Budget Resolutions and Economic Situation

– in the House of Commons at 3:54 pm on 21st March 1983.

Alert me about debates like this

[Relevant European Community Documents: Nos. 10337/82, Annual Economic Report 1982–83, together with the final version as adopted by the Council, and 10480/82, Annual Economic Review 1982–83, together with paragraph 7 of the Fourth Report from the Select Committee on European Legislation, House of Commons Paper No. 34-iv of Session 1982–83, and paragraph 4 of the Eleventh Report from the Committee, House of Commons Paper No. 34-xi of Session 1982–83.]

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I have selected the amendment in the name of the right hon. Member for Glasgow, Hillhead (Mr. Jenkins).

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford 3:57 pm, 21st March 1983

I begin by welcoming the right hon. Member for Leeds, South (Mr. Rees) to our debates in his role as overlord. I understand that he was elevated to this job so that he could keep an eye on his right hon. Friends the shadow Secretaries of State for Industry, for Employment, for Trade and for Energy. I imagine that his job is to shadow the shadows. Indeed, his role has been so shadowy that until today we have not had the pleasure of hearing him speak in an economic debate. Like the House of Lords in "Iolanthe", he does nothing in particular, but he does it very well. We welcome him here today.

The Labour party sometimes seems to be puzzled by its low—if the polls are anything to go by—and falling level of popular support. The reason lies in its failure to understand why things have gone wrong with the British economy and what needs to be done to put it right.

The right hon. Member for Stepney and Poplar (Mr. Shore) summed up the Opposition's case again last Wednesday when he referred to "lack of demand" in the British economy as reported at c. 249 of the Official Report. In the Opposition's view, that is the main cause of the recession and of unemployment and the answer is to scatter money all over the country. I cannot remember whether the figure is £10 billion, £11 billion or £12 billion. I lose track of the right hon. Gentleman's various proposals.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

I am grateful to the right hon. Gentleman. I believe that the figure was somewhat larger a few months ago. The right hon. Gentleman believes that our problems would then melt away, but when previous Governments tried scattering money around, what melted away was the pound in the consumer's pocket and our share of world trade.

My right hon. and learned Friend the Chancellor in his Budget statement gave the lie to the argument that there has been a chronic decline in demand. Domestic demand in Britain is growing in real terms by about 2·5 per cent. per year. The growth in demand is stronger than in most other industrial countries. The January demand for cars in this country was the highest January figure in our history. All too often, however, that demand has been met by imports rather than by home-produced goods. Why is that so? That is the critical question.

In the past, industrial production in Britain has been a nightmare obstacle race. Firms have had to try to reach the winning post across the obstacles of restricitive working practices, monopoly state-owned industries, monopoly unions, disincentives to enterprise and profits, anti-business taxation and failure to adapt and innovate. I could go on. The list is very long.

The Labour party should know about those obstacles, because it invented most of them. The Labour party was responsible for the massive nationalisation which has been an incubus round our necks. The Labour party gave sweeping obstructive powers to the trade unions and—according to this morning's press—intends to do so again. The Labour party has deliberately discouraged enterprise and constantly peddled propaganda denigrating profit. We should never forget, either, that each of the leaders of the Social Democratic party has backed everything that the Labour party has said and done.

The present Government have begun to put matters right, and this budget makes further progress. It is a Budget for enterprise, innovation and industry, and especially for the small and medium firm. Just as the jobs depend upon customers, so industrial recovery depends upon British firms being able to supply the customer with what he or she wants. The price of the product is crucial. One of the best ways in which we have helped industry is by bringing inflation down from more than 20 per cent. to about 5 per cent. Interest rates have fallen by more than 5·5 percentage points since the autumn of 1981, and each percentage point cut helps industry to the tune of £250 million per year.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

The right hon. Gentleman is making some extravagant claims. Have not British interest rates simply followed American interest rates down and, indeed, remained higher than American interest rates, which are currently at least 2 per cent. below our own? What credit can the right hon. Gentleman claim for success in that area?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

When the Labour Government faced economic crises, as we faced problems in September 1981, interest rates had to go up. The fact that my right hon and learned Friend has presided over a fall of over 5·5 percentage points in the interest rate is a measure of the strength of the economy.

There is also the help given by cutting the national insurance surcharge—the tax on jobs introduced by Labour, increased by Labour and supported by the Liberals and the SDP. Our cuts in that tax will help private business by about £2 billion in a full year. The right hon. Member for Salford, West (Mr. Orme) complained last Wednesday that the Budget offered no help to big business. It is interesting to hear the Labour party boosting the claims of big business, but in claiming that the Budget offered no help to large firms the right hon. Gentleman seemed to forget that last November's 1 per cent. cut in NIS takes effect this April. That is in addition to the 0·5 per cent. cut announced by my right hon. and learned Friend the Chancellor last week. That is an earnest of our intention to get rid of the tax altogether. When we came to office it was 3·5 per cent. It is now down to 1 per cent., and the value of that to private industry is about £2 billion.

Industry will also be able to seize the opportunities opened up by the more competitive exchange rate, but it must continue to curb production costs, including pay, if the benefit is not to be eroded. There are inevitable time lags before the full effect on trade flows is felt, but the benefits on cash flow and profit and loss accounts should be felt much sooner.

Lower oil prices will also generate a stimulus to industry through increased output and trade. It cannot be repeated too often that lower oil prices benefit our economy, just as rising oil prices damaged it. One way in which industry can reduce its energy costs is by conversion to coal. Even with the fall in dollar oil prices, many industrialists would find it cheaper to change from oil or gas to coal. I remind the House that the coal conversion scheme provides grants of up to 25 per cent. for conversion, and there are cheap ECSC loans to cover a further 50 per cent. of the cost. The grants and loans scheme was due to expire at the end of this month, but I have decided to extend it until the end of the year and any applications received before then will be eligible for grant.

During the debates on the Budget many hon. Members have rightly referred to the importance of developments in the world economy and the forthcoming summit at Williamsburg. My right hon. and learned Friend the Chancellor deserves more credit than he has so far received for the major part that he has played as chairman of the IMF interim committee. It was at his insistence that the meetings were accelerated and agreement reached to implement the replenishment decisions this year. In effect, that means a doubling of fund resources, with the increase available two years earlier than would otherwise have been the case.

My right hon. and learned Friend the Chancellor has also played a leading role in shaping the global economic strategy adopted by the internatinal economic community. The initiative agreed at the Versailles summit last June on closer convergence of policy by the major countries whose currencies make up the SDRs was built on a proposal made by my right hon. and learned Friend at the 1981 annual fund meeting. Moreover, hon. Members will have read on the tape that my right hon. and learned Friend chaired the meeting in Brussels this morning which resulted in agreement on the realignment of the EMS currencies.

There is no doubt that the greater stability heralded by those moves will be of the utmost value to the increase of world trade.

Taken together, all those developments—lower inflation, lower interest rates, lower exchange rates. lower oil prices and greater stability—provide a substantial boost for industry. The right hon. Member for Salford. West rather missed the point in his speech last Wednesday when he analysed the problems of British industry in terms of markets lost due to lost capacity. In fact, it is loss of competitiveness that has lost markets. The motor car industry is perhaps the most conspicuous example, but there are many others. As a result, imports of manufactures have steadily risen. I believe that it is this perception of the home market being gradually eroded by imports that has galvanised many firms in the past two or three years to replace outdated plant with far more efficient capacity, such as I saw at BL Cowley, where the new Maestro car is being built. It is most impressive.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

Yes, but it will be in the private sector eventually. There is no reason why that company should remain a burden on the taxpayer. It can fly with its own wings, as today's Financial Times suggests it should.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

Will the right hon. Gentleman give way?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

No, I must press on.

Recovery depends upon Britain's greatest natural resource—people. It is people who start companies, who build them up, who win orders, who create wealth for the community and who provide jobs. It is the Government's job to provide a positive climate in which people can respond as I have outlined. I shall give examples of what my right hon. and learned Friend the Chancellor has done to that end in his Budget.

Last year we introduced the enterprise allowance scheme as an experiment for five areas, through which we made it easier for unemployed people to start up businesses by making an allowance of £40 a week available to them to offset their loss of unemployment benefit. The response was so encouraging that from 1 August to the end of March 1984 we are making the enterprise allowance available throughout the country—enterprise allowance goes nationwide.

Not only do people set up their own businesses, but many of them provide work for others. For example, an engineering firm in Scotland was set up by three people. They now employ three other skilled workers and an apprentice. In Kent a building trade wholesaler now employs two people, and in Coventry an insulation firm now employs seven people. Every successful venture under the enterprise allowance scheme means a job for someone. If one multiplies that 10,000 or 20,000 times, one can see that it is worth while.

There are also employee buy-outs. Many businesses which used to be parts of large groups of companies are being run more successfully now that they have been hived off into independent companies, as there is greater motivation among the employees. Businesses which might have been thought moribund have undergone a staggering revival. The Budget has helped such management or employee buy-outs, because interest payments on loans that have been taken out to buy the business will qualify for tax relief. One such example is W.H. Podmore of Wolverhampton in the heart of the west midlands. It is an electrical retailer and contractor and provides an excellent example of a management buy-out—it saved 30 jobs. My Department's small firm counsellors were happy to give advice.

Perhaps the most striking measure in the Budget and that which will have the biggest impact is the conversion of the modest business start-up scheme into the much more ambitious business expansion scheme. From 6 April the tax benefits of the original scheme will be extended to investment in most established unquoted companies. We are doubling the maximum—

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

The hon. Gentleman refuses to accept that this is tax relief to the investor who puts up equity capital, not public expenditure. We are doubling the maximum investment that qualifies for relief in any year from £20,000 to £40,000. That opens up new sources of equity capital for unquoted companies, which will help companies which have potential for growth to achieve growth and encourage local investors to back local firms, so helping the local economy. It is a major step in a direction that we must take to steer personal tax incentives much more towards individual investment in productive enterprises.

On Wednesday the right hon. Member for Stepney and Poplar gave a grudging welcome to our measures for small businesses. He said that he welcomed help for small firms "in principle". We welcome them in practice. The Budget is full of them. I am aware that many small firms depend on big firms for their business, but most big firms started as small ones. The Government have done far more than any previous Government to help small firms. Since we took office we have introduced more than 100 measures to help small firms, both established and new ones. One of the most important innovations has been the loan guarantee scheme, which the Budget continues. My hon. Friend the Under-Secretary of State gave details of that in a written answer last Wednesday. There is no doubt that the scheme is providing and maintaining thousands of jobs.

The Budget also helps small firms by raising the VAT registration threshold, by reducing the small companies rate of corporation tax, by there being a much lower marginal rate of tax between the upper and lower limits than that which we inherited and by widening the 100 per cent. tax relief on the conversion of old buildings to small workshops. One of the most encouraging things that I see when I go around the country is the number of new small businesses that have started up in convertedmills and other workshops which people can rent for modest fees with no long-term commitment.

Another of my aims has been to shift the emphasis of spending away from supporting the casualties of the past to backing the industries and products of the future. That, also, is now being achieved. At Question Time a week ago I told the House that support for British Leyland, the British Steel Corporation and British Shipbuilders, which was £1·75 billion in 1980–81, is forecast to be under £750 million in 1983–84. That is a major reduction.

During our term of office we have doubled Government support for new technology and innovation. This year's Budget provides £185 million over three years for that purpose, £100 million of which will be used to reopen the small engineering firms investment scheme—or SEFIS 2 as we shall call it. SEFIS 1 was launched last year to help small engineering firms to invest in advanced capital equipment.

I was astonished to hear the right hon. Member for Stepney and Poplar claim that the Labour party introduced SEFIS. Having virtually disowned the national insurance surcharge, which the Labour party certainly did introduce, he is now trying to claim the credit for SEFIS, which the Labour party most assuredly did not introduce.

SEFIS 1 was launched by my hon. Friend the Under-Secretary of State in March 1982. So great was the response from the engineering industry that we had to stop taking claims after just 8½ weeks, despite the fact that we added £10 million to the original £20 million that had been allocated. Under SEFIS 1, 1,400 firms have been made offers of assistance, £10 million has already been paid out to nearly 600 firms, and nearly 60 per cent. of the equipment orders will be produced in the United Kingdom.

Photo of Mr Douglas Jay Mr Douglas Jay , Wandsworth Battersea North

Why, after all these wonderful schemes, are there still nearly 4 million people unemployed?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

Perhaps the right hon. Gentleman can wait until I deal with bankruptcies. These measures are necessary to enhance competitiveness so that industry can win back customers and rebuild jobs. If the right hon. Gentleman, whom I greatly respect as a senior Member of the House, cannot see that, I am sorry for him. That is at the heart of what we are trying to do.

