Yesterday we heard a Budget Statement that was one of the shortest on record, or certainly one of the shortest I have listened to since I have been a Member. Today we had to listen to another from the hon. Member for Cornwall, North (Mr. Pardoe). It will take some getting used to to appreciate that we have two Budget Statements for the price of one. But I imagine that that is what we shall have to do. I did not detect much unanimity of purpose between the Chancellor yesterday and the hon. Member for Cornwall, North, today.
The hon. Member yesterday called this a Budget of hope. I was reminded of the saying of Dr. Johnson about a man who married again immediately after losing his wife and who called it a
triumph of hope over experience.
Already, after just 24 hours—I do not know whether the hon. Gentleman saw the Chancellor—he seemed to be not his real self at all. He was like a lion become lamb. I fear that after whatever consultations took place the hon. Gentleman found that it was a triumph of experience over hope.
I do not want to go into the Liberal Party's programme, if for no other reason—none of them is here. I suggest that the Liberal Party's programme is different from that which we had from the Chancellor yesterday. I saw it suggested in The Sunday Times, for example, that there should be a reduction in income tax of some £9·4 billion and that this should be paid for by new social security taxes under which the worker would get only half the agreed increase in earnings. I cannot say that that policy would appeal very much to the Liberal Party's new allies but, at any rate, it was an interesting proposal for the hon. Member for Cornwall, North. I daresay that we shall see more of these proposals from him.
Obviously, there will be much more consultation. I should have thought that with the Liberal Party and the Labour Party together the House could have expected to see more tangible results than have so far appeared. I am disappointed that there have not been some closer arrangements already. One would have thought, for example, that the property assets of the Labour Party could be merged with the National Liberal Club. That might have produced some interesting results. I suggest it to the hon. Member for Tottenham (Mr. Atkinson).
The National Liberal Club appears to be full of Danes at present who are under the impression that the National Liberal Club is a hotel. I suppose it is an im- provement on the position many years ago when F. E. Smith was Lord Chancellor and used the National Liberal Club, I am told, as a convenience. When the hall porter remonstrated with him and asked him whether he was a member, F. E. Smith said "Good God, is this a club?" I suppose things have improved since then.
The Chancellor will have to do rather better for the Liberal Party than he has done so far. The fact is that there is a Duchy of Lancaster of which there is a Chancellor. There is a Duchy of Cornwall, too. Could not the Chancellor make the hon. Member Chancellor of the Duchy of Cornwall, North? At least that might be some satisfaction for the disappointments that the Liberals have so far encountered.
However, the hon. Member for Cornwall, North made a most important point about the case for rural transport and the effect on rural transport of the proposals in the Budget to increase the vehicle excise duty and petrol tax. The hon. Gentleman was specific about this. I understood that he personally feels bound by the remarks he made in previous speeches some two years ago, which were very strong indeed and very convincing.
I understand from the hon. Gentleman that he and his colleagues will be joining the Conservative Party on Monday night in voting against these proposals. We understand that that is the position and we look forward to the hon. Gentleman's support in the Lobby because he, like many hon. Members in the debate during the course of the day, had much to say about the problems of rural transport and the effect on industry as well.
With all due deference to the hon. Member, I could not think that this Budget was directly related to the Liberal Party. I think it bears a close resemblance to the Budget of last year, which was related very much more to the trade unions and the spirit of Jack Jones. That was the source of last year's Budget. It is the same position today.
This is the tenth Budget that this Chancellor has introduced. On each occasion the House has become more and more irrelevant to the Budget. The Budget is not directed to the House. It seems to be scarcely directed to the International Monetary Fund. It is directed much more to the Trades Union Congress and to Mr. Jack Jones. We do not know whether Mr. Jack Jones will find these proposals acceptable, but I think it is important to state that there are other people in this country besides Jack Jones and that for us the test of this Budget is what it will do for inflation, for investment, and for unemployment.
On all those matters this Budget seems to me to be either irrelevant or damaging. We have had 10 Socialist Budgets from this Chancellor, and he has shown in the past that he is prepared to put the economy at risk in order to win the election. He will assuredly do so again if he can get away with it.
My first concern—this was mentioned by the hon. Member for Stoke-on-Trent, Central (Mr. Cant)—is that the main element of risk seems to be the size of the public sector borrowing requirement. As is well known, the Letter of Intent had a figure for the PSBR of some £8·7 billion. I believe that the figure of £8·4 billion that the Chancellor is expecting is very near the mark and, if there is a prospect, as the Chancellor makes out in the Financial Statement and Budget Report, of manufacturing investment increasing by some 17½ per cent., I think that that public sector borrowing requirement will be very hard pressed, because it will be in competition with the private sector for funds.
I very much doubt whether manufacturing investment will increase by 17½ per cent. That is most unlikely. It would have been much better to reduce public expenditure to give the leeway required in the size of the PSBR.
The second point on which considerable interest has been expressed is the Chancellor's claim to have reduced income tax. The Red Book shows that the yield of income tax is up by £1 billion. As my right hon. Friend the Leader of the Opposition said yesterday, this is not a give-away Budget at all but a take-away Budget.
The fact cannot be concealed that under this Government the exchange rate has fallen by one-third and for most of the Government's period of office production has been rather less than it was during the three-day week. Public expenditure has almost doubled in money terms and prices have risen by 70 per cent.
I am sorry that the Chancellor could not attend today. He kindly sent me a message to explain the reasons, which I absolutely accept. I understand that the Chancellor's wife sends the Chancellor off to buy cod every Saturday morning. I think that the Chancellor knows a thing or two about that. He had only to look at c. 322 of Hansard of 3rd March to see that the price of cod in terms of minutes worked had scarcely altered since 1945.
