payments position is being made worse by oil. I hope that the Government will see that a Minister is appointed to deal with that problem.
In all these problems the vital factor is labour relations. However much we may be shuttlecocks and talk about imports from Japan—Datsun cars, Toyota cars, Sanyo television sets—there is one key factor in the success of Japan i
The hon. Member for Harwich (Mr. Ridsdale) has dealt with one part of the Chancellor's problem—that of inflation. I want to return to the balance of payments and to some remarks about the oil crisis.
As on previous occasions, the Chancellor exuded an extraordinary euphoria totally unjustified by the present situation. Two things are clear: first, that we cannot go on indefintely with the kind of balance of payments deficit we are now running; secondly, that this is basically clue to fiscal imbalance and the overheating of the domestic economy.
The balance of payments deficit is being financed by borrowing, as was pointed out by the hon. Member for Dewsbury (Mr. Ginsburg). For a time it can of course be financed by borrowing; it has been inconspicuous borrowing, and it has not led to any kind of crisis of confidence.
But how long can it go on? A point will come when, if there is no early pros- pect of curing the balance of payment deficit, people will no longer be willing to lend. The time will come, as surely as night follows day, when action will have to be taken to cure the present deficit. It will have to be taken, it seems, by the next Government, whatever that may be, whether the same Government, who will have to change their course yet again, or their successors. But, as has been pointed out, the problems of 1964 will by then be minor by comparison.
My second comment concerns the cause of the balance of payments deficit. There seems no doubt that it is caused basically by the fiscal imbalance. It will not be solved, as the Government hope, by a fall in the price of raw materials. That may help with imported inflation but it will not basically affect the existing pressures to import. Our balance of payments deficit reflects the excess of domestic expenditure over domestic production.
There is no question, as was underlined in a remarkable speech by the hon. Member for Oswestry (Mr. Biffen), about the extent of overheating. His speeches are always distinguished. His speech on this occasion was especially so and the evidence he cited saves me from having to cite evidence of this fact myself. I would however add that one can also see this overheating reflected in the figures for shortfall in public expenditure.
In the last White Paper it was estimated that there would be an overall shortfall for 1972–73 of some £300 million. The Chancellor said at the time of the last Budget that it would be more like £500 million, and recent evidence suggests that it will be even more. The reason for this is obvious. It is that, because of the overheating, in the public sector too, delivery dates cannot be met and projects for expenditure are postponed.
The nature of the balance of payments deficit, which amounts to about £1,400 million a year, combined with the present degree of overheating, suggests that the imbalance between taxation and public expenditure is of the order of £2,000 million a year. The hon. Member for Harwich expressed the hope that this deficit financing was now being cured His hope is not founded on fact.
The public sector deficit is now as large as it ever was.
There is no sign that the Government recognise the size of the problem. In the course of his speech I twice asked the Chancellor whether he did not recognise that if measures were now taken to restrain domestic demand there would be a shift of resources to exports. His answer to my question appeared to be that he was not in favour of deflation.
This, however, is not the choice. It is not a question whether we deflate and reduce production. It is whether we take action to shift the resources which are at the moment being used in domestic production to exports where, as the Chancellor himself pointed out, there is a field for unlimited expansion.
Now is a time with the present world boom, when measures can effectively be taken to restrain domestic demand without decreasing the growth of production. If these measures were taken, it would mean that there would not be a slow down of the economy, but that some improvement in the balance of payments would be visible whereas at the moment there is no improvement in sight.
When phase 3 was announced, we got from the Government some belated recognition of the need for one part of the fiscal imbalance to be redressed—namely, some cuts in public spending. It is not clear how large the effect is of the moratorium on various contracts, but it appears that in a full year it might be as much as £300 million. I cannot understand the strategy on which the cuts are based, and here I wish to come back to some remarks made by the hon. Member for Derbyshire, South-East (Mr. Rost) about energy policy, with which many hon. Members would wholeheartedly agree.
Schools and hospitals are included in the moratorium, but two exemptions are made. One is housing, which is understandable, and the other is roads, which is incomprehensible. One can understand certain roads, such as urban bypasses, being exempted, but to exempt roads in general, in present circumstances, is absurd.
The hon. Member for Derbyshire, South-East rightly said that one must have a strategy which is concerned not only with the short term but also with the longer term when one is considering the energy problem. If it is a question of encouraging the production of coal, that is right. If it is a question of encouraging nuclear energy, it would be right if it were not for the reservation which one must make in the light of the uncertainty which exists about how far technology can deal adequately with the disposal of waste. But there is no strategy for the conservation of energy. According to the last public ependiture White Paper, of the major items, the amount spent on roads is increasing faster than any other item. It is still scheduled to increase at an annual rate of 5½ per cent. per year.
If one considers surface transport—in fact public transport—which could be one way of conserving and making more effective use of energy, one finds that over the next five years expenditure on it is scheduled to decrease by 4·6 per cent. per annum. Thus, there is to be increased expenditure on roads, which will encourage the use of the motor car and the using up of energy, and a decrease in expenditure on surface transport, which could conserve it. Expenditure on waterways is negligible, and the plan for the railways clearly envisages that they will be further run down. Roads are specially exempted at a time of cuts in public expenditure generally. Therefore, the strategy for the conservation of energy is fundamentally mistaken.
I was also in strong agreement with the hon. Member for Derbyshire, South-East on the attitude to the pooling of oil supplies within Europe. The Prime Minister made a statement last week, in which, so far as I could gather, although I missed the opening sentences, he was supported this afternoon by the Secretary of State for Trade and Industry, to the effect that Britain was all right; we had assurances from the Arab States which were to supply the oil, and we had sufficient reserves. Britain was all right, we were told, and the implication was that we should not worry too much about the problems elsewhere.
The Leader of the Opposition said last week, in effect, "Let us make quite clear to the European Community that what we have, we hold". That is the new cry of international Socialism, "What we have, we hold".
Both those attitudes are insular. They are not only unattractive but eminently shortsighted. As the hon. Member said, the oil problem is not only short term. What is desperately needed in the longer term is a common policy for the European Community. The European Parliament brought out a good report pointing out that if there were not a common policy for the Community as a whole, which overrode the national veto, we might find the lights going out all over Europe. The Commission urged much the same approach. When the Council of Ministers met last May, however, there was no agreement, and national interests prevailed.
This country should give a lead to see that a Community policy is arrived at and that the issue is not considered from a narrow nationalist point of view. It is no good saying, "We are all right. We can leave the Dutch in the lurch, because they are directly affected", or, "We can leave the Germans in the lurch, who are indirectly affected", because we shall need the assistance of both those countries on other vital matters. The problem will not be solved unless there is a common European policy.
Not only the hon. Member for Derbyshire, South-East but, I think, the right hon. Member for Stafford and Stone (Mr. Hugh Fraser), referred earlier today to another aspect of this matter. One can be highly critical of Zionism—one can say this not in any hostility to the Arab States—but it is intolerable if, in the policy followed in foreign affairs, one becomes dependent on the requirements of particular States. That is not a solid basis for foreign policy on any issue.
The Government's strategy is nonexistent as regards the balance of payments. There are equally grave gaps in their policy towards the energy crisis in the long term as well as the short term.
The hon. and learned Member for Lincoln (Mr. Taverne) referred to the road building programme. He, being the great European he is, should have known how much the Common Market countries have already spent on producing a much more efficient transport system, especially a road system, than we have. One has only to fly over the port of Antwerp to see the system of motorways and connecting roads and to appreciate the enormous disadvantages that our transporters and exporters have in using the ports in this country. Apart from the economic advantages of building better roads, we want to improve the environment and to preserve towns such as Oundle, in Northamptonshire. The only answer to that problem is to build a bypass which will take the lorries away from old buildings, people and their homes. That I consider to be a very good future investment.
