Conclusion

Economic Situation – in the House of Commons at 12:00 am on 17 December 1973.

Alert me about debates like this

I do not think that any of my predecessors would dispute that, in the face of the many uncertainties ahead of us over the coming year, an economic judgment at this time is—to put it mildly—more difficult than usual. That is why it is important to say quite openly that, while I believe that the judgment I have made is the right one, I shall not hesitate to take, at any time, any further action which may be required in the national interest.

Within five to seven years about two-thirds of our oil requirements will be met from the North Sea, and beyond that there is every hope that production will grow to equal our total needs. This alone will give Britain an immense industrial advantage. It will transform our balance of payments.

But over the next year or so, it must be said that we in Britain face a severe test, and that over this period we shall not achieve the prosperity we expected. No Government, no party, could honestly pretend otherwise.

I hope the House will permit me one personal word. I have taken the action which I believe to be right. I have tried to be fair. I hope the nation will respond.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

The House has listened to a very sombre statement, and I do not think that any of us will complain about its length. It is that Autumn Budget for which many of us had been waiting, and I hope that I may be allowed a little more latitude than is normal in asking questions following a ministerial statement, because of the comprehensive statement made by the right hon. Gentleman.

First, the Opposition welcome the degree of realism shown by the Chancellor in facing some of the facts of our national economic situation. Many hon. Members on both sides of the House feel that if the Chancellor had shown the same degree of realism when he framed his Budget last March some of the sacrifices which the nation faces today would have been unnecessary.

Having said that, I am bound to say that in the measures which the Chancellor has outlined to deal with our national situation he has shown a degree of discrimination in favour of the private individual against the public services and public expenditure which will undermine the appeal for national unity which the Prime Minister made only a few days ago.

In his remarks about the contribution made by current industrial disputes to our problem the Chancellor invited his critics to put some facts on record. The fact is—and the House knows this—that the cuts which the Chancellor has announced would have been just as necessary if there had been no energy problem and no industrial disputes.

Figures published in the last few days show that in the last two months our balance of payments deficit has been running at an annual rate of more than £3,000 million per year, and that is in a period in which the increased cost of Arab oil could not have been more than £10 million to £20 million.

Figures published on Friday show that, in the first year of the Government's humorously entitled counter-inflation policy, inflation was running at more than 10 per cent.—

Sir Harmar Nieholls:

On a point of order. Mr. Speaker. Is there a motion before the House? We seem to be debating instead of asking questions. For one right hon. Member to take up all the question time is not fair to the House or to back benchers who want to ask questions which will enlighten them on the terms of the statement.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

It is the custom, following a statement of the kind that the Chancellor has made, for the Opposition spokesman to be allowed a certain amount of time. On each occasion there is an objection from the Government side. I seem to remember the hon. Member for Ebbw Vale (Mr. Michael Foot) making the same point when a statement was made in the previous Parliament.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

As I was saying, inflation was running at more than 10 per cent. during the first year of the humorously entitled counter-inflation policy adopted by the Government, and last week's figures also show that growth had fallen in the last three months to under the rate of 3 per cent. per year, and is still falling. I am glad that the Chancellor at last gave us a more realistic assessment of the implications of the oil crisis, although it gives a different impression from his earlier statement and, above all, from that given by his right hon. Friend the Secretary of State for Trade and Industry.

The background to the proposals which the Chancellor has put before us is an oil crisis which, as the right hon. Gentleman fairly said, will lead the whole of the developed world into a trade recession and a recession of production over the next 10 months which Britain is in a weaker position to meet than any of her competitors.

The Opposition welcome what the Chancellor said, if I understood him rightly, about agreement on international action to neutralise the effect on trade and the payment of unexpended Arab surpluses arising out of the increase in oil prices. But it is quite clear from what the Chancellor said that this is a national crisis that will require the best efforts of us all to resolve.

Photo of Mr William Clark Mr William Clark , East Surrey

On a point of order, Mr. Speaker. I trust that in your generosity you will allow hon. Members on this side of the House also to debate this motion, or to debate what the Chancellor said. I always understood that when a Minister made a statement questions were allowed but not a debate. I should like to ask whether, if I am fortunate enough to catch your eye, I, too, shall be allowed to debate the matter?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I have already referred to this. It is a convention of the House that, when a statement of this sort is made by whichever party is in office, the Opposition spokesman is allowed considerable latitude.

