Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 5 November 1973.

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Photo of Mrs Barbara Castle Mrs Barbara Castle , Blackburn 12:00, 5 November 1973

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——