Bill to continue income tax and corporation tax at the existing rates; to increase the main personal reliefs from income tax; to withdraw child tax allowances; and to continue the limit on relief for interest imposed by paragraph 5 of schedule 1 to the Finance Act 1974, presented accordingly, and read the First time; and ordered to be printed. [Bill 133.]
I beg to move, That the Bill be now read a Second time.
I confess that I feel a little bit like a man who turns up to play the leading role in the opera and all they want him to do is to help them hold the scenery together. I hope that nobody will blame me if I sing sedately at my work.
The Finance Bill now before the House is very different from that which would have reflected the Budget I had completed a week ago. It is introduced simply to maintain the ability of the next Government to introduce a Budget of their own choosing by preserving the basic powers of taxation as Parliament has already laid them down.
The economic background of this Bill is of course the same as that for the Bill I originally planned to introduce—namely, the state of the economy in the past year and the prospects for the year ahead— and I doubt if that background will have changed very much if the next Government decide to introduce a Budget in the summer. It may be convenient to the House if I briefly sketch it now.
1978 was a good year for the United Kingdom economy. We halved our rate of inflation, bringing it below the OECD average last spring and keeping it in single figures ever since. It is still below the level in the United States and France. Over 1978 as a whole, disposable incomes were 6·4 per cent, higher than in 1977 and 3·6 per cent, higher than in the previous peak year of 1974. Domestic demand expanded rapidly, private manufacturing investment increased in volume by 14 per cent for the second year running—to the highest level since 1970—and GDP rose by 3 per cent. As a result, we brought unemployment down by more than 100,000. After two bad months of winter and industrial disruption, unemployment is falling again.
Externally, we achieved a £250 million current account surplus, in spite of the fact that the extra net help we got from North Sea oil was to a great extent offset by a fall in invisible earnings, largely due to an increase in our contributions to the European Community budget—something we are determined to correct in future.
In addition, we were able to repay 4·6 billion dollars of overseas debt—3·6 billion dollars ahead of schedule—as against new borrowing of 1·8 billion dollars. This was in accordance with the intention I expressed last year of combining net repayment of debt, year by year, with new borrowing to spread the maturities. We have continued with this policy in 1979.
As I have told the House in answer to a question from my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Thomas), I propose shortly to repay a further 1 billion dollars to the IMF well ahead of schedule. We shall then have repaid to the IMF the equivalent of all our 1976 standby drawings and all the amounts we drew under the four credit tranches. This will be in addition to early repayments of market debt of up to 2 billion dollars in 1979.
Against this encouraging background we could look forward last autumn to a stable rate of inflation during 1979 and a further period of reasonable growth with the current account remaining close to balance. But we still face two major problems in our domestic economy, one of which became more serious in the winter months.
The first problem is the sluggish response of our manufacturing industry to increases in demand. As a result of the fall in inflation and the tax reductions that I announced in October 1977 and in last April's Budget, consumer spending increased by 5½ per cent, in 1978. But manufacturing output rose by less than 1 per cent., so imports inevitably gained an increased share of the United Kingdom market.
The second problem is wage inflation. As the current pay round has progressed, it has become clear that, as a result of excessive pay settlements, the rate of inflation in 1979 will be higher than we forecast last autumn. The earnings outturn for 1978–79 will be nothing like as high as the 20 per cent, to 25 per cent, which some commentators were predicting a couple of months ago. There is now a good chance of our achieving an outturn of about 13 per cent.—a little less than the last round. We have had a much larger number of people making settlements than by the same time last year.
There are many reasons. One is that the rate of wage increase last year was higher than the Government had hoped for when they laid down their guidelines in 1977. Another reason is that, whereas last year we benefited from a very small increase in world prices and no increase in oil prices, this year we are likely to get an increase in oil prices very much greater than was planned by the OPEC countries even a short time ago. I shall have more to say about that later.
I have answered the hon. Gentleman very fully. I have given him all the facts and he must mull over them.
As I said, any increase above the Government's guidelines is bound to raise prices and damage our competitiveness. Although, by sticking to the fiscal and montary policies that the Government have pursued, these dangers can be limited, nevertheless output and employment will be lower than they would have been if the pay guidelines had been observed. The solution to this problem—the main domestic cause of accelerating inflation—lies in our own hands. The Government and the TUC have already declared their determination to resolve it. But we face other difficulties on a broader international scale that we cannot solve by ourselves.
This time last year I stressed that, in order to find a solution to our own difficulties, action was needed on a world scale and I looked forward to the Bonn summit in July as a key element in any concerted approach to the world's major economic problems. The sniggering by the hon. Member for Blaby (Mr. Lawson) is not justified by the outturn of the Bonn summit.
In the months before the summit we pressed our international partners very hard on the need to sustain the rate of world growth and to reduce the current account imbalances. Our efforts were rewarded. The commitments undertaken at Bonn have been carried out, and 1978 ended with world growth and trade rising rapidly. We must continue our efforts to sustain world growth and achieve a better balance in the world economy at the Tokyo summit in June.
The European Community has committed itself to work towards greater convergence of economic performance and living standards, and it has the machinery through which this can be achieved. But its progress in this area has been most disappointing. I have already referred to the heavy burden placed upon us by our net contributions to the EEC budget. In 1978 these amounted to around £800 million. The Prime Minister has already made it clear that the Government regard it as intolerably perverse that the United Kingdom, which is seventh in order of GNP per head in the Community, should be the largest net contributor to the budget. My right hon. Friend the Minister of Agriculture has argued in the Agriculture Council, as he told us again this afternoon, for an end to the wasteful surpluses created by the common agricultural policy which are one of the major causes of the present inequitable resource transfers.
I, too, have taken the opportunity of meetings with my Finance Minister colleagues to emphasise that this perversity must be corrected if the European economies are to converge. There are signs that some of our partners are beginning to recognise the justice of our case. When we are returned to power, we shall continue to press this issue until we achieve results.
Thus, despite the success of the Bonn summit, current account imbalances have by no means disappeared, and there are also wide disparities in inflation rates round an average which is anyway much too high. Although the world economy grew by almost 4 per cent. in 1978, this was insufficient to reduce unemployment which, for the past three years, has stuck stubbornly at 16 million for the OECD area as a whole.
Yet there is widespread fear that more expansionary policies would simply rekindle inflation instead of leading to sustainable growth. This fear affects not only the United Kingdom but all our major partners. It is such fear, for instance, that led the United States last year to adopt a more restrictive stance. As inflation started to rise, the external deficit widened, and the dollar weakened. So in 1979 growth in the industrial countries is likely to be around only 3 per cent.—almost 1 per cent, lower than last year—and unemployment will remain high.
The recent oil price increases and the uncertain prospects for oil supply following events in Iran add to these difficulties by further increasing inflation and reducing the prospects for world growth. In consequence, we must all now give a high priority to saving oil so as to take pressure off the oil markets, and we must meet the commitment agreed with the International Energy Agency to reduce oil consumption by 5 per cent. Second, until we can secure together a lasting fall in inflation, we are unlikely to achieve the rates of growth which we need to get unemployment down.
I have no doubt that for us in Britain, as for most of our partners, the defeat of inflation must remain the highest priority if we wish to reduce unemployment. This must be tackled on two fronts—by continued adherence to firm and responsible financial policies and by a moderate growth in earnings over the year ahead.
Our domestic and external financial policies have formed the foundation of our counter-inflation strategy. Externally, over the last two years the £ sterling has remained strong and relatively stable. This has helped to contain the effects of pay increases on the rate of inflation. We have proved our ability to maintain the effective stability of sterling. Our reserves now stand at $22 billion, or $17½billion on the old valuation, compared with $6½ billion at the end of 1973.
Domestically, we have succeeded in keeping the underlying growth of the money supply under control. It will be another six weeks before we know the outcome for the year ending on the April make-up day. But the indications are that the rate of growth of sterling M3 over the year as a whole has been in the middle of the target range which I set in my last Budget. There are very few other countries which can claim as much this year.
The present target relates to the year to mid-October 1979. So far, we have been above that range but, thanks to recent gilt sales, we should see the outcome for the first half of that year close to the top of the range. Recent sales of part—paid gilts have secured a good start to funding the PSBR in the first month of the next banking year. It would not be appropriate for me to propose a change in the target range today or to roll it forward. In any case, if it were raised significantly at this juncture above the existing 8 to 12 per cent, range, this would simply mean printing money to finance the higher pay settlements of the current pay round. That would be the road to still higher inflation. On the other hand, if it were lowered, it would depress the economy more than is justified by the prospects for pay and prices, and that would be the road to recession.
The monetary authorities will continue to act during the coming month to keep the underlying growth of sterling M3 within the target range. For example, the Bank of England will announce this afternoon the detailed arrangements I have approved as a holding operation for rolling forward the supplementary special deposit scheme for three months on a basis consistent with that target.
An important element in achieving control of the money supply in the last year has been our success in holding the PSBR in 1978–79 close to the Budget estimate of £8½ billion. As the House knows, I have already committed myself to preventing the PSBR in 1979–80 from rising above that figure. Holding the PSBR at this level in money terms, and so reducing it as a proportion of money GDP, will ease the financing task in the coming year and allow adequate room for finance for industry. But I recognise that the parliamentary Opposition might prefer to reduce the PSBR below £8½ billion this year and to adopt a lower monetary target. Nothing in this Finance Bill will prevent them from doing so if they find themselves responsible for our economic affairs after the forthcoming election.
I come now to the coverage of the Finance Bill. The purpose of the Bill is to enable the tax regime to continue on its present basis during the period when Parliament is dissolved. It follows discussions which my right hon. Friend the Chief Secretary and I have had with the right hon. and learned Member for Surrey, East (Sir G. Howe) and his colleagues and is intended to ensure that, so far as circumstances allow, the Chancellor of the Exchequer in the incoming Government, whoever he may be, will be faced with the same scope for tax changes in his Budget as would have been available to me had I been standing here in rather different circumstances.
As the House knows, some of our taxes—income tax, corporation tax and advance corporation tax—have to be imposed each year. Under the Provisional Collection of Taxes Act, income tax can be collected until 5 May on the basis of the law prevailing in the tax year now ending, but there is no power to continue its collection beyond that date. Similar provisions relate to corporation tax and advance corporation tax. Hence, the first and foremost purpose of the Finance Bill is to renew these annual taxes at the rates in force over the last 12 months.
However, it has been necessary to go a little further than that. In renewing the income tax, we have had to take account of the indexation provisions to be found in section 22 of the Finance Act 1977—the so-called Rooker-Wise amendment, which we owe to my hon. Friends. These require that, unless the House decides otherwise by affirmative order, the main personal allowances—that is, the single allowance and the wife's earned income relief, the married allowance, the age allowances and the additional personal allowance which, broadly, is given to single parents—should be revalorised each year in line with the increase in the retail price index over the previous calendar year. I have no intention of asking the House to lay aside the Rooker-Wise amendment this year. Indeed, if I had been able to introduce a normal Budget, I would have proposed an increase in income tax thresholds higher than envisaged in section 22 of the Finance Act. Parliament has decided that these increases in the allowances should be made, and hence it seems right that any continuation of the income tax in this caretaker Budget should fully reflect that fact. This is, indeed, the effect of the law, although the actual figures to which the allowances would be increased under the indexation provision are not precisely specified. Moreover, there could be some confusion if the indexed allowances took immediate effect and were then changed a second time by the new Chancellor.
There was more than one way open to us of dealing with this situation, but the solution we have adopted is to lay down in the Finance Bill new figures for the main personal allowances which correspond—subject to rounding adjustments upwards—to the figures which are required under the indexation provisions. The percentage increase required under the latter—that is to say, the increase in the retail price index for the calendar year 1978—was 8·9 per cent., but because of the rounding adjustments the actual increase in the allowances proposed in the Bill is just over 9 per cent. However, we have also provided that no changes should be made in the amounts of tax due under PAYE until 1 August 1979. The purpose of this is to give the next Chancellor time to decide what he wishes to propose to the House before pay packets are affected. By this means we shall have made clear what the revalorised allowances should be, and we have ensured that no one can proceed against the Inland Revenue for failure to implement what is a statutory responsibility. But we have done so in such a way as to give rise to no party advantage.
I wish to stress that, if the next Govern-men secured the agreement of the new House not to implement the Rooker-Wise amendment, the increases in allowances now set out would never actually be implemented and they would not be reflected in pay packets. They will not take effect before or during the election campaign, and they will only take effect after the election if they remain unchanged by any Budget introduced thereafter. On the other hand, if the next Government wish to maintain or increase them, they will be able to do so within weeks of introducing their Budget, without waiting for 1 August—and in that case they will, of course, be backdated to 6 April.
I now turn to the child tax allowances. The House will recall that these allowances have been progressively reduced over the last two years at the same time as child benefit was introduced and increased. My right hon. Friend the Chief Secretary announced last July that proposals would be included in this year's Finance Bill for the final abolition of these allowances, apart from non-resident children and the purely transitional provisions for certain students. Moreover—and here again I must salute the efforts of one of the Government's supporters, in this case my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham)—the present arrangements for the allowances have been made only on a year-by-year basis. Hence, if no provisions were to be made in this Bill for the child allowances, they would revert to the level at which they were last fixed permanently, that is to say, the level for 1975–76—at a cost of well over £1 billion in a full year. Accordingly, in order to remove any uncertainty, and to ensure that no one can seek to get his allowance restored, the Bill provides for the removal of the allowances, along the lines which my right hon. Friend originally announced, to take place simultaneously with the increase of £1 in child benefits for each child.
The Inland Revenue has already prepared the 1979–80 PAYE code numbers on the basis that the House would approve the proposals in my right hon. Friend's announcement. Hence, the deductions which family men will find in their pay packets next week will reflect the loss of the allowances. At the same time, however, child benefit is being increased to £4 per week, and for over 90 per cent, of families the increase in the child benefit will be greater than the effect of the loss of child tax allowances. Indeed, if account is taken also of the 70p advance payment of child benefit made last November, more than 99 families out of 100 entitled to child benefit will see their incomes increased as a result.
We all fully appreciate the increase in the child benefit to £4, but, in view of the fact that my right hon. Friend is now proposing to continue the indexation of personal allowances and cannot do anything about the child tax allowances, can he tell the House what proposals he had—I hope still has—for a further increase in child benefit next November?
What I can tell the House is that the Government had planned a further increase in the child benefit next November. There is great advantage, incidentally, in increasing the child benefit at the same time as most other benefits are increased in the year. However, I do not think that it would be right to tell the House on this occasion precisely by how much child benefit would be increased in November. That is still a matter for consideration.
