Charge of Income Tax for 1978–79

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 8 May 1978.

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Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton 12:00, 8 May 1978

I shall give way to the hon. Member for Horncastle, but he should not rush at me like that. It upsets me. Let him wait a minute. He should not get too excited.

I was saying that the effect of the first amendment proposed to the Finance Bill would be to increase the borrowing requirement. We are told by the Shadow Chancellor that the Tories would offset it by cutting public expenditure. The Shadow Chancellor said where he would cut public expenditure. The hon. Member for Blaby plainly did not believe him, and I shall come to what he said about cutting public expenditure and precisely how he would do it. He used the strangest argument I have heard in my life. The way to plan to cut expenditure, he said, was to wait until there was a shortfall and to hope that that shortfall would be sufficient to offset the irresponsibility of the Opposition Front Bench. That is a strange argument.

The right hon. and learned Member for Surrey, East put forward approximately £500 million worth of cuts in public expenditure as an offset. He hold us three times—he is getting almost as repetitious as his hon. Friend the Member for Blaby—that there was a total of £67,000 million involved in public expenditure and that all that was needed was three-quarters of 1 per cent. He would have us believe that this would be an easy task. What did the right hon. and learned Gentleman do? He proceeded to list items in the £500 million. That was the best he could do. He must have stuck a pin in the White Paper.

The first and biggest item which the right hon. and learned Gentleman gave us was £300 million from the National Enterprise Board which, he said, the House had voted a few weeks ago. I am sorry to have to tell him that he is confused on these matters. The House voted a few weeks ago on a statutory limit for the NEB. I would be interested to know how we can cut £300 million from the NEB expenditure when the total expenditure of the Board in 1978–79 is £275 million.

The bulk of that money is already committed, for British Leyland, Rolls-Royce and other commitments to subsidiaries of the NEB. Is the right hon. and learned Gentleman telling the Committee that he would cut the whole of that and take the £275 million? Would he cut the funds to British Leyland, Rolls-Royce, Alfred Herbert and others?

The Shadow Chancellor told us that he would cut 25 per cent from the selective assistance to industry. This is selective assistance under the 1972 Industry Act. We all recall that Act. It was introduced by the then Tory Government. What the right hon. and learned Gentleman would be doing in respect of that money, which is virtually all committed, would be removing employment opportunities and affecting private sector investment. Is that what he has in mind?

Another big item which the Shadow Chancellor put forward for offsetting the tax cuts was a cut in the staff of the Inland Revenue and the Customs and Excise, which, he claimed, had increased by 20,000 since 1974. The increase between 1974 and 1978 was about 13,000, slightly less than the increase between 1970 and 1974, when it was 15,000. Even if the right hon. and learned Gentleman were to sack tomorrow the whole of that 13,000 increase, without redundancy pay or notice, he would save approximately £49 million. Is he telling us that that is what he wants to do? If he did that, we would have a very large borrowing requirement because there would be no one to collect the taxes. If that is the way he would act as a Chancellor, it is fortunate that he will never hold office. That is the oddest proposal I have ever heard.

Perhaps the right hon. and learned Gentleman's finest hour, or finest cheer, came when he listed his proposal on public expenditure, which involved a cut of £5 million in money to the front-line Presidents. One shudders to think of the effect of the combination of the right hon. and learned Gentleman and the right hon. Lady the Leader of the Opposition upon our foreign policy if that is the kind of thing they would be doing. Maybe the right hon. and learned Gentleman has not heard that some of those frontline Presidents are very friendly with the Chinese.

10.0 p.m.

When the right hon. and learned Gentleman tries to list how he would cut £500 million and says that it is so easy, I am bound to tell him that he should not listen to his hon. Friend the Member for Blaby. Out of £67,000 million, the best he can do, £500 million, which is only 0·75 per cent., is totally ineffective and could not possibly work.

Opposition Members who have said that the borrowing requirement should not be increased by cutting taxation unless public expenditure is first cut know that the Shadow Chancellor, despite all his efforts, was not able to come up with any such proposal. We know why that was so. As the right hon. Member for Down, South pointed out on Second Reading, it is very difficult indeed to cut public expenditure in the year of the announcement.

Of course, it has been done. It was done by removing the nationalised industry price restraint subsidies, but there is nothing left now that they have been removed. Maplin Airport is an example, and defence expenditure is another. The only other areas in the last four years where cuts in public expenditure were announced and made effective in the same year were when they were a small part of ongoing cuts which took place in the following year. Anyone who understands these matters knows that it cannot be done in the year in question.

So much for the public expenditure cuts that the right hon. and learned Gentleman proposes as an offset in order not to have an increase in the borrowing requirement. I am bound to say that the Opposition Front Bench should have been proposing something more than simply not increasing the borrowing requirement. If they meant what they said about reducing the borrowing requirement, they should have mentioned something very much more than the £500 million, which could not work anyway, but they have not done so.

What is it, then, that the Opposition would like to do? What is this fresh start that they would like to make on cutting taxes? It is 1p off the basic rate. I agree with the hon. Member for Chichester (Mr. Nelson) that as soon as possible we should make some cuts in the basic rate for differential reasons, but let us understand what is involved in this great risk of which the right hon. and learned Gentleman speaks. What are we getting for it? We are getting 1p off the basic rate.

For people at the bottom end of the scale, on £40 a week, there is nothing at all. The average worker, the married man on £80 a week, would get 36p. If he had a mortgage of £10,000, he would get only 16p a week. A single person with a total income of £50 a week would get 17p a week and a widow over 65 would get 11p a week from this great risk that the Conservatives are prepared to take in making their fresh start. Even the people that Opposition Members have said they want to help, on £10,000 a year, would get very little. A married man on £10,000 a year would get about £1·20 a week from this. Those above £10,000 a year would get a lot more from the other amendments. A man on £25,000 a year would, from the amendments put forward, get £1,643 a year.