To return to the Gracious Speech, this is the occasion when hon. Members are supposed to make their comments on whether they think that it is a good speech and whether the legislation proposed will be relevant to the country's problems. One would be exceedingly naïve if one did not also estimate the effect of the legislation in the next year upon the Government's chances of re-election.
I confess that I found the Gracious Speech disappointing, because it is not the clear, outspoken method of putting forward Conservative principles that we expect in contrast to some of the nonsense put forward by the Opposition. The electorate is deeply disillusioned with both the major political parties, and part of the disillusion arises because too many people are not too sure what kind of policies the present Government are putting forward.
There was a classic example earlier when the hon. Member for Coventry, North (Mr. Edelman) spoke about the Norton Villiers motor cycle factory. There, if ever, was a clear example of not spending public money on a venture of that kind and allowing many skilled employees to fill some of the thousands of vacancies now existing in the Midlands.
Let us examine the emotions now affecting the British electorate. Although there are some good points in the Queen's Speech—I particularly like the thought that we shall legislate on rural transport, which will be most important in parts of my constituency—I feel that we have not really understood what arouses the emotions of the public. Apart from prices, the public are concerned about the Common Market, immigration, 11 per cent. mortgages, and the difficulty of buying houses. It is disappointing that the Gracious Speech did not attempt to answer some of the latest criticism and suspicion on the part of many supporters of the Government.
We do not always husband our resources well. I instance Northamptonshire, where there is a shortage of labour to fill the many existing vacancies. We are told that we should rein back a bit on public expenditure. The situation is that we are going ahead with the redevelopment of Peterborough, of Northampton, of Milton Keynes and Wellingborough, the main town in my constituency, and this at a time when the unemployment rate is 0.8 per cent. The only result of this policy is that no one can be found to do anything in the immediate area of my constituency. Council house contracts cannot be fulfilled, private builders cannot find people to do jobs, and surplus labour is drawn into the developing towns.
In the "South-East Study," as a result of which these plans were first put forward, we were told that London desperately needed to export thousands of people. Yet the present GLC is beginning to realise that if it exports its firms and exports people, not only will its rateable value go down, but there will be fewer people to run the public transport that, we are told, must be improved in the capital. It strikes me that we should have a basic rethink about the enormous resources that we are pouring into areas such as Northamptonshire. People who have lived in that county for many years do not welcome what is happening on their doorstep. They have never been asked about it: it has been imposed upon them.
This underlines my main criticism of the Gracious Speech. With the best of intentions—and I am a supporter of their general economic policy—the Government are guilty of appearing to know best and deciding what is best for ordinary people, as all Governments occasionally are so guilty. It appears to the people of Northamptonshire that the Government have suddenly decided that their county is one of those which must have its population doubled, that their way of life must be completely changed, and that there is no choice in these matters. Is it any wonder that they become somewhat disillusioned with politics? I hope that they are not so completely disillusioned with their local politician.
I believe that we do care. We should make it a little more obvious that we understand the emotions and feelings of the people by giving them some consideration, instead of making these large plans which look very nice on paper but which can cause unhappiness to individuals. Our stock would rise and so would the Government's.
The Gracious Speech should have shown that politics is more than just deciding policies and carrying them out. Politics is an appeal to the heart of the people, and it is that appeal I find lacking. During the next year, I hope, the Government will realise that need and remedy it.
I begin by taking up the theme of the closing words of the hon. Member for Wellingborough (Mr. Fry). Obviously I do not associate myself with all the detailed points he raised, but he seemed to put his finger on a frequent defect in our economic debates in the House, namely, that they become opportunities for an exchange of views about economic management without bearing as directly as they should upon the needs of the people whom we represent.
The argument in the amendment to the humble Address expresses more than just a difference of opinion about the way in which the economy should be managed. It reflects a different analysis of what is wrong, and a different view on who should bear the burdens which we recognise society has to bear.
I have heard the Chancellor speak on many occasions, but never less convincingly than this afternoon. He addressed us—the hon. Member for Wellingborough put his finger on it better than I could—as if we were a shareholders' meeting, without any apparent regard for the human factors which lie behind economic policy. We had from the Chancellor the usual pride expressed in steady growth, exceptional export prospects, evidently improving as the terms of trade switch against us—a favourite theme of the Secretary of State for Trade and Industry—an expression of growing business confidence, not altogether echoed by what was said by others in the debate, a boast about lower taxation, to which I shall return, and a hint of a continuation of his charitable approach to the less fortunate, but there was one significant omission from his speech. There was no reference to the key phrase in the Gracious Speech about the importance of the EEC. It is strange that he made no reference to economic and monetary union.
For the Chancellor—this has been his theme time and again, proud of his record as a tax reformer—the only real threats are unjustified wage demands and the possibility that the lower paid might be threatened by the higher paid, as if that were the only conflict in our society.
It is important, if we are to understand the meaning of the debate, that we should note that the Chancellor significantly omitted from his long survey any mention of the way in which the problems of Britain appear to the people of Britain, that is, a crisis of living standards experienced by more and more of our people. There is not an hon. Member, on whichever side he sits, who does not have his attention brought to these problems day by day in his correspondence and week by week at his "surgery".
There is not one of us who cannot be aware that people listening to this debate or reading about it tomorrow would wonder why it was that the Chancellor made practically no reference to the way in which they see it, as a crisis that hits them in their homes, in their pay packets and in the shops. As far as the Chancellor and the Prime Minister are concerned, the daily experience of the British people might just as well not exist.
The plain truth is that the majority of the British people are now desperately hard pressed by inflation and anxiety, which may well arise out of their anxiety about their work. If Parliament appears to be out of touch with the people—we have had some references to that today—the reason is that the realities of people's daily experience do not find much expression in the thinking of Ministers as they address us on the problems of our society.
Our starting point in a debate of this kind must be an acceptance by Members of Parliament of the reality of that crisis and of that anxiety, if only because—to put it at its lowest—the consent of the British people to any policy will never be won unless those who advocate that policy show some awareness of the way in which it affects the people whom it is intended to influence or affect.
The evidence of the crisis in living standards is there for us to see, and we have a duty to express it here, to represent the views of those who sent us here, who are hit by inflation and who are becoming increasingly conscious of the injustice which they feel lies behind the Government's policy. We shall make no progress whatever while Ministers, as the Chancellor did this afternoon, continue to try to conceal the nature of that crisis by false optimism, by half-truths and by deception as to the real nature of the crisis as it affects our people.
I shall not make many quotations, but I shall quote now one modest phrase from Len Murray, the new General Secretary of the TUC. Commenting on the 3·2 per cent. increase in the grocery price index, he said:
There is a growing feeling of desperation in many homes, particularly among the old people and the low paid families, about where all this will end.
That is not exactly a militant phrase. It is not a phrase which would drive people into the streets. But it is a much more correct understanding of how the British people see the situation than we had from the Chancellor of the Exchequer or expect from the Secretary of State for Trade and Industry.
Let us look at the conditions of the people as the basis for our consideration of the problems of the economy. If the figures of the Child Poverty Action Group are to be accepted they can be reported simply to the House. There are 2 million people living below the poverty line. There are 4·6 million on the poverty line. There are 4 million just above it. There are 5 million people on supplementary benefit. Three million heads of households are paying rents so "fair" that they can afford them only with the help of means-tested rebates or allowances. Seventeen per cent. of school dinners are free after a means test. Half a million children come within the orbit of the family income supplement.