Photo of Mr John Biggs-Davison Mr John Biggs-Davison , Chigwell

Further to that point of order Mr. Speaker. While it is in accordance with precedent to allow latitude to a Front Bench spokesman, is it not an abuse that a spokesman from the Front Bench opposite should be allowed to deliver a lecture on Socialist economics which, quite clearly, was written before the Chancellor made his statement?

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

I anticipated these points of order, and I examined the precedents before coming to the House. It is a convention that a certain amount of latitude should be given. I do not think that there should be abuse of that convention, and I am not saying that there has been any yet. It is a convention which I propose to observe.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

In the light of what the Chancellor told us, is it not the Government's duty in this situation to achieve maximum growth out of the diminished resources that are likely to be available to this country over the next year? Is it not impossible for any Government to achieve those objectives unless they are prepared totally to change our national priorities and to allocate scarce resources in order to maximise the possibilities of growth?

The Opposition's contention is that by indiscriminate cuts in public expenditure right across the board the Chancellor is likely to make all our problems more difficult—not less difficult—to solve, and I should like to put this question to the Chancellor of the Exchequer. The right hon. Gentleman had something to say about the contribution made by current industrial troubles to a possible reduction in growth. Am I to infer from his speech that the right hon. Gentleman does not assume that the country will be subjected to a three-day week for the next 12 months? Am I not right in assuming that the whole of the right hon. Gentleman's statement and his proposals assume that those industrial problems will be overcome in the very near future?

Were not all his proposals related either to the economic situation which existed before the energy crisis or to the aggravation of that situation created by the increase in the price of Arab oil and the probable cuts in its supply? Is it not the case that a cut of just over £1,000 million in the Government's deficit would be totally irrelevant if we were dealing with the sort of situation which the Prime Minister tried to frighten us into accepting last Thursday?

Can the Chancellor explain how, at a time when energy is likely to be a major constraint on our national growth, he is subjecting the oil, coal, electricity and gas industries and the nuclear power industry in its public aspects to the same 20 per cent. cut as the Maplin airport?—[HON. MEMBERS: "No."]—If I misunderstood the Chancellor about this, I invite him to make it clear in his statement. So far as I could understand it, he talked about reducing the element of subsidy on the products of the nationalised industries. Does he propose to do that by increasing the price of their products? If not so, how does he propose to do it?

Secondly, is steel production to be exempted from the cuts to which the right hon. Gentleman referred? Thirdly, why is he not prepared to submit less necessary public expenditure projects such as Maplin, the Channel Tunnel and, above all, defence, to a disproportionate cut compared with the more essential elements in public expenditure?

I pass now to some questions about the tax side of the Chancellor's proposals. The Chancellor made it clear that during the next year living standards are likely to fall. What many of us—many on the Government side of the House, as well as the Opposition—were hoping to hear from the Chancellor was talk of some redistribution of the tax burdens. We say that the cut in living standards should be borne by those best able to bear it. But all that we have concerning direct taxation is a levy which will bring in £35 million—I think the Chancellor said—from people who paid surtax last year.

Why has the Chancellor made no proposal whatever in his statement to cushion those whose earnings are below the average against the appalling increases in rents, mortgage rates and the cost of food, which are bound to continue by the Chancellor's own arguments? Why did the Chancellor have no proposals for dealing with the 100 per cent. increase in bank profits over the last year, due not to any increased productivity by bank staff but wholly to the means by which the Chancellor is trying to deal with economic problems that he has created for himself?

Photo of Mr John Gorst Mr John Gorst , Hendon North

On a point of order, Mr. Speaker. Surely the usage of the House, Mr. Speaker, has been taken to such an elastic extent that it has by now snapped.

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

That is a matter for the Chair. I remind hon. Members on both sides of the House that we are to have a two-day debate.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

Why has the Chancellor made no proposal to withdraw the tax-free loan interest which he introduced in his Budget last year and which, in itself, has been in part responsible for our rate of inflation?

I come now to the Chancellor's proposal for dealing with profits in land and property. The Opposition welcome at least the Chancellor's bold and accurate statement about the nature of these profits and their obscenity in the current situation, or, indeed, in any situation. But can the Chancellor explain how his proposals will do anything to remove the monstrosity of the treatment of Centre Point, with which the Government promised to deal over a year ago and which the Government have now decided to do nothing about?