It is interesting to note that the west midlands gets about twice as much SEFIS support per head of population as the national average. By reopening the scheme and allocating no less that £100 million to it—four times as much as was allocated to SEFIS 1—we shall bring substantial help to the west midlands especially, as well as to small engineering firms in general.

There is no doubt that industry in the west midlands has suffered grievously in the recession. The reasons for that are deep and complex, the roots going back many years. West midlanders are rightly proud of their skills as metal bashers. They have an innate skill in handling metal to which industrialists in the area often refer. Of course there is a future for those industries, but many firms there need to modernise their plant, design new products and seek new markets. Moreover, the west midlands must broaden its industrial base.

It was disappointing to realise that relatively few firms in the region applied for the various forms of assistance under our support for innovation scheme. The reintroduction of SEFIS, and the additional help that the rest of my right hon. and learned Friend's innovation package makes possible, enables me to anounce a new initiative to encourage more innovation in the west midlands. I am setting up a special team, to be called a team for innovation, in the west midlands regional office of the Department of Industry. Its purpose will be to help and to encourage firms in the west midlands to make the fullest use of all the national schemes of support for industry. The CBI in the west midlands is considering plans to coordinate and to promote industrial and commercial development in the region on a self-help basis. I hope that the CBI, the chambers of commerce and the local authorities will come together in a partnership to achieve this. I have asked my officials to give them as much help as they can.

I shall be ready to consider providing a modest grant-in-aid for the promotion of the region overseas, in coordination with the Invest in Britain Bureau in my Department. The CBI has called for firms in the region to make greater use of the Government's schemes, and I know that that organisation will wish to co-operate to the full with the innovation team. I am recruiting a senior industrial adviser to head the team and I am asking my hon. Friend the Under-Secretary of State—the hon. Member for Coventry, South-West (Mr. Butcher)—to take charge of this work. Under our support schemes for innovation in addition to SEFIS, a wide variety of help is available for the development and introduction of new technology, new processes and new products. That is what the west midlands needs, and by making a special effort to bring this to the attention of local businesses I hope that we shall see a much greater take-up of the schemes and, with it, a revival of the fortunes of manufacturing industry in the region.

Photo of Geoffrey Robinson Geoffrey Robinson Shadow Spokerperson (Science)

I apologise for missing the Secretary of State's introductory remarks. It would be churlish to denigrate his new initiative, but does he accept that it will be woefully inadequate to tackle the scale of the problem in the west midlands? Does he accept also that, with or without the innovation, unless the Government can come forward with a major purchasing programme that will affect the entire west midlands we shall see further bankruptcies, rising unemployment and a growing lack of competitiveness, which we cannot sustain against foreign competition that is becoming more intense?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

I am grateful to the hon. Gentleman for welcoming the initiative. By far the best thing that could happen to the west midlands would be for British Leyland to get a larger share of the market and so expand its purchases of car and lorry components. It is now doing that and it needs all the support and encouragement that we can give. We shall have put nearly £1,900 million into British Leyland for that purpose.

Photo of Mrs Jill Knight Mrs Jill Knight , Birmingham, Edgbaston

Did my right hon. Friend notice the encouraging signs last week—without the enormous amount of Government support demanded by the Opposition—from companies such as GKN and Tube Investments?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

Both companies are clearly feeling the effect of the world recession and both had to report lower profits. However, the chairmen of those companies gave encouraging accounts of how they had weathered the storm.

Photo of Mr James Pawsey Mr James Pawsey , Rugby

Will my right hon. Friend give way before he leaves the west midlands?

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

I am still talking about the west midlands.

Photo of Mr James Pawsey Mr James Pawsey , Rugby

In that case, I shall wait.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

One problem in the west midlands is the lack of industrial premises. I am asking the English Industrial Estates Corporation to investigate the industrial property market and to establish whether it is meeting the needs of new industrial development, including high technology industry and new and small businesses. If necessary, I shall ask the corporation to undertake development in the region, although it is not an assisted area. I shall make separate financial provision to cover any work in the west midlands so that it does not affect the corporation's programmes elsewhere. All this is in line with our industrial strategy to encourage industries of the future, to encourage established industries to modernise and to encourage firms to adopt new technology.

Photo of Mr James Pawsey Mr James Pawsey , Rugby

Does my right hon. Friend accept that his package of measures will give encouragement to those who live in the west midlands? We appreciate, just as he does, that we need special measures. Those that my right hon. Friend has outlined will do much good and will be much appreciated.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

I am grateful to my hon. Friend. I do not claim that they are more than a modest help, but they show what we have identified as the key issue in the west midlands—the need to modernise, to innovate and to seek new markets.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

I have given way a great deal to hon. Members on both sides of the House.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

Nor to many other right hon. and hon. Members.

Last year we regrouped the various schemes of support under the general title "Support for Innovation". It brought together all my Department's assistance for industrial research and development, for increasing awareness of the new technologies and for promoting their application. We raised the maximum grant level from 25 to 33⅓ per cent. and, with the help of the Budget, the rate will be kept at 33⅓ per cent. for a further year beyond May 1983. There is plenty of evidence that the increased rate attracted many more applications, which I hope will be sustained.

However, research and development alone are not enough. It is vital to exploit the results in the market, which is something that we as a nation have not always done well. I am extending the support for the innovation programme by an innovation-linked investment scheme, to which we are allocating about £40 million. Projects will be eligible for investment support under the scheme either when development work is being supported by the Department of Industry or if it would have been eligible for such support had the firm applied. This addition will help to fill a gap and will bring products out of the backroom and into the showroom. We are also giving extra help to promote computer-aided production management. There will be more support for the software products scheme and for the various advisory services to make management, especially in small and medium-sized firms, more aware of the opportunities to improve design and manufacture.

I am convinced that design is crucial to commercial success. I am much encouraged by the way in which our new design advisory service, set up last year, has generated a demand from companies way above our expectations. The manufacturing advisory service has already provided benefits to more than 3,000 firms. We are currently considering a proposal from the Institute of Marketing to help to establish an advisory service on marketing to small and medium-sized firms. Making management more aware of the opportunities may represent a small, although a growing, part of my Department's budget, but the Department must become more people-oriented, because people create prosperity. That is why I am giving the scheme high priority. [Interruption.] I do not know why the right hon. Member for Leeds, South is laughing. When I say that to industrial audiences, they give it a very warm welcome because they recognise the need for those services, even if the right hon. Gentleman does not.

The industrial policies of successive Governments have been shaped more by the pressures of the past than by the opportunities of the future. We must redirect our industrial support to the products, processes, companies and industries of the future, because that is where prosperity and jobs will come. A most encouraging sign for the future is the enthusiasm and skill shown by our young people in new technology. We are top of the world league in providing microcomputers in schools. Thanks to our initiative, every secondary school has its own microcomputer and we intend to do the same for our 27,000 primary schools.

We must look to our universities and polytechnics. Unfortunately, the links between academic research establishments and industries are much less strong in the United Kingdom than in other countries, and there is a huge untapped potential for transferring technology from the laboratory to the market place. Therefore, I have set in hand a programme of consultation to determine how best to accelerate this process. My officials are already embarking on a series of consultations with 24 universities and polytechnics. I wish to see discussion with industry, research councils and other Government Departments. When this round of talks is completed, I shall bring forward further proposals for action.

The answer to Britain's industrial decline since the second world war is a more competitive, more enterprising and more innovating industry. We are clearing away obstacles. Step by step we are transferring state monopolies from the insulated public sector to the more competitive private sector. It was said: What we lack in Government is entrepreneurial ability. Those are not my words, but the words, spoken in 1974, of the right hon. Member for Bristol, South-East (Mr. Benn). For once, he was right.

Governments do not create wealth. That is done by people, partnerships, firms and companies. Governments can create the climate to provide the incentive and remove the obstacles. There are now real signs of improvement. Industrial production, housing starts, productivity, consumer spending and exports are all up, and last year when world trade in manufactures fell United Kingdom exports of manufactures rose and we increased our share of world trade. I shall say that again. Last year, we increased our share of world trade in manufactures.

The Budget reinforces that success, not only by the many imaginative measures that the Chancellor has announced, but by substantial reductions in taxation. The Budget's measures are worth no less than £2·75 billion in a full year—a considerable boost in itself. In the many words spoken and written about the Budget since my right hon. and learned Friend sat down, the fact of that £2·75 billion boost has not been given the prominence that it deserves. This is an expansionary Budget, and, because of his careful financial management of earlier years, my right hon. and learned Friend has been able to combine in the Budget both prudence and incentive—prudence in sticking to a strategy that has brought our inflation rate from being one of the highest in Europe to one of the lowest, and incentive in that tax cuts and other measures will provide a substantial boost to the economy and, above all, to jobs. We are on the road to sustainable recovery, and for that reason the Budget deserves the support of the House and the country.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South 4:32 pm, 21st March 1983

I am grateful to the Secretary of State for Industry for his words of welcome. My job is to keep an eye on the Government, and it is as terrifying to watch economic affairs as it is to watch others. Although it is 20 years since, in a small way, I had responsiblity for economic affairs, they are no different from the other matters for which I have had greater responsibility. When I was shadow Home Secretary, the Government were going to deal with law and order, cut crime and deal with the problem of immigration. That was nonsense. When I look at the Government's policies on economic affairs, on jobs and on cutting taxes, the circumstances are the same. Whatever the Government touch goes wrong and whatever promises they made three or four years ago they have not carried out.

In retrospect, since last I was involved, I detect that the mystery or romance of the Budget has been taken away. Gone is the secrecy. [AN HON. MEMBER: "Gladstone retired."] That may be so. In that case, he retired fairly recently. Gone is the special unit that worked in the Treasury behind locked doors with access only by passes. In the Franks committee of 1972—and this shows how things have changed—we recommended, on the basis of the advice and evidence given to us, that part of the Budget should at least be protected by the criminal law. If that had been the case, half of Fleet street would now be in gaol, because for weeks what was to happen in the Budget had been discussed and orchestrated at both City and press lunches.

I have been reading myself into this job in the past few months and I feel that it would be better if, when the Treasury and Civil Service Select Committee looks at public expenditure in the autumn, it also looks at the Government Budget proposals in advance of their being put to the House in the formal way. We could have earlier debates, and the long debates on the Budget, which occurs after the event and which is a little like déjà vu, could be shorter and more to the point.

There is also the problem of timing. What did the Chancellor have in mind when he said that he might come back to the House? Is he suggesting that later in the year there will be another Budget? I assume, and I am probably right, that this is because of the fall in oil prices, which will affect the PSBR, the balance of payments and the exchange rate.

However, what is the Government's policy on oil prices? Today, the Secretary of State for Industry said that he welcomed the fall in oil prices. Is it Government policy for BNOC not to co-operate with OPEC so that we can have a steady fall in oil prices? All that we have been reading in recent weeks about the Secretary of State for Energy and his discussions with OPEC Ministers in London adds up to little if that is so.

In terms of the Budget overall, however, the misuse of our oil revenues in recent years to finance unemployment is one of the greatest scandals of the Government's policies. I agree with the right hon. Member for Chesham and Amersham (Sir I. Gilmour) who said in the debate last week that without oil the Government could not have relied on what he called the medium-term financial strategy. We have had large oil revenues only in the past two or three years, and they have been wasted.

Our overall indictment of the Budget is that it contains no strategy to return to full employment. The Government show lack of concern for the unemployed and the 500,000 young people who have never been employed. We are glad that schools have computers and that we lead the way on computerisation in the way described by the Secretary of State for Industry. Does he know about 500,000 young unemployed who have never worked and who have no chance of working? We have many people like that in our constituencies.

I am surprised that, compared to the inter-war period, there has been no rumbling of discontent. What hurts me most is that there is no rumbling of discontent from those in work about the position of these young people. Nothing said in the Budget enables me to go back to my constituency and tell the large number of unemployed young people who have no chance of getting a job that there is something in the Budget that, at least in the course of time, will give them a job. If I said so, I should be telling an untruth.

The Budget is like those pre-war Budgets of Neville Chamberlain before he achieved fame in international affairs. He told my generation when it was in its teens that unemployment was inevitable and that nothing could be done. We have no doubt that unemployment is man-made and can be ended.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

Will the right hon. Gentleman explain why, during the six years that he was a Minister, unemployment doubled?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I am happy to do that, but more people were working at the end of our period in office than when we came into power. It is all very well to talk about doubling unemployment to 1 million plus, but we are talking now about 4 million unemployed. If there is any way that I could go to the unemployed in my constituency and honestly tell them that they will be getting a job before the end of the year I should be prepared to do so. However, there is no point in adding to the gloom of such young people just to secure a political advantage.