Finally, the Finance Bill provides for the continuation for another year of the ceiling on mortgage interest relief at £25,000. No change of policy is implied here, and it will be open to the next Chancellor to propose that the figure be varied if he considers that desirable.
Not so much of "the next Chancellor". My right hon. Friend may have to do it himself.
I sincerely hope, Mr. Speaker, that the Prime Minister will give me the order of release after the next general election, if it is his will. If it is the Prime Minister's will that I should continue to carry this heavy burden, this poisoned chalice, for the benefit of the nation, I shall have no hesitation whatever in doing so.
This, then, is a caretaker Finance Bill. It provides what is essential in order to ensure that our tax affairs are carried on in an orderly manner while Parliament is dissolved and ensures that the next Chancellor—who might well be myself—will be able to consider his Budget proposals against a backcloth essentially similar to that against which, in other circumstances, I might have been producing a normal but such an extraordinarily wise and prudent Budget today.
The Chancellor of the Exchequer must have been looking forward to the opportunity today of beating one of the many horrendous records that he has been able to beat in his five years at the Treasury by introducing his fifteenth Budget. Speaking for the Opposition, I can express our total pleasure at the fact that the defeat of the Government in last week's vote of no confidence has turned this from a fifteenth Budget to a total non-Budget, as is inevitable.
The Chancellor presented himself a little more engagingly than usual, purporting to be a stagehand at an opera. My picture of him is rather closer to him arriving to sing the requiem at his own funeral.
Indeed, if I may express a typical Welsh observation upon this funeral, we frequently comment on these occasions saying "Oh, indeed, it was a lovely funeral". Therefore, we celebrate the Chancellor's demise today with great enthusiasm.
Even so, we were warned to have high expectations by an article which appeared in yesterday's edition of the Financial Times where it was said that Labour Benchers
are hoping that Mr. Denis Healey, the Chancellor, will use the debate on the Bill as an opportunity to parade the Government's economic achievements and to point out what voters will miss as a result of him not being able to go ahead with the Budget e had planned.
His performance has not quite lived up to those high expectations. We are not surprised that he could not altogether resist the temptation to begin to say something about his achievements during his five years in the Treasury.
The House is all too familiar with the Chancellor's dismal record. If one takes account of the fact that in the past five years the Government have faced identical international circumstances, as have all our major competitors, but with the unique and massive benefit of North Sea oil added to their hand, it is lamentable that Britain's general economic performance in the past five years while the Chancellor has been at the Treasury has been worse than that of any other major industrial country.
The Chancellor was fleetingly able to retain the proposition that price inflation was still in single figures—but only just.
Another week or month and that vision would soon have disappeared. The reality is that prices have risen during the past five years in Britain more than in any other competitor country, except Italy. Judged by his own standard of 8·4 per cent, on the three-month price increase rate with which he sought to delude people at the last election, the latest figures show that prices in Britain are now rising at an annual rate of 13·3 per cent.
Unemployment in Britain has risen faster than in any similar country except France and it is higher than in any other country except Canada. On manufacturing output, the Chancellor was good enough to concede that performance had been sluggish but he used a revealing phrase because he denounced manufacturing industry, in effect, for being sluggish to respond to a growth in demand instead of recognising that the shortcomings of our manufacturing industries are due to the extent to which the Chancellor and his policies have discouraged and deterred enterprise and investment on the supply side. That is perhaps the most astonishing part of his record—that manufacturing output is still more than 4 per cent, below what it was five years ago
The Chancellor sought to take credit for the strength of sterling and for the strength of the balance of payments, but he did so in a characteristic way. He was not reluctant to blame the European Communities for shortcomings on the balance of payments but was most reluctant to give any credit to North Sea oil for such achievement as there has been. The House should be under no illusions about the fact that the strength of sterling is entirely due to the strength that North Sea oil and North Sea gas have contributed to our economy and not in the least to the strength of the Chancellor of the Exchequer.
The balance of payments, looked at over a proper period, over the five years to the end of last year, was in a deficit of £5·3 billion despite the contribution from North Sea oil and gas of almost £10 billion. That is the reason for the balance of payments being in narrow balance. For the Chancellor, in his swan song, to complain about the intolerably perverse effects of the European Community budget and the extent to which this Government are being required to make contributions beyond what is reasonable, may well leave room for discussion. But it is not for the Chancellor to complain about that, because the arrangements of which he now complains are the arrangements that he and the Prime Minister renegotiated.
Turning to the Finance Bill, it is, in many ways, a remarkably fitting epitaph for the Chancellor's taxation policy over the past five years. Corporation tax is continued at 52p as against 50p when he took office in 1974. The standard rate of income tax will continue at 33p in the pound, compared with 30p when he took office in 1974—and had he had his way last year it would have been not 33p in the pound but still 34p in the pound. It is thanks to the Opposition that 1p was knocked off the standard rate of income tax.
In other respects it should be noted that the effect of the Finance Bill is, in many senses, to increase the real burden of direct taxation because a number of allowances will not be changed to take account of inflation over the last 12 months. For example, the mortgage interest relief provision will continue as it was last year, in order to maintain the status quo, at £25,000 maximum. Stamp duty will continue to operate from a minimum figure of £15,000. All these things are continuations of a pattern which the Chancellor has not changed over the past five years, and they represent a continuing increase in the real burden of taxation.
There are two quite interesting examples that should be noted. Because the Rooker-Wise amendment applies only to personal allowances, on this Finance Bill the reduced rate band in the year ahead remains at £750 and it should have been increased by £60 in order to prevent an increase in the burden of taxation. The highest rate tax threshold remains, of course, on these provisions at £8,000, and that also should have been increased by £700 to take account of inflation. This Bill is no more than a holding operation, and the effect is to increase the burden of direct taxation on almost everybody.
I know that the right hon. and learned Gentleman does not want to mislead the House, but he has done so very gravely. Today the Revenue is publishing the usual tables, which include the impact of the withdrawal of child tax allowances and the increase in the ceiling for national insurance contributions. That shows that there are increases in income resulting from the provisions of this Bill—up to 4 per cent, from about ½ per cent. The House will be able to study these tables at its leisure, and will see that the statement that has been made by the right hon. and learned Gentleman, no doubt in error, is a fiction.
The Chancellor should not attribute error to me. Of course, there is a change in the money rate of taxation following from a change in the personal allowances. But the Chancellor knows perfectly well that if this were the only change to be made in this Finance Bill and the Budget of this year the real burden of taxation would increase. I have given two reasons which are perfectly clear. The reduced rate band of £750 should be enlarged by about £60 to take account of its erosion by inflation. The higher rate threshold should be enlarged from £8,000 to £8,700. Unless those things are done, the real burden of taxation will be increased if this is the only Finance Bill we get.
Of course, it will be diminished in so far as the Rooker-Wise provisions make some impact, but the total pattern is in line with the performance of the Chancellor and this Government over the last five years. In 1973–74, the total taxation per household in this country was £389, and in the year that we are just finishing it is £939—an increase of two and a half times on each household in this country. Merely to get back to the level of personal taxation which operated in the last year of the Conservative Government would require a reduction in personal taxation of about £2,000 million beyond that proposed in this Finance Bill.
The change in personal allowances which is provided for by the Rooker-Wise amendment goes no further than the obligation which this Parliament imposed upon the Chancellor when that amendment was made. Even that does not go anything like far enough to increase personal allowances to the levels that were operating in 1973–74. The proposal in this Bill is for a single personal allowance of £1,075. To get that back to its real value at the time of the last Conservative Government, it should go up to £1,340. Under this Bill, the marriage allowance is fixed at £1,675. To get that back to its real value at the time of the last Conservative Government, it should go up to £1,745.
Of course, this Bill makes no change whatever, because it is only a standstill Bill, in the level at which people begin paying investment income surcharge. There we see one of the most shameful monuments of all of this Chancellor's record at the Treasury. Had the starting point for tax on savings income been raised in line with prices in order to leave it where it was left by my noble Friend Lord Barber, one should not now begin paying that tax on savings income until one attained a savings income of £4,500 a year. But under this Government and this Chancellor even people who have retired begin paying that investment income surcharge on an investment income of £2,500. That is one of the most shameful things of all about the Chancellor's record. [Laughter.] I do not know what the Chancellor thinks there is to laugh about. He should know, and take note, that no burden of taxation is more widely resented than investment income surcharge on the income which comes to people after a lifetime of thrift.
The Chancellor should acknowledge one other thing. Even the modest abatement in the burden of real taxation contained in the Bill is not there thanks to the Chancellor of the Exchequer and his fellow Treasury Ministers. It is there, quite rightly, because this House of Commons imposed an indexation obligation upon the Chancellor, unless he was prepared to ask the House of Commons to overrule it. In fact, it is there over the dead bodies of the Chancellor, the Chief Secretary and their fellow Treasury Ministers. It is rightly associated in its name—the Rooker-Wise label—with the hon. Members for Birmingham, Perry Barr (Mr. Rooker) and for Coventry, South-West (Mrs. Wise). Much though we have enjoyed some of their contributions to our proceedings, we look forward to the next Parliament being convened without either of them being present.
The two hon. Members have one remarkable achievement to their credit. So far as I know, it is very unusual to have any legislative provision in our Parliament bearing the label of a given Member of Parliament around its neck. I have not found any that has the twin label of such a well-matched pair, or indeed any pair. The area of precedent into which we are moving is that with which the American legislature is much more familiar. For example, we often talk about the Taft-Hartley Act. It will be nice for the hon. Members for Coventry, South-West and Perry Barr, as they languish outside this House in years ahead, to reflect that Rooker-Wise will take its place alongside Taft-Hartley in the legislative history of the English-speaking world.
Is not the right hon. and learned Gentleman getting somewhat confused, because Taft-Hartley put burdens on to the working people of America, whereas Rooker-Wise actually eases the burdens?
I am not prepared to reopen the debate about Taft-Hartley with the hon. Member for Liverpool, Walton (Mr. Heffer). There are many people who would think that that legislation lifted substantial burdens from the people of America which they are well without. However, I am trying to pay a tribute to his two hon. Friends. We do not begrudge them the linking of their names with this amendment, but they should acknowledge that the real credit for its enactment goes to the Conservative Party, because, of the 19 votes that were cast in favour of the Rooker-Wise amendment, 16 were cast by Conservative Members. A modest contribution was, of course, made by the hon. Member for Cornwall, North (Mr. Pardoe), whom I see in his place glinting with pride for the last time.
In many senses the real leadership came from my ever effervescent hon. Friend, as the Chancellor has noticed on many occasions, the Member for Blaby (Mr. Lawson). Perhaps the hon. Member for Coventry, South-West might consider even at this late stage a change in the name of the provision, if not to Lawson-Rooker-Wise, at least to Rooker-Wise-Lawson.
The right hon. and learned Gentleman should acknowledge that the contribution of his hon. Friend was to dilute the orginal Rooker-Wise amendment. Had it remained in its pure form it would have left no opportunity for any forthcoming Chancellor to evade this provision. The hon. Member for Blaby (Mr. Lawson) weakened it rather than strengthened it.
My hon. Friend was anxious to make it in a form that was at least to some extent acceptable to the hon. Lady's right hon. Friends, thereby to prevent its being eliminated at a later stage of the proceedings.
Does the right hon. and learned Gentleman recognise that the reason why American legislation is studded with the names of legislators is that the American legislature controls the Executive? It has only been in this Parliament that the legislature has controlled the Executive. The only way in which we shall be able to have more Rooker-Wise or Taft-Hartley amendments is if there is a balance of power at the next election and no single party controls with an overall majority.
I recognise that the hon. Gentleman has an intense interest in reproducing such a precarious balance. I can assure him that he will not be able to look forward to such an existence again. The legislature will certainly control the Executive in the next Parliament, but the Executive will be a Conservative Executive, sustained and controlled by an overwhelming Conservative majority.
I turn briefly to the point on which the Chancellor slightly disappointed the House. It was said that he would be pointing out what the voters will miss. I understand the great expectations of Labour Members. After all, when the Chancellor last introduced a Budget within weeks of an election—in July 1974—he was then able miraculously to lower VAT to 8 per cent., to double regional employment premium and to distribute goodies in all directions, only to reverse every one of those actions on a much larger scale as soon as he had deceived the people.
When the Prime Minister was Chancellor of the Exchequer in March 1966, he was able to play the same game and was able to tell the people through the House of Commons that he saw no need for any significant increase in taxation after the election. Thereafter, having won the election on that false platform, he proceeded to increase taxes substantially and introduced selective employment tax.
We should remember why the Chancellor has disappointed expectations so much. He has well in mind the threats and forecasts that he was making in the last economic debate which we had in the House in January, when he was saying that if public sector pay was to increase significantly over the Government's former target he would have to do two things: either to begin cutting back public expenditure, or to begin increasing taxes—or to begin doing both. Plainly that was an accurate forecast.
If the present Government remained in office, this Bill would be only one very modest part of the economic policies which the next Chancellor would have to introduce, were he a Labour Chancellor. I am not surprised that the Chancellor manifests an obvious reluctance to continue in his role if his party were to win the next election, because he will be leaving a dreadful inheritance for the next Chancellor, from whatever party he may come.
The Bill as it stands clearly provides for an increase in the PSBR of about £1 billion, because that is the cost of Rooker-Wise. Cash limits have not been changed to take account of pay settlements, in respect of which the Government are now busy signing cheques that look suspiciously blank, to be picked up by the next Chancellor of the Exchequer. But if in fact public sector expenditure and public sector pay behave in the central Government area as they have done in local government, people should be warned from the fact that increases in rates are running not at less than 10 per cent, but at 19 per cent, over the past year.
The next Chancellor will inherit a balance of payments precariously in balance as compared with the forecast that the Chancellor was making two years ago of a surplus of £3 billion. [Interruption.] If the right hon. Gentleman does not want the answer to the question, he should not have asked it.
The reality is that the incoming Chancellor will inherit a balance of payments that is in balance owing nothing whatsoever to the achievements of this Chancellor but owing everything to the resources contributed by North Sea oil, thanks to private enterprise. But, so far as the public exchequer is concerned, he will inherit a situation in which any Government, in order to begin putting the matter back into balance, are likely to be obliged either to raise taxation or to begin pruning the public spending plans. The Chancellor knows that very well. He was telling the House just that only two or three months ago.