The Chancellor told us that he proposes to raise £80 million out of various forms of taxation of property companies which have seen their assets increase in value by thousands of millions of pounds in the last two or three years. Does not the right hon. Gentleman's new tax on rental, treating it as disposal, apply only to the first rental, property companies remaining free to increase their rents year by year in line with the enormous increase in the value of the property which they rent? Does not the Chancellor feel that in this situation it would have been right to mulct the property companies by a special levy of at least some thousands on the millions of pounds which they have made out of inflation in the last few years?

Finally—[Interruption.]— does the Chancellor recognise that in seeking to place the burden of the inflation for which he has been responsible on local authorities, the public services and the social services, and in sparing the richer sections of the community from making a contribution commensurate with their wealth, he has undermined the possibility of creating that national unity which is the nation's only hope in dealing with the current crisis?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

I could have adopted the device of one of my predecessors, in a previous Labour Government, and made my statement as the opening speech in a debate. I decided not to follow that practice on this occasion because I thought, out of courtesy to the House, that it would be helpful to make my statement today so that it could be considered before the debate began. We would have avoided the questions if I had adopted the previous practice.

Perhaps hon. Members would like to hear the answers to some of the points raised by the right hon. Member for Leeds, East (Mr. Healey). Concerning the Government's economic strategy, before the oil crisis and before the self-inflicted shortages of energy—

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

—both the TUC and the CBI agreed that it was perfectly reasonable to keep the rate of growth up to that of productive potential. That was the agreement between us.

Next, the right hon. Gentleman asked how my measures were related to the possible length of the present industrial disputes in the coal and electricity industries and on the railways. In deciding upon the particular measures which I considered best and most appro- priate at this time, I certainly had in mind the fact that as a result of this industrial action there would be many people in this country who would be suffering considerable hardship and who would be having thinner pay packets. It was to some extent for this reason that I decided on the particular measures that I have announced today.

Because some hon. Members opposite were interrupting at the time and obviously did not hear what I said about the energy industries, I will repeat it. In my statement I said that there would be no reduction in investment in the energy industries. As for steel, I have no doubt that, as a result of the shortage of energy, that industry will not be able to achieve the targets that it would have otherwise achieved. We have already had a foretaste of that from some of the figures of production which were reported recently.

The right hon. Gentleman went on to make some general criticisms about the measures that I have chosen. He gave the House the clear impression—I understand from what he has said outside that it is his view—that instead of the action this Government have taken to deal with public expenditure, to which he objects, and to deal with the expenditure of local authorities, to which he objects, in his turn, having said that it was necessary to take action, he would presumably have taken action on direct or indirect taxation. Therefore, those outside the House will take note of the right hon. Gentleman's choice.

I have given the House the facts. There are many uncertainties and many conflicting considerations, but, bearing all these in mind, I have decided on the measures which I believe are most appropriate, in all the circumstances. The right hon. Gentleman also made an extraordinary statement, which I took down. He complained and criticised us over what he called our "discrimination in favour of the private individual". I think that those words, too, will be noted outside. Those outside will know where, if the right hon. Gentleman had had to act over the oil problems which face the country now, the burden would have fallen under his administration. Perhaps it would have been better, for the right hon. Gentleman's sake, if I had adopted the practice of his predecessor and not allowed myself to be questioned.

Photo of Sir John Hall Sir John Hall , Wycombe

Is my right hon. Friend aware that I have not written my speech for tomorrow's debate, so my question will be brief? Is he further aware that the implications are so far reaching that it is difficult to deal with them in the form of question and answer? Will my right hon. Friend confirm that, in the new arrangements which he has announced for the banks, industry's ability to obtain credit for the financing of industrial development will not be limited?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

My hon. Friend is right in that assumption. There is no such intention. The objective is to limit credit for private consumption and not in any way to limit it for industrial development.

Photo of Mr Edmund Dell Mr Edmund Dell , Birkenhead

In the cuts in public expenditure, can the Chancellor say what discrimination he has made in favour of the regions?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

The grants, loans and subsidies available to the regions under the Industry Act will not be affected by the cuts. Areas which have higher unemployment than the rest of the country will, therefore, get some protection from the effects of the crisis through the continuation of those policies. In the serious situation that we face, the effects of the action we are taking are bound to be spread throughout the country.