The Secretary of State and the Government should be grateful to the unemployed. According to the Conservative manifesto at the last election the Government would not be having an incomes policy. The Government have an incomes policy, however, and it is represented by 4 million unemployed. The unemployed are not consumers to the extent that they would be if they had jobs. The reason for the fall in inflation is not some clever abracadabra of economic policy. It is due to the 4 million unemployed. What sort of society are we living in when the Government still have to use, as in the inter-war years, a large number of unemployed to bring down inflation?

There is a basic division between the two sides of the House on unemployment and the policy to deal with it. I am again reminded of the 1920s and the 1930s. The first Budget that was designed to use all the manpower and womanpower in this country was that of 1941. It was completely unlike all previous Budgets since the Lloyd George Budgets of the first world war. To enable us to win a war, we had to use all the manpower in the country. [AN HON. MEMBER: "What about national service?"] National service was relevant then. It is not now.

In 1944, Ernest Bevin, on behalf of the three major parties, introduced a White Paper on "Full Employment". He made a speech on 21 July 1944, shortly after the D-Day landings, which were on everyone's mind. Like everyone in the House, Ernest Bevin, who was Minister of Labour—not Secretary of State for Employment—was concerned about what was happening 100 miles away. He moved a motion that welcomes the declaration of His Majesty's Government accepting as one of their primary aims and responsibilities the maintenance of a high and stable level of employment after the war,"—[Official Report, 21 June 1944; Vol. 401, c. 211.] Ernest Bevin told the House that he was stating this on behalf of the coalition Government. He gave a history of what had happened in his public life explaining that social services had come into being at the turn of the century to alleviate the problem of unemployment. However, that was not enough. It was after the event. What had to be done, irrespective of party and with widespread agreement, was to face the fundamental problems of maintaining full employment in a free society. It is moving to read his words when he stated, in relation to full employment, We are, indeed, grappling with the problem which is uppermost in the minds of those who are defending the country to-day, at home, overseas, and in those bitter fights across the Channel. With my right hon. Friend the Prime Minister, I had an opportunity of visiting one of our ports and seeing the men, of the 50th Division"— he was referring to the 50th Northumbrian Divisionamong others, going aboard ship—gallant men, brave men with no complaint. They were going off to face this terrific battle, with great hearts and great courage. The one question they put to me when I went through their ranks was, 'Ernie, when we have done this job for you, are we going back to the dole?"' Ernest Bevin's reply, as he told the House, was Both the Prime Minister and I answered, 'No, you are not.' That answer of 'No' to those brave men, going aboard those ships to fight, was an answer which, I hope, will be supported by the House, and I hope that policy will be directed towards making that answer a fact, not only for them but for future generations."—[Official Report, 21 June 1944; Vol. 401, c. 212–13.] I wonder what the Prime Minister and Secretary of State for Employment today would say now in such circumstances. I wonder what the Secretary of State for Employment would have said to those men. That is a measure of the change that has taken place. I am not suggesting that there are easy solutions to the problem. I am suggesting, however, that a Government retreat from those problems and a failure to declare that their aim is the maintenance of full employment show that something is wrong. A modern society should not tolerate 4 million unemployed.

The Budget does not provide the means to expand the economy. It does not provide the thrust to motivate Government Departments to concentrate on the problem. It would be foolish to try to suggest easy solutions. We are not talking about full employment in the context of 1944. There have been advances in technology. It is our case, however, that full employment should be the keystone of the arch of Government policy. The Secretary of State for Industry forgets that the economic situation today is different from what it was five years ago in terms of boom and slump. We are at the bottom of a slump. It is necessary to increase the PSBR. Our fiscal policy is the tightest in the western world. We should be spending money on the construction industry, sewers, education and housing. My right hon. Friend the Member for Stepney and Poplar (Mr. Shore) has spelt out the action that needs to be taken.

I notice that the hon. Member for Horsham and Crawley (Mr. Hordern) has raised again the absurdity that the Treasury still follows, as it did during the time of the Labour Government. It fails to make a distinction between capital investment and borrowing for current expenditure. If that distinction had been made, we would have been spared half the nonsense that has occurred over privatisation. It was getting the PSBR right and not so much for reasons of ideology, although it happened to coincide, that motivated the Treasury.

It is not a matter of chucking money at the problem. At the bottom of a slump, compensatory spending makes good sense. Our aim is to reduce unemployment, provide new jobs, more jobs in new industry and to stop the de-industrialisation of Britain.

De-industrialisation should be considered by hon. Members as unemployment was in 1944 when party differences were not allowed to interfere with the obvious needs of full employment. I commend to the House an article by Professor Thirlwall of the University of Kent in a recent issue of Lloyds Bank Review in which he points out that statistically, although there are problems of definition, the de-industrialisation of Britain is not new, that it has been going on for 20 years or more, but that its growth has been far greater recently and, according to figures that I have examined, ours is the greatest in the western world. We have to ask ourselves why this has happened. According to the views of economists, there are three reasons for de-industrialisation. The first is Government spending. That is the conclusion that the Government have drawn. The second is technological change and the third the effects of foreign trade. His conclusion was that it was caused not by Government spending or by technological change—which, on the whole, provides jobs—but that it arose mainly from foreign trade. That is the aspect that we should be examining.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

Was not the whole point behind the paper to which the right hon. Gentleman refers an argument for expansion and increase in foreign trade? How does the right hon. Gentleman feel that this thrust coincides with the Labour party's commitment to import controls?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

Our view is to say "No" to general import controls, but "Yes" to selective controls. To have selective import controls and then to do nothing in the context of planning would mean failure. The reason that I may have found the article by Professor Thirlwall so engaging is that many years ago I taught him economics.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

The right hon. Gentleman did?

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

I did, yes. It is not the explanation for his view. People can go a long way in their careers afterwards.

De-industrialisation is the other side of the coin.

The Government have intervened and are not leaving things completely to free market forces. The Secretary of State is preening himself on what he has done with the small engineering firms investment scheme, SEFIS 1 and 2—SEFIS and son of SEFIS. The House has heard them all today. In this respect I wondered why the Secretary of State was concerned about the west midlands. There has not been a great deal of concern about the west midlands before. However, I imagine there are other reasons for it that I know not of.

British Leyland is not a nationalised industry. It is a publicly owned industry that fell into the Government's lap because it went bust. That was the position with Rolls-Royce. Hon. Members should look at the publicly owned, as opposed to the nationalised industries, in a different way. It all began with Rolls-Royce in the days of the right hon. Member for Sidcup (Mr. Heath). The Secretary of Stat for Industry took my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) to task because he had not been very forthcoming about the proposals that had been put forward by the Chancellor and the Secretary of State.

In yesterday's edition of The Observer an interview with the Secretary of State for Industry was very revealing. It was like Peg's Paper. It said that the Secretary of State is not the sort of man who throws things at his television set, but he was apparently tempted on Tuesday … The object of his rage was a small businessman whose verdict on the Budget was: 'There's nothing in it for me'. My right hon. Friend the Member for Stepney and Poplar is in good company—only one so far.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

May I finish? Then, of course, I shall give way. The interview continued: 'He says that without even bothering to look,' explodes the Minister, displaying a martyred expression of those who are not understood. Then he has a go at the Engineering Employers Federation. It got even rougher treatment: 'They have been banging and banging away at us because we had to stop the small engineering firms investment scheme (SEFIS). Then they say there's nothing in this Budget for our industries, and here we are with 100 million over the next three years to revive SEFIS and I don't think they've even noticed. It's so damned unfair.' He continued in that way. I do not decry what he has done, but it is puff-ball compared with the real needs of the economy.

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

My indignation was directed towards a lady who is a small business person. She is a member of the CBI's small businesses committee, whose chairman, Mr. Jeremy Pope, said with some exultation after the Chancellor of the Exchequer's Budget that he had given them almost everything they had asked for.

Photo of Mr Merlyn Rees Mr Merlyn Rees , Leeds South

It is not for me to criticise people in small businesses, but the lady obviously felt like that. It is interesting how the article finishes: However much the Secretary of State argues, no figures are given about the number of jobs that are provided by this scheme because they do not know". The Government have intervened in a small way. Our policy is to develop that intervention in a bigger way. There are plans to deal with the national crisis. There must be partnership between the employers, the Government and the trade unions. It is no good the Labour party's saying that the employers in the private sector are somehow an enemy because they are in the private sector. Similarly, the Government should not take that attitude with the trade unions. Unless the trade unions are brought into partnership to discuss matters, the economy will not come right. There is no panacea or blueprint. Until we talk together in this country, we shall not achieve in peacetime the unity that was achieved in wartime. However, it can be done. That is why we should spell out our policy. I ask—I have not consulted on this, although it seems to be a good idea—that just as the public expenditure proposals were discussed by the Treasury and Civil Service Select Committee the Labour party's proposals that have been spelt out should be looked at by such a committee. There is nothing to lose. If mistakes are made it is better to iron them out and have them discussed before proposals are implemented. If the Government proposals on immigration had been looked at before 1979 by anybody who knew anything about the subject, they would have proved them to be wrong because they were rubbish.

I play a part in working out the Labour party's general policy, and hon. Members ought to discuss it before the election just as we discuss the Government's policy.

The Department of Industry should have wider responsibilities, with the forecasting part of the Treasury brought within it. Forecasting is important for discussing what is happening with individual firms and industries. A national investment bank, which has been on the agenda for 30 or 40 years, should be set up to provide resources direct to industry rather than to portfolio investments. Finally, there should be tripartite discussions between the three sides of industry to examine growth, employment and real income. By partnership and discussion, and by looking at the wider aspect of employment, incomes of all sorts can be examined. It is not sufficient just to look at pay and incomes by themselves. The right way is to examine the position collectively where everybody plays a part in coming to a decision.

The press said that the Budget was boring. We can all bear what the press says on these matters. We in the Opposition regard it as irrelevant to the main aim of stopping de-industrialisation and returning to full employment. We do not need to look for our salvation to eastern Europe with its bureaucracy, or to Reaganomic United States with its free market forces. Britain needs to do something in the international economic scene, and this will be dealt with later. At home we can be our own economic schoolmasters, as we were in 1944, but we must relearn the lesson of the 1944 White Paper and update it to meet today's problems. The Government must lead in the fight to deal with unemployment. The Government's policy palpably does not deal with unemployment, the fall in industrial production and the large number of bankruptcies. This Budget is irrelevant to the needs of the community.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Glasgow Hillhead 4:57 pm, 21st March 1983

I beg to move, as an amendment to the proposed motion, in line 5, leave out paragraph (a).

I shall deal briefly with the amendment before turning to the wider issues in the Budget. Its purpose is to delete the entire paragraph dealing with VAT. It is not that the Social Democratic party does not want any VAT. Indeed we proposed a lower rate of VAT, which would have been a useful counter-inflationary and stimulating measure in the present circumstances. As the paragraph stands—it is a narrow point—it would not allow the House to discuss any specific changes to VAT when considering the Finance Bill. Amendments could be put on the general rate but not on questions such as zero rating. The Social Democratic party regards this as of considerable importance.

Charities should be debated and more strenuous efforts should be made to find relief for charities, which could be done.

The major question here is the zero rating of building repairs and maintenance. It is increasingly ludicruous that there should be zero rating on new constructions and the full VAT rate on maintenance and house renovation. That does not make sense, on economic, amenity, housing or conservation grounds. There is much unemployment in the construction industry and a great deal of the repair business is done by smaller firms which the Government say they want to encourage. The Social Democratic party wants to press this issue very hard in the present circumstances. Without the amendment it will not be possible for the House to debate this and other important matters relating to VAT when we come to consider the Finance Bill.

The Budget disappears from the centre of political attention—I do not direct my criticism especially at this year's Budget—more quickly than used to be the case. We are debating the Budget six days after the Chancellor of the Exchequer announced it and when it is receding into There are two reasons for that. The first was mentioned by the right hon. Member for Leeds, South (Mr. Rees) in a slightly different way, and it is that it is now possible to read much of the Budget in the Sunday newspapers two days in advance, and whatever the Budget may say it inevitably comes as an anticlimax. I do not say that it is necessarily wrong to have more advance information about the Budget. Indeed, there was a great deal of mumbo jumbo about Budget secrecy and I do not want to take a rigid traditionalist position. However, any previous announcements should probably be made to the House instead of being leaked to the Sunday newspapers, partly by the Treasury but particularly, I suspect, by No. 10, Downing street. To cite the famous words of the editor of one Sunday newspaper, if there is a change of policy. we ought to be told. Has there been a change of policy about secrecy?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

Perhaps I might draw the right hon. Gentleman's attention to an article in the Financial Times on Friday, which reminded the House of the very important and deliberate changes that I have been making in response to the Select Committee's representations to publish much more information, notably in the autumn statement. I think that the right hon. Gentleman will find that all the forecasts, calculations and speculations could have been derived from that.

