Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 1st April 1974.

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Photo of Mr Peter Walker Mr Peter Walker , Worcester 12:00 am, 1st April 1974

The right hon. Gentleman completely misunderstood and did not bother to find out what the negotiations were all about. They started in July long before the oil crisis. We had been working hard to build up a totally new economic relationship with Iran for nine months. Already we had announced £260 million of projects for British industry, and, in addition, we announced the recent arrangements.

The real problem is that the Budget has a tendency to discourage outward investment, and that could be a serious mistake. One of the things I did in the Department of Trade and Industry was positively to try to encourage British retailers to buy retail outlets in Europe in order to sell British goods there. It may be very much to the advantage of the balance of payments for that to be encouraged and continued in every possible way. Likewise, it is very much to our advantage for British firms to invest in assembly plants throughout the world, sending British products out to them. It is also important to have access to new markets. That may well result in outward investment.

The Chancellor also fails in any way to encourage inward investment. The Budget does just the opposite. Its whole negative attitude towards investment is in complete contrast to the approach of the Tory Government. The Chancellor's attitude to Europe is the same. It might give him some delight to see additional tax paid by foreigners in London, but the delight is shortlived if those foreigners move their offices abroad, taking their business connections and purchasing power to foreign centres.

In recent years we have succeeded in building and improving the City of London as a financial centre and measures of this sort put it at a grave disadvantage. The Chancellor says that he is sorry about the poor chaps on the Stock Exchange losing their money and about the pension funds. He fits in with the new tone of The Guardian editorials which say that when the Stock Exchange slides like that it is not very good for ordinary people and that it is not just the few big investors who are adversely affected. But what a remarkable thing, when the Stock Exchange was already at low level, to impose the sort of measures on industry which the Chancellor imposed and, specifically for the Stock Exchange, to increase stamp duty from 1 per cent. to 2 per cent.! What a way to boost investment, and what a way of demonstrating that he is serious about trying to improve the state of the equity market!

Once again, there are disadvantages to this country with regard to our foreign earnings. We shall now be the only financial centre in Europe with a stamp duty. Does the Chancellor of the Exchequer think that that is an advantage to the City of London as a financial centre? All those Commonwealth companies registered in the United Kingdom will be well advised to consider registering elsewhere and saving the stamp duty.

I hope that the Chancellor of the Exchequer will take my next suggestion seriously. I think that the increased stamp duty is a mistake, but it may be part of the right hon. Gentleman's Socialist policy. However, if the right hon. Gentleman wants to impose it as a further tax on capital, I hope that in Committee on the Finance Bill he will consider, for international reasons and in the interests of the country, the possibility of exempting overseas investors. If he does not, he will find that a number of other markets in the world will thrive at the expense of London. He should also consider the possibility of exemption for life assurance and pensions investment.

The real criticism of the Budget is of the Chancellor of the Exchequer's attitude to the mixed economy. The Chancellor of the Duchy of Lancaster went out of his way this afternoon to say how he loved private enterprise, how Nye Bevan loved it, and how the Government had no hostility towards it. I was reminded of the last time I debated with the right hon. Gentleman, on the Companies Bill. The two main speakers for the then Opposition were the right hon. Gentleman and the present Secretary of State for Industry. The right hon. Gentleman will admit that his winding-up speech was much more of a reply to his right hon. Friend than was the winding-up speech for the Government. The two main Opposition speeches could not have been more diametrically opposed in their affections for the investor.

I have a feeling that we have been witnessing a similar occurrence today, that the right hon. Gentleman is put up to speak for the Government to utter pleasing sounds to the free enterprise system—"They all know Harold. Let him say that we love the Stock Exchange". In fact, the present Chancellor of the Exchequer has succeeded in putting down the Financial Times ordinary share index by a greater amount in one week, as a result of his Budget, than any Chancellor in history. Something needed to be said today. I gather that the fall has continued today, and that another firm was hammered on the Stock Exchange. Those are serious consequences, as the right hon. Gentleman understands, but nothing in the Budget did anything other than aggravate the situation.

When it comes to our attitudes to the mixed economy, whatever other criticisms can be made of the previous Government, it cannot be said that we treated the nationalised industries in a way that did other than to encourage their expansion through the whole range. The airlines went through a massive period of expansion under us. The railway investment programme was approved, and electricity power station programmes were approved and went ahead. We gave sanction for the Gas Corporation to buy the Frigg gas field from the Norwegians. I announced the biggest investment programme in our history for the steel industry, and the Coal Industry Act was passed to give a new future for the coal industry.

We may not like nationalisation. On occasions we may try to get rid of such concerns as Thomas Cook and Son. But we accept the mixed economy. We accept the nationalised industries in major parts of our economy and try to run them as well as possible and give them the finance for expansion.

The Labour Party's attitude towards the private sector is different. The House should note the contrast between the Government's treatment of the public sector and the private sector. For all sorts of reasons, the public sector is allowed price increases of 15 per cent. to 30 per cent. in the Budget. I wonder what price increases the Government will allow the private sector over the next few months. Already there are regulations which suggest delays of three months in approving them, and no applications may be made, no matter what extra costs are sustained. There is a very different atmosphere towards price control.

The overall Budget strategy withdraws £500 million from savings, almost certainly primarily in the private sector. There are positive threats towards the equity market for the future, and positive measures, such as the increased stamp duty, to deteriorate it. Already industry was facing rising raw material and fuel costs unparalleled in our history. It will face substantial rising wage costs.

It is no wonder the Chancellor of the Exchequer refuses to make any predictions for the first half of next year when he talks about encouraging investment. Asked why the Treasury is not giving the figures for the first half of 1975, figures that have been given since the present Home Secretary agreed to their being given, the Financial Secretary to the Treasury replied to my hon. Friend the Member for Worthing (Mr. Higgins) today: the omission of figures for the first half of next year both mark the greater than usual uncertainties in the economic outlook. If the Government are unwilling to predict what will happen in investment and exports and expansion of the economy, they cannot expect industry to be very confident.

Let the House consider the impositions the Government have put on industry, the extra bills for the coming year. Industry's fuel bill for oil and other fuels will be up by £500 million—an increase that is not all created by Government action. National insurance payments this year will be £430 million, and I believe that in a full year they will be £700 million, although that has not been confirmed. There will be increases in the cost of steel of £300 million, postage £75 million, telecommunications £35 million, rail freight £35 million and corporation tax £130 million, plus the speeding up of corporation tax payments for the coming year. They constitute a total imposition of between £1,600 million and £1,800 million, at a time when the Chancellor of the Duchy of Lancaster has told us that industry is facing great problems of liquidity, and that the Government wish to encourage industry and people in the private sector.