Photo of Mr Enoch Powell Mr Enoch Powell , Wolverhampton South West

Is my right hon. Friend aware that those of us, at any rate on this side of the House, who have for many months been stressing the urgency of budgetary measures to deal with our underlying problem of inflation, will offer to him every encouragement and support in carrying through those of the measures which he has announced?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

I say very genuinely to my right hon. Friend, I am grateful.

Photo of Mr Jeremy Thorpe Mr Jeremy Thorpe , North Devon

Would the right hon. Gentleman confirm that it would be his hope that his financial statement will not only deal with the management of the economy but psychologically that it will make all sections of the community more ready to accept the prices and incomes policy? Does the Chancellor feel that the Government's objective has been achieved and is it the Government's view that phase 3 still remains realistic? Second, what is the Chancellor's assessment of the effects of his measures on unemployment? Third, may we take it that the Government intend to make a more rigorous control of prices, and why, in particular, has he excluded rents? Fourth, has the right hon. Gentleman considered, and if so why has he not adopted, the concept of land value taxation in order that the assessed revaluation of capital appreciation, whether disposed of or not, may be taxed? Finally, in view of the admitted importance of energy, has not the time come for urgent consideration of the appointment of an energy commission to deal with the exploitation and conservation of our resources?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

On the right hon. Member's first point, I am afraid that it is inevitable and inherent in this situation, with the shortage of energy, of oil and coal, and all the problems that we face in the transport of both oil and coal—as a result of actions deliberately taken, as I said, outside and within this country—that there will be unemployment and short-time working. No Government could take action to avoid this so long as these problems persist. As for taxation of land, I have considered all the aspects and I came to the conclusion that, in all the circumstances, by far the best and most practicable way—there are great practical problems—was to deal with it in the way that I have mentioned.

May I comment on the incomes policy and the right hon. Gentleman's request that it should be accepted? I say, as I said in the concluding words of my statement—which, for understandable reasons were not clearly heard by hon. Members opposite—that in the action I have taken I have done what I believe to be right in the national interest in the circumstances. Furthermore, I have tried to be fair. I now hope that the nation will respond.

Photo of Major Sir Henry D'Avigdor-Goldsmid Major Sir Henry D'Avigdor-Goldsmid , Walsall South

On this sombre day, will not my right hon. Friend cast a little light, a ray of brightness, on the proceedings by telling us by how much these measures which he has announced will reduce the Government's borrowing requirement?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

The reduction in public expenditure to which I referred—£1,200 million in the next financial year—will reduce the borrowing requirement, pound for pound, by the same amount.

Photo of Mr Thomas Swain Mr Thomas Swain , North East Derbyshire

Is the Chancellor of the Exchequer aware that his right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) warned him months ago about the situation that was gradually but inevitably creeping upon the Government—months before the wage negotiations with the miners even began, let alone before the industrial action took place?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

It is well known that both my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) and I have been warning each other of various things for a long time.

Photo of Sir Harmar Nicholls Sir Harmar Nicholls , Peterborough

Is my right hon. Friend aware that while his statement may have made it quite clear that public housing will be relieved from some of the imposts which he has described, it was not clear what would be available for private housing? Private housing must work in partnership with public housing or our housing needs will not be properly met.

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

Certainly what I said about public sector housing investment was said in relation to my statement about public expenditure, but one hopes that, despite the shortages that we shall undoubtedly have in building materials, in bricks, cement and steel, as a result of the shortage of energy, the maximum priority will be given to housing in the private sector. Of course, if the public sector's demands for these materials for construction of one kind or another had continued unabated, there would have been even less available for private sector housing.

Photo of Mr Frank Allaun Mr Frank Allaun , Salford East

Will the 10 per cent. cut in public expenditure apply to arms spending, which this year increased by £520 million to £3,350 million? Is the right hon. Gentleman aware that if the Government cut back in this direction to the same level of the gross national product as is devoted to armaments by the other West European NATO countries, it would save our country £1,083 million a year and thus obviate the need for nearly all the other cuts, which will hurt our people severely?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

The reduction in public expenditure on defence under these proposals amounts to £178 million. The hon. Member will be pleased to know, I am sure, that the forces that we are contributing to NATO will not be reduced, despite the fact that some improvements in equipment may be delayed as a result of these decisions.