The next Chancellor will be assuming responsibility for an inheritance that will be dismal indeed, as the CBI pointed out in its report published this morning. It has reported the most pessimistic outlook for nearly two years. The judgment on the Chancellor's achievement is really contained in the last Bank of England Quarterly Bulletin, which said:
The consequences of failing to arrest this country's industrial decline are likely to become more pressing and obvious as time goes on. Now condemned to very slow growth, we might later even have to accept, if present trends continue, declines in real living standards.
That is the inheritance that will face the next Chancellor.
There should now be no room for doubt that this country needs a fundamental change of course if we are to repair the damage done by the Chancellor. The nation clearly needs substantial reductions in personal taxation to restore incentives, reductions in public spending programmes so that public spending is in line with what the nation can truly afford, and a willingness to shift the balance of the tax system away from pay-as-you-earn to pay-as-you-spend.
These are the lessons of this Chancellor's tenure of the Treasury. The first is that the vitality of an economy can never be restored by continued increases in taxation and continued growth in public spending, public borrowing, which are the hallmarks of the present Chancellor's regime. It will be restored only by liberation and encouragement of personal initiative by cutting personal taxes—which will be the hallmarks of the next Conservative Government's administration of the Treasury.
The next Chancellor can also perhaps learn one other lesson from the present Chancellor, and that is that he would be well advised to refrain from believing that a lack of the right policies can be made good by the use of fine phrases, whether in the House or in Budget broadcasts. If I have one clear recollection of the Chancellor over the last five years, it is of his readiness to pepper his orations to the nation and to this House with references to the economic situation having been "transformed", the imminent onset of an "economic miracle", the approach of the threshold of a "golden decade", and that we were about to make a"tremendous leap forward".
Last year, the Chancellor may recollect the way in which his tributes to himself became positively Wordsworthian as he spoke to the nation. He talked about the snow "melting amongst the daffodils" outside the Treasury. He may remember the way in which a year ago he was going to "bring a bit of sunshine to brighten the spring of our recovery." If Healey spring comes, can Healey winter be far behind?
It is appropriate that the Chancellor's tenure of the Treasury should be coming to an end with this modest Bill, which we gladly accept as a threshold for an election which we shall win, and coming to an end not with a bang but with a whimper.
Although this is of necessity a very limited Budget and a very limited Finance Bill, I do not think that we should let it go without placing on record the fact that it marks a milestone in social policy. I refer, of course, to the full implementation of child benefit.
I think that the House has barely grasped the social significance of what we have achieved in deciding that in future what the community can afford in family support will be given to the mother in the form of a cash benefit.
This certainly has not been easy to achieve. Anyone who thinks that this switch of policy has not come up against the instinctive resistance of male chauvinism cannot have been on the inside of some of the battles that have had to take place. We should chalk this up as a very remarkable piece of social advance—that for the first time in our history the mother, the woman of the household, will get her own income, weekly, to help feed and clothe the family. It is one of the most important pieces of social and sexual emancipation that we could have.
This also embodies the practical application of what has frequently been discussed—the need to merge tax reliefs and cash allowances in one form of social help. That was a grandiose idea in the Conservatives' tax credit scheme.
I am sorry that the right hon. and learned Member for Surrey, East (Sir G. Howe) is about to leave the Chamber. I proposed to have a good deal to say to him and to answer some of his points. However, with good masculine wisdom, he has now fled the Chamber.
I was saying that, in the Tory tax credit scheme, this great principle was enunciated. How foolish, it was said, to tax with one hand and to give back in cash with the other, and why not merge them and balance them? While the Conservatives talked, we have acted. This child benefit scheme is all that remains of the Tory tax credit scheme. The right hon. and learned Member for Surrey, East said so in as many words only a few days ago, when he said that a Conservative Government would not proceed with a tax credit scheme as the child benefit scheme had been introduced. Therefore, this great reform is ours, and ours alone. It is a sensible piece of rationalisation, as well as a humane provision.
Under a Conservative Government we would not have had this child benefit. Two or three years ago the Conservative Opposition made it clear that they wanted the child benefit scheme introduced at a level that would involve no extra cost. Under that formula the payment of £4 a week tax-free for every child that will start this month could not have been possible.
The figure that we have achieved at a time of economic difficulty is pretty remarkable. It is a real upturn in family support after years of stagnation or decline. The figures prove that. In February 1974 when we came to power the value of family support in a family with two children under 11 years of age was £5·43 and it is now £8 a week. That is based on 1979 prices. That costs money.
The right hon. and learned Member for Surrey, East cannot cut the taxes that he has promised without cutting that sort of expenditure. The Conservative Party promises to cut taxes and give people more money to spend as they wish. That merely means that it would give some people more money to spend on their own account and others less. As these figures show, mothers and children would get about £3 a week less in the value of their child benefit. That should be set against the tax cuts that would primarily benefit those in a higher income bracket who are better off.
In October 1970, when the right hon. Member for Sidcup (Mr. Heath) became Prime Minister, we heard the same promises that the right hon. Lady the Leader of the Opposition is making to restore the incentive society, cut taxes and cut public expenditure. The right hon. Member for Sidcup practised what the right hon. Lady is preaching, and the result was catastrophic for ordinary families. It is an illusion and a trap. The tax relief benefits go primarily to those who need them least, and the increased charges and reductions in benefits fall on those who most need help. The promise of the Conservative Party to cut taxation will not increase everyone's power to spend money. It will merely redistribute money and take it away from low wage earning families with children. Those who benefit most from child allowance are normally on too low an income to pay tax. They are interested not in tax cuts but in increased child benefits.
On social security benefits generally, I welcome the Prime Minister's statement last week that the Chancellor estimated that next November he would be increasing pensions to £35 a week for a married couple and £22 for a single person. That would be achieved by relativity with prices and earnings, not only on a forecast to next November but making good last year's shortfall. A Conservative Government cannot cut taxes without altering that policy.
In an article a few days ago in The Daily Telegraph the hon. Member for
Knutsford (Mr. Bruce-Gardyne) said that public expenditure had to be cut if taxes were cut. He suggested how that could be done and said that social security payments had become too extravagant. On pensions he said:
The linkage of pensions with average wages should be severed forthwith.
If the Conservative Government had been in power over the past five years, pensioners would be £10 a week worse off. That is what Tory tax cuts mean.
The same applies to all forms of social services. We introduced mobility allowance for the disabled. That is now £10 a week and is grouped with the other benefits for annual uprating. It is indexed. I say to the disabled people of this country "Return a Labour Government and your mobility allowance will go up to £11 a week. Return a Conservative Government and those increases will be cut to give tax relief to their wealthy friends who send them here." That is an inescapable choice in this election.
The most heartening news today was the Chancellor's statement that he was planning a further increase in child benefit next November. If he is returned, he will introduce it. Increases in child benefit should take place in November, because that is the general uprating date. That increase should be automatic every year for child benefit allowance, pensions, mobility allowance, invalid care allowance and so on. The Labour Government will never again allow family support to fall behind so insidiously.
We shall fight and win the election on the facts of social justice. The country tried the Ted Heath-Margaret Thatcher policy and it did not work. It does not want that miserable medicine again. Incomes must be fairly shared. The only way to achieve that is by social security payments, family benefits, disablement benefits and so on. When we are returned, we must not rest until we have brought the level of child benefit allowance up to that of the dependants' allowance for the unemployed on short-term benefits.
At present the child of an unemployed man is getting an allowance of £4·85 a week—already ahead of the £4 child benefit. That dependants' allowance will be automatically uprated in line with prices in November this year, unless by a tragedy we have a Conservative Government and they repeal the legislation which I, as Secretary of State for Social Services, put through the House binding the Government to automatic increases in pensions and benefits in line with inflation or wages, whichever is the better for the beneficiary.
Supposing inflation is 10 per cent, by November—I do not know whether it will be anything like that any more than anyone else—that will mean another 48p on pensions and benefits. Therefore, for child benefit to be in line with the dependants' allowance for those who are unemployed or on sickness benefits, it will have to be at least £5·33 a week. We should not begin to consider indexing below that figure. In fact, below that we must increase.
This is the only way to deal with the work disincentives in our society. That is one of the biggest arguments for child benefit. Not only does the money go directly to the mother's purse, but it removes the anomaly whereby if a man is out of work he will get more to bring up his child than if he is in a low or modestly paid job. At present if a man has low wages and a large family, he can be brought, when he is out of work, above the level of wage and income that he enjoyed when he was employed. It is another vital social purpose to equalise these benefits.
That is the way to get rid of any work-shy syndrome in our society. That is the humane way, and is the very opposite to the brutal way that has been proposed by the hon. Member for Knutsford. He has been at the very heart of Conservative Party counsels and he is a very representative voice. In his article in The Daily Telegraph last Thursday he said:
We have got to widen—and widen substantially—the gap between reward for work and compensations for idleness …
I agree. That is why I am such a passionate supporter of child benefit. But that is not the method for the hon. Member for Knutsford—on the contrary. He continued:
so severing the index-linkage of supplementary benefits is also essential.
In other words, the standard of living of those on unemployment and sickness benefits would be allowed, under a Conservative Government, to fall systematically below the rise in the cost of living. That is what their tax cuts mean.
Therefore, we join issue with them triumphantly and wholeheartedly. Let us go into the fight and make known the differences that divide the two sides of the House. We stand for the policies that we have struggled successfully to introduce in these most difficult years. That is why I believe that when election day is over we shall see a Labour Government in power again. I shall not be here. This is my last speech in this House, my last word on my favourite subject of child benefit. However, the subject will keep rolling on because my hon Friends will carry on with the battle until, through the return of a Labour Government, we have built a just society.
The House will be the poorer when the right hon. Member for Blackburn (Mrs. Castle) is no longer a Member. We all wish her well after she has left. She has always been a doughty fighter, championing causes with great ferocity and vigour. I make no complaint about that except to say that perhaps it leads her to be less easy in wearing the mantle of authority and responsibility than that of a campaigner.
If I criticise what the right hon. Lady has just said, it is only because I thought that when she had responsibility for these matters she was less easy than she was when she made the fighting and angry speech that we have just heard. I shall refer to the substance of her speech a little later.
We on this side of the House prefer the Chancellor in his new-found role of scene shifter. He did not take up so much time or do quite so much bragging as he has done on his previous 14 performances on Budget Statements. I do not know what opera he intended to sing when he came here today, had the events of last week not intervened. I suspect that it might have been a mixture of Trumpet Voluntary and Rigoletto. We are glad that we missed that.
The problem is that in the Chancellor's 14 Budgets he has achieved nothing at all. The national production is identical to what it was before, and there has been no growth whatsoever. If there is no growth in the gross national product, fighting a cause such as the right hon. Member for Blackburn has just fought and taunting my hon. Friend the Member for Knutsford (Mr. Bruce-Gardyne) is to say that one lot of persons must be dis-advantaged at the expense of another. We all believe that we can do much better if we increase the total. What has gone wrong with the Chancellor's philosophy is that he has failed completely to increase the total disposable wealth of the nation. Everybody's aspirations could be met year by year in part if the wealth was increased.
My view about indexation of wages, pensions and benefits to either the cost of living or to average earnings is that sometimes it may be too much, but at other times it may be far too little. I should like to outbid the right hon. Member for Blackburn, both on child benefits and on the level of pensions. I know, but somehow she does not quite seem to realise, that one can only do that when there is real growth in production—
Taking the situation as it is now, does the hon. Member think that it is right to switch some of that money from the pensioners, the disabled and children to people who are already comfortably off? Is that his idea of an incentive society?
The right hon. Lady is rather naughty because she is seeking to put words into my mouth. She could not have been in the House when the Leader of the Opposition made it clear that we would match the pensions promised by the Prime Minister for this autumn. That disposes once and for all of the insinuation which the right hon. Lady is trying to put about.
I was talking of the long-term future. The right hon. Lady, with all her zeal, must realise that in a year of declining national wealth, which we might well have, there cannot be more for pensioners, and that indeed there might have to be less. In a year of growing national wealth, there can be more. It is the inflexibility of the right hon. Lady's mind to link what is available with what is produced that is the weakness of her case.
It is extraordinary that the taxation levelled by the Labour Government has been counter-productive. The higher the taxes screwed from the people, the less we have had in growth and in taxation yield. One of the effects has been that as a result of the Chancellor's policies tax.
evasion has spread on a massive scale. We know from the Inland Revenue that possibly between 7½ per cent, and 15 per cent, of gross domestic product is not being disclosed for income tax purposes, which might amount to as much as £10 billion. That could yield £3 billion or £4 billion in tax. I am afraid that as taxes are increased, more and more people tend to find ways round paying tax, either legally or illegally. I refer to people in all walks of life. The bulk of the money we lose comes from the large numbers of people who are "on the fiddle", as the chairman of the Inland Revenue recently put it. If one worker in eight does not declare £1,000 a year, that would result in 15 per cent, non-declaration of gross domestic product.
The danger is that as one decreases rates of taxation people find it less easy to bring themselves to come back to the straight and narrow. The effect of Labour's penal taxation policy has been to discredit income tax, to gather less money than otherwise might have been gathered, and at the same time greatly to restrict the growth of the economy. When this is coupled with an amnesty for Fleet Street casual workers, I believe that many people feel a deep and burning sense of injustice. That causes further disrespect for the tax system and causes the problems to multiply.
The verdict on the Chancellor has been that he has so misused the taxation machine that he has made the dream of the right hon. Member for Blackburn of increasing child benefits infinitely harder to realise.
We are now forced as a nation to transfer much more of the revenue-raising need from income tax to indirect taxes and VAT. That is perhaps regrettable, and many Labour Members may have wished that it had not happened. But it is their fault because they have made income tax appear so intolerable in the mind of the least well off, as well as of the better off, that they have been forced to find ways round the system. The position has now become so grievous and serious that the present system can no longer be considered as a fair vehicle for the collection of a large quantity of tax.
The comparison between the harassment of the self-employed, the sole traders and the unincorporated businesses and the amnesty granted to Fleet Street casual workers has probably done more harm in highlighting this injustice and in making other people feel that they, too, must save themselves from being fully honest to the tax system, so that a switch to indirect from direct taxation is now a necessity which any Chancellor will have to allow for in his next Budget. That proves that for many years my right hon. Friends were right in seeking to take such a step.
Finally, it must be realised that the taxable capacity of our nation, whether by direct or indirect taxes, rates or any other form of taxation, even through the erosion of values through inflation, has reached a point where it has become directly counter-productive. I do not think that there is any chance of paying £4 per week child benefits and in maintaining the value of that figure, or of putting £4 on the pension and maintaining the value of that pension in the years ahead, unless we do something to arrest the decline in the productive capacity and effort of this country. That makes it essential that income tax as well as spending should be cut.