I have some advice for Mrs. Healey. She should send the Chancellor down the road and get him to buy a sack of potatoes and a sack of coal and lug them back home and then send a 15-word telegram to himself explaining why the price of those three commodities has more than trebled. He would then get a pretty good idea of the increase in the cost of living, and the exercise would not do him much harm, either.
Everyone knows the Chancellor's personal record on forecasting. He will for ever be known as "Mr. 8·4 per cent.". The Chancellor has been around long enough for us to be able to form a proper judgment. His 10 Budgets give us the right sort of scope to do so. Every prediction and every forecast that he makes is always too optimistic. They are always accompanied by boasts. It is rather like Mohammed Ali in reverse: be can always predict in which round he will be knocked out.
I shall remind the House of some predictions that the Chancellor made a year ago in the 1976 Budget statement. He said:
The tide has now turned and output in the United Kingdom is rising.
That is correct. It grew by a little under 1 per cent. last year and is due to rise by 1½ per cent. in the next 18 months. I cannot say that I call that much of a tide.
The Chancellor also said:
The outlook for unemployment now seems distinctly brighter.
In fact, it got worse. The Chancellor went on:
We should thus have no difficulty in meeting our external financing needs this year."—[Official Report, 6th April 1976; Vol. 909, c. 234–6.]
We entered the worst financial crisis that we have ever had and were in the arms
of the International Monetary Fund in December. The Chancellor also said that the pay limit guaranteed that our reduced rate of inflation would continue to fall in 1976. The rate of inflation on an annual basis is now 16·6 per cent., and, on the three-month basis which the Chancellor particularly likes to quote, it is 20 per cent.
It is not always possible to get forecasts right, but it would be nice to get some right occasionally. We feel as though we have been through 10 rounds with the Chancellor and that in every one he has been knocked to the floor. It is time that he packed it in or that his manager threw in the towel for him. It is time that his manager retired, too.
It is no good blaming the Treasury computer for these mistakes. If optimistic assumptions are fed into a computer, one will receive optimistic forecasts. The surprising thing about the Treasury computer is that it has no monetary input and no monetary capacity of any sort. This means that the Chancellor appears to rely specifically on controlling wages to control inflation. He said so in his Letter of Intent on 15th December.
This is a most interesting commentary on the Labour Party's wages and incomes policy. The Letter of Intent said:
Under the first stage of this policy, the increase in average earnings was reduced to 13·9 per cent. in the year ending July 1976 … Under the second stage, the T.U.C. and Government are applying the present pay agreement strictly; average earnings resulting from this second stage policy in the period July 1976 to July 1977 will rise by something like half of the amount of increase in the preceding 12 months.
That is important because at that time the Government were saying that there would be in this current period an increase in earnings of only 7 per cent. But by January, less than a month after the Letter of Intent had been written, the level of earnings had risen by 5½ per cent.
If we go on at that rate the level of earnings by this July will have reached 11 per cent., and that is 50 per cent. above the level mentioned in the Letter of Intent. That was the first specific pledge which the Government made in the Letter of Intent. Can the Government have been serious about that? Was it important to them that the Letter of Intent should be strictly observed, because that is what one would normally imagine to be the position?
The Letter of Intent said on the following page:
Nevertheless the Government is determined to ensure that the rate of inflation continues to fall. Accordingly, it will begin early next year to consider, in consultation with the TUC and the CBI, how this objective can best be pursued in the period beyond July 1977. I would aim at reaching agreement through these consultations in the early spring of next year, in time for the Budget.
We all know that spring was very late this year, but there has been no agreement before the Budget and, so far as one can see, practically no consultations.
This looks very different from the assurances that were given to the IMF only a matter of three months ago. Yet listening to the Chief Secretary this afternoon it appears that the only way in which the Government are concerned about controlling inflation is to have a strict incomes policy. Already during the course of the last few months it has been broken to the extent of 50 per cent. Surely no one in the House or outside can think that an earnings and incomes policy applied for the next year, from July 1977 to July 1978, will be more restrictive than that of the past year, but that is what the Letter of Intent says—that it will be just as restrictive, if not more so.
It stands to reason that it will not be more restrictive, because of the disgraceful anomalies already existing under the current pay code. One has only to consider the fact that television and film people are allowed to get any increase in wages which is index-linked, whereas the policeman is bound by the £6 pay limit. These sorts of anomalies are unacceptable. The vast majority of the people in this country believe that earnings will increase much faster than hitherto.
If that is the case this policy, which is the first objective in the Letter of Intent, will be irrevocably broken. How, therefore, can the Government pretend that their policy for controlling inflation by an effective incomes policy is either satisfactory or will be acceptable to the International Monetary Fund? I do not believe that they can make any such claim.
The fact is that their inflation policy seems to depend entirely on building a
house of cards with the TUC which the merest puff of wind from Mr. Scanlon or the toolmakers will blow down. That is how it appears. It is no good the Chief Secretary asking us to talk about our incomes policy and say whether we believe in that as a means of controlling inflation when it is plain that the Government do not believe in it either. The Letter of Intent says at a later page:
It is also essential to reduce the public sector borrowing requirement in order to create monetary conditions which will encourage investment and support sustained growth and the control of inflation.
That is already written into the Letter of Intent. It is quite plain that this is the point to which the IMF attaches importance. If the country had to depend on an incomes policy secured at a level of earnings written into the Letter of Intent, we should be in a singularly bad position.