Several hon. Members:

Several hon. Members rose

Photo of Mr Selwyn Lloyd Mr Selwyn Lloyd , Wirral

Order. I should like the help of the House. This cannot go on for much longer. Those who catch my eye now to put a supplementary question may be diminishing their chances during the debate.

Photo of Sir Robert Cary Sir Robert Cary , Manchester, Withington

Is my right hon. Friend aware that, for a few months past, I have been wondering what it meant to be 75 years of age? For his statement on surtax, may I thank him? May I point out that a large number of firms have installed generators with sufficient oil stocks to run their factories? May the firms which had this foresight be allowed to use those generators to help employ their work people?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

I will draw what my hon. Friend said to the attention of my right hon. Friend who is responsible. As for your adjuring us, Mr. Speaker, to be careful about putting questions now, I hope that the fact that the right hon. Member for Leeds, East was the first to catch your eye will not prevent him from being called in the two-day debate.

Photo of Sir John Morris Sir John Morris , Aberavon

Am I right in assuming that, so serious does the Chancellor regard the state of the economy, if the trouble with the industrial unions were resolved tomorrow, he would not change his proposals by one comma?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

If, as we all hope, the industrial troubles are settled soon, certainly there would be no immediate change in the proposals that I have made.

Photo of Peter Tapsell Peter Tapsell , Horncastle

When will the special measures be announced to which my right hon. Friend referred to protect the poorer sections of the community from the proposed increases in the price of coal and electricity—before Christmas or not? Will they include measures to take direct action to stabilise the cost of certain basic foodstuffs?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

We have been over the ground on food subsidies many times, and we have also discussed the considerable increase in taxation which would be necessary if we were to make the sort of stabilisation which has been suggested by right hon. and hon. Members opposite. As for energy prices, what I said, as my hon. Friend will find if he looks up the exact words, was that consultations with the industries will be held as a matter of urgency. Until those consultations have been completed, it would be wrong to say any more about the

PUBLIC EXPENDITURE: 1973–74 AND 1974–75
£ million
Reductions for
1973–74 Cmnd. 55191974–75 Cmnd. 5519CapitalProcurement1974–75 Total1974–75 Revised programmes
At 1973 Survey prices
Defence and external relations
1. Defence3,3983,418−16−162−1783,240
2. Overseas services590603603
Commerce and industry
3. Agriculture, fisheries and forestry576532−4−3−7525
4. Trade, industry and employment1,9171,664−10−9−191,645
5. Nationalised industries' capital expenditure of which—
Fixed assets:
Fuel and power industries1,815723*−2641,801
Other industries1,323−264
Other capital expenditure19
Environmental services
6. Roads and transport1,5701,632−188−24−2121,420
7. Housing2,1651,9631,963
8. Other environmental services1,4251,409−139−9−1481,261
9. Law, order and protective services948973−21−11−32941
Social services
10. Education and libraries, science and arts4,1634,249−119−63−1824,067
11. Health and personal social services3,2863,378−69−42−1113,267
12. Social security5,4585,7255,725
Other services
13. Other public services419412−4−4408
14. Common services433459−17−6−23436
15. Northern Ireland770782782
Total programmes28,93329,264−851−329−1,18028,084

arrangements which in the event would be made to safeguard the neediest households.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

How much will the Chancellor's statement on land and property help or not help to let Centre Point?

Photo of Mr Anthony Barber Mr Anthony Barber , Altrincham and Sale

I do not propose, on an occasion when I am making a statement about a general change in taxation—a question and answer occasion—to deal with the question of a specific tax claim.

Following is the table:

£ million
Reductions for
1973–74 Cmnd. 55191974–75 Cmnd. 5519CapitalProcurement1974–75 Total1974–75 Revised programmes
16. Debt interest2,9502,8002,800
Contingency reserve150+ 100250
Shortfall−400−300−100−400
Adjustment to 1973–74 out-turn prices and relative price effect865890−25−10−35855
At 1973–74 outturn prices
Total32,34832,804−876−339−1,21531,589
Percentage increase (+)/decrease (−) on 1973–74:%%
in total expenditure (cost terms)†+ 1·8−2·0
in purchase of goods and services (volume terms)+2·9−3·7
*This figure embodies assumed shortfall of £100 million.
† Excluding Investment Grants.