I have taken some interest in this issue, and although the variety of speculation was infinite, none of the forecasts was correct. That is confirmed by the article in the Financial Times. There has been no change of policy on leaking, but there has been a significant change of policy in laying as much information before the House as possible, in response to its representations.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Glasgow Hillhead

I am sure that the Chancellor wishes to inform the House properly, but I am not sure that I find his argument wholly convincing. Of course the options are clearer than they used to be, because of the information given in the autumn, but I am sure that the right hon. and learned Gentleman and the House know that speculation in the Sunday newspapers went far beyond outlining the options. With the exception of one little mistake, which may have been due to a last-minute change after discussion between Downing street and the Treasury, or it may have been a deliberate error in order not to make the degree of leak too great, the Budget's general line appeared in the newspapers. That one little mistake was thinking that the ceiling for mortgage relief would be raised to £35,000 rather than £30,000.

It is not a question of options. The amount of information might be right or wrong, but it is no good the Chancellor of the Exchequer saying that there has been no change of policy about Budget secrecy. Indeed, while we are about it, we should give the late Hugh Dalton a posthumous part in this, because he resigned over the most minor indiscretion, and if anything like the same standards applied today the Chancellor of the Exchequer, the Prime Minister and all the Treasury Bench would be out of office.

The second reason why the Budget recedes so quickly from the centre of public attention is that a decade of high inflation has deadened the public mind to traditional budgetary changes. There are other factors, and other changes in incomes and prices, that make far more difference during the course of the year than 3p up or 2p down. Therefore, the traditional budgetary changes have become increasingly like toy sailing ships that are engulfed by the waves of much greater movements in the economy during the year. Of course, budgetary strategy can affect those waves, and it is the Chancellor of the Exchequer's strategy, rather than its execution, that is at fault. That strategy is mistaken, but in its own terms the Budget is reasonably consistent and creditable.

I am sure that the Chancellor will come bitterly to regret his treatment of pensioners. His disguised clawback will give him the worst of both worlds. The fact that he thought it worth doing clearly underlines the extent to which the Government's only economic achievement—the reduction in the inflation rate—is about to reverse itself in the second half of this year. For the rest, the Government's record is appalling. The right hon. Member for Stepney and Poplar (Mr. Shore) put that point with great force at the beginning of his speech last Wednesday. I do not agree with all his remedies, but his destructive analysis of this Government's record was put very succinctly.

Unemployment has increased from 1·3 million to 3·4 million. Industrial production has fallen by 12 per cent., while gross domestic product has fallen by 5 per cent. All that has happened while North sea oil revenues have increased from £5 billion to £14 billion during the Conservative party's period of office. This Government would be totally bankrupt without North sea oil revenues. I cannot believe that it does not give the Chancellor of the Exchequer cause for concern that when North sea oil revenues are pretty well in full spate he is spending more on keeping people unemployed than he is receiving in total revenue from that oil. That is an extremely sobering fact.

Given those facts, the idea that some sort of moral regeneration is taking place in the economy is profoundly irrational and distasteful. There are fields of human endeavour in which, according to one's beliefs, one can think that purification of the spirit can be achieved by mortification of the flesh, but the management of the economy is certainly not one of them. Management of the economy is essentially a material process to achieve material aims by material means and must be judged in terms of the wealth and welfare that it succeeds in creating. On that test, the Government's record is appalling. The' Government have elevated the public sector borrowing requirement and it has now become a new fetish. In the Government's first few years sterling M3 was their fetish, but in the past two years the PSBR has replaced it. In the memorable words of the right hon. Member for Chesham and Amersham (Sir I. Gilmour), sterling M3 proved to be the uncontrollable in pursuit of the indefinable—or perhaps it was the other way round. It is equally good either way, but when that clearly became the case the Government switched to the PSBR.

I do not take the view that monetary aggregates and the relationship of public expenditure to public revenue are unimportant. Indeed, I am hardly likely to do so, because my record on public borrowing is much stricter than that of the Chancellor of the Exchequer. However, that was achieved in very different circumstances, when unemployment was less than 600,000. It was right in those circumstances, but it is not right in the present circumstances. To use the PSBR as almost the sole measurement for controlling the economy is ridiculous.

The Chancellor is hoisted, to some extent, by his own petard, because he has been forced in the Budget to do some pretty doubtful footwork with the contingency reserve to pretend that he is keeping to £8 billion or 2·75 per cent. of gross domestic product. However, surely the real as opposed to the symbolic impact of the PSBR on interest rates and inflation should be seen in terms of its total impact on the public debt. The real problem in relation to interest rates is how much Government paper one can get the non-bank public to hold voluntarily at a given rate of interest so that the banks do not have to take it, thereby creating money.

I was not aware until recently—I do not know how aware hon. Members are—that the real volume of public debt in relation to the national income has declined dramatically over the past two decades. When 13 years of Conservative rule came to an end in 1964, they handed over to the new Government of the right hon. Member for Huyton (Sir H. Wilson) a volume of public debt that was 85 per cent. of the national income. The relationship of public debt to the national income fell to 42 per cent. by the early or mid-1970s. Since then it has increased a little, but it is still under 50 per cent. I cannot see how, in those circumstances, it can be argued that the real volume of the national debt is the major determinant of inflation.

Although the Conservative Government after 13 years handed over to the incoming Government that heavy burden of debt, which has been greatly reduced, they also handed over a rate of inflation which was rising slightly but which was much lower than anything that we have known recently.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

Surely the right hon. Gentleman has forgotten to point out that the rate of inflation, which started increasing in the late 1960s and continued into the mid-1970s, was a major factor which led to the change in the ratio and meant that the poor investor and the lender to the Government were the people who were left out.

Photo of Mr Roy Jenkins Mr Roy Jenkins , Glasgow Hillhead

I am not sure that the facts bear out the hon. Gentleman's case. I have the figures for the period here, but I do not want to quote them all. If one looks at the movement from year to year, one finds that, even taking into account the fact that things take their time to work through, it is impossible to see the decline in the relationship between national debt and national income from 85·3 per cent. to 42·9 per cent. in 1975 having any relationship with the rate of inflation.

I do not wish to argue that we should be indifferent to the size of the national debt or to public sector borrowing. That would be ludicrous. I pursued a stringent policy on that in particular circumstances. However, too much of a fetish as been made of the PSBR, and in the interests of himself and the country the Chancellor would be wise to step back and take a rather wider view.

There is a difference between Britain's position and that of the United States. The United States has a greater problem than we have, because it undoubtedly has a structural long-term, or, as it is sometimes called, full employment deficit. We do not. In other words, if one makes the adjustment in public finances if full employment were to return, we should be in surplus and not in deficit. Therefore, the Chancellor has locked himself into a false strategy, and as long as he so proceeds there will he no fall in unemployment and no escape from the increasingly divided nation that unemployment brings about.

The Chancellor told us that last year's Budget was a Budget for growth. There was little growth except in unemployment, which increased by 250,000. He told us that this year's Budget is one for the family, for enterprise and for Britain's continuing recovery. I should like to see Britain's recovery begin. I do not know what will happen to the family, but I do not think that enterprise will achieve a great deal. There will be some growth, but nothing created by the Budget and nothing that will reduce unemployment.

On the whole the London Business School is much more favourable to the Chancellor than most such independent bodies. It said that, of the increase in unemployment and the slump since May 1979, about half is attributable to the restrictive policies of the Government and about half to international circumstances. I agree with that. It would be ludicrous to blame the Government for the whole of the increase in unemployment, but it is reasonable to blame them for a significant part of it, particularly that part which has taken us well above the average for other major industrial countries.

By the same token it would be possible to correct half the damage for which the Government have been responsible by a sensible, well-directed change of budgetary strategy. The other half will to a large extent depend on international circumstances. It is vital that we take as constructive a role here as we possibly can. There is a real opportunity to achieve greater currency stability, not just on a European basis, but on a world basis. Nobody should be mocking about that. We cannot put Bretton Woods on its throne again. The Bretton Woods world with fixed exchange rates was an immensely better world for traders and exporters, for production, growth and employment, than anything we have known since.

I was immensely depressed a short while ago to hear the Chancellor's reply when the right hon. and learned Member for Hexham (Mr. Rippon) asked him for his response to the United States Secretary of the Treasury's tentative suggestion for a new conference to look at current stability. The Chancellor said that Mr. Regan's ideas should not to be taken too literally.

The right hon. Member for Leeds, South was in a historical mood this afternoon in his interesting and powerful speech. Perhaps I may be allowed a historical comparison for that reply. Thirty-five years ago General Marshall went to Harvard and tentatively remarked that the United States should assist the European recovery. Twenty-four hours later Ernest Bevin mobilised the European nations and swept tentativeness into reality. The result was to give Europe—the recipient—and America—the donor—25 years of the greatest surge of prosperity that we have ever seen in world history.

A side result of that was the forging of the Atlantic partnership and a generation of peace and freedom in the west. It is horrifying to think what might have happened if the Chancellor had been in Ernest Bevin's place: if he had bumbled down to the House of Commons and said that General Marshall's words were not to be taken too literally. Had that happened, the history of the past 35 years might have been completely different. Europe might not have recovered. Freedom might have been destroyed and peace might not have been preserved.

I am glad that the Chancellor is presiding competently, as I am sure he is, over the interim committee of the IMF. However, I still do not think that there is sufficient world leadership coming from the Government at present. There is an opportunity for that, and that is what we should see happen today.

Photo of Mr Edward Heath Mr Edward Heath , Bexley Sidcup 5:18 pm, 21st March 1983

In his Budget speech my right hon. and learned Friend the Chancellor of the Exchequer dealt with the international situation, as indeed did the right hon. Member for Glasgow, Hillhead (Mr. Jenkins). Before I deal with that, I want to congratulate my right hon. and learned Friend on his constructive measures. They will all be helpful. In particular, I agree that there should be increased allowances instead of a reduction in the upper levels of taxation. My one reservation is about the retirement pension, to which the right hon. Member for Hillhead referred. That has become an infinitely contentious issue. It is not understood by the public. There is great confusion about whether there is clawback or no clawback. I cannot believe that that is for the good either of Government Members or of the country as a whole.

I ask myself why the change was made by a Labour Government to a system of forecasting what retirement benefit would be paid in the November when it was due. The reason was simply that every time it was fixed in May the pensioners said, "Why can't we have that amount now because we do not know whether it will be worth more or less by the time we get it?" That is a natural human reaction. If one could now say to pensioners consistently, "Of course, inflation will be down by the time you get it," we might not be able to convince them at once, but it would at least be a rational position.

The Chancellor is not in a position to say that, as he has frankly admitted to the House. Therefore, retirement pensioners will be critical because they are unsure of the value of their pension by the time that they receive it. The answer to them is, "Yes, but if it is inadequate, account will be taken of that in the succeeding year." The human element enters again. I am afraid that pensioners do not think in terms of what they will receive in a subsequent year or years. That is human nature. When one has reached pensionable age, one thinks of the year in which one is living. One may hope to go on, but one wants the resources to carry on in the present year. It may be too much to ask my right hon. and learned Friend not to implement his proposal this year and thereby involve us all in numerous acrimonious discussions at the hustings, but I hope that he will recognise the human and natural difficulties.

Photo of Mr George Cunningham Mr George Cunningham , Islington South and Finsbury

I should like to jog the right hon. Gentleman's memory. The real reason why the change was made by Mrs. Barbara Castle was exactly the reason why the Chancellor is proposing the opposite change now. At that time the change saved money, just as this change will. Two people have made changes in opposite directions for the simple purpose of reducing expenditure at the expense of the recipients of the benefit.

Photo of Mr Edward Heath Mr Edward Heath , Bexley Sidcup

I was not responsible for Mrs. Castle. I was responsible for many things, but fortunately not for her. I do not know what was in her mind. I am recalling all the difficulties that we had over many years and the criticism by pensioners for fixing the amount in May which made them ask what it would be worth in November and why they could not have it immediately. The system has never been understood by people drawing their pensions. That is why I emphasise the human element.

The aspects discussed by my right hon. Friend the Secretary of State for Industry will be helpful. He was right to emphasise that his was a modest contribution but my right hon. Friend should not be too modest in these matters. For a Government who believe that the market solves everything automatically and therefore that the Government should opt out of everything, the recital of my right hon. Friend's measures of special incentives here, tax reductions there, special subsidies elsewhere, and, above all, advice for everybody, is a remarkable achievement. I hope that my right hon. Friend will not underestimate that aspect of his work.