The right hon. Member for Blackburn is therefore wrong to look at the matter in terms of giving money to the rich or to the earners. What she has misled the House about, and what she has left out of her calculations, is the fact that, unless we do something to make people earn more, declare more and pay more in tax, the standard of living of those of us who depend on the State cannot be maintained.
I am interested in the argument about the need to increase wealth and in the complaint that the Labour Government have discouraged investment. The latter is a remarkable accusation to level at a Government who have given huge allowances for stock appreciation to large corporations and who grant 100 per cent, first-year depreciation allowances for the purchase of equipment. If taxation is said to prevent investment, there appears to be something very wrong indeed with the calculations made by the multinationals, because they are omitting to take into account the fact that they pay very little taxation indeed.
Has my right hon. Friend noticed a practice which has grown up, according to no less an authority than the Financial Times, in order that companies which have no connection with manufacturing should have the benefit of the 100 per cent, first-year depreciation allowances on capital equipment? The method is that these companies, which have no connection with manufacturing, purchase equipment which they do not need and lease it so that they can "shelter" their profits from corporation tax.
The use of the word "shelter" is interesting. A whole new language has grown up in taxation matters. I have in my hands an interesting article from the Financial Times concerning another kind of tax avoidance or evasion. The wording used is nothing so crude as "tax evasion" and not even as direct as "tax avoidance". The new expression is "tax efficient". The Financial Times kindly tells those who are wealthy that they can obtain unbeatable tax shelter if they adopt a certain form of investment, which is apparently known as "greenhouse" planning, because the investor can watch his money grow while it is protected from the financial climate. This means that an investor who, on paper, is liable to pay 98 per cent, tax can cut his tax to 37½ per cent.
It is an interesting fact of life that, at one fell swoop, the Opposition complain of those high rates of taxation while knowing that they are fictitious and that they and their friends can use some of the most clever brains in the country in order to find cunning and devious ways to become "tax efficient" —not paying their fair whack into the common kitty for the common good.
I understand from the Financial Times that the new plans replace an earlier generation of schemes which were
so outrageously tax efficient that they could not be publicised and were kept under the counter for customers in the know.
There is a class within a class within a class when it comes to the large investors. Those in the know have been permitted to take advantage of schemes which even the Financial Times called outrageous. However, in 1976, my right
hon. Friend killed off those schemes by bringing in new rules that required insurance plans to be specifically approved by the Inland Revenue. "Tax efficiency" has nothing to do with the efficiency of our economy—it is deviousness for the benefit of the rich.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) spoke of the need to improve production in this country. He is talking to the wrong people when he addresses these Benches. He should talk to the manufacturers of machine tools who, by consistently making the wrong production decisions, have ensured that there is a machine tool industry which makes the wrong goods. When investment opportunities are given to British industry and large amounts of public money are provided for investment, other manufacturers cannot even find produced in this country the sort of machine tools that are needed in the country. These are not decisions made by working people or decisions which have been made because of tax rules or tax levels. They are decisions which have been made by companies because they perceived the short-term profits and did not care about the long-term value of their work to the economy.
I agree that it is not sufficient to consider taxation alone. It is necessary to consider the underlying health of the economy. The economy will only be healthy when working people dominate decision making about the use of their labour. Then, talent—rather than cunning or deviousness—will be released.
I have enjoyed some of the speeches of hon. Members. For the first time in my five years here I enjoyed the speech of the right hon. and learned Member for Surrey, East (Sir G. Howe). My enjoyment was caused because of the passage in which he belatedly sought to bestow approval on my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) and myself. We took steps to ensure that tax thresholds would be improved for the benefit of working people. However, I regret that he gave us credit only in order to claim some for the hon. Member for Blaby (Mr. Lawson)—a credit that is quite misplaced. The hon. Member for Blaby did not put down any amendment to the 1977 Finance Bill relating to indexation of personal allowances. His contribution was confined to an amendment to our amendment, by which he sought to weaken our provision.
I am afraid that the hon. Lady is wrong on that matter, as she is on a number of matters. There was an indexation amendment on the amendment paper in Committee in 1977 in my name—as there were indexation amendments concerning personal allowances and other aspects of the tax system in 1975 and 1976 in my name. If the hon. Lady looks at Hansard she will see that I opened the indexation debate in 1977, because my amendment was called first. At that time, I said that I did not propose to press the amendment to a vote but would support her amendment provided that it was amended by my amendment. I thought that course of action had the greatest chance of success, and that is what ensued.
I should like to clear up the matter. The hon Member for Blaby (Mr. Lawson) has frequently claimed the credit. The credit belongs to my hon. Friends the Members for Birmingham, Perry Barr (Mr. Rooker) and Coventry, South-West (Mrs. Wise). It is easy for the Opposition to oppose the Government—it is their function and they do it all the time. To claim credit for opposing the Government is to claim credit for something that they do by force of circumstances. Where my hon. Friends succeeded was in bringing to bear the pressure of the views that they took and defying the Government—which is not an easy thing to do. They were right, and without their support nothing would have happened.
I am grateful to my right hon. Friend for his generous remarks. The hon. Member for Blaby may have put down a rhetorical amendment—though I do not have it in front of me—but he did not have sufficient confidence in it to press it to a vote. What sort of amendment is that? If I put down an amendment, I want it voted upon.
We all know what happened in 1977. I accept that the hon. Member for Blaby agrees with indexation. At that time, he saw an opportunity to persuade his hon. Friends to go along with him, provided that he weakened our proposal. That was the effect, because if we had had our way there would be no opportunity for a future Chancellor of the Exchequer to escape his responsibility to do this. If there is ever a future Conservative Chancellor, it will be he who seeks to evade the order.
My right hon. Friend has just indicated that we have converted our Front Bench. We have the whole Labour movement behind us in the belief that tax concessions must benefit the low paid the most. There was no possibility that the hon. Member for Blaby would have won Conservative votes for our proposal unless he could show them that he was providing them with a loophole. We were content to take our Front Bench on at full tilt. That is the difference.
I was fascinated to hear that the right hon. and learned Member for Surrey, East believes that tax thresholds, in which I am particularly interested, are still not high enough. I have a couple of questions for Conservative Members. If they think that the thresholds are still not high enough, why did they not move amendments to last year's Finance Bill to increase them instead of seeking to give huge concessions to the best off? They had the opportunity, but they used their majority for the benefit of the best off.
What about the present circumstances? The Chancellor of the Exchequer has indicated that he would like to have increased the thresholds rather more. If the right hon. and learned Member for Surrey, East is so keen on raising thresholds, I am surprised that he did not go to the Chancellor and say that the Opposition want working people to have the best and quickest benefit from the Rooker-Wise amendment and therefore the Government and the Opposition should put their heads together to agree that the holding Budget could be implemented straight away and put money in people's pockets in the next few weeks.
That would not have given a party advantage to the Labour Party because it would have been an agreed holding Budget. Since the Conservatives are so keen to show their conversion to the principle of higher tax thresholds, they ought to have confidence in their ability to persuade electors that it was Opposition pressure on a reluctant Chancellor that resulted in increases.
Such a move would have been an interesting, though not very important, injection into the general election campaign, but, more important, it would have been a useful addition to the money in people's pockets in the next few weeks. However, I am convinced, as is the press—and for once I think that the newspapers are right—that, instead of doing that, the right hon. and learned Gentleman and his colleagues bent their efforts to trying to prevent the present proposals coming before the House, even in a holding form.
The Leader of the Opposition has promised tax cuts, but she studiously avoids promising increases in personal allowances. Her words relate to the standard rate of income tax and she reinforces them with references to the higher rate bands.
The right hon. and learned Member for Surrey, East complained that the Chancellor of the Exchequer had not increased the value of the 25 per cent, rate band, but I wonder how much time and energy the right hon. and learned Gentleman spent trying to twist the Chancellor's arm to do that. The 25 per cent, rate band is not included in the Rooker-Wise amendment because it did not exist in 1977. If it had, we would have provided for it. It exists now because the Chancellor of the Exchequer introduced it when he bowed to proper and useful pressure from the TUC.
In 1977 the hon. Member for Cornwall, North (Mr. Pardoe), who speaks for the Liberal Party on economic matters, suggested, rather cautiously and unconvincingly, that he was keen on a reduced rate band. I suggested in the Finance Bill Committee that he should introduce such a proposal in an amendment because he would have the support of my hon. Friend the Member for Perry Barr and myself. Unfortunately, the hon. Gentleman missed the opportunity of preceding the Chancellor. The 25 per cent, rate band stands entirely to the credit of the Government.
We have heard about the problems of elderly people, but we have not heard that, in his first Budget, the Chancellor of the Exchequer improved the method of calculating and allocating tax concessions to the elderly. He changed the rates and the method, greatly to the advantage of the elderly.
It is no secret that the Chancellor of the Exchequer and I do not see eye to eye on a number of matters. I am not suggesting that we see eye to eye now. There are many deep differences of opinion between us, but my right hon. Friend should have the credit for introducing the reduced rate band and improving, as far back as 1974, the method of allocating tax concessions to the elderly.
I believe that the holding Budget will be the forerunner of an improved Budget shortly after 3 May when we shall be able to hear from the Chancellor his proposals for child benefits. I endorse what my right hon. Friend the Member for Blackburn (Mrs. Castle) said about child benefits. It is greatly to the credit of the Government that they heeded the collective pressure of the Labour movement and implemented the child benefit scheme in full. One of the great advantages of a Labour Government is that they have the opportunity of being in close touch with the voices of the people. Whenever a Labour Government heed the voices of the people, through the Labour movement they take actions that are morally right, popular and helpful to the population.
Seeing my right hon. Friend the Minister for Social Security on the Government Front Bench reminds me that the pressure for making good the shortfall in pensions arising from the calculation of the increase in earnings last year came entirely from this side of the House. I shall gladly give way if my right hon. Friend wishes to intervene in order to put the record right if he did receive pressure from the Opposition. If he received pressure from the Opposition, it would relieve my mind a little.
I am surprised and disappointed that the Opposition were prepared to see pensioners less well off than they ought to have been. Did I say that I was surprised? That was a mistake. I am disappointed, but not surprised, at the Opposition's attitude. My right hon. Friend the Minister knows that there was pressure from Labour Benches and private representations stressing the importance of the Government keeping faith with their own legislation. I am pleased that the Government saw the wisdom of that. It was expensive—I acknowledge that. I also acknowledge that there are difficulties in choosing priorities. But the Government have made a right choice, which is important in principle as well as in the pockets of the pensioners.
Hon. Members opposite have had many opportunties to say that they will maintain the practice of raising pensions in line with earnings if earnings are higher than prices. But they have conspicuously failed to take advantage of those opportunities. They have every intention of repealing that provision so that pensioners will be protected only against inflation and will not share in any increase achieved by working people generally. That is despicable. It will not be overlooked by people outside.
I promise that when the Labour Chancellor of the Exchequer stands again at the Dispatch Box to present his Budget, I and many of my hon. Friends will be vigilant. I am sure, however, that the Chancellor will honour the promises that he has made today in relation to child benefit and increased thresholds. Just as voices and votes on this side in the past have been used to improve Government policy, so they will be used in the future, whenever necessary. I am convinced that, if such action is necessary, there will again ultimately be generous tributes from the Front Bench saying how right we were. It would save a lot of trouble if the Front Bench listened to the voice of the movement before, rather than after, we have any public fights. I am fairly sure that on present form that will be the case. I look forward, with immense anticipation and pleasure, to listening from these Benches to the next Budget of my right hon. Friend the Chancellor of the Exchequer.
In rising to speak I am conscious of the fact that this is the closing moment of this Parliament. That brings to mind two matters. Earlier, we heard the final contribution in this House of the right hon. Member for Blackburn (Mrs. Castle), while today sees my first contribution to this Parliament. I know there is a convention that hon. Members congratulate new hon. Members on maiden speeches. I believe it is right that a new hon. Member should congratulate the right hon. Lady for the work that she has put into her movement in fighting for ordinary people.
I am also deeply conscious that I enter a House that has been recently bathed in sorrow, mourning the death of a man brutally murdered in an act of cowardice and terrorism. I am conscious, coming from the great city of Liverpool, that there has been a great deal of religious strife in our city over the years. There has been great sectarianism and the city has been divided on religious lines.
I am pleased to say that sectarianism in Liverpool has been conquered. In 1972, when I became a member of the city council, there was still a Protestant party fighting under that label. That is no longer the case. If the Liberal Party has achieved anything in the city of Liverpool, it is the breaking down of barriers and bringing together people of all colours and creeds, classes and sexes. We have broken away from the bigotry and prejudice that once existed.
I am sure that our philosophy of involving people is required in Northern Ireland today. The bullet can never replace the ballot in a free society.
Hon. Members will recall my predecessor, Sir Arthur Irvine, who had served the Edge Hill constituency since 1947, having been elected at a by-election. He was always most courteous to me. Many constituents have spoken of the warmth he showed to them. Like the right hon. Member for Huyton (Sir H. Wilson), he started in the Liberal Party and although he later replaced a big "L" for a small "1" he never forgot the fundamental principles of Liberalism.
Over those 30 years, my constituency has suffered the same basic problems as the rest of the country. Sometimes, those problems have been accentuated. A year ago, I came to the House of Commons with a delegation of local council representatives to meet the Prime Minister. We warned then that the employment situation on Merseyside was becoming desperate. I am sad to report that since that meeting a further 8,000 jobs have been lost in manufacturing industries and that, in the first quarter of this year alone, a further 3,000 jobs in manufacturing industry have been axed. This means for people employed in companies such as Plessey and Dunlop the agony of the dole queue.
When the new Government are formed I hope that one of the first acts of the new Chancellor, the new Secretary of State for Employment and the new Secretary of State for the Environment will be to get together and begin a week of action. For one week alone, those Ministers should drop everything else and make a concerted effort to tackle the problems of the Merseyside conurbation. In order to create industrial growth on Merseyside, we must reclaim derelict land. There are 250 acres of derelict land in our South docks. Existing land within the city boundaries will have been exhausted by the end of this year. We desperately need an input from the Government to ensure that this land can be put to good use.
I also believe that the new Government must take measures to ensure that a fair system is introduced into industry. Until we introduce a fair system, we shall never create wealth. Unless we create wealth, we shall never create more work.