If we talk of the living standards of our people, let it not be forgotten that when the public services suffer as they are now suffering either through cuts in public expenditure or because the pay policy deprives them of the staff that they need, it is the majority of the people who are affected by the public services being allowed to decline and not the tiny minority who dwell in the atmosphere of business confidence about which so many boasts are made.
My right hon. Friend the Member for Leeds, East (Mr. Healey) gave some figures of food price increases that have occurred in recent months and years. There have been 30,000 since the General Election. Food is 42 per cent. up, housing costs are up, council rents have been forced up, land speculation is forcing up house prices, and wages are controlled rigidly.
The statisticians do us a disservice when they give average figures, as they do so often in reporting what has happened to wages. The £40 average wage which recently received wide publicity, when reported to a majority of our people, is seen to be totally misleading.
Let me give a figure which relates to an immediate past event. I refer to the Glasgow firemen, who took five years to reach a top basic rate of £26·76 for a 40-hour week. That required, even then, an examination and eight hours' overtime. As soon as they began to draw attention to their problem the whole chorus of official vilification began against them, even though 11 of these firemen have died in the service of their community in the past few years. Glasgow is a city with a high fire risk, yet it is 23 per cent. below establishment. I cite these figures because the firemen's claim was a just one and it was trade union pressure, thank God, which won for them justice, or some measure of justice, from the Government.
Much is said about equal pay for women, but the figures in the Sunday Times show an average rate of £22 for a 40-hour week for women, down to laundry workers, catering and hotel workers receiving £15 or £16 a week for a 40-hour week—contrasted with the obscenity of the increase recently awarded to the Chairman of the Fatstock Marketing Corporation. Where the Government could get some help, where they could reverse this in their Budget, they have consciously chosen to reinforce the inequalities in favour of their political and business allies.
I come now to the Chancellor and his boast about tax cuts. They cut no ice with the public, and I will tell him why. It is because the public know that the Chancellor has found a new way to siphon off purchasing power without taxation. It is to use inflation to collect his taxes—without the embarrassment of high taxation rates that would put him in difficulty in a "phone-in" programme.
He has the shopkeeper, the estate agent and the rent collector to act as his tax collectors, so that a proportion of all the higher prices we pay is being used to hold back or cut back the living standards of the people and to help manage the economy for the Chancellor while he can boast of lower taxation. This is a fraud. The difference between now and two or three years ago is that the fraud of lower taxes and accepted higher prices is a fraud which people are beginning to understand.
That is why the Gracious Speech talks only of containing inflation, not of reducing or ending it. This phrase about containing inflation accidentally blurts out the truth, which is that the Government accept that inflation at 10 per cent. serves their purposes well. It was in this respect that the speech of the right hon. and learned Member for Gloucestershire, South (Sir F. Corfield), in my view, acquired such significance. He knows what the rest of us knows quite well—that inflation serves four vital political purposes for this Government.
I will recount them. First, it redistributes wealth from poor to rich as an instrument of social policy. My right hon. Friend the Member for Leeds, East cited the example of the small saver in National Savings who loses his money as the years go by compared with the large saver or investor or property speculator who does very well out of speculation and inflation. Secondly, inflation serves the Government's purpose in acting as a secret weapon to control demand. Thirdly, inflation acts as an excuse to hold down wages by law. I will come to that later. Fourthly, it conceals the cost of Common Market entry because it all gets lost in the generally tolerated inflation which the Government now tell us they cannot control.
That is why the hon. Member for Oswestry (Mr. Biffen) and his spiritual father in economics, the right hon. Member for Wolverhampton, South-West (Mr. Powell) are doomed to failure in their pleas to the Government to re-examine their attitudes towards money supply. The hon. Gentleman thinks that the Government want to check inflation. The Government do not want to check inflation, for the reasons I have given. The hon. Gentleman thinks that the Government believe in free enterprise. The Government do not believe in free enterprise, unless it can be used to preserve the interests of those whom they represent. The hon. Gentleman thinks that the Tory Party stands for the little man. The Tory Party does not stand for the little man. It does not stand for the little shopkeeper, any more than it stands for the worker in industry. It stands for the people whose interests it serves. The hon. Gentleman and his right hon. Friend believe that unemployment would cut inflation, but it would not, because the trade union movement is so well organised that even with high unemployment it does not follow that wages could be brought down as is suggested.
There is an important and wide political division opening up in the Conservative Party between those—and there are many—who honestly believe that the Tory Party stands for the little man against the abuse of power and those who do not. The epitaph of the Prime Minister when he is finally laid to rest will be, "He forgot the little man because that was not where his interests lay".
I turn from the immediate effects of these policies to the crisis in the economy. The price we are paying for inflation endangers our economic growth. Not only has inflation precipitated the devalution of 18 per cent., but that devaluation has accelerated the inflation. Several hon. Members have spoken of the balance of payments deficit running at £1,400 million. To this must be added £400 million, unless the Arabs buy more whisky from us or lend us the money to cover the deficit so that it comes back in the capital account, or invest the money in North Sea oil. There is a deficit running at £1,700 million a year, and apart from that the domestic inflationary effect of higher oil prices. There are the steel price increases of between 10 per cent. and 14 per cent., due to be announced on Sunday, adding £200 million to industrial costs. Under the European Communities Act the Government have no power to stop it. They have only succeeded in checking it temporarily. Taken with the 9½ per cent. increase in steel prices in May there will be an addition of about £350 million in industrial costs. In addition to that, as my right hon. Friend the Member for Battersea, North (Mr. Jay) mentioned, there is the burden of the common agricultural policy.
Coupled with all this the continued failure of the Government to achieve an increase in industrial investment suggests much less than the buoyant business confidence to which the Chancellor referred. The Chancellor thought that tax cuts would produce more investment. They did not. The Chancellor thought that entry into the Common Market would automatically produce more investment. It did not. The only way in which room can be found for investment is by cuts in living standards brought about by inflation. The Chancellor always says that he does not intend to go back to "stop-go-stop". That is his continual message. This is the word of encouragement he gives to businessmen to persuade them to invest. He cannot accept the realities of the problems that confront him. This growth rate will not go out with a bang but with a whimper, it will be a "stop-go-fizzle", as a result of all the factors I have mentioned.
It is not only the crisis of living standards or the crisis in the economy that occupy the attention of our people. To carry through this programme the Government have deliberately implemented a policy designed to dismantle the democratic safeguards that exist for our people. The Prime Minister quoted from a speech made by Lord Balogh last week. Let me reply with a quotation from Lord Rothschild in a speech for which he was rebuked:
We must be ready to give up a small fraction of the freedom of action and decision that we now have.
That part of Lord Rothschild's recipe has been implemented.
It is astonishing that on a day when a quarter of a million engineering workers have been out in protest against a vicious fine by a vicious court under a vicious Act no mention of that should have been made by the Chancellor. Yet the attack upon the trade union movement is an integral part of the right hon. Gentleman's attempt to see that the effects of inflations cannot be corrected by collective action.
The significance of the Housing Finance Act is not only the increase in the rent but the fact that local councillors have been denied the right to vote for their own council rents. Parliament—here there must be some response from Conservative as well as Labour Members—finds its powers removed to a Pay Board, to a Price Commission—which does not even report what it does—and to a Lancaster House Press conference, where the journalists were given the White Paper in the morning but Members of Parliament had to queue up at 2.30 p.m., when the television broadcast began, to be allowed to see what the Press had had in the morning; or to the European Commission. Members on both sides have been reduced to spectators, when they were elected to exercise some control.
That is a part of the legitimate social unrest and discontent to which some hon. Members have referred as the "politics of the streets". If Parliament is denied the power to remedy the grievances of the people, of course the "politics of the streets" will become more important, as the House of Commons is seen to be drained of its authority and power.