We are talking in terms of £2.5 billion, but we often tend in our mental activities to act in terms of a former currency that existed when my right hon. Friend the Secretary of State for Industry was at the Treasury. I am sure that my right hon. Friend, in his opening condemnation of the measures taken in past decades, would not include those measures taken when he was at the Treasury. The £2·5 billion would have been less than £1 billion when my right hon. Friend was at the Treasury—perhaps only £850 million or £900 million. That is a comparatively small sum, and that is why my right hon. Friend is right to emphasise its modest nature and the impact that it will have on the economy.

The governing fact must be that it is right to encourage small businesses, but they cannot make up for the large employment by the great concerns which have got rid of so many employees in the past few years. We must face that, and I shall deal with that when I talk about the international situation.

I thank my right hon. and learned Friend the Chancellor because he has removed many of the anxieties that some of us have had in the past two or three years. I am sorry about the pensioners. If he is able to do something about pensions, many people will be grateful and it will certainly save us a great deal of political embarrassment. I hope that I am entitled to say that.

The oil issue is immensely complicated and not generally understood by the public. My right hon. and learned Friend rightly said that he could not foretell exactly what will happen and that perhaps later in the year he will have to make allowance for that. He specifically mentioned increasing the public sector borrowing requirement. I believe that to be justifiable in such circumstances.

One or two points in connection with oil remain to be cleared up before one makes a general statement. Is it right that my right hon. Friend the Secretary of State for Energy has given an undertaking to OPEC about the total production of North sea oil? Has he agreed that it should be limited to 103 million tonnes instead of the 113 million tonnes on which the Budget is based? If he has, it is bound to have a considerable impact on the Chancellor's calculations. How will the Secretary of State limit the output of North sea oil to the figure agreed with OPEC? I am not saying that limitation is undesirable, but if there is a difference of 10 million tonnes it will have an impact on the Chancellor's figures.

I believe that it is desirable that we should not stand aside, but that we should make every effort to influence OPEC in its decisions. There will be no reason for us to rejoice if OPEC fails to keep its agreement and we enter into a price war. Ir. the long term, stability is what is basically required over what is still the major energy material. If there is anything that we, governing North sea oil, can do to encourage immediate and long-term stability, we should do it.

Our relations With some OPEC contries, particularly Saudi Arabia, have not been good, to say the least. If we incur bad relations with OPEC now, we cannot expect it to take any notice of us if and when there is a world recovery, the demand for oil rapidly increases and OPEC wishes to push up the price far beyond what it is now. I strongly urge the Government to do everything possible to work with and influence OPEC in its decisions on production and price levels.

I am particularly worried about Nigeria, another country which produces oil similar to ours. Nigeria believes that we are leading a cut-price war against it. The Nigerians thought that at the time of the first reduction in North sea oil prices, and they believe it again now. Nigeria is our major trading partner in Africa. Our trade with Nigeria is greater than that with South Africa. Therefore, an enormous amount is at stake in our relationship with Nigeria. We should go out of our way to make it clear that we do not wish to engage in a price war with Nigeria.

I hope that the Chancellor will have a word with British Petroleum about its statements and their timing. Although the British Government no longer have a controlling interest in British Petroleum, they have almost a controlling interest. The Government should talk to British Petroleum about its interventions and their timing and what it says. It has not been helpful in the past.

My concluding topic is the international position. My right hon. Friend the Secretary of State for Industry said that my right hon. and learned Friend the Chancellor of the Exchequer had not had the credit to which he was due. I gladly give him all the credit for what he has been doing since he has been chairman of the Committee of Twenty. The fact that he achieved a considerable increase in the general agreement to borrow is to his credit.

As my right hon. Friend the Secretary of State for Industry said, my right hon. and learned Friend has been immensely influential in the settlement reached at Brussels. This raises the question whether Britain should be a full member of the European monetary system, in which we take such a close interest and have such influence. We would then have our own currency backed by the resources of the Community. It was argued at one stage that the rate had to be right before we joined the EMS. We have moved from $1·55 to $2·42 and down to $1·48. Is there no rate within that bracket at which it is suitable for us to go into the EMS? If not, where is the rate to be found? Is it above $2·42 or below $1·48? If it is at the upper end of the scale, how do we reach it? If it is at the lower end, we may get there all too soon. With all the Chancellor's influence, which he has so successfully exercised, Britain is not a full member of the EMS. Perhaps he will give us a detailed explanation why that is so.

My right hon. and learned Friend has persuaded the members of the International Monetary Fund to increase their quotas by 47·5 per cent. I know that he would have liked to go further and that it was impossible to persuade the Washington Administration to do so. My right hon. Friend the Secretary of State for Industry has said that the amount available to the IMF was doubled. I was not aware of that.

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

The usable resources were doubled. My right hon. Friend will appreciate that not all the resources available, either under fund quotas or even under the general arrangement to borrow, can actually be drawn. However, a large proportion of the GAB resources—I think 75 per cent.—is usable. An increase of that kind is worth a great deal more than an increase of just under 50 per cent. in the fund's resources. The managing director, at the conclusion of the proceedings, calculated that by more than doubling the GAB and by increasing the fund's resources by just under 50 per cent. he had doubled the resources which he could effectively use. There was a doubling of usable resources and slightly less than a 50 per cent. increase in the fund's quotas.

Photo of Mr Edward Heath Mr Edward Heath , Bexley Sidcup

I am grateful to my right hon. and learned Friend for that explanation, because it emphasises that the necessary bridging of the developing countries' deficit is less likely to be achieved by the quotas, which have been increased by 47·5 per cent., and by the increase in the general arrangement to borrow. If we estimate that the gap is about $85 billion—it may be slightly less now as the price of oil has been falling and it may stand at about $70 billion—the gap will be bridged only partly by the general arrangement to borrow resources. There is also the limitation that the quotas cannot be used until 1984. I give my right hon. and learned Friend credit for having brought forward the date on which the quotas will be increased, but they will still not be effective in bridging the gap this year.

I understand that my right hon. and learned Friend is to bring forward a discussion on the special drawing rights. I strongly support him in adopting this approach. There will then be another battle about getting approval for special drawing rights, especially from Congress. If Congress refuses to accept 47·5 per cent. or an increase in the IMF quotas, what will everyone else do? This is a major political question. My view is that we should say, "Very well, the United States wishes to opt out but the rest of us will go ahead." I do not believe that it is possible to allow every member of the IMF or the international community to be blocked by Congress and prevented from implementing a measure that is essential in enabling us to deal with the developing countries, and especially to give those countries the resources that they require to get world activity going again.

I direct my remarks to the overall economic activity of the world and of Britain's role within it. My right hon. Friend the Secretary of State for Industry quite rightly said that there has been increase in demand. That has been consumer demand to a large extent. How is this accounted for? There has been a reduction in the Government's public sector borrowing requirement—the right hon. Member for Hillhead touched upon this—and the banks have increased their loans to finance consumer consumption, which has increased. Is that the right way to deal with the economic problem?

When consumption increases there is an increase in imports and then, often unnecessarily, there are doubts about our currency. It is not realised that we have to import more raw materials before we can manufacture goods and export them. We are thus faced with the sequence of difficulties from which we have suffered in the past. The public sector borrowing requirement is more limited—as the right hon. Member for Hillhead said, that is in part because of the reduction of such things as contingency funds—but bank loans are increasing, and in the process consumer demand is being financed. Is this the process that we need to go through to get our economy alive again?

I do not believe that we can bring our economy to life once more unless we are able to deal with the problem of the indebtedness of the developing world, the interest that it has to pay and its repayments. We do not always recognise that such measures as have been taken will deal with the problem for about a year and that they will then have to be renewed over a period in an attempt to correct the problem. In the meantime the imports of the developing world are decreasing and will probably drop still further. That is bound to have an effect on our economy in the developed world. The indications in the world economy are that we shall not get anything like the growth that some are forecasting. Moreover, I cannot see that the developing countries will produce the surplus that the IMF sometimes calculates as a result of its actions. All these factors put the international situation in doubt.

I am grateful to my right hon. and learned Friend the Chancellor of the Exchequer for the actions that he has taken in international finance, but I believe that much more is required. I think that he has room internally for an increased public sector borrowing requirement if that becomes necessary either because of oil developments or because he recognises that he can do more through capital investment to encourage the economy generally. I urge him not to be tardy in his well-doing.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East 5:38 pm, 21st March 1983

I agree with the concluding remarks of the right hon. Member for Sidcup (Mr. Heath). I add that I think we would be unwise in Europe to rely upon a continued United States recovery. Undoubtedly it will have an effect on Europe's position and may enable us to grow rather faster than we would otherwise do during the next 12 months.

A battle is going on between Congress and the President of the United States, and unless the President reduces defence expenditure he will have a budget deficit next year that will be of horrific proportions in the eyes of Wall street. There is little doubt that if that happens interest rates in the United States will increase and its recovery may well be abortive. These consequences may not emerge in time to prevent the re-election of President Reagan—I think that the recovery will last until then—but they may well abort any possible recovery that may seem to be breaking out in Europe and in our own country.

The world is more divided now on its economic objectives than at any other time that I can recall. This is because of the break-up, as the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) said, of the Bretton Woods agreement and of the solidarity that was engendered following General Marshall's offer, the approach of the OECD and the building of the Alliance. This structure has begun to dissolve and some of the complacency that I hear is not justified when we consider the disarray in which the West stands.

There is no agreement, as the right hon. Member for Sidcup said, on the treatment of debts of Third world countries. Even given the increase in resources of the GAB and elsewhere, it is highly likely that the debt problems of Venezuela, Mexico and Brazil will have to be dealt with again. I do not know that we are in a position to do that, even though we have the resources, for political reasons. That is one problem.

There is the disarray in the exchange rates, to which the right hon. Member for Hillhead referred. If I may add a personal historical note, when Giscard d'Estaing and Helmut Schmidt were anxious to set up the European monetary system we had breakfast together to see whether this country would take part. I was against it then for various reasons, including the one mentioned by the right hon. Member for Sidcup. However, as the right hon. Member for Hillhead said, there is no doubt that on the broader canvass we need something approaching Bretton Woods, which for many years gave us faster growth than the world has since seen.

One of the major tasks at Williamsburg should be to give directions to those who can work out the details that they should attempt once more to achieve greater stability between European rates, American rates and the yen, so that we can return to something closer to the system that gave us so much prosperity.

The third issue is that of the trade war that has begun with the United States. I know that Ministers are there trying to stop it. I should regard it as catastrophic were we to embark upon such a trade war. The common agricultural policy, the agriculture war that has broken out and the cross-subsidies that are now taking place mean that our position as an island nation, dependent for so much of our prosperity on our international trade, is in greater danger that I have ever known. That is coupled with the disarray in oil prices. I do not believe that they will stay at their present level. I belive that they will become lower. If they become too low, there will be less drilling in the North sea and elsewhere.

Photo of Mr Nicholas Baker Mr Nicholas Baker , North Dorset

Does the right hon. Gentleman agree that the disarray in the West and the difficulties of Third world countries can be ascribed to the irresponsible inflation in Western industrial countries?

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

I should not agree wholly with that. Inflation has clearly played a part, but the lack of demand for Third world resources, commodities and materials has also played a large part. The prices that they received did not keep pace with their requirements. If the Western world increased its demand, that would have a beneficial effect upon the Third world's indebtedness.

I fear—I say this with regret—that if the worst of the four matters about which I have been talking were to come to pass we should find countries being driven much faster towards protectionism. Perhaps the Chancellor has helped to save the day by taking part in the discussions that led to the revaluation of the deutschmark and the devaluation of the French franc. Only time will tell whether the French were wise to push for such a small devaluation. They might have been wiser if they had concentrated less on national pride and gone for a little more in their pockets, but that is a matter for them. If we continue in this way, the pressures for protectionism will undoubtedly grow.

I want to talk about the domestic scene. I was taken by the idea of the right hon. Member for Hillhead when he said that it would be sensible to exclude the repair side of the construction industry from VAT. I do not know what the bill would be, but I thought that he was making a sensible proposal. New building, apparently, is exempt from VAT, but repairs are not. One surely is as essential as the other. The Government would be sensible if they considered this problem.

I have a vested interest in studying the Government's record since 1979. After all, I was put out of office on the basis of what the Government were proposing to do. Without boring the House, I should like to remind it of what the Government intended. Let us see how far they have fulfilled their undertakings and the policies upon which they embarked. If we summarise the past four years, I believe that they underestimated the problems that they would face when they came to power, although there is no doubt that they were warned about them.