I also come to this House as chairman of the city housing committee. It would be wrong for me to pass without making mention of housing problems. In Liverpool, many homes are without inside toilets and bathrooms. On large council estates, there are tenants who have not got security of tenure and rights, promised to them at the outset of this Parliament.
Throughout the country as a whole, there are still 250,000 acres of derelict land within our cities and towns, enough to build nine new major cities. It came as a body blow to us to read circular 54/70 which threatened the whole basis of our home ownership policies in the city of Liverpool. This was a retrograde step. I hope that the Secretary of State for the Environment will think again, withdraw this circular and give people the opportunity of a stake in their community, as we believe in a stake at work through industrial participation. It would be a stake in their own community through home ownership.
In the past few years this House has spent a great deal of time discussing devo- lution to Scotland and Wales. Perhaps the finest sort of home rule is rule over one's own home. I have sad news for members of the Tory Party who might cheer me when I say I believe in home ownership. I do not refer only to people living in council houses. Home rule should also apply to people living in private accommodation, owned by private landlords, who have refused to give basic amenities such as inside toilets and bathrooms.
The time must come when this House turns its attention to the finances of housing. It is the economics of the madhouse that it costs £150,000 over a 60-year borrowing period to build one three-bed-roomed council house. We must also increase improvement grants to ensure that people can get 80 per cent. grants. It is crazy that men in the construction industry should be idle and unable to use their skills. It would be far better if they were able to improve homes and provide people with decent places in which to live, rather than standing idle in the dole queues. Those people should be put to good use. Incentives should be offered through 80 per cent. improvement grants for all people in housing action areas and for all in full-grant areas.
This House should also turn its attention to the problems of protecting our community. When people are frightened to walk on the streets in many major conurbations, we need to look again at the way in which we run our system of law and order. We need to see more policemen back on the beat, walking around thir own local communities, and small local police stations should be reestablished. It was a retrograde step to close small police stations and leave communities without proper police protection.
Also on the subject of smallness, we should look again at our schools policy. I was concerned last Friday, the day after the Edge Hill by-election, to read that the Secretary of State for Education and Science had decided that she would determine her proposals for the reorganisation of schools in Liverpool. I was amazed that the right hon. Lady should have waited until the day after the by-election to announce her plans, and that, in the dying breaths of this Parliament, she should decide on the future of many children in Edge Hill.
If local Labour Party proposals go through, they will sound the death knell of many of our small, local, non-selective schools. Arbitrarily, children will be herded off to a school built, as a result of Labour Party dogma, for 2,000 children, but with only 400 in it at present. It would be an act of incredible folly to ignore the wishes of parents who have chosen schools for their children.
We should also look at the way in which we use our resources. I plead with the House and with the Secretaries of State for the Environment and for Transport to reconsider their proposals for the extension of the urban link of the M62 motorway and the construction of the inner ring road. If the inner ring road goes ahead, it will cost £40 million in capital expenditure and £1 million a year in interest charges for the next 40 years. That is too much of a burden to expect local people on Merseyside to pay for a road which most Merseyside politicians agree is not needed.
If one cannot afford the blankets on the bed, one does not have the piano french-polished. If politics is about priorities, surely it means putting first things first and dealing with basic amenities and services, not spending money on grandiose pie in the sky dreams which will become taxpayers' nightmares.
Five days ago, the people of Edge Hill decided to reject the old ways. They gave a massive thumbs-down sign to both the other parties. I believe that that happened because people are frustrated and cynical about the way in which politicians have let them down. People of my generation are angry about the way in which the establishment parties have forgotten what service means, have forgotten about the way in which people should see and hear from their elected representatives.
Although it may sound arrogant of me to come here and say these things, hon. Members will appreciate that there will not be much time in the present Session for me to say much more on this subject. I am confident that, in the election to come, not only will Liverpool lead the way, as it has done so often, but Liberals will lead the way, under the leadership of my right hon. Friend the Member for Roxburgh, Selkirk and Peebles (Mr. Steel). I hope that I shall return to this Bench so that I may make more speeches in future. I also hope that there will be many more Liberals with me.
It is a privilege for me to be able to congratulate the hon. Member for Liverpool, Edge Hill (Mr. Alton) on his maiden speech. There are certain traditions about maiden speeches, and if his was perhaps a little more controversial than tradition normally allows, no doubt that is because of the present circumstances. I suppose that many of us, not including myself, may use the same speech in two general elections and make several parliamentary speeches in between, but few of us can manage to do so without updating in the meantime.
We listened to the hon. Member with interest, particularly to his generous tribute to his predecessor, the late Sir Arthur Irvine, who served the House for more than 30 years, including a period as Solicitor-General in a Labour Government. The hon. Member for Edge Hill must have set a record in the shortness of time between his introduction and his maiden speech. Front Bench speeches are rarely as short as those which we have had today, so a space of three hours is surely a record. However, it remains to be seen whether the hon. Gentleman is re-elected. If he is, he may find himself leader of the Liberal Party.
I was intrigued by the speech of the Chancellor of the Exchequer, who said that he felt rather like an opera singer who had arrived on stage only to be required to do scene shifting. I wondered what opera he had in mind. Since this has been his swan song, I thought that it was probably "Lohengrin". There was an unfortunate circumstance in one production of "Lohengrin", in which the scene shifter pulled the rope attached to the end of the swan before the tenor could get on it. The tenor said to his comrades "What time does the next swan go?" For the Chancellor of the Exchequer, it has already gone.
As one looks back over the right hon. Gentleman's innumerable Budgets—I have almost lost count of them—one sees him more in the circumstances of "Götterdämmerung", in the last act of which the scenery falls down rather than someone being called upon to hold it up.
The Chancellor's record has not been spelt out in great detail today, although my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) referred to some aspects. I want to refer to that and also to something which concerns a number of us—the Fleet Street tax amnesty. I also want to deal with cash limits, which have not so far beer mentioned at all, even by the Chancellor.
It is important to stress this Government's disastrous record compared with their predecessors. It is usual to say that one bases such assessments on the main economic indicators—the level of unemployment, the cost of living and, of course, economic growth. On that basis, even now, the comparison is remarkable, despite the temporary fillip given to the Government's performance by preparations last October for the election that never was.
Taking unemployment first, under the previous Conservative Government it fell by 23,000; under this Government it has risen by a disastrous 250,000. The hon. Member for Edge Hill mentioned the effects of that on his constituency. The average annual figures were 700,000 under the Conservatives and 1,100,000 under this Government—an increase of almost 50 per cent.
On prices, the record is almost equally disastrous. Under the Conservatives, the average rise was 9·5 per cent. per annum and under this Government it has been 15·5 per cent.—again, more than a 50 per cent. increase—and with a pound which has dropped in value to 50p. That has all happened against a background of world economic circumstances far more favourable to this Government than to the previous Government.
Finally, the level of output under this Government, despite the fact that they recast the basis of the indices and despite the effect of North Sea oil, has been less than 1 per cent. a year in terms of GNP, compared with 3·6 per cent. under the previous Government—a remarkable difference.
The opinion polls still show clearly that these economic indicators—unemployment, prices and real standard of living—are the issues about which people are concerned. On all of them, the comparison is remarkable and the present Government's failure is appalling. That is due to no one more than to the Chancellor of the Exchequer, who, as usual, appeared so blandly before us today.
Finally in this area, one must stress the point made by my right hon. and learned Friend the Member for Surrey, East about the investment income surcharge, particularly its effect on pensioners. No group has suffered more than pensioners, particularly those on fixed incomes, from the ravages of inflation. Despite the increases in the national insurance pension, those relying to some extent on savings or other pensions not related to the cost of living have seen their real standard of living steadily decline. It is incredible that they have managed to survive for so long. The only way in which one can help such people is by raising the limit on investment income surcharge pensioners to about £4,500 instead of the £2,500 set by this Government. One of the first things that the present Government did was to lower that limit. That will not be forgiven easily.
I turn from the broad issues to the question of the amnesty negotiated by the Inland Revenue with trade union casual workers in Fleet Street. Both my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) and I have been worried about the issue. I raised it under Standing Order No. 9 and my hon. Friend the Member for Cirencester and Tewkesbury sought to introduce a Ten Minute Bill. We pointed out the disastrous effects that this move is having on many people who feel that they have been unfairly treated. There is grave cause for concern.
Important constitutional issues are involved in the precise relationship between Ministers and Inland Revenue officials. The traditional view is that Ministers are responsible for decisions made by officials. However, it is difficult to avoid the impression that Ministers have sought to shelter behind the provisions of clause 1 of the Income and Corporation Taxes Act 1970. That Act gives the management of the tax system to the Inland Revenue.
Ministers have implied that those provisions give the Revenue absolute discretion about whether it charges taxes which are imposed by the House. That has never been the view of hon. Members. Of course it is right that the Inland Revenue should have discretion in individual cases.
We all accept that there may be extenuating circumstances in individual cases. However, that is totally different from agreeing that the Inland Revenue should negotiate with a whole group and decide that relief should be given to that group. That is the prerogative of the House. That prerogative should not be usurped by Inland Revenue officials.
In a letter to one of my hon. Friends and in reply to a question, the Minister said that negotiations were carried out not with the trade unions but with individuals. That is not borne out by the facts.
In the letter from the Inland Revenue to the trade unions, it is stated that the concession was to be given only to members of SOGAT, NATSOPA and the NGA. That means that the agreement was not negotiated with individuals.
The inconsistencies in the Minister's letter are remarkable. He states that the negotiations were carried out with individuals. Two paragraphs later he adds that the Government had to come to this special arrangement with the trade unions because they did not know who the individuals were. That was a strange letter for a Minister to sign. It should be carefully considered.
I shall not weary the House by going into many other aspects of this issue because I am sure that the next Conservative Government will consider it carefully.
If the traditional limits which we have always expected to be imposed on the Inland Revenue have been broken by precedent—and this decision is a precedent—there should be a clear qualification to clause 1 of the 1970 Act which makes it clear that any group relief should be agreed by a statutory instrument approved by the House. That is why I was party to an amendment to this measure which, unfortunately, was not selected.
I turn to the question of the cash limits White Paper which was published today. Cash limits are an important way of imposing monetary control. Pay forms a high percentage of total Government expenditure. Similarly, increases in pay form a high percentage of increased Government expenditure. If cash limits are to be effective, they must be limits and they must be imposed regardless of what happens to pay, albeit on a reasonable forecast of what is expected to happen to pay.
The White Paper is quoted in the Treasury press release which was distributed this afternoon. It states:
In respect of pay, the cash limits will be set in accordance with the policy stated in Cmnd. 7293, together with the £3·50 underpinning subsequently announced. The Government will review each case as settlements are reached. Certain adjustments may be necessary but for Central Government expenditure on manpower the general principle will be that a substantial proportion of any excess cost above the provision already made till have to be absorbed within the existing cash limits.
The Government are saying that the cash limit will be reviewed and adjusted if necessary in the light of pay settlements.
If that is so, it is rubbish to call them cash limits. They are not limits. In those circumstances the pay claims are setting the cash limits and the cash limits are not in any way restricting the pay claims, except in the sense that some may be absorbed and some may not. This undermines the point of having cash limits.
It is the proposal to integrate this system which gives cause for concern. It means that if the Government are unsuccessful in resisting an inflationary pay claim, and the House does not approve a change in the cash limits, the issue will be set between the trade union on the one hand and the House on the other. That is likely to lead to difficulties. It reinforces the case for changing the position for essential industries and restoring it to what it was prior to 1971 for industries such as electricity, gas and water, while ensuring that they do not suffer as a result of having negotiated a non-strike clause.
The Chancellor of the Exchequer has presented many Budgets. Today's Budget is less damaging than many that have gone before. However, an enormous amount must be done. The late lain Macleod used to say—and he was right—that Labour Governments always increase taxes and Conservative Governments always cut them. I have no doubt that that will continue to be so. On that basis, I hope that we can say farewell to this Finance Bill. I look forward to the one which we shall introduce shortly.
I congratulate the hon. Member for Liverpool, Edge Hill (Mr. Alton) on his maiden speech. He is right to have no truck with the tradition of so-called noncontroversial maiden speeches. We come to the House to speak on behalf of our constituents. We can go nowhere else. The hon. Member was right to use today to make that speech. I have no doubt that he will be back in the next Parliament to make further speeches. I can say that because not many of my colleagues are in the Chamber.
I too am falling into the trap of tradition. That is exactly the type of phrase that all hon. Members use when referring to an hon. Member's maiden speech. We all mumble that we have no doubt that we shall hear much more from an hon. Member and none of us means it, especially when we are talking of an hon. Member from a different party. I do not speak in party terms, but if a few more of my hon. Friends make speeches like the one made by the hon. Member for Edge Hill, I shall be pleased after the next election.
I congratulate the hon. Member for Edge Hill on the genuine tribute that he made to his predecessor and to my right hon. Friend the Member for Blackburn (Mrs. Castle). He paid her a very generous tribute after we heard her swan song today. I would have said more about my right hon. Friend had she still been here. The House and the Labour movement owe my right hon. Friend a great debt for the contribution that she has made in the time that she has been in this House.
We are supposed to be debating the Second Reading of the Finance Bill, but not many of us are talking about the Bill. We have not had a real Budget. However, certain things have to be put on the record. First, I wish to express my total disdain at the fact that the Inland Revenue has over the last eight or nine weeks wasted an enormous amount of public money in sending out to millions of workers notices of coding based on last year's figures. If the Revenue has time to do that, knowing full well that section 22 of the 1977 Act contains an index provision, and that the Government have not indicated that they would bring forward an order to negative that provision, it must have time to waste. It should have sent out coding notices based on the new figures. I would much rather it did not waste public expenditure in the way that it has. It is no function of the tax system to provide jobs for tax inspectors. Its function is to collect taxes in the most efficient possible way.
If it has been tipped the wink by the Chancellor that he is planning to introduce personal allowances over and above those required by section 22, that is fine. My right hon. Friend the Chancellor may have hinted at something along those lines when he spoke today. It will be interesting if my right hon. Friend the Chief Secretary puts a figure on what the Government have in mind. In that case, those of us who are going to the hustings will be armed with the figure now, rather than having to wait for it to come out at a press conference during the election campaign.
The Inland Revenue could have used its time more wisely. It could have spent time on finding ways to stop the tax fiddles—I mean all of the tax fiddles. No one in the House can accuse me of being hypocritical on this issue, of supporting some tax fiddles and attacking others. I have attacked them all, from top to bottom. I have attacked them whether they have been the establishment figure of the chartered accountants' profession, Mr. Stitt, from Arthur Anderson, doing his tax evasion and tax avoidance courses on transfer pricing. That was some years ago, but he is probably still doing them for all I know. The workers on The Sun are in the same boat. They have just as many fiddles and are just as much scroungers on the rest of the workers in this country as anyone who fiddles the Welfare State or the tax system. I hope that the tax laws will take their normal course with the employees of The Sun.