Under the cover of all that, we now see, week after week, evidence of the abuse of business power, protected by the Government, with only minor modifications proposed under the new Companies Act. I think of Lonrho, Lowson, La Roche, Stratton and Chrysler, and now Triumph, where the Government put in £4·8 million. Mr. Dennis Poore, using a phrase which I hope will be long remembered, "It's just a matter of mathematics", has now dismissed the men who produce the Triumph motorcycles, without any accountability to the House for his actions.
Will my right hon. Friend stress that Triumph is one of the last British motor-cycle firms left? As Mr. Dennis Poore has already told dealers from all over the world that they may not receive any motorcycles for two years, many dealers will go bankrupt and the name of Triumph will be damaged. The right hon. Gentleman and his friends could be killing off the whole British motor-cycle industry.
My hon. Friend spoke about the matter in the House on Friday, and I agree with what he said. My hon. Friend the Member for Coventry, North (Mr. Edelman) has raised it again today. Its importance lies in the rights of the people working at Triumph, at Meriden, but also in the principle of the abuse of business power, of which there are daily new examples, protected in every case by Government action.
We have included in our amendment a reference to public ownership and control because we believe—I think that this view is shared by all the workers in the firms that I have mentioned—that there are large numbers of people who much more fear the asset stripper and take-over bidder than the accountable and responsible exercise of public power. The hon. Member for Stratford-on-Avon (Mr. Maude) warned the Tory Party at its conference not to be too sure that the public would fear an extension of public ownership and responsibility, because he knows, as every hon. Member who does his job must know, that the anxiety about the abuse of business power is not limited to the unskilled labourer, the toolmaker or the office worker; it goes right up to quite high levels of management, as people find their interests set aside.
If we are ever to increase investment, if we are ever to get it located where the problem of unemployment is high, to end the trench warfare in industry, which is widespread, we can do so only by confronting the question whether economic power entitles people to control the lives of workers without regard to any accountability to them and the community. The Government make a great mistake if they think that by attacking the Labour Party for this part of its programme they will win public support. Quite the reverse: there is a widespread element of support for what we are saying.
Indeed, if one considers only the energy crisis and the exploitation of the North Sea by the oil companies, who will be charging the Middle Eastern posted price and pocketing the profit, if one looks at the effect of the energy crisis at home, with the transfer from private transport to public, if one looks to see what will be needed in terms of public investment by the Steel Corporation, the Coal Board, or the Gas Corporation, one sees that the energy crisis, far from weakening the case for public ownership, makes it much stronger. As the Government stumble into this crisis——
If the right hon. Gentleman is contending that workers in the public sector feel a greater security of employment than workers in the private sector, all I can say is that lie will have a very hard job making that case in areas in which massive redundancies have been declared in the nationalised sector.
If the hon. Gentleman is referring to steel, the BSC corporate plan was held down by Government action as part of the deal for entering the Common Market. The British Steel Corporation wanted to expand its production beyond the level which was allowed. If the hon. Gentleman has any doubts on this, I invite him to ask any workers in the public sector whether they want to be transferred to the private sector. He will find a bitter resistance to the idea that they should be put at the mercy of market forces.
More and more people, observing the situation that we have debated today, reject the analysis that the Chancellor put before us. Let us be clear; the social unrest in Britain today is justified social unrest. If we want to know why Parliament does not have the respect among the public that most hon. Members think it should have it is in part because members of the party opposite, elected to represent their people, do not bring to the House of Commons a correct reflection of this anxiety that is expressed in social unrest.
It is no good saying that militants are confined to trade unions affiliated to the Labour Party. Hon. Members opposite know as well as we do that civil servants and office, technical, and managerial workers are among those most angered by the injustice which they feel is being done to them. What the Government have done in the Queen's Speech is to take the challenge of the hon. Member for Oswestry and the point made by the right hon. and learned Member for Gloucestershire, South (Sir F. Corfield) and convert the problem of legitimate social unrest into a question of law and order. If we were to accept the view that when manifest injustice is done we can ignore it, and that when it leads to trouble then we have a law and order situation on our hands, we are heading for very serious trouble.
The policies that we advocate cannot long be delayed. I do not think that the injustice and neglect and the fraudulent presentation of policies from the Government are likely to hold public support for much longer. What these policies are doing in the name of preserving or maintaining growth is to defend the existing pattern of power and privilege in society. This is a political debate, not an economic debate. What is needed is a fundamental and irreversible shift in the balance of power and wealth in favour of working people and their families.
If there are fears in the House—they have been expressed—that the politics of the street threaten the security of this Parliament, I recommend hon. Members to read their history books. Demands made by working people in the streets of this country have had to be expressed in Parliament and Parliament has had to find remedies for them. If remedies are not found for these injustices and grievances, it will not be only the Government who are threatened but our democratic institutions which peacefully offer the right to make these changes, to which the people are fully entitled.
The right hon. Member for Bristol, South-East (Mr. Benn) began by referring to the ordinary people of Britain. He endeavoured to argue that the injustices and the difficulties which have confronted ordinary people are a result of the Government's policies. The right hon. Gentleman seems to have forgotten whole sections of ordinary people who must rejoice that the present Government are in power.
The ordinary people were neglected by the last Labour Government. For example, disabled people had no attendance allowance under the previous Government. Pensioners over the age of 80 years were completely ignored by the previous Government. Families with lower incomes and large numbers of children received no direct benefit from the previous Government. People in the private sector of rented accommodation received no rent rebates under the previous Government. In the past three years of the present Government my right hon. Friend the Secretary of State for Social Services has done more to help the under-privileged than all that was done during the six years of the last Labour Government.
The interesting factor about the debate is an omission from the amendment. The amendment says:
noting that the rate of growth is falling…
It does not regret that the rate of growth is falling. There is no suggestion that the rate of growth should increase. There has been no comment from the Opposition Front Bench about the need for growth. It is significant that from the Opposition only the hon. Member for Berwick and East Lothian (Mr. Mackintosh) attached any importance to continuing policies of growth. What a contrast to the statements which have been made by the Labour Party.
Before the 1964 General Election the Labour Party, beyond all else, believed in breaking through to increased growth. It said that its social reforms were dependent upon growth. Now we have a party which in debate after debate, and throughout its annual conference, comes forward with no policy to obtain growth in the country's economy. Not only does it now ignore growth; it is significant that neither in the wording of the amendment nor in the debate has there been mentioned by the Opposition the importance of regional policy. Perhaps that can be explained when we examine what has happened in the past three years.
There is no appreciation from the Opposition of the dramatically transformed condition of world trading markets and the importance of taking full advantage of that situation. Markets which were limited for British exports are now presenting immense opportunity. For example, in the Japanese market exports have increased at an annual rate of 68 per cent. this year. Markets which were previously closed to us and which the previous Government failed to try to open up have now been opened, to the immense benefit of British exports.
Further, there has been an enormous increase in commodity prices. The right hon. Member for Bristol, South-East, when talking about inflation and the importance of curtailing inflation, uttered not one word, and neither did the right hon. Member for Leeds, East (Mr. Healey) about what they would do about meeting the enormous increase in commodity prices. The only thing which they can say is that they would have no wage restraint. Therefore, they would add further to the inflationary spiral which would take place.
At present, there are enormous in-creases——
That is a matter which will be reviewed at that time.
If the Opposition would not have wage restraint this year they would positively aggravate by their policies the very things which they now condemn.
It is notable that on every occasion right hon. Members of the Opposition endeavour to portray the balance of payments position in the worst possible light. In the same way as they did considerable harm to their economic position in 1964 by a completely wrong misrepresentation of the then £800 million deficit——
—so they try now, without justification to undermine this position.