The difficult position that the Government inherited needed skilful handling, but they turned to gross butchery, with the result that they destroyed confidence in industry with their first Budget. Every year since then they have been far too optimistic about the effect of their policies. They have misled the country—not deliberately perhaps, but because they misjudged the position themselves. They have raised hopes constantly, only to dash them. The only conclusion that one can reach is that when the Government come to the end of their term of office the country will be poorer than they found it and that the poorest and the weakest will have suffered most.

The Chancellor of the Exchequer, in a speech in April 1979, a month before the general election, said three things which I am sure he believed. He promised reduced tax for all, rising production and real prosperity. Not one of those objectives has been fulfilled. Taxation is higher, not lower, except for the very rich; industrial production, instead of rising, has decreased by 12 per cent.; and the national wealth has diminished by £3·5 billion. I am sure that the right hon. and learned Gentleman believed what he said, but he has failed. I am sure also that he was sincere when he said in the same speech that the Conservative Government would ensure secure, well-paid jobs.

I shall not talk about macro-economics. I shall talk about my constituency. On the eastern side of Cardiff there is a post-war mixed estate of council and private houses. As a result of the Chancellor's four-year stewardship, one man in every third house is unemployed. In the ward of Adamsdown, in the inner industrial area of the capital city of Wales, there are 1,100—to use the jargon—economically active men. Of those, 633 are out of work, according to the latest estimate. There are 467 in work. We talk about unemployment in social and economic terms. I say to the Chancellor and all Ministers that it has become a moral question. I am not content that we should have economic arrangements that leave so many of our people sitting idle when they should be working. What kind of society do we think we are creating?

Since the beginning of the year—Mr. Speaker, you know the city, as I do—there has been a constant succession of company closures in Cardiff. In the first firm about which I learnt 270 employees were to be sacked in the new year. The reason that it gave was that there were no prospects of any significant improvement in market conditions despite Major cost reductions achieved in co-operation with the employees. I heard what the Secretary of State for Industry said about the unions. I hope that he will remember that for every case that he can quote there are 100 unheard of where there has been major co-operation but unemployment has still resulted.

The second firm is well known to you, Mr. Speaker. It is Gripoly Mills. It is a small firm that is 100 years old. It has survived many blizzards, but it has been taken over by a multinational company. I do not know whether you are aware, Mr. Speaker, that the mills are to be closed and 65 jobs are to go. The managing director has written to me saying that that is despite the employees' co-operation, which has been excellent throughout. Will the Secretary of State for Industry kindly remember that?

The letter goes on to say that for the last two years turnover has been depressed. The forward business forecast shows deterioration. It is no longer possible for us to sustain this loss. In the third company, 160 employees are to lose their jobs. The reasons are continuing financial losses, marked deterioration in demand and shortage of orders. The company wrote to me: Without the efforts on the shop floor, in the offices and in the sales territory to cut costs, improve quality and get more orders, our financial position would have been much worse. I ask the Chancellor and the House to note that there are two common factors in all three companies. The first is the co-operation of the employees, to which the companies pay tribute, and the second is the lack of demand. I am not speaking about a long period. The companies have notified me of their intention to close—indeed, two have already closed—within the past eight weeks. The first letter arrived on 14 January and the others followed it. Where are the "secure, well-paid jobs" of which the Chancellor spoke?

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

I am not talking about Peter Rabbit or anything like that. I know the difficulties that have existed—previous speakers have referred to them—but the Chancellor cannot escape his responsibility; his misjudgments of economic, fiscal and monetary policies have contributed heavily to what has happened in our country. He was warned by the right hon. Member for Sidcup that the policies in his first Budget four years ago would not work. We remember that in that first Budget the Chancellor nearly doubled VAT and put up MLR to 16 per cent. and later to 17 per cent., so that companies had to borrow and pay over 20 per cent. interest on their borrowings. Of course the Chancellor killed confidence, and it has never been recovered.

As Leader of the Opposition, I had to make an immediate response to that first Budget. When I heard what the Chancellor said I was aghast and I said that he was embarking on a most colossal gamble with the future. It was a gamble that has failed.

Earlier, I had warned the Prime Minister about her error in supposing that the control of the supply of money would bring us prosperity. I said: The sweet simplicity of her statement hides a multiplicity of bankruptcies and tens of thousands of men and women out of work."—[Official Report, 14 December 1978; Vol. 690, c. 925.] I underestimated the number.

The Government were warned. They were told what would happen, but we were ignored. Ministers were conscious of their rectitude, confident in their remedies, impenetrable in their complacency and gross in their error. As I said those things at the Dispatch Box, all the new Conservative Back Benchers, rejoicing in their victory and arrogant in the fact that we had been defeated, laughed and attempted to put me off my stroke. Four years later they are bound to agree that there was much more in that criticism than they conceded at the time.

Of course the Government did not have an easy inheritance in 1979. We never pretended that they did., and that was one of the reasons why we lost the election. We did not pretend that all the issues would be soluble. However, the Government inherited an economy which was growing and in which investment in new plant and machinery was high. They even inherited trade unions that were not instinctively hostile. In some ways, because of the winter of discontent, they were as hostile to me as they were to the Conservatives. The situation needed skilful handling, but did not get it.

The Government doubled VAT, increased the MLR and encouraged the sterling rate to rise to $2·33. Where is it now—$1·48? There has been a fall of about 60 per cent. They scolded and sneered at trade unions instead of trying to win their consent. My hon. Friends remember the attitude to trade unions, which was demonstrated in speech after speech. The Government also wasted parliamentary time and energy on irrelevant legislation to fritter away national assets such as aerospace, oil, telecommunications and the ports.

That is not all. The Government are culpable through their constant misjudgment of the effects of their policies. Let us look at what they said. In 1980 the Treasury forecast that that would be the worst year. In 1981 the Chancellor said that the economy should pick up from there on. In 1981 the Secretary of State for Energy said: Better times are clearly in sight. In early 1982 the Chief Secretary to the Treasury said: We have embarked on a path of steady recovery". The actions to which he was referring were aborted a few months later. In 1983 the Chief Secretary said: Evidence of recovery is all about us. Why should I believe them when they have been wrong so often? Given that record, why should anyone believe them? Prospects are brighter? It is like taking a penny candle into St. Paul's cathedral to illuminate it.

The Government tell us that their major object is to continue to reduce inflation. They still cling to the belief that if they reduce inflation—we do not know to what level—it will lead to spontaneous and substantial economic growth. I tell the Chancellor that he is wrong. The longer that he persists in his policy, the worse our industrial position will become.

We have not only the evidence of the past four years to disprove the Government's beliefs. I can go back to the 1930s, when inflation was non-existent. As a young clerk in the Civil Service I used to get an increment every year, but for four years in a row the fall in the cost of living bonus, based on the retail prices index, washed out my increments and I was on the same salary for four years.

There was some growth in the 1930s in one or two favoured areas, but it left whole regions dying and they have never recovered. The Government have failed to read the lessons of history. The damning thing for those of us who have argued year in and year out for increased productivity is that, in the absence of increased demand, increased productivity today leads not to new jobs, but to higher unemployment. The gulf between the Government and their critics, the number of whom is growing, concerns the level of demand.

Unemployment prospects are so tragic for whole groups of our young people that a new approach is needed. As the right hon. Member for Hillhead said, the Government were wrong in concentrating so much on the monetary supply in the first half of their term of office and in concentrating so much on the PSBR in the second half.

There were days when Chancellors took an approach that was much more civilised and less concerned with mumbo jumbo. We were concerned with four things being kept in balance—growth, stable prices, high employment and the balance of payments. Those are the issues which matter—not the size of the PSBR or concentrating on M3 as though it is the only factor which matters and which would solve all the problems.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

Will the right hon. Gentleman give way?

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

The hon. Member for Enfield, North (Mr. Eggar) knows before he interrupts that that was the doctrine uttered by Ministers, to our intense disgust, year after year.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

The right hon. Gentleman referred to the four aims that he was pursuing, but was not the culmination of his efforts to reach those aims summed up by the 1967 devaluation?

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

I do not think that it was. I shall not be tempted into giving the whole history of the matter, but there was a strong case for devaluing in 1964, as a result of what we inherited from the previous Government. For reasons that I will not go into now, we did not devalue, even though the OECD suggested that we should. I shall write all this in a book, which I am sure will be read avidly.

Our efforts were summed up in the fact that at that time we were getting a 3 per cent. growth rate, a high level of investment, the level of unemployment was about 400,000—I shall be corrected if I am wrong—and a balance of payments. Only oil has saved the skin of Conservative Members. Let there be no doubt about that.

A major priority must be to change the Government's policies. I trust that when the election comes we shall get rid of the Government. Individual measures have been put forward. I do not intend to go into them now. I know that times are hard for the Chancellor of the Exchequer. He was in Brussels this morning and is now on the Front Bench. That is a test of his durability. I do not wish to be personally offensive to him, because I know the task that he has to undertake. However, the right hon. and learned Gentleman has been wrong in the policies that he has followed. They need changing for moral as well as economic and political reasons. I beg him to do so.

Photo of Mr William Clark Mr William Clark , Croydon South 6:11 pm, 21st March 1983

It is a daunting experience, as a Back Bencher, to follow five Privy Councillors, including two ex-Prime Ministers. It comes ill from the right hon. Member for Cardiff, South-East (Mr. Callaghan) to criticise the optimism of my right hon. and learned Friend the Chancellor of the Exchequer. I recollect that when he was Chancellor, according to him, he had got it right and we were going round the corner, "steady as she goes". However, his optimism was misplaced. I remind the right hon. Gentleman, with no rancour, that his Government incurred an overseas debt of $22 billion because of their disastrous economic policy. This Government have paid back $10 billion of the debt that the right hon. Gentleman's Government incurred.

Photo of Mr James Callaghan Mr James Callaghan , Cardiff South East

I have heard that story so often that I have brought the figures with me. The hon. Gentleman is wrong. It is true that during the period of the Labour Government our debts grew by $13 billion. It is also true—but it is never mentioned by the hon. Gentleman and others—that our assets grew by $15·5 billion. We were better off at the end than we were at the beginning.

Photo of Mr William Clark Mr William Clark , Croydon South

That is an extraordinary argument. One cannot refute the fact that the Government have repaid $10 billion of the debt that the right hon. Gentleman's Government incurred. Whether the debt was $17 billion or $22 billion, we have repaid $10 billion.

It was a pleasure to listen to the right hon. Member for Leeds, South (Mr. Rees). I think that this is the first time that he has taken part in an economic debate. I was absolutely astounded to learn that he taught economics. Apparently one of his pupils writes in Lloyd's Bank Review. I do not know whether that pupil had another tutor after the right hon. Gentleman. The right hon. Gentleman tried to argue that the position today is analogous to that in 1944, when Japan and Germany were devastated and the whole world was crying out for goods. If one is comparing unemployment, it is ludicrous to think that the circumstances then were the same as today.

I welcome the Budget. It should not be seen in isolation. It is one of five Budgets. The various measures for business have been accelerated and increased in the Budget. Over the years business has had assistance, in the form of tax relief and so on, worth about £3 billion. It was right that this year the emphasis in the Budget should be on the direct taxpayer. This year he gets relief worth about £2 billion.

It is not fair for Opposition Members always to say that when we took office we took over a thriving country. If one looks at the record, one sees that inflation, unemployment, interest rates, public borrowing and overspending were rising. The Government had to honour many unpaid cheques from the last Government.

The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) lectured us, saying that the Chancellor takes the public sector borrowing requirement as his only criterion. That is absolutely wrong. He went on to speak about the national debt and gave the impression that the PSBR and the extent of the national debt did not matter in our economic life. I talk in down-to-earth language. The British taxpayer, not repaying the national debt but merely paying the interest, is paying £1·7 million every hour. I should have thought that to increase that figure would be economic madness. I am delighted that my right hon. and learned Friend has reduced the PSBR to 2·75 per cent. of the GDP.

We are criticised by the Opposition that it is not a vote-catching Budget. The Opposition do not realise that the Government under the Prime Minister are not opportunists. We want to win on our policies. It ill becomes the Opposition to say that it is not a vote-catching Budget, but, if it had been, and if we had given more or not enough tax relief, we would still have been criticised. Presumably the Conservative Government cannot be right in any way.

I welcome, as do many others, including, I believe, the Opposition, the help given to smaller businesses. The reduction in corporation tax from 40 per cent. to 38 per cent. is good. The business expansion scheme is excellent. I am delighted that there has been some relaxation in the capital allowances, which help investment, which helps business. The capital allowance on industrial buildings has been extended to commercial buildings with warehouses. It is agreed on both sides of the House that capital allowances for tax purposes stimulate investment in industry.