It crossed my mind that perhaps some of these Fleet Street casual workers—those who work a Saturday night on the Sunday newspapers—may be members of the Inland Revenue. Perhaps they have so much time to spare on a Saturday that they can pop down to Fleet Street and do a quick night's work free of tax. Perhaps that is why the amnesty has been granted. It is a point that someone has to raise, and this is the only place in which to raise it. It probably could not be raised outside.
There is no shortage of work for the Revenue. Its staff could have been usefully employed on other matters in the last few months rather than sending millions of workers incorrect tax codes. The staff could have examined the agenda of the 1979 corporate tax conference which is to be held on 25–27 April this year. I need describe only one of the seminars which is to be held. It deals with tax efficient remuneration arrangements for top management and offers "a co-ordinated approach". That seminar is being held by one of the staff of Keyser Ullmann Ltd. Of course, there are hon. Members who speak on behalf of and are top brass members of that organisation. They know a thing or two about tax efficient remuneration.
In sending out the inaccurate codings, the Revenue has been giving a misleading impression. My postbag, like that of my hon. Friend the Member for Coventry, South-West (Mrs. Wise), has been full in these past few weeks with letters from people saying that they have received their tax coding and asking what has happened to the Rooker-Wise amendment. They complain that their tax coding is the same as last year's. I have had to write back and tell them that I have every confidence that the Government will be implementing the amendment and may increase the thresholds in real terms, but that they must wait until the Budget to find out.
It must be said said loud and clear, because even my right hon. Friend the Chancellor has not stated it, that personal allowances are being raised in this Bill, that the payments will be made on or before 1 August and will be back-dated to 5 or 6 April, and that they will be worth about £1 a week off the income tax of a married man at work. Pensioners who pay income tax—there are millions of them—and who have small works pensions will, as a result of the rise in the age allowance for married couples, have a tax cut of over £1.10 a week.
I was shaking my head because the hon. Member is speaking as though he does not understand the import of the indexation provisions of section 22 of the 1977 Act. He played an important part in getting them through the House. They were to ensure that a man or a woman would be no worse off as a result of inflation. They are not designed to make people any better off.
We now hear the newspeak, the Orwellian technique. In the past, Conservative and Labour Chancellors have announced increases in personal allowances from the Dispatch Box, and have trumpeted them outside the House as tax cuts. When allowances are not raised in line with inflation, there is a bigger tax bite. A tax cut is a tax cut is a tax cut. In terms of the pound in your pocket, Mr. Deputy Speaker, you will be better off as a result of this Bill. You will have £1 a week more—in fact, Mr. Deputy Speaker, you will be even better off because you probably pay more tax. The average worker will have an extra £1 a week in his pocket, and that cannot be denied. It is the same for the pensioner. Those pensioners who are caught in the tax trap will have more than £1 a week.
In real terms, I know, this change will simply be keeping taxpayers in line with inflation, but that in itself is a success. It is, indeed, a success to achieve today the sort of tax cut that is involved here, bearing in mind what has happened over the last decades. This is not a party argument. Over the decades the erosion of the thresholds has meant that tax has bitten harder and harder on the low-paid workers—those on less than average earnings, which is two-thirds of all employees—and on the pensioners who pay tax.
I have no doubt that my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) acknowledges that the constant references by the Opposion to high taxation obscure the real position, which is that the only people who really suffer from high taxation are those on lower incomes. Does not my hon. Friend agree that the Opposition use that fact to their own advantage with the intention of improving the lot of the best-off?
My hon. Friend is correct. The highest marginal rates of tax in this country are paid by the low-paid. It is possible for someone in that category to
pay a marginal rate of more than 100 per cent. A rise in a man's earnings can be counteracted by implications for school milk, rent rebate, rate rebate and family income supplement. He could be worse off at the end of the day. My hon. Friend talks about the well-off—the managers and the entrepreneurs. They have had massive tax cuts in the last two or three years. Let me quote one point about managers from the Financial Times of 6 December last. The headline is:
Managers ' surviving income tax demands '.
Managers in Britain are not as harshly penalised by the personal income tax system as is often claimed, especially when other countries' higher costs of living are taken into account, says a survey ".
It points out:
In Britain, the average married executive with two children retains 74 per cent. of his gross income, compared with 60 per cent. in New York, 33 per cent. in Sweden, 62 per cent. in Belgium ".
Where is all the evidence about hard-pressed business executives if that is what they retain from their gross earnings, not counting all the tax packages which can be got round? There is nothing in this Budget for those earning over £150 a week, and I am proud to stand here and say so. I should have attacked any change which gave any benefit other than the spillover from the raising of the thresholds which is a consequence of our crazy tax system. I hope that, during the general election, we shall not have any promises by my right hon. Friend the Chancellor to that section of the population. Their backs are broad enough to relieve the burden on the low-paid and pensioners.
Were it not for this Bill, we should again be in real trouble because of the interaction of the social security and tax systems. If we do not change the allowances, come November, when the social security uprating takes place, we shall have calls by the Opposition to the effect that it does not pay to work in this country. Such calls have been silenced in the last two years because the Finance Act 1977 and the further Act that was passed in October that year gave a substantial increase in the tax thresholds. Calls by Tory Members—for example, by the hon. Member for Aberdeen, South (Mr. Sproat)—have been almost totally silenced. We have not got the thresholds up to what my hon. Friend the Member for Coventry, South-West and I would like, but at least we have silenced that call.
The hon. Gentleman denies that fact. But my postbag has diminished. My hon. Friends also privately admit that their postbags have diminished. I understand from talking to various outside organisations that pressure on them has receded somewhat because of the substantial raising of the tax thresholds in 1977 and 1978.
Muted. But if we had not made that change, we should have again been back in that situation. Therefore, I am doubly pleased that this situation has come about.
I am also pleased that the right hon. and learned Member for Surrey, East (Sir G. Howe) had the good grace to come here today and tell the truth. I was beginning to think that he could not separate fact from fiction. I heard him on the "World at One" last Wednesday claiming all the credit for this indexation clause. I rang the BBC and said "You had better get something done about this on the 'PM' programme, because it is not true."
Section 22 of the 1977 Finance Act is very badly drafted. I am prepared to admit that it is loosely drafted and technically deficient. But its intention is perfectly clear:
In the year 1978–79 and subsequent years the personal reliefs allowed in this section shall be changed by not less than the same percentage as the increase in the retail price index for the previous calendar year ".
There is nothing muddy about that. It may be normal parliamentary language, but I am not a lawyer. Nevertheless, the intention is clear. Those are the words of myself and my hon. Friend the Member for Coventry, South-West. We put it in that way because we knew that Budgets always came in March or April. We knew that if we said the previous year "there would be disputes about what year we meant and about leaving it open to Chancellors to use any part of the year. Therefore, we made it precise by
referring to "the previous calendar year".
I understand that there is an argument whether a calendar year means December to December or January to January. We had not thought that anyone would have such a warped mind as to try to twist us out of that. If we take January to January, the figure will be slightly different.
The part of the section which I have quoted was tabled, advocated and voted for by Labour Members of Parliament.
I am talking about myself and my hon. Friend. Of course it was supported by Tory Members on the Committee. It is axiomatic. It would not have been passed without a majority in Committee. It was actually supported by the hon. Member for Cornwall, North (Mr. Pardoe), who woke up a bit late in the day in that Committee on 14 June 1977. When he saw the light of day—when he realised that my hon. Friend the Member for Coventry, South-West and I had gone to that Committee to do a job of work, not to be rubber stamps—the hon. Gentleman changed his tune and started to vote with us for the rest of the night. Indeed, he voted against the Government more times that day than did my hon. Friend and I, and he was part of the Lib-Lab pact.
My right hon. and hon. Friends are democratic and have social consciences big enough to appreciate the supreme benefit of that amendment over the last two years. That is not to attack them for accepting it. It is greatly to the Government's credit that they have seen the benefit of the amendment. It is no use Opposition Members trying to nullify my right hon. Friend's characteristic generosity in accepting our amendments with good grace and sincerity in his heart.
The other part of the provision in 1977 was added by the hon. Member for Blaby to give the Government of the day a getout. If anyone wanted to get the thresholds linked to inflation so that they maintained their real benefit, he would not have come along with an amendment such as that. It clearly implies that there will be times when the Government will not want to raise them in line with inflation. The only time that I can envisage our wanting to wipe them out completely is a time to which I look forward—namely, when a Labour Government come forward with a Finance Bill containing a root and branch reform of the income tax system. That is when we shall attack the real problems. They cannot be solved with piecemeal amendments tacked on to finance legislation by the quirks of history and voting strengths in this House. That is not the way to operate a tax system in a country with 50 million people, almost half of whom pay income tax.
We need a root and branch reform of the system to take account of the genuine needs of people. For example, we need a householder's allowance for the single person running a household. We must reform the allowance for a married man whose wife works so that certain people do not get an unfair advantage over others. We need a system without loopholes. Until we reach that situation, the Government will be faced with piecemeal changes such as this one. I shall return after the general election not to be a rubber stamp—I have never been a rubber stamp—but to seek further changes.
I want the age allowance benefit for retired people to be given to women who retire at 60. I put down an amendment to that effect on the Finance Bill of 1977. But, after the problems that we caused, I decided not to press it. I reserved my position to come back another day, and I shall come back after the general election.
Another point I should like to mention concerns the increase in the child benefit allowance. Ministers must make it abundantly clear during the next few weeks that a great step forward has been taken today, as was pointed out by my right hon. Friend the Member for Blackburn. It will be difficult to put over the argument that there will be a change from the wage packet to the purse. We understand some of the problems which exist in society today in this regard. Labour Members know more about them, of course, because we are more in touch with ordinary people.
A massive percentage of working men in this country will not disclose their wages to their spouses. The problem is not as great as it was in the past but it is still a major one. These working men will resent in some way the fact that they will pay a little more tax for a few weeks until the Rooker-Wise amendment takes effect and they get their bonus. They will tend to forget that their wives will be picking up the child benefit. It will be the same money, and overall there will be a gain. That has to be made clear.
Most working people who pay income tax only at the basic rate do not appreciate that the effect of the child tax allowance system, which has now gone, was such that the rich, the well-off, people getting upwards of £200 a week—and there are many of them—were getting far more out of the system than ordinary workers. This was because of the marginal rates of tax that these well-off people were paying. We have attacked a massive tax loophole for the rich by making a single benefit tax-free to all, so that the benefit to low-paid families as a proportion of their income is now much greater than it is to the well-off. It is a real social change, but it is one which will require some educational work on the part of Ministers on the hustings in the next few weeks.
In a parliamentary question on 30 November last, I asked what was the total increase in net expenditure on child benefit between April 1978 and April 1979, including the changes of April 1978 and November 1978 and the change that was planned for April 1979, which has now taken place. I was told that the change in child benefit outgo was £1,895 million and that the loss in tax revenue was £715 million. There was a net cost to the Exchequer—that is to say, an increase in public expenditure—of £1,180 million. There were savings in some other social security benefits of £350 million.
The net result is that over the last 12 months the Government have added new resources amounting to £830 million to people with families.
That takes account of the increased tax that men will pay. It takes account of the raising of the threshold and of the raising of child benefit last April, last November and this April. This is a massive achievement for a Government—£830 million in 12 months—bearing in mind the economic circumstances that we face.
As we have heard today, the people will not get that from the Tories. The first question asked at Question Time today was about help for the disabled, and we heard the truth then from the Opposition Front Bench—that only when there is an increase in gross national product will the Tories give these increased benefits to the disabled and to the pensioners. That theme was echoed by Tory Members throughout Question Time and in the speeches of Tory Members in the present debate.
I accept that there is an element of truth and common sense in that approach, but I do not regard a period of slow growth or nil growth as one in which we can do nothing about the needy. I am here in this place, and on the Labour Benches, in order to take from the people represented by the Tory Party, so that we can give benefits to the disadvantaged and the needy in our society.
There is nothing to be ashamed of in standing here and saying that I want the well-off to pay more to those who are poor, to the single parents, the disabled and the pensioners, even in a nil-growth economy. I am here in order to help
to bring about a fundamental and irreversible shift in the balance of wealth and power in favour of working people and their families.
I want to make that a reality. I am not prepared to wait until we have a sustained growth of 4 per cent., 5 per cent., 6 per cent. or 7 per cent. a year. In the Labour Party we do not need to wait for that to take place, even though it is desirable, before we give help to those who need it.
The Tories have made their message loud and clear today. They have said that they will accept what we did about pensions in November, but that is not now the test before the electorate, because the measure already passed by the Labour Government is to the effect that pensions will be raised in line with earnings or prices, whichever is the higher. The Government have kept faith with that, and there is no doubt whatever about it. No one can claim otherwise.
The Tories have said that they will meet the commitment, but the electorate will want to know what the Tories, if they are returned to power, will do in 1980 and 1981. That is the crucial question, and the Tories will have to answer it in the next four weeks. It is easy enough at the moment for the Tories to carry out our promise because it is already part of the law, but I believe that if they win power they will change section 125 of the Social Security Act 1975, in order to relieve themselves of the need to raise pensions in line with prices or earnings, whichever are the higher.
The Tories have been challenged day in and day out by Labour Members over the past three years, and they have never been prepared to give the undertaking that we have asked them to give. The message has obviously come down to Tory Members from the top to keep their mouths shut on this question. Just before Christmas, a Tory Member appeared on the Opposition Front Bench for one debate. He was promoted for the occasion. I refer to the hon. Member for Walsall, North (Mr. Hodgson). It fell to him to deal with the Bill concerning the Christmas bonus for pensioners. He actually said from the Opposition Dispatch Box that he thought that the Christmas bonus to the pensioners should go to those who most needed it.
There was only one interpretation to put on that—that the Tory Party would means-test the Christmas bonus to the pensioners. Of course, the Shadow Chancellor—he who brushes his teeth in the dark—denied it, but that promise was made by the Tory Front Bench spokesman on that occasion. From that day to this the hon. Member for Walsall, North has had to languish on the Tory Back Benches. The Tories will not let him come to this House for social services debates because he told the truth that day. He blew the gaff.