The right hon. Member for Leeds, East asked about the imports of industrial materials and machinery. In the past nine months, on current account, there has been a deficit of £717 million. During that period we have increased our imports of industrial materials and machinery not by £717 million—enough to explain the whole of the deficit—but by no less than £1,953 million. Taking the three months during which we have had the biggest adverse balance on current account, £333 million, in that period we have imported over £600 million worth of machinery and £2,000 million worth of industrial materials.
For the very simple reason that after all the years of Labour stagnation this country and, at last, British industry are re-equipping, as they should have done in the six years of Labour Government if it had not been for the policies of stagnation that the Labour Party is again advocating.
My right hon. and learned Friend the Member for Gloucestershire, South asked for the evidence about investment and expressed his anxiety. He argued, quite rightly, that unless there were a major increase in investment the whole policy of going for growth would be undermined. He gave figures about situations that occurred earlier this year and figures for machinery installed at that time, but they were not the figures for the investment decisions being made in British industry at that time. Those are two significantly different facts. First, the orders to our machine tool firms—a very good indicator—have increased by no less than 88 per cent. in the last nine months.
The Financial Times has carried out a survey of industry, the details of which would have been published today had that newspaper been published.—[HON. MEMBERS:"Oh."]—We notice the rejoicing on the Opposition side of the House. But that survey shows that, of the firms in the survey, 93 per cent. of engineering firms expect to increase their investment programmes over the coming 12 months. As one witnesses the decisions announced by major firms such as British Leyland, Courtaulds, ICI and, in the public sector, British Steel, one realises that there is no doubt that there is a very considerable increase in investment taking place in this country. Nowhere is that reflected more than in the regions.
Is the right hon. Gentleman aware that in 1971 investment was 8 per cent. less than the declaration of intentions to the DTI and that in 1972 it was 12 per cent. less? Therefore, is there any reason why the House should take the figures of intention that the right hon. Gentleman has just given any more seriously than it should have taken the earlier figures?
Regarding the DTI and the figures of intention, the figures I have quoted were not DTI figures of intention. What I have quoted are facts. It is an absolute fact that, for example, orders to the machine tool industry have increased by 88 per cent. If the right hon. Gentleman, claiming to be Shadow Chancellor of the Exchequer, is unaware that there is a massive increase in investment at present, he is totally out of touch with industry. Firm after firm is waiting for deliveries of machines and machine tools, and factory extensions are occurring.
If the right hon. Gentleman wants more evidence, let us look at the position in the regions, the great theme of the Labour Party. In practice it is a theme that completely fails. As hon. Members representing regions of high unemployment will be aware, in 1968, 1969 and 1970 unemployment increased every year under the Labour Government. Ordinary people in the regions under the Labour Government were facing increased unemployment year after year.
Now that position has been dramatically reversed. In the regions of former high unemployment there has been a reduction since March 1972 of 193,000. In the past nine months of this Government more advance factories have been let in the regions than in the last two years of the Labour Government. The Labour Party built them to be empty. We filled them.
That is typical of the Opposition. They build factories to follow economic policies, but never with anybody to fill them; and so they left empty factories.
Does the right hon. Gentleman understand the meaning of the two words "advance factories"? They are built in advance. Until they are built, they cannot be filled. He could not fill them unless we built them.
The difference between this side of the House and the other side is that the other side built them years in advance, whereas we build them a few weeks in advance and they are immediately bought. They remained constantly empty under the Labour Party. In the regions, not only has unemployment fallen dramatically, but also there has been a dramatic change in the infrastructure of those regions. No wonder that in the whole of this debate not one Opposition speaker mentioned regional policy. Not one mentioned it because the Government have succeeded where the Labour Government failed.
We have succeeded in the infrastructure of those regions, enabling them to attract more industries and jobs. Under the Labour Government the clearance of derelict land was but a small proportion of what has been achieved by the Government. In the regions, in the last 12 months of a Labour Government, 74,000 older houses were improved. In 1972 alone three times as many were improved. In all these spheres we have obtained a dramatic transformation. Let us turn to the positive side of what the Labour Party suggests. The theme of the speech of the right hon. Member for Leeds, East and that of the right hon. Member for Bristol, South-East was the importance of increasing taxation. At the Labour Party Conference the right hon. Member for Leeds, East made great play with the manner in which that was to be done by taxing the rich.
Now that the right hon. Gentleman has been rejoined in the Shadow Cabinet by the right hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), who, I thought, was the one person pleased with the right hon. Gentleman's speech earlier today, it is interesting to reflect on his advice to the Labour Party on this subject a short time ago. On 11th March last, in an article entitled "The New Challenge of Injustice" he wrote:
It is an illusion to imagine that the gap between rich and poor and the rest of us can be closed solely at the expense of the very rich. The rich can and should make a disproportionate contribution, but it would be intellectually dishonest, and in the long run politically disastrous, to pretend that increased taxes on the rich can solve the problem altogether. Two years ago—all figures of this sort tend to be a little out of date—if the State had taken all incomes of more than £5,000 a year, the additional revenue at the Chancellor's
disposal would have amounted to only about 1 per cent. of Inland Revenue receipts.
The right hon. Gentleman lowers it to £3,000. What does the Labour candidate at Berwick-upon-Tweed do? He raises it to £5,000. It will be interesting, as the election approaches, to see the speed with which the right hon. Gentleman retreats from that figure, because the Labour candidate at Berwick-upon-Tweed found that some of the policemen voting were not terribly pleased about the £3,000 idea. The Labour candidate found the position embarrassing and quickly shifted from it. As the right hon. Gentleman knows, if he shifts from his £3,000 position to a £5,000 position, he will be in considerable difficulties as regards his overall income.
As one of its major, fundamental approaches to our economic problem the Labour Party proposes an increase in taxation. An increase in taxation did not assist the Labour Government to obtain growth during their previous term in office. If increases in taxation brought with them economic success the Government in power between 1964 and 1970 would have been most successful. Instead, we had an incredibly slow rate of growth.
The Labour Party has, therefore, turned to the alternative, namely, the extension of public ownership. The right hon. Member for Bristol, South-East always links this with the theme of democracy as it concerns the worker. The right hon. Gentleman started talking about what a failure nationalisation was under the previous Labour Government. He is now beginning to confess the failures. It is interesting that at the 1970 election, in the Labour Party manifesto, there were no firm proposals for the extension of public ownership. After six years of office, operating a mixed economy with a public and a private sector, the Cabinet of that day decided to prepare an election manifesto which contained no such proposals. I wonder why? [An HON. MEMBER: "The Labour Party lost the election."] But by a much smaller margin than will occur next time.
Just look at the successes they had with the nationalised industries. We all know the triumph the right hon. Gentleman had in landing the order that put Rolls-Royce into difficulty. With regard to the railways, under six years of a Labour Government 4,200 miles of railway were cut. The Labour Party now jeers about the state of public transport. That is the party that cut 4,200 miles of railway in six years. With regard to the democracy of the workers, at the same time 135,000 railway workers lost their jobs. With regard to the mines, under six years of the Labour Government, 274 pits closed and 232,000 jobs were lost. What a nice Utopian workers concept nationalisation is.
The right hon. Member for Bristol, South-East suggested that some agreement with Europe was curtailing the investment programme of the steel industry. He knows that one of the main problems of capacity is shortage of steel. He also knows that the main reason for shortage of steel was a complete collapse of investment in steel in the six years of a Labour Government. In the three years prior to the Labour Government, investment in steel——
The right hon. Gentleman mentioned the steel industry. If there is such a shortage, why does he seek to close steelworks such as those at Shotton and throw 6,000 men out of a job?