Under successive Governments over the years capital allowances have been given to manufacturing industries. I am not suggesting for one moment that we should not have done that or that we should cease doing that. However, one must realise that in manufacturing industries investment means that a new machine is put in that can be operated by eight men instead of 10 men. Therefore, investment to a certain extent aggravates unemployment.

Service industries are more labour-oriented than manufacturing industries. In our fiscal system we should have a deep look at our service industries—tourism, hotels, and so on. The shibboleth is that only manufacturing industry is of any use. I am not denigrating that industry, but our service industries and invisibles are the things that give us our balance of payments surplus.

I welcome the fact that at last the Government have accepted that there may be cheaper ways for business to borrow than straight through a bank. I shall not go into the technicalities. I am delighted that my right hon. And learned Friend has introduced the deep discounted bonds. I am delighted also that he has decided to introduce free ports, which will and must provide more jobs. One encouraging thing on the job horizon is the fact that there are now over 2 million self-employed people. That is a very good trend.

In the coming year, public spending will be contained at 43·5 per cent. of GDP. That is still too high. Overmanning in the public sector is the scourge of our economy. Employees in the public sector are a privileged class. They have security of employment. No one is ever sacked, irrespective of what might happen. They also enjoy pension rights that are not available to the private individual. Therefore, overmanning in the public sector should be looked at carefully. I am delighted that my right hon. Friend the Secretary of State for Social Services is at last undertaking a study into the NHS.

As I have said to no avail in previous economic debates, I am extremely worried about the issue of index-linked gilts, which merely put off the evil day when the taxpayer must repay. Last year, the Bank of England issued 2 billion such gilts. How many private or public companies have ever issued an index-linked bond? Obviously, they could not do it. I dislike the fact that the issue of a bond on a 10-year term will mean that the Government who issue it cannot possibly control the financial acumen or otherwise of the Governments who will follow. My fear is that we may borrow too cheaply today that which must be paid back in five or 10 years' time.

We should also pay more vigorous attention to the inflation rate within the public sector. On 19 March, the Daily Mail contained an excellent article which pointed out that in the last month overall inflation went up from 4·9 per cent. to 5·3 per cent. When that figure is broken down, it can be seen that inflation in the public sector went up from 12·5 per cent. to 13·4 per cent., whereas in the private sector it went down from 3·2 per cent. to 3 per cent.

The overall figure is, I believe, merely a slight hiccup which will not last. Our critics argue that inflation is now on the upturn, but they fail to take into account that under this Government inflation has come down from 20 per cent. to 5 per cent. It may well go up to 6 per cent., but such a hiccup does not mean that inflation is about to take off. I therefore urge the Government to look closely at the inflation rate in the public sector. Indeed, had the public sector matched the private sector on prices, inflation would now be even lower than it is. Consequently, for our future economic stability it is essential to privatise as much of the public sector as possible so that we can have real criteria on which business should be run.

I could go on about the public sector, but I would not like to give the impression that I am diametrically opposed to it. I merely feel that it should be much more efficient.

I welcome the fact that the Government will undertake a review of VAT. That seems to have been overlooked. Bearing in mind the administrative burden of VAT on small businesses, it should not be beyond the wit of man to be able to pay VAT on an annual basis. That would eliminate much of the form-filling to which small businesses are subjected.

Everyone recognises that the main problem is unemployment, but it is a confidence trick for any political party to suggest that it has the answer and can solve the problem overnight. It is harsh and cynical to hold out to our fellow citizens who are unemployed the prospect of a Government, be they SDP or Labour, waving a magic wand and solving the problem of unemployment. I am delighted that my right hon. and hon. Friends never indulge in that sort of thing.

The Opposition's answer seems to be to throw money at the problem—that we should spend more Government money. We often talk about "Government money", which gives the impression that if the Government do nothing they are niggardly or mean. It is not the Government's money; it is the taxpayers' money.

President Mitterrand tried throwing money at the problem, and look at France now. The French did precisely what the right hon. Member for Stepney and Poplar (Mr. Shore) is suggesting. Where has it got the French?—[Interruption.] It is all very well for SDP Members to nod their heads and smile. The only difference between the right hon. Member for Stepney and Poplar and the SDP is that the right hon. Gentleman wants to spend £10 billion whereas the SDP wants to spend £8 billion or £9 billion.

We must create jobs which will be paid for by the taxpayer. We should pay tribute to the Government for introducing many schemes—such as the youth training scheme—that have cost the taxpayer about £2 billion. Therefore, it is wrong to suggest that the Government view unemployment without compassion. It is not the prerogative of the Labour, Social Democratic or Liberal parties to think that they are the only parties with compassion. If one looks at the record of successive Governments, one will see that the working man is better off under a Conservative Administration.

My right hon. and learned Friend has made a good start on the investment surcharge, which affects our saving potential. It is unfair that someone who belongs to a pension scheme, be it public or private, should get an income on retirement, whereas someone who did not have the opportunity of joining a pension scheme must save his money and get precisely the same gross income as the man in the pension scheme. It is wrong to penalise one person with an extra 15 per cent. tax.

The Labour party's policy seems to be coming out in dribs and drabs. I do not know whether the right hon. Member for Leeds, South has his hands behind the tiller or whether it is the former Prime Minister the right hon. Member for Cardiff, South-East. Whoever it is, Labour's policy seems to be one of class envy and of soaking the rich to pay for everything. It will not work, even if we return to the high penal rates of tax that we inherited in 1979. If we embarked on the policies of the Labour, Social Democratic and Liberal parties, we would have to borrow more.

The right hon. Member for Cardiff, South-East spoke about the borrowing requirement of the American Administration. He said that if they were that much in deficit, interest rates would not come down. There is no difference between America and Britain. If we borrowed more money, interest rates would increase in the long term.

The right hon. Member for Stepney and Poplar said that there will be a 30 per cent. devaluation. I have news for him. If a Labour Government came to power tomorrow, we would not have to devalue by 30 per cent. Indeed, we would not have to do anything, because the pound would collapse and there would be economic chaos.

The present Government have kept faith with the lower paid and the pensioners. For all the talk about 2·7 per cent. in May or November, the cold fact is that, after this Budget, the pension will have been increased by 75 per cent., while prices have risen by only 70 per cent. Of course we should like to give the pensioners more money and we should like to give the taxpayer back more of his own money.

We have embarked on something that I think is exciting. Opposition Members laugh. It is exciting, but only if one understands it. The Government have turned economic attitudes round. People now realise that we cannot get something for nothing. That has never been possible. We can do it for a time, but then we go broke. The general public realise that the Conservative Government have been implementing a policy of good housekeeping which will stand us in good stead.

Photo of Simon Hughes Simon Hughes , Southwark Bermondsey 6:21 pm, 21st March 1983

I hope that it is significant that I utter my first words in the House on the first day of spring. The occasion may be doubly significant in that I follow not only to these Benches but in this debate a Member for the borough of Croydon. In 1949 Fenner Brockway wrote a biography of one of my most eminent predecessors, Dr. Salter, whom I believe you met, Mr. Speaker, before you were called to high office or had started on your journey to this place.

The borough from which my constituency takes its name was described by Fenner Brockway in 1949 as a backwater in the life of the metropolis". I shall deal with the economics of the matter in a moment, but politically one thing seems sure. Not only is Bermondsey no longer a political backwater; it is arguable that today there runs through it the strongest current in British political life. That may be because over many years, and particularly since they have been closed, massive pressure has built up behind the dock gates that have represented the industry and the economy of that part of south-east London, and that pressure has found its escape at last.

In 1884 the Bill to establish separate parliamentary representation for Bermondsey was introduced in the House by the Liberal Adminstration. The issue which concerned the first Member for Parliament for the area was one that is as commonly discussed on these Benches today. It was the issue of electoral reform. Seventy-five years ago my Rotherhithe predecessor, Mr. Carr-Gomm, argued for the representation of workers on the Port of London Authority. The demand for the proper representation of workers on the seat of management has not been heeded as it might have been in the intervening time.

Sixty years ago, in 1923, in an address to the electors of Bermondsey before a campaign that was successful, but—perhaps I know the feeling—not originally expected to be so, a Methodist minister and Liberal candidate, Rev. Kedward said: The enemies are in front of us in plain sight: unemployment, poverty, sickness, bad housing; let us attack them with courage. He continued: There is no easy road to victory over such foes, no magic word which when uttered will banish cares for ever". In the same year Dr. Salter made his maiden speech, calling for a national minimum wage and decent treatment for the people who start at the bottom of the heap. He said that in a civilised society every worker has a right to a living wage. That has been a principle, though not a practice, endorsed by Governments since then. He added that wages have now sunk for millions of our people below the subsistence level". I use his words because they are no less appropriate today. He added that it is grossly unfair that the whole burden of that depreciation of the standard of life should be borne, as it is, by one class, and that the most helpless and the weakest class. If the country has to submit to a reduction of the standard of living, that should be universally applicable."—[Official Report, 7 March 1923; Vol. 161, c. 627–36.] I listened to the Chancellor's Budget statement last week, and I ask him this: where are the reforms of justice and the social progress of sympathetic and progressive economic management? Why will he not consider giving the security and hope that his long-suffering fellow citizens in the inner cities need to hear from this place? Why could he not promise that they, when qualified adults, would not be left behind in the struggle for survival, and often not just left behind but also left out? Why, after 60 years, could he not ensure that people received a decent minimum wage? If he wants to see a monument to his four years of economic policy, let him come and look at my constituency. The Chancellor's Budget last week and the examples given by his colleague today reminded me, in a phrase that came to mind last Tuesday, of a Chancellor fiddling while Britain groaned.

My predecessor gave 36 years of distinguished service to the House and for much of that time served all the constituents whom I now have the honour to represent. He was joined in that task for a short time by my right hon. Friend the Member for Glasgow, Hillhead (Mr. Jenkins), until my right hon. Friend's seat was taken away by the process of democracy. In that election, in which my predecessor first stood as a candidate at Rotherhithe, there was one thing in common with my own—his Conservative opponent, like mine, lost his deposit. In a local election in Bermondsey two weeks after my own election, the Conservative vote fell yet again—this time to 3·6 per cent. The message is firm. The deserving people of the inner city are saying loud and clear that they have no trust in the Conservative Government.

In the words of the right hon. Member for Leeds, South (Mr. Rees), there is a rumbling of discontent. I, too, rumble with discontent. I come here to share that anger and discontent. As in the city of Cardiff, which I know well, as do you, Mr. Speaker, and as does the right hon. Member for Cardiff, South-East (Mr. Callaghan), male unemployment in my constituency is very high. In Southwark it is no less than 18·6 per cent.; yet the Chancellor holds back for a further seven months the restoration of the unemployment benefit abatement for those who need that money to live. Of all London's ratepayers, the residents of Southwark pay the highest inner city rates. Non-domestic ratepayers pay 245p in the pound and, as in Cardiff, are daily being driven out of business. The borough has the worst record for empty properties and hard-to-let accommodation of any authority in London. The Opposition can take no comfort in that, as it is the Labour party which is responsible locally.

Just before I took my seat in the House there was a pensioners' lobby here. One out of five of my constituents was represented by those who rightly came here to ask for a better deal. What do they receive in the Budget? The answer is a mean-minded and ill-timed administrative alteration in pensions that will lose 70p for a single person and 110p for a married couple every week. They receive no help with heating or standing charges and are still penalised if they receive income which is additional to their pension.

At the other end of the age scale, the young, with whom I have worked for a long time in this city, are job-starved, often educationally deprived, having left school before the statutory age, and look with little hope at the future of communities where they want to stay. Therefore, as in the past, they are soon forced out—and will continue to be so, whether it be on bicycles or whichever other form of transport the Government have not seen fit to provide.

Yesterday's papers told us that the low-paid have lost at least £45 a year in real terms over the period of the past five Budgets. It is no benefit to them to know that people who earn £30,000 now get an extra £3,500 each year.

The economy of the past four years has done nothing for the inner city. That area is as bare, empty and lacking in progress as it was in 1979. Our people refuse to believe that there cannot be a better way. They also refuse to believe that they do not deserve a better way. I hope that I am not arrogant, but I am angry on their behalf. I am not only the newest but I am the youngest Opposition Member of this House. I am here to tell the House what people said by electing me three weeks ago. This waste and mismanagement of our resources, both human and natural, is, and I agree with the right hon. Member for Cardiff, South-East, not only unacceptable, but immoral too.