I shall be making the Tory Party policy abundantly clear in Perry Barr, for a start, because the Tories have clearly said today that only if there is growth, and only if there are tax cuts for the rich, will they keep faith with the pensioners and do something for the disabled. In addition, it ought to be remembered that the Tories are almost pledged, from their statements in Standing Committee, to involve unemployment pay and short-term benefits within the tax system. Given half a chance, they will do it, because it is a way of raising revenue. They believe that they could raise an extra £400 million or £500 million a year in revenue by taxing sickness benefit. They have said as much in Committee, although what happens there is not always widely reported outside.
I am in favour of any measure to eradicate abuse, but the Tories are attacking and fundamentally undermining the Welfare State. I want my right hon. Friend, when he replies, to make quite clear that that is no part of Labour policy or Labour philosophy. We want to see a root and branch reform of the tax system, What we do not want to see are piecemeal reforms, once computerisation starts. We know that the Tory Party is waiting to do that, although it will not get the chance to do it. There must be no changes at all on this issue unless they are part of a fundamental root and branch reform of the tax system.
My hon. Friend the Member for Worthing (Mr. Higgins), in congratulating the hon. Member for Liverpool, Edge Hill (Mr. Alton) on his maiden speech, said that he thought that the hon. Member had created a record in speed between the time he was introduced to the House and the making of his maiden speech. As I believe I am the final speaker in the debate from the Opposition Back Benches, and the hon. Member for Edge Hill and I are meeting in extraordinary circumstances, I shall add my congratulations to the record. In that way, by the time the debate concludes, everyone who has spoken will have congratulated him.
The hon. Member for Birmingham, Perry Barr (Mr. Rooker), who has just left the Chamber, is critical of the conventions in regard to this matter, but there is also a convention that one looks forward to many speeches from hon. Members after they have made their maiden speeches. If the Tory candidate in the forthcoming general election for Edge Hill is an exception to the rule that there will be a Conservative landslide, I sincerely hope that the hon. Member for Edge Hill beats all his other opponents and returns to the House to make further speeches as good as that which he made today.
I myself came into this House within days of a vote of confidence and was spared making my maiden speech quite as fast as the hon. Member for Edge Hill, because the Liberal Party had forged the Lib-Lab pact. I am grateful to the Liberal Party for having reversed that pact in a more recent vote of confidence.
My main reason for speaking in the debate is because I wish to respond to the remark made by the hon. Member for Coventry, South-West (Mrs. Wise). But, clearly, one should make a brief reference to the debate as a whole.
The Chancellor, in opening the debate, used an operatic metaphor. I was reminded of the soprano who stands at the top of the steps and says "I must fly" and then continues for a quarter of an hour. My hon. Friend the Member for Worthing saw a resemblance in "Lohengrin", but I was reminded of the documentary, produced by a television company in 1974, showing the Chancellor at work in which the incidental music was taken from Rossini's "Thieving Magpie".
The hon. Member for Coventry, South-West was implicitly critical of my constituents in the City of London in one reference in her speech. I did not follow the whole of her speech, but she implied that machine tool manufacturers in Coventry deliberately design their tools either in order to lose money or in order to pass it into the hands of the National Enterprise Board, which, I believe, employs three out of five people in the city of Coventry.
The hon. Lady referred to what she called the "greenhouse scheme" which she described as deviousness for the benefit of the rich. There is an old adage about people in greenhouses not throwing stones. It seems to me that the scheme is relatively simple and straight-forward. Given the malevolence of this Government towards the investing community, I would have been surprised had they not put such a scheme out of order during their time in office.
I am at one with the hon. Member for Coventry, South-West in what she said, because it would seem unfortunate if investment had to take these indirect routes through schemes of that sort rather than through private investment. It is a fact that we have relatively centralised power. At a time such as the present, when things are getting better, that is a good thing because it means that things get better faster. But when things are getting worse it is a disadvantage, and I would much rather see power in the hands of individuals than in the hands of institutions.
When my right hon. and hon. Friends on the Front Bench form our Administration, I hope that we shall see a general reduction in taxation such that these shelters become less attractive than they were previously. If the hon. Member for Coventry, South-West does not return to the Chamber after the election, she can at least rely on me to support that particular view in her absence.
My hon. Friend the Member for Ciren-cester and Tewkesbury (Mr. Ridley) made general reference to lawlessness in the land as regards tax matters. Obviously all hon. Members would deplore that state of affairs, but one of the encouragements which one should derive is that when it becomes as general as, alas, it has now become, it forces Governments to realise that they must change the law in such a way that it will once again be respected.
In the eighteenth century smugglers did a lot to save this country from mercantile errors by the effectiveness of their smuggling. I hope that what we have seen in the course of the past five years in terms of the trends in this direction will lead to Governments bringing in sensible laws which the people can respect.
The greatest relief in coming to the end of this Parliament, and what would otherwise have been the fifteenth Budget of the Chancellor of the Exchequer, is that of thinking that we shall not be subjected to a Budget from this Government again in the near future. To paraphrase and parody a sentence on cigarette packets, we have learned, to our distress, over the past five years that Her Majesty's Government can seriously damage one's wealth—I do not say that in an individual but in a collective sense. The country as a whole must realise that its wealth can be damaged by policies such as have been brought in by this Government.
I do not adhere to the view that by any direct action of their own Her Majesty's Government can create wealth. However, the Government can create a climate in which wealth can be accumulated for the good of the nation as a whole. I sincerely hope that when my right hon. and hon. Friends form their Administration after the election they will bring in laws which will enable wealth to be created.
The Chancellor of the Exchequer has introduced Budgets almost without number, together with Finance Bills. This is, I think, the first Finance Bill that he has introduced without a Budget. This is in no sense a Budget debate. It is not even a debate about a caretaker Budget. The Chancellor of the Exchequer has neither the authtority nor the legitimacy to inflict yet another Budget on the country. However, being the compulsive budgeteer he is, the Chancellor could not resist a 20-minute analysis of the economic position of the country.
In so doing, I am sorry that the Chancellor did not compare what he said today with what he said on 11 April last year when he introduced what was his last Budget. I shall remind the House of what he said on that occasion:
Four years of painful and difficult decisions have now got the economy into much better balance.… Our financial position has been transformed. The year-on-year rate of inflation is well into single figures and still falling. Interest rates are far below the level of four years ago.
Later, in a rather muted voice, he said:
Thus I do not, in this Budget, make any call to sacrifice."—[Official Report, 11 April 1978; Vol. 947, cc. 1183–1207.]
As I said, tonight he inflicted on us a short analysis of the financial and economic position of the country as he saw it.
The only crumb of comfort that the Chancellor was able to offer to the House was that sterling was momentarily strong. That, of course, is not the gift of the Chancellor of the Exchequer. If anything, it is the gift of the North Sea. There is an uncomfortable parallel—on which I have no doubt the Chief Secretary will remark—between the position of this country and that of our Dutch friends and neighbours whose stagnant industrial position is masked by a strong guilder, again dependent upon North Sea gas.
There is no need tonight to debate what needs to be done in this situation; there will be time enough over the next four weeks. However, from these Benches I think that we should like to introduce a note of caution, and it will be necessary to see what the books disclose when they are opened on 4 May.
The Finance Bill has generated perhaps a better debate than it really deserves. I should like to echo the sentiments expressed by all right hon. and hon. Members about the right hon. Lady the Member for Blackburn (Mrs. Castle). She made, as always, an impassioned speech, blazing with indignation, and we were privileged to hear a preview of what she will no doubt be giving to the country from the hustings over the next four weeks and, indeed, when she stands for the European Parliament. I have no doubt that we shall miss her personally, even if we do not miss the policies which she has peddled.
My hon. Friend the Member for Ciren-cester and Tewkesbury (Mr. Ridley) picked up a theme which my hon. Friend the Member for Worthing (Mr. Higgins) has made particularly his own, and that is the scale of the black economy and the amnesty which apparently has been negotiated between the Inland Revenue and certain trade unions. I should like to come back to that in a moment.
The hon. Member for Coventry, South-West (Mrs. Wise)—predictably of course—claimed full credit for the amendments which have led to the one change in this Finance Bill. It would, I think, be churlish to deny her or her hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) at least a little credit for the so-called Rooker-Wise amendment. However, I think that they were less than generous to my hon. Friends, particularly my hon. Friend the Member for Blaby (Mr. Lawson), who has been a pioneer as regards indexation. Indeed, I am sure that the Chief Secretary when he replies will recall that he said that since my hon. Friend the Member for Blaby entered this House some four years ago we have debated the subject of indexation "ad nauseam"—to quote the Chief Secretary's words. The principle has been established by my hon. Friends. Indeed, I congratulate the hon. Members for Coventry, South-West and Perry Barr on having picked it up and translated it into an amendment, which with considerable Conservative support was eventually passed into law in the Finance Act 1977.
It gives me particular pleasure to congratulate the hon. Member for Liverpool, Edge Hill (Mr. Alton) on his maiden speech. It is perhaps rare for an hon. Member to be introduced in the last week of a Parliament, but it must be unique for an hon. Member to make his maiden speech within three hours of his introduction. I thought that his speech was polished and self-confident. I regret that the pressure of public business will probably prevent us from hearing more from him, at any rate in this Parliament. If the hon. Gentleman will allow me to say so, we warmed to his tributes to his predecessor, Sir Arthur Irvine, who was a distinguished member of my profession and who made a distinguished contribution in earlier years as Solicitor-General. We also warmed to his timely tribute to Airey Neave, a colleague we all miss in particularly tragic circumstances.
The hon. Gentleman was well advised to pick out two particularly Conservative points, and I congratulate him on his wisdom. He concentrated on home owner-ship—I am happy to find that we share the same platform on that—and on the protection of the community. The hon. Gentleman will find a considerable identity of view between his own position and that of the Conservative Party, which may possibly account for his singular success in Edge Hill. I congratulate him on his wisdom and tactical success, although I am sure those sentiments come from the heart in his case.
I come to the speech of my hon. Friend the Member for Worthing, who speaks with particular authority as one who held distinguished office on the Treasury Bench in the last Conservative Administration. He was right to remind the House of the Chancellor's record, because the Chancellor was singularly coy about doing that himself. He was also right to point out the fatal inconsistency of the Government's policy with regard to cash limits. I have no doubt that the Chief Secretary will wish to revert to that point when he replies.
Finally, my hon. Friend touched on the question of the amnesty which has been given to Fleet Street casual workers. We Conservatives certainly have no objection to a sensible, perhaps a generous, use of the Inland Revenue's powers to negotiate settlements in individual cases. This has been long recognised. The Chief Secre- tary seems to find this a point of some hilarity, but it must be that he was talking to the Financial Secretary about some other question. This particular move offends every kind of constitutional principle because it appears to have been negotiated by the Inland Revenue with a body of workers and the negotiations have been conducted on behalf of the taxpayers by three trade unions. This offends against any previous known practice of the Inland Revenue.
I hope that the Chief Secretary will make it clear whether these negotiations were carried on with the full knowledge and approval of Treasury Ministers. We Conservatives find it particularly offensive that this amnesty should have been negotiated and implemented at a time when the Inland Revenue has thought it right to lean particularly hard on individual taxpayers and sole traders. It would have been rather more tactful had it considered the impact this would make on the general body of taxpayers, because it was an amnesty for which there was no precedent and very little justification indeed.
I hope that the Chief Secretary will make one point clear—whether the Inland Revenue thought that there was any possibility of recovering the tax from the unions concerned, since they at least held themselves out as providing the labour for which these casual payments were made. This is a point of particular difficulty which we Conservatives find very unattractive.
The hon. Member for Perry Barr could hardly resist coming back to the Rooker-Wise amendment. I think that he was a little ungenerous to my hon. Friend the Member for Blaby. At this stage in this Parliament's life, to go through the particular amendments that were debated in those sultry June days of 1977 would be a rather pointless exercise, but briefly, to set the record straight—unless the Financial Secretary will attempt to catch the eye of the Chair and do it for me—
Well, he rather shirks that.
We recall, as indeed the country will recall that the amendment was carried against the strong arguments advanced by the Treasury Bench. We should like to know whether Treasury Ministers have now modified their point of view, whether they feel that this is something which should be incorporated in our fiscal legislation and whether the principle of indexation should be extended, for example, to capital transfer tax, to the threshold for investment income surcharge or to capital gains tax. If they do not, we shall recognise that their conversion has come at a rather late stage and that it is only skin deep.
We had a useful debate in those days in June, but the first amendments that were debated—we can argue whether they were textually different from those which the hon. Members for Perry Barr and for Coventry, South-West commended to the Committee—were moved by my hon. Friend the Member for Blaby. We believe that an important principle has been established through Conservative votes. Indeed, it would perhaps be unkind of me to remind the hon. Member for Perry Barr, since he has not chosen to stay for the rest of the debate, that the Patronage Secretary was at particular pains to exclude him and the hon. Lady from any subsequent Committee stage debates on Finance Bills. Of course, we can only speculate as to the reason why.
With the Rooker-Wise amendment incorporated in this standstill Finance Bill—this is the one divergence from a total standstill in rates and relief—the cost will be £960 million, as my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) reminded the House. But, even with this particular move, it still does not restore personal allowances to their true value of 1973–74. I remind the House that to do that would cost slightly over £2 billion. Indeed, the country will not forget, even if the Chief Secretary is not disposed to remind it, that in 1973–74 the Government's total revenue take was £17,250 million, of which income tax comprised £7,300 million. In 1978–79, the total tax take was something over £41 billion, of which income tax comprised about £19 billion. That is the true measure of the fiscal policies which the Chancellor and his team have inflicted over five years on a long-suffering country.
This is perhaps the occasion for valedictory addresses. The House should be reminded, because there is perhaps a tinge of sadness to the contributions on this occasion, that the Chancellor and his Chief Secretary have formed a partnership for the last five years. From these Benches, we have admired the intellectual grasp and stamina of the Chancellor—qualities that were worthy of better causes. We have watched the battle that he has fought with his hon. Friends below the Gangway, and no doubt in due course we shall hear in his memoirs of the battles that he lost in Cabinet. But now he has come to the end of the road. All the options open to him in relation to public expenditure and taxation have been closed by the prejudices of his own party, but they have been prejudices which over the years he has stoked.
I recall that in a speech not so very long ago to a Labour club somewhere in the North-West—who knows, perhaps even in the area of the right hon. Member for Blackburn—reported on 13 March in the Burnley Star, the Chancellor said:
I will offer you proper Socialism when we get a decent majority in the House of Commons to enable us to do it.