As the hon. Gentleman well knows, Shotton and other works will be closed only when much greater capacity comes on-stream as a result of new investment. In terms of investment in the steel industry, in the three years prior to the Labour Party taking office, investment was running at £250 million a year. In the three years since the Labour Government, investment has been running at more than £250 million a year. In the six years of the Labour Government, investment dropped to £150 million a year, and that is why we have a steel shortage today.
The Opposition know that, but they will say that it was not nationalisation; they will say that it was the threat of nationalisation; they will say that the private sector stopped investing before nationalisation took place, as it did. Therefore, let them think of the drop in investment in British industry with the present threat of massive nationalisation.
When the right hon. Gentleman came into office in 1970, did he say to the steel industry, "Go ahead at once and achieve the biggest steel production that you can."? Or did he say, "We have to have a big argument whether steel nationalisation is to remain."? The right hon. Gentleman cannot foist the follies of his own Government on to us for this situation.
The hon. Gentleman represents a steel industry constituency and knows of the massive under-investment in the six years his Government were in office, and he should be ashamed of it. The people in his constituency must be relieved that the present Government did not pursue his policies. Otherwise, Hoover's enormous investment near to his constituency would never have taken place. Only because of a combination of the policies of the Industry Act and entry into the European Community will his constituents have a much better future than they would otherwise have had.
The right hon. Gentleman knows that the type of steel needed for the pipeline is not available from the British Steel Corporation, whereas, if there had been a little pre-planning by the previous Government, it could well have been available. We can see by the performance of industries which have been nationalised that not only was it bad for investment and prices but it was exceedingly bad for many of the people working in those industries.
The right hon. Gentleman talked of consulting the workers. Many of us on this side remember that, when he was advocating nationalising Rolls-Royce without compensation, and he was asked point blank at the Dispatch Box whether, if the workers of Rolls-Royce were against a future Government nationalising it, he would take note of what they said, he refused to answer "Yes".
We have not said that decisions on nationalisation or denationalisation are a matter that we should decide firm by firm. We are against an extension of nationalisation. The right hon. Gentleman is suggesting that this is something for which the workers are clamouring, and if they are not clamouring for it he will still nationalise the companies. By worker participation the right hon. Gentleman means that he is in favour of workers participating on all of those matters on which they agree with him. That is where the participation ends. His concept is to run British industry on the basis of his decisions.
The right hon. Gentleman talks about the democracy of take-over bids and such matters. Hon. Members opposite should know, because of the manner in which the Labour Government used the IRC during their period in office. The chairman of the IRC, in the last 12 months of the Labour Government, boasted that there were no fewer than 70 companies which he was considering for merger or take-over bids. Was that decried by the right hon. Gentleman?
Indeed, they were publicly accountable. What about, for example, the 6,000 jobs lost at Trafford Park as a result of one of the mergers advocated? What about all the other redundancies which took place in the many mergers and take-overs that the right hon. Gentleman not only supported but openly advocated, month in month out during
In the whole of this debate we have been faced with an Opposition who have totally failed to spell out the impact on the economy of their policies. We have not heard one word from the Opposition Front Bench on the challenge of the Chancellor to say whether they agreed with the Leader of the Opposition's policy of cutting petrol tax. Do they agree with that policy now? Have they already denounced the one tax proposal made recently by the Leader of the Opposition? Do they want to increase taxation by £1,000 million as advocated by Transport House? How will they pay for nationalising—by increasing the borrowing requirement by £10,000 million? These are all questions which have remained unanswered. They are unanswered because the Opposition know that the answers will be totally unpalatable to the British people.
The choice that has arisen from this debate is between a party that has succeeded in obtaining growth, a party that has used that growth to embark upon many social reforms, and a party whose only policy is to return to the high taxation, the increased nationalisation and the stagnation that was a hallmark of the last Labour Government.
|Division No. 1.]||AYES||[9.59 p.m.|
|Abse, Leo||Boothroyd, Miss Betty||Crawshaw, Richard|
|Albu, Austen||Bottomley, Rt. Hn. Arthur||Cronin, John|
|Allaun, Frank (Salford, E.)||Boyden, James (Bishop Auckland)||Crosland, Rt. Hn. Anthony|
|Archer, Peter (Rowley Regis)||Bradley, Tom||Crossman, Rt. Hn. Richard|
|Ashley, Jack||Brown, Ronald (Shoreditch & F'bury)||Cunningham, G. (Islington, S. W.)|
|Ashton, Joe||Buchanan, Richard (G'gow, Sp'burn)||Darling, Rt. Hn. George|
|Atkinson, Norman||Butler, Mrs. Joyce (Wood Green)||Davies, Denzil (Lianelly)|
|Barnes, Michael||Callaghan, Rt. Hn. James||Davies, G. Elfed (Rhondda, E.)|
|Barnett, Guy (Greenwich)||Campbell, I. (Dunbartonshire, W.)||Davies, Ifor (Gower)|
|Barnett, Joel (Heywood and Royton)||Cant, R. B.||Davis, Clinton (Hackney, C.)|
|Baxter, William||Carter, Ray (Birmingh'm, Northfield)||Davis, Terry (Bromsgrove)|
|Beaney, Alan||Carter-Jones, Lewis (Eccles)||Deakins, Eric|
|Benn, Rt. Hn. Anthony Wedgwood||Castle, Rt. Hn. Barbara||de Freitas, Rt. Hn. Sir Geoffrey|
|Bennett, James (Glasgow, Bridgeton)||Clark, David (Colne Valley)||Delargy, Hugh|
|Bidwell, Sydney||Cocks, Michael (Bristol, S.)||Dell, Rt. Hn. Edmund|
|Bishop, E. S.||Cohen, Stanley||Dempsey, James|
|Blenkinsop, Arthur||Concannon, J. D.||Doig, Peter|
|Boardman, H. (Leigh)||Corbel, Mrs. Freda||Douglas, Dick (Stirlingshire, E.)|
|Booth, Albert||Cox, Thomas (Wandsworth, C.)||Douglas-Mann, Bruce|
|Driberg, Tom||Kelley, Richard||Price, William (Rugby)|
|Duffy, A. E. P.||Kerr, Russell||Probert, Arthur|
|Dunn, James A.||Kinnock, Neil||Radice, Giles|
|Dunnett, Jack||Lambie, David||Rees, Merlyn (Leeds, S.)|
|Eadie, Alex||Lamborn, Harry||Richard, Ivor|
|Edelman, Maurice||Lamond, James||Roberts, Albert (Normanton)|
|Edwards, William (Merioneth)||Latham, Arthur||Roberts, Rt. Hn. Goronwy (Caernarvon)|
|Ellis, Tom||Lawson, George||Robertson, John (Paisley)|
|English, Michael||Leadbitter, Ted||Roderick, Caerwyn E. (Brc'n & R'dnor)|
|Evans, Fred||Lee, Rt. Hn. Frederick||Rodgers, William (Stockton-on-Tees)|
|Fernyhough, Rt. Hn. E.||Leonard, Dick||Roper, John|
|Fisher, Mrs. Doris (B'ham, Ladywood)||Lestor, Miss Joan||Rose, Paul B.|
|Fitch, Alan (Wigan)||Lever, Rt. Hn. Harold||Ross, Rt. Hn. William (Kilmarnock)|
|Fletcher, Ted (Darlington)||Lewis, Arthur (W. Ham, N.)||Rowlands, Ted|
|Foot, Michael||Lipton, Marcus||Sandelson, Neville|
|Ford, Ben||Lomas, Kenneth||Sheldon, Robert (Ashton-under-Lyne)|
|Forrester, John||Loughlin, Charles||Shore, Rt. Hn. Peter (Stepney)|
|Fraser, John (Norwood)||Lyon, Alexander W. (York)||Short, Mrs. Renée (W'hampton, N. E.)|
|Freeson, Reginald||Lyons, Edward (Bradford, E.)||Silkin, Rt. Hn. John (Deptford)|
|Galpern, Sir Myer||Mabon, Dr. J. Dickson||Silkin, Hn. S. C. (Dulwich)|
|Garrett, W. E.||McBride, Neil||Sillars, James|
|Gilbert, Dr. John||McGuire, Michael||Silverman, Julius|
|Ginsburg, David (Dewsbury)||Mackenzie, Gregor||Skinner, Dennis|
|Golding, John||Mackie, John||Small, William|
|Gordon Walker, Rt. Hn. P. C.||Mackintosh, John P.||Smith, John (Lanarkshire, N.)|
|Grant, George (Morpeth)||Maclennan, Robert||Spriggs, Leslie|
|Grant, John D. (Islington, E.)||Mahon, Simon (Bootle)||Stallard, A. W.|
|Griffiths, Eddie (Brightside)||Mallalieu, J. P. W. (Huddersfield, E.)||Stewart, Rt. Hn. Michael (Fulham)|
|Hamilton, James (Bothwell)||Marquand, David||Stoddart, David (Swindon)|
|Hamilton, William (Fife, W.)||Marsden, F.||Stonehouse, Rt. Hn. John|
|Hamling, William||Marshall, Dr. Edmund||Stott, Roger|
|Hardy, Peter||Mason, Rt. Hn. Roy||Strauss, Rt. Hn. G. R.|
|Harper, Joseph||Meacher, Michael||Summerskill, Hn. Dr. Shirley|
|Harrison, Walter (Wakefield)||Mellish, Rt. Hn. Robert||Swain, Thomas|
|Hart, Rt. Hn. Judith||Mendelson, John||Taverne, Dick|
|Hattersley, Roy||Mikardo, Ian||Thomas, Rt. Hn. George (Cardiff, W.)|
|Hatton, F.||Millan, Bruce||Thomas, Jeffrey (Abertillery)|
|Healey, Rt. Hn. Denis||Miller, Dr. M. S.||Tinn, James|
|Heffer, Eric S.||Milne, Edward||Tomney, Frank|
|Hilton, W. S.||Mitchell, R. C. (S'hampton, Itchen)||Torney, Tom|
|Horam, John||Molloy, William||Tuck, Raphael|
|Houghton, Rt. Hn. Douglas||Morgan, Elystan (Cardiganshire)||Urwin, T. W.|
|Howell, Denis (Small Heath||Morris, Alfred (Wythenshawe)||Varley, Eric G.|
|Huckfield, Leslie||Morris, Charles R. (Openshaw)||Wainwright, Edwin|
|Hughes, Rt. Hn. Cledwyn (Anglesey)||Morris, Rt. Hn. John (Aberavon)||Walden, Brian (B'h'ham, All Saints)|
|Hughes, Mark (Durham)||Moyle, Roland||Walker, Harold (Doncaster)|
|Hughes, Robert (Aberdeen, N.)||Mulley, Rt. Hn. Frederick||Wallace, George|
|Hughes, Roy (Newport)||Murray, Ronald King||Watkins, David|
|Irvine, Rt. Hn. Sir Arthur (Edge Hill)||Oakes, Gordon||Weitzman, David|
|Janner, Greville||Ogden, Eric||Wellbeloved, James|
|Jay, Rt. Hn. Douglas||O'Halloran, Michael||Wells, William (Walsall, N.)|
|Jeger, Mrs. Lena||Oram, Bert||White, James (Glasgow, Pollok)|
|Jenkins, Hugh (Putney)||Orbach, Maurice||Whitehead, Phillip|
|Jenkins, Rt. Hn. Roy (Stechford)||Orme, Stanley||Whitlock, William|
|John, Brynmor||Owen, Dr. David (Plymouth, Sutton)||Willey, Rt. Hn. Frederick|
|Johnson, Carol (Lewisham, S.)||Padley, Walter||Williams, Alan (Swansea, W.)|
|Johnson, James (K'ston-on-Hull, W.)||Paget, R. T.||Williams, W. T. (Warrington)|
|Johnson, Walter (Derby, S.)||Palmer, Arthur||Wilson, Alexander (Hamilton)|
|Jones, Barry (Flint, E.)||Parker, John (Dagenham)||Wilson, Rt. Hn. Harold (Huyton)|
|Jones, Dan (Burnley)||Pavitt, Laurie||Wilson, William (Coventry, S.)|
|Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)||Peart, Rt. Hn. Fred|
|Jones, Gwynoro (Carmarthen)||Perry, Ernest G.||TELLERS FOR THE AYES:|
|Jones, T. Alec (Rhondda, W.)||Prentice, Rt. Hn. Reg.||Mr. Donald Coleman and|
|Kaufman, Gerald||Prescott, John||Mr. Tom Pendry.|
|Alison, Michael (Barkston Ash)||Fortescue, Tim||MacArthur, Ian|
|Allason, James (Hemel Hempstead)||Foster, Sir John||McCrindle, R. A.|
|Amery, Rt. Hn. Julian||Fowler, Norman||McLaren, Martin|
|Archer, Jeffrey (Louth)||Fox, Marcus||Maclean, Sir Fitzroy|
|Astor, John||Fraser, Rt. Hn. Hugh (St'fford & Stone)||Macmillan, Rt. Hn. Maurice (Farnham)|
|Atkins, Humphrey||Freud, Clement||McNair-Wilson, Michael|
|Austick, David||Fry, Peter||Madel, David|
|Awdry, Daniel||Galbraith, Hn. T. G. D.||Maginnis, John E.|
|Baker, Kenneth (St. Marylebone)||Gardner, Edward||Marten, Neil|
|Baker, W. H. K. (Banff)||Gibson-Watt, David||Mather, Carol|
|Balniel, Rt. Hn. Lord||Gilmour, Ian (Norfolk, C.)||Maude, Angus|