The electorate will be able to pronounce on that particularly menacing threat over the next four weeks.
What shall we say about the Chief Secretary, who has played with great fidelity the role of Sancho Panza to the Chancellor of the Exchequer's Don Quixote? The Labour Party has always been lucky in the talent that it has been able to command. It has had its own millionaire, the right hon. Gentleman the Chancellor of the Duchy of Lancaster, and it has had its tame accountant, in the form of the Chief Secretary. Over the years, we have admired the Chief Secretary's resilience and his mastery of detail. We have enjoyed the comradely wink with which he has managed to convey that, subject to the rather absurd pressures from his own party, he recognised that he was inflicting a series of fiscal outrages on the country.
For the Chief Secretary, this must be a rather poignant moment. He must now be regretting the opportunities that he has missed. I remind him and the House of what he said in our debates in 1977. He may recall the evening of 14 June. It is all reported in Hansard. He said on that occasion:
I hope that the 2p reduction in the basic rate of tax will be possible.
Regrettably, but perhaps predictably, it did not prove possible for that particular Chancellor and that particular Chief Secretary. The Chief Secretary went on to say:
I hope that many other things might yet be possible. Between now and October 1979 the Government will have ample opportunity to accept many of my hon. Friends' recommendations about taxation, public expenditure and all kinds of things. I ask the Committee to recognise that this is not the time to take such steps. Let us wait. We shall have ample opportunity to deal with them in our own good time."—[Official Report, Standing Committee D, 14 June 1977; c. 492–3.]
I know that Latin is unfashionable in the House at present, but I am moved to recall sunt lacrimae rerum—there are tears and things, and no doubt the Chief Secretary will enlarge on that in due course.
I am bound to tell the Chief Secretary, however, before he is overcome with maudlin remorse, that the Opposition have always had doubts about the authenticity, the genuineness, of his desire to lift taxes. We think that the best commentary on his five-year partnership with the Chancellor of the Exchequer is the evidence given by Sir William Pile only last week—that the secondary economy, or what is, perhaps, less charitably called the black economy, is now of the order of £11 billion. The conclusion is inescapable, and that is that no talk of a social wage will be an adequate substitute for our fellow countrymen for a reasonable income after tax. This is a mood to which a Conservative Government will respond. Tonight, in the nature of things, no contribution will be made to that. Tonight, all that we have heard is the last frigid fiscal whimper of a beaten and descredited Government.
I think that I once said, in reply to a question, "Ugh." It was in reply to that kind of comment. I spelt it "Ugh"—with an exclamation mark, or two. Only the hon. and learned Member for Dover and Deal (Mr. Rees) could deliver a valedictory address, as he called it, in that way. I think that I thank him for what he said. I am not absolutely certain. I shall read it—no, I shall not.
The hon. and learned Member said that I might consider this to be a poignant moment. No, I do not consider it to be a poignant moment. What I consider is that, with any luck, I shall never have to listen to the hon. and learned Member, from that Dispatch Box on Finance Bills. That is what I was thinking when I heard him speaking. I hope that he will be on some other subject and that I shall be on some other subject, so that I shall not personally have to hear him paying me compliments of the kind which he pays so eloquently.
However, be that as it may, I start by joining very sincerely in the congratulations that have been offered to the hon. Member for Alton. It was an excellent maiden speech. I am sorry. I meant to say "The hon. Member for Liverpool, Edge Hill (Mr. Alton)". I hope that I may be forgiven for that mistake, because I have seen the hon. Member's name so frequently recently. I was looking at it on television for about two hours on Thursday night. The only consolation was hearing of the lost Conservative deposit.
My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) said, as we always say on these occasions, that we look forward to hearing the hon. Gentleman frequently in this House. My hon. Friend was saying that he hoped to hear the hon. Gentleman as the hon. Member for Edge Hill. I do not quite go along with that. I should like to see a Labour Member representing Edge Hill. However, for wherever the hon. Member may sit—and I hope that if he wins a seat at some other time, and in another place, it will be a Conservative seat—I am sure that all of us will want to hear him frequently and the kind of speech that he delivered in the House today.
I also take this opportunity of paying tribute to the swan song delivered by my right hon. Friend the Member for Blackburn (Mrs. Castle). I have had a few exchanges of pleasantries with my right hon. Friend, particularly in the past five years and especially in the period 1974 to 1976, when she was a very excellent Secretary of State for Social Services. From time to time I had to resist her constant demands for more expenditure. I am happy to say that we finished up good friends, even if she did not finish up with quite as much money as she asked me for in the first place. However, as has been said, my right hon. Friend the Member for Blackburn has made a quite magnificent contribution to public life in Britain from 1945 onwards, and particularly to the Labour Party and Labour Governments over many years.
Speaking for myself, I am very grateful for that contribution and I happily pay a very high tribute to her for the work that she has done, particularly in the cause of women, and, not least, for what she has done to persuade the House of Commons, the Labour Party, the trade union movement and the country generally to recognise the value of child benefits, which have now been brought to fruition in this Finance Bill, which has phased out child tax allowances and introduced child benefits. [Interruption]. I have sat and listened to the hon. Member for Blaby (Mr. Lawson) when he has been speaking on his feet. I am not quite sure which I prefer—the hon. Member muttering from a sedentary position or hearing him when he is on his feet. But I do not wish to encourage him tonight. Perhaps I dislike both. The hon. Gentleman really is intolerable. In some ways he is even more intolerable than his hon. and learned Friend the Member for Dover and Deal—and that is really saying something, as my hon. Friends who have had to listen to both of them will know.
I also take this opportunity of saying that, with any luck, this might be a swan song for me on Finance Bills, certainly in this Parliament. I have been on every Finance Bill Committee, whether on the Floor of the House or upstairs, for the past 15 years. I should like to think that I shall be discussing Finance Bills for another 15 years or more, but in this Parliament at least I expect that this will be my last contribution on a Finance Bill. One of the reasons why I look forward to watching the hon. Member for Blaby signing his mail to his dear constituents rather than speaking in the House is that this is the last Finance Bill of this Parliament.
I turn to some of the contributions to the debate, and first to those from the hon. Member for Worthing (Mr. Higgins) and the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), and that from my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), on the subject of what has happened in Fleet Street in relation to taxation. This was also referred to by the hon. and learned Member for Dover and Deal.
A fascinating new idea was floated by my hon. Friend the Member for Perry Barr—that maybe all these moonlighters of Fleet Street were really inspectors of taxes working there because they did not have enough work to do during the day, that they were working at nights and at weekends to make up the miserly pay that they now get. It is an interesting proposition, but the fact is that, by the very nature of things, one does not know who was Mickey Mouse, as a number of pay slips were then signed, as being the particular casual worker concerned. However, I feel that when the hon. and learned Member for Dover, and Deal said that perhaps the trade unions should be expected to pay the tax that was lost he was on a rather bad point and should, just for once, have listened to his hon. Friend the Member for Cirencester and Tewkesbury. The hon. Member said in the House on 16 January:
I think it is fair to say that the practice has arisen over the years because management has opted out of the control of labour in the newspaper industry, particularly in the printing of the Sunday newspapers."—[Official Report, 16 January 1979; Vol. 960, c. 1514.]
Management was responsible for filling in the pay slips marked "Mickey Mouse" and should bear some responsibility. The hon. Member for Cirencester and Tewkesbury was right at least in that sense.
I do not want to see any sort of evasion continue for longer than necessary. The problem is to identify the people concerned. The only negotiation was to identify them and ensure that from now on tax was deducted. It was necessary to obtain the names and addresses of the individuals who were being paid, and that could only be done in co-operation with management and the trade unions. There was no question of negotiation with the trade unions about whether there should be an amnesty, and there is no blanket amnesty.
Tax relief prior to April 1977 was granted on two strict and limited conditions. Without the co-operation of the trade union movement and the employers, it would not have been possible to cut out the evasion, and the negotiation was was to identify the people involved. The unions were informed what the Inland Revenue intended to do to stop the abuse, but there was no question of a blanket amnesty without conditions.
Sub-contractors on the lump have received similar treatment The hon. Member for Cirencester and Tewkesbury complained about that comparable treatment, but he wanted to make it easier for the people on the lump to continue tax evasion. Throughout the whole of this Parliament, the hon. Gentleman has pressed for relaxation of the schemes that we introduced to cut out tax evasion among sub-contractors. He now has the effrontery to complain that we are giving an amnesty in this area, and I find it astonishing that the hon. Member for Worthing, with his experience, should get on to that bandwagon. What has been said is without foundation. The hon. Member for Worthing wants to cut out evasion, and so do I, but we must first identify the people who were obtaining large sums of money tax-free.
The Board of Inland Revenue is responsible for collecting taxes. It told us the action being considered, but it has the responsibility and discretion in the way that the taxes are collected. It would be a foolish income tax system that did not allow the Inland Revenue some discretion. There has been criticism of that approach compared to the Government's attitude to the self-employed.
The letter that was written by the Inland Revenue to the trade unions said specifically that the arrangements would only apply to members of SOGAT, the NGA and so on. The letter written by the Financial Secretary also said that there had been no general negotiation. It had been with individuals. From what the right hon. Gentleman has said, it is quite clear that the Government and the Inland Revenue did not know who the individuals were.
I am sure that the hon. Member for Worthing will appreciate that the Inland Revenue could not have known who the individuals were. It merely had pay packets marked with ridiculous names. The only way to find the names and addresses was with the co-operation of the trade unions and employers, which was a perfectly reasonable approach. That applies also to many other cases of self-employed people where it is not possible to collect tax and the situation is hopeless. If there is no way of pursuing it to the nth degree, it is not pursued.
The fear is frequently expressed that income tax inspectors sometimes exceed their authority in dealing with the self-employed. In the past I have acted on behalf of the self-employed, but I think that that criticism is grossly exaggerated. If ever I knew of a case of an income tax inspector exceeding his authority with an individual, even where there has been a tax evasion, I would consider it reprehensible. It should be stopped.
Does the Chief Secretary know of another case where an amnesty has been implemented for a defined group of people rather than for individuals? Secondly, since he has drawn the analogy with the lump, will he admit that there is a closer analogy? In the case of the lump, the person who procures the labour is ultimately responsible for the tax. The trade unions were involved in this particular case because they procured the labour. Should not the Inland Revenue therefore consider whether the trade unions concerned might not ultimately be responsible for the tax?
That would be most unreasonable. One might consider making the employers responsible when they pay money without deducting tax to individuals who they know are not casual workers. The hon. and learned Member for Dover and Deal mentions a defined group of people rather than individuals. It was a defined group of people in the newspaper industry, and it was the only way to handle the matter.
In back-duty cases where there is an investigation, sometimes some tax inspectors may be pretty tough on a taxpayer. I deplore excesses, but on the facts it is not shown that those excesses are prevalent. Since the Inland Revenue started the in-depth examination of the self-employed and small businesses, 88 per cent. of cases have been accepted without further inquiry. Of the remaining 12 per cent., only 3 per cent. were subjected to full investigation. In 80 per cent. of that 3 per cent. something was found to be considerably wrong. The Inland Revenue must act in the best interests of the taxpayer generally, and it is right that those cases should be investigated, but they are only a tiny proportion.
I turn to the main point dealt with in this debate—that which has become known, to the chagrin of the hon. Member for Blaby, as the Rooker-Wise amendment I pay tribute to my hon. Friends the Members for Perry Barr and Coventry, South-West (Mrs. Wise) for the action that they took. I did not agree with them at the time, I do not agree with them now, and I will not attempt to hide that from them. This might be described as the "Whips' amendment". It was because of the Whips that my hon. Friends were on that Finance Bill Committee. Had they not been there, we might not have lost on the issue.
I disagreed with my hon. Friends because I was not in favour of the indexation of personal tax allowances. I am not necessarily in favour of arguing for a substantial increase in the tax threshold. For example, I would not like to say that if I had £1,000 million to spare at any time my first choice would be to raise the tax threshold. There may well be other priorities for me—the priority of child benefit, as put by my right hon. Friend the Member for Blackburn, more money for the National Health Service and all kinds of other things which I consider should have priority. I hope that when we come back after the election my hon. Friend the Member for Coventry, South-West will be here, because she is an excellent Member and she has argued for the amendment becaue she believes in it.
In order that there should be no misunderstanding, I hope that my right hon. Friend will look at the level of the threshold at which my hon. Friend and I moved our amendment. We were not arguing in a vacuum. We were arguing from the starting point of the threshold being considerably below the supplementary benefit level. I agree that a lot of priority must be given to other forms of disbursement of money, particularly public expenditure, on services and cash transfers.
Perhaps there is not much disagreement between us after all. Of course I want to raise the threshold and increase personal allowances.
I was asked by the hon. and learned Member for Dover and Deal about my position on indexation. I have made that clear. He then asked me whether I was in favour of extending indexation to capital transfer tax and various other taxes on the statute book. I am not in favour of such indexation, but I would be interested to know the policy of the Opposition on this matter.
The hon. Member for Blaby says "Wait and see". Therefore, we do not know whether it is Opposition policy to index all taxes. I know that it is the policy of the hon. Member for Blaby, and I know that he has inflicted his opinions on his Front Bench ad nauseam.
I conclude on the central theme of the Opposition—the need for massive cuts in direct taxation. As I have indicated, I am in favour of some cut as soon as we can afford it, and, unlike some of my hon. Friends, I would not be averse to some switch from direct to indirect taxation. However, I am not in favour of a switch of anything like the degree required if the Opposition are to carry out in any way the twin propositions they have put before us—cutting the public sector borrowing requirement year after year, and making substantial reductions in direct taxation.
I believe that speeches promising things like that do a disservice to truth and honesty in political life. They lead people to believe that there can be some real improvement in their personal living standard brought about by a cut in direct taxation, regardless of whatever else happens in the economy. That is a disservice to public life. By switching from direct to indirect taxation one could do that to a certain extent but not to the extent that the Opposition indicate. The effect on inflation would cause chaos in this country and enormous disturbance. It is a disservice to suggest that it could be done without an improvement in real output and to imply that the people of this country can expect a real increase in living standards, other than giving that increase to a few at the expense of many other people.
But that is what a Conservative Government would have in mind—improving living standards for some at the expense of others. That is what it is all about. If one cut public expenditure and increased indirect taxation in order to provide cuts in direct taxes, it could only be done at somebody's expense, and that would create a divided society.
Fortunately, I do not believe that there will be a Conservative Government, I believe that the next Budget and the next Finance Bill will be introduced by a Labour Chancellor who will make a redistribution of income in a way that the country wants.