|Barber, Rt. Hn. Anthony||Gilmour, Sir John (Fife, E.)||Maudling, Rt. Hn. Reginald|
|Batsford, Brian||Glyn, Dr. Alan||Mawby, Ray|
|Bell, Ronald||Godber, Rt. Hn. J. B.||Maxwell-Hyslop, R. J.|
|Bennett, Sir Frederic (Torquay)||Goodhart, Philip||Meyer, Sir Anthony|
|Bennett, Dr. Reginald (Gosport)||Gorst, John||Mills, Peter (Torrington)|
|Benyon, W.||Gower, Raymond||Mills, Stratton (Belfast, N.)|
|Berry, Hn. Anthony||Grant, Anthony (Harrow, C.)||Miscampbell, Norman|
|Biffen, John||Gray, Hamish||Mitchell, Lt.-Col. C. (Aberdeenshire, W.)|
|Biggs-Davison, John||Green, Alan||Mitchell, David (Basingstoke)|
|Blaker, Peter||Grieve, Percy||Moate, Roger|
|Boardman, Tom (Leicester, S. W.)||Griffiths, Eldon (Bury St. Edmunds)||Molyneaux, James|
|Body, Richard||Grylls, Michael||Money, Ernie|
|Boscawen, Hn. Robert||Gummer, J. Selwyn||Monks, Mrs. Connie|
|Bossom, Sir Clive||Gurden, Harold||Monro, Hector|
|Bowden, Andrew||Hall, Miss Joan (Keighley)||Montgomery, Fergus|
|Braine, Sir Bernard||Hall, Sir John (Wycombe)||Morgan, Geraint (Denbigh)|
|Bray, Ronald||Hall-Davis, A. G. F.||Morgan-Giles, Rear-Adm.|
|Brewis, John||Hamilton, Michael (Salisbury)||Morrison, Charles|
|Brinton, Sir Tatton||Hannam, John (Exeter)||Mudd, David|
|Brocklebank-Fowler, Christopher||Harrison, Brian (Maldon)||Neave, Airey|
|Brown, Sir Edward (Bath)||Harrison, Col. Sir Harwood (Eye)||Nicholls, Sir Harmar|
|Bruce-Gardyne, J.||Haselhurst, Alan||Noble, Rt. Hn. Michael|
|Bryan, Sir Paul||Hastings, Stephen||Nott, John|
|Buchanan-Smith, Alick (Angus, N & M)||Havers, Sir Michael||Onslow, Cranley|
|Buck, Antony||Hawkins, Paul||Oppenheim, Mrs. Sally|
|Bullus, Sir Eric||Hay, John||Orr, Capt. L. P. S.|
|Burden, F. A.||Hayhoe, Barney||Osborn, John|
|Butler, Adam (Bosworth)||Heath, Rt. Hn. Edward||Owen, Idris (Stockport, N.)|
|Campbell, Rt. Hn. G. (Moray & Nairn)||Heseltine, Michael||Page, Rt. Hn. Graham (Crosby)|
|Carlisle, Mark||Hicks, Robert||Parkinson, Cecil|
|Carr, Rt. Hn. Robert||Higgins, Terence L.||Peel, Sir John|
|Cary, Sir Robert||Hiley, Joseph||Percival, Ian|
|Channon, Paul||Hill, John E. B. (Norfolk, S.)||Peyton, Rt. Hn. John|
|Chapman, Sydney||Hill, S. James A. (Southampton, Test)||Pike, Miss Mervyn|
|Chataway, Rt. Hn. Christopher||Holland, Philip||Pink, R. Bonner|
|Chichester-Clark, R.||Holt, Miss Mary||Pounder, Rafton|
|Churchill, W. S.||Hooson, Emlyn||Powell, Rt. Hn. J. Enoch|
|Clark, William (Surrey, E.)||Hordern, Peter||Price, David (Eastleigh)|
|Clarke, Kenneth (Rushcliffe)||Hornby, Richard||Prior, Rt. Hn. J. M. L.|
|Cockeram, Eric||Hornsby-Smith, Rt. Hn. Dame Patricia||Proudfoot, Wilfred|
|Cooke, Robert||Howe, Rt. Hn. Sir Geoffrey (Reigate)||Pym, Rt. Hn. Francis|
|Coombs, Derek||Howell, David (Guildford)||Quennell, Miss J. M.|
|Cooper, A. E.||Howell, Ralph (Norfolk, N.)||Raison, Timothy|
|Cordle, John||Hutchison, Michael Clark||Ramsden, Rt. Hn. James|
|Corfield, Rt. Hn. Sir Frederick||Iremonger, T. L.||Rawlinson, Rt. Hn. Sir Peter|
|Cormack, Patrick||Irvine, Bryant Godman (Rye)||Redmond, Robert|
|Costain, A. P.||James, David||Reed, Laurance (Bolton, E.)|
|Critchley, Julian||Jenkin, Rt. Hn. Patrick (Woodford)||Rees, Peter (Dover)|
|Crouch, David||Jessel, Toby||Rees-Davies, W. R.|
|Crowder, F. P.||Johnson Smith, G. (E. Grinstead)||Renton, Rt. Hn. Sir David|
|d'Avigdor-Goldsmid, Sir Henry||Jones, Arthur (Northants, S.)||Ridley, Hn. Nicholas|
|d'Avigdor-Goldsmid, Maj.-Gen. Jack||Joplinq, Michael||Ridsdale, Julian|
|Dean, Paul||Kaberry, Sir Donald||Rippon, Rt. Hn. Geoffrey|
|Deedes, Rt. Hn. W. F.||Kellett-Bowman, Mrs. Elaine||Roberts, Michael (Cardiff, N.)|
|Digby, Simon Wingfield||Kershaw, Anthony||Roberts, Wyn (Conway)|
|Dixon, Piers||Kilfedder, James||Rodgers, Sir John (Sevenoaks)|
|Dodds-Parker, Sir Douglas||Kimball, Marcus||Rossi, Hugh (Hornsey)|
|Drayson, Burnaby||King, Evelyn (Dorset, S.)||Rost, Peter|
|du Cann, Rt. Hn. Edward||King, Tom (Bridgwater)||Royle, Anthony|
|Eden, Rt. Hn. Sir John||Kinsey, J. R.||Russell, Sir Ronald|
|Edwards, Nicholas (Pembroke)||Kitson, Timothy||St. John-Stevas, Norman|
|Elliot, Capt. Walter (Carshalton)||Knight, Mrs. Jill||Sandys, Rt. Hn. D.|
|Emery, Peter||Knox, David||Scott, Nicholas|
|Eyre, Reginald||Lamont, Norman||Scott-Hopkins, James|
|Farr, John||Lane, David||Shaw, Michael (Sc'b'gh & Whitby)|
|Fell, Anthony||Langford-Holt, Sir John||Shelton, William (Clapham)|
|Fenner, Mrs. Peggy||Le Marchant, Spencer||Shersby, Michael|
|Fidler, Michael||Lewis, Kenneth (Rutland)||Simeons, Charles|
|Finsberg, Geoffrey (Hampstead)||Lloyd, Ian (P'tsm'th, Langstone)||Sinclair, Sir George|
|Fisher, Nigel (Surbiton)||Longden, Sir Gilbert||Skeet, T. H. H.|
|Fletcher-Cooke, Charles||Loverldge, John||Smith, Dudley (W'wick & L'mington)|
|Fookes, Miss Janet||Luce, R. N.||Soref, Harold|
|Speed, Keith||Thatcher, Rt. Hn. Mrs. Margaret||Wall, Patrick|
|Spence, John||Thomas, John Stradling (Monmouth)||Walters, Dennis|
|Sproat, Iain||Thomas, Rt. Hn. Peter (Hendon, S.)||Ward, Dame Irene|
|Stainton, Keith||Thompson, Sir Richard (Croydon, S.)||Warren, Kenneth|
|Stanbrook, Ivor||Thorpe, Rt. Hn. Jeremy||Wells, John (Maidstone)|
|Stewart-Smith, Geoffrey (Belper)||Tilney, Sir John||White, Roger (Gravesend)|
|Stodart, Anthony (Edinburgh, W.)||Tope, Graham||Wilkinson, John|
|Stokes, John||Trafford, Dr. Anthony||Winterton, Nicholas|
|Stuttaford, Dr. Tom||Trew, Peter||Wolrige-Gordon, Patrick|
|Sutcliffe, John||Tugendhat, Christopher||Woodhouse, Hn. Christopher|
|Tapsell, Peter||Turton, Rt. Hn. Sir Robin||Wylie, Rt. Hn. N. R.|
|Taylor, Sir Charles (Eastbourne)||Vaughan, Dr. Gerard||Younger, Hn. George|
|Taylor, Frank (Moss Side)||Waddington, David|
|Taylor, Robert (Croydon, N. W.)||Walder, David (Clitheroe)||TELLERS FOR THE NOES:|
|Tebbit, Norman||Walker, Rt. Hn. Peter (Worcester)||Mr. Walter Clegg and|
|Temple, John M.||Walker-Smith, Rt. Hn. Sir Derek||Mr. Bernard Weatherill.|