The people of Bermondsey and Southwark are, however, spirited and have not yet given up the fight. The spirit that led them to resist some of the worst attacks that the city knew during the second world war has led them, in peace, to resist the destructive attacks of politicians in their turn. However, they cannot resist for ever. They have already been generous. They were generous when my learned predecessor made the mistake of saying that the docks would close only over his dead body. They forgave him for that. They were also generous to the Leader of the Opposition when he made similar statements about an election not many weeks ago. They spared him from that. However, they cannot be generous for ever. They have turned to me and I, above all, now turn to the House to remedy their problems.

William Wilberforce died 150 years ago this year. It was his part as a reformer to liberate the people who were enslaved abroad. At home, Gladstone and Lloyd George followed that tradition, as did others who turned their attention to inner cities where the work was done and where the workers remain. My politics are to be those politics of liberation. I am anxious to liberate our people—those whom I can help—in little ways as we are allowed to do, from enforced idleness, unjustified discrimination and harmful dogma.

I have news for the hon. Member for West Stirlingshire (Mr. Canavan). He seems to think, to judge from his comment when I took my seat, that I shall not be here for long. I can tell him this. I shall be here for as long as is necessary to work for those people who sent me here to get them back to work.

I conclude with a quotation from a small guide which my library provides for those who want to know about the history of the constituency which I now have the honour to represent. It says: People are right to be proud to say 'I am from Bermondsey'.This little area has a great history. In the old times it was the place of Chaucer, Shakespeare and, later, Dickens. It continues: In Victorian times it was at the centre of London's trade and industry. Later, it took a lead in social reform. Now is a time of change when Bermondsey, like its neigbours in North Southwark and Rotherhithe, awaits new developments. The tide of economic welfare has flowed out far enough and for long enough as well. Although there may be an appropriate analogy between my arrival here and the quiet, timid and, as yet, inexperienced first cuckoo of spring, I hope that the Government will listen and learn that it is still not quite too late to turn the tide and to come to the rescue of the people who, at the moment, are beached and waiting for help.

Photo of Mr Charles Morrison Mr Charles Morrison , Devizes 6:34 pm, 21st March 1983

The hon. Member for Bermondsey (Mr. Hughes) arrived at the House as a result of what is by any standards a remarkable electoral triumph. He said that Bermondsey had been thought of as a backwater. There can be no doubt that, recently, it has been thought of as a seashore on which tides ebb and flow. Because of his triumph, the House had high expectations of the hon. Gentleman's speech. He has more than lived up to those expectations and the House will join me in congratulating him on his speech.

The hon. Gentleman follows a distinguished predecessor and the House will appreciate what he said about him. His predecessor was a great character. May the hon. Gentleman go a long way to fill the gap that his predecessor's departure has left. All hon. Members will have enjoyed the hon. Gentleman's speech, not least because he did not make the mistake of being non-controversial. I understand that Mr. Disraeli was so controversial in his maiden speech that he did not get far as he was shouted down. Rightly, the House was more polite today, but perhaps it will not be next time. Nevertheless, I must admit to having considerable sympathy with many of the anxieties that the hon. Gentleman expressed.

Like many other hon. Members, I should like to welcome many of the Budget proposals and congratulate my right hon. and learned Friend the Chancellor on making them. I am glad that he resisted the siren voices—perhaps they were not so strong—to reduce the basic rate of income tax. Instead, and rightly, he concentrated on raising the threshold. In addition to helping people on low incomes, that can do nothing but help to stabilise wage demands.

The further cut in the national insurance surcharge is excellent news, although I am a little disappointed that that pernicious tax cannot be abolished. The proposal to legislate to enable the designation of free port sites is imaginative and sensible. Last May, I was part of a parliamentary delegation that went to the Miami free port. I was impressed by what I heard and saw. There is no doubt that free ports are attracting a great deal of trade. I see that it is estimated that between 1981 and 1985, as a proportion of the world total, trade passing through free ports will more than double from 9 per cent. to 20 per cent. It would be a pity if we were not in on that piece of action.

Although I accept the arguments for free ports in areas of economic expansion—most of the emphasis seems to have been on their being established in such areas—I hope that the rejuvenating effects of free ports will be tested in one or two of our old cities such as Liverpool.

I am especially pleased about the restoration of the 5 per cent. abatement of unemployment benefit. The delay in doing so was an unfortunate episode which did the Government's reputation no good and it is a great relief that it has now ended. I trust that the Government will turn their attention to the need to improve benefits for the longterm unemployed in the next Parliament. The grinding boredom of being out of work, let alone the adverse effects on family life and self-confidence, is bad enough. It is that much worse if benefits are set at a level at which the unemployed can obtain only the basic requirements of life. If life is to be worth living, and if we believe, as I do, even if it proves difficult to provide for a fully employed society, that it is necessary to provide for a fully occupied society, the unemployed must receive benefits that will enable them to be occupied in a satisfactory and satisfying pastime. In that regard, the long-term unemployment benefit is inadequate and must be improved as soon as possible.

I am also very pleased that my right hon. and learned Friend has been able to make still further concessions for charities. The Budget contains many bouquets and lollipops that will help many people to feel a little better. Furthermore, it was consistent with the Chancellor's cautious attitude towards economic management, which he has displayed since he has been in charge. However, at this point, and not for the first time, I must part company with him. The Times said that the Budget failed to convey a sense of vision and purpose. That was a little unfair, because to me it conveyed the same vision and purpose as did his previous Budgets. The vision is that of the market place as the ideal mechanism. Therefore, the purpose is to have no purpose beyond the creation of some basic requirements—the control of inflation, low interest rates and control of the money supply. The Chancellor has done well on those counts, but there is precious little evidence that we are anywhere near his vision of the market place as the venue of Utopia. I cannot yet dismiss from my mind recollections of the nonexistent inflation, lower interest rates and the appalling unemployment of the 1930s to which the right hon. Member for Cardiff, South-East (Mr. Callaghan) referred.

As my right hon. Friend the Secretary of State for Industry said, ultimately people will control and influence the market, but people need encouragement. Therefore, I cannot force myself to believe that more active intervention by the Government into the market would do any harm. Far from it. Government measures to assist both large and small industry are a help, but they put nothing in the order book. Even if it is assumed that a mild economic recovery is under way, the outlook for a reduction in unemployment is bleak. Surely now the Chancellor can begin to build on the foundations to which he has referred so often. Surely now is the time to increase public capital investment, especially on roads, telecommunications and sewers. Such investment is needed now in any case and would provide jobs. What is more, it would provide jobs at no great cost to the Chancellor's policy.

Apart from Norway and Australia, Britain is apparently running the smallest Government deficit of the OECD countries. I am sorry to have to say it, but I regret that there is not more of a boost to capital investment. Furthermore, we must note that in 1982–83 it is estimated that the shortfall in capital investment by nationalised industries will be £600 million, and by local authorities will be £1,300 million. What is being done about that problem, which I regard as serious? Why not also take up the suggestion made among others but especially by my right hon. Friend the Member for Taunton (Mr. du Cann) that private capital should be mobilised to finance public works? There must be scope for such an initiative. If such ideas are not adopted, I fear that the mild recovery worldwide will be stillborn at home.

As a farmer, I have long since learnt that adequate note must be taken of the uncontrollable elements. We must be prepared to show flexibility and to react to the prevailing conditions. The same must be true of economic management. If in his first Budget in 1979 the Chancellor had said that there was nothing he could do to stop unemployment rising to 3·25 million in 1983, he would have been told by his party to go away and think again to avoid that horror. But it has happened and, despite this Budget, he must still go away and think a little more constructively and sympathetically about how to cope with it.

Photo of Mr Douglas Jay Mr Douglas Jay , Wandsworth Battersea North 6:45 pm, 21st March 1983

I congratulate the hon. Member for Bermondsey (Mr. Hughes) on his excellent speech. Like him, I entered the House as a result of a by-election, although it was not as exciting as his. I am afraid that I cannot wish him as long a stay in the House as myself, but his speech was so good that I think he should join the Labour party.

Almost without exception today, and since the debate began on Tuesday, every speaker has agreed that great damage has been done to the British economy by the Government's policies since 1979. If I understood the hon. Member for Devizes (Mr. Morrison) correctly, he also agrees with that. All the economic indices that really matter—real income, employment, production and investment—are drastically down, and industrial capacity is being reduced every week.

It is no good saying that such destruction has been worth while to slow down the fall in the value of money, or inflation as it is called nowadays. Changes in money values are no doubt highly inconvenient and, other things being equal, are to be avoided, but money is only a means, although essential, to an end. The objective of economic policy is the highest possible real employment, production and living standards. To claim that one has destroyed real output in order to preserve the value of money is like saying that one has destroyed the car to preserve the speedometer, or sunk the ship to save the compass.

The main cause of Britain's economic collapse since 1979 has been the swarm of errors and illusions that goes buzzing round the minds of the Prime Minister and some of her colleagues, although, to be fair, the Chancellor never sounds as though he really believes them. The most damaging mistake has been the complete failure to control money demand in the economy.

My right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said that he would not talk about macro-economic policy, so I will say something about it. It is total money demand—strictly, the money GDP—not the total stock of money, which directly affects prices, employment and output. The United States Federal Reserve Board has now explicitly recognised that fact, and, interestingly, as a result, the American economy shows some signs of recovery this year. President Reagan, in his economic report to Congress on 2 February, said that the Federal Reserve will use its judgment to modify monetary growth rates so as to keep the growth of total spending in the economy (nominal gross national product) on the right track. Why cannot our Chancellor forsake his fetishes—the money stock and the PSBR—and at least follow the President of the United States? Some of us have been urging this ever since 1979.

If one does not control demand in a modern economy, one is bound to get either unemployment or price inflation, or, if costs are rising, both at the same time. All the fiddling trivialities, some of them good in themselves, that the Chancellor has introduced in the Budget will make no difference if there is an overall deficiency in demand. The level of employment and production depends on the ratio of demand overall to the total of money costs overall. There is no hidden hand—nobody argues that there is—that brings these into balance unless the Government and the central banks do so. The right flow of demand can be defined sensibly as that which maintains full output and employment, and the right quantity of money is that which supports that level of demand.

Those of us who understand this correctly predicted from the start that the result of the present savage deflation would be exactly what it has been—several million unemployed and a disastrous fall in output. Like my right hon. Friend the Member for Cardiff, South-East, I could quote the prediction that I made in the Government's first Budget debate in June 1979. Those who swallowed all the monetarist mumbo-jumbo a few years ago are now saying rather pathetically that they never expected 3·5 million unemployed and cannot understand why it has happened. Not merely did some of us predict this correctly, but those countries which, in the past three years, have stuck to the crucial job of maintaining demand—Norway, Sweden, Austria and others—have all maintained employment and output far better than we have.

If anyone still argues that unemployment is increasing all over the world not through a mistaken policy but for some strange, long-term reason, I must draw to his attention two facts. First, the United States has increased its total employment in the past two decades by 40 per cent. Secondly, Norway has just about doubled its real standard of living in the past 10 years.

Then we are told that unemployment is due to that mysterious visitation from Heaven—a world recession. But there is a world recession today only because too many Governments are pursuing the same deflationary policies as the Prime Minister and the Chancellor here. "World recession" simply means that the world is suffering from a lack of the purchasing power necessary to set the wheels of production, employment and exchange moving again, just as in 1932–33. It is this deliberate deflation of demand that is causing the crisis in shipbuilding, steel, engineering, textiles and one industry after another; and we cannot cure such a crisis by special remedies applied to the particular industry when the cause is a general one covering the whole economy. The crisis will not cure itself any more than it did in the 1930s.

All the tedious repetition about the so-called money supply and the PSBR is now little more than ritual incantation. The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) spoke about the PSBR, but he did not point out that in recent years there has been virtually no correlation, in this or other countries, between the PSBR and the quantity of money, and very little between the quantity of money and the price level. The totem pole of the PSBR is the greatest economic nonsense of all as a guide to policy.

Many people blithely imagine—I heard one Conservative Member speak of the deficit this afternoon—that in the United Kingdom the PSBR is the same as a Budget deficit, and that this country has been running a Budget deficit in the past few years. But it has not. In the sense in which every Chancellor from Gladstone to Sir Stafford Cripps used the terms "Budget deficit" or "Budget surplus"—balance between current revenue and current expenditure—we have been, and still are, running a surplus throughout the past few years.

For example, in the 1982–83 Budget, the Budget surplus—the surplus of current revenue over current spending—turned out to be £6·6 billion according to the Red Book. This year it is to be £6·2 billion. That surplus is wholly devoted to the capital expenditure of public authorities, which this year is to total £16·8 billion. The PSBR—that curious animal—is not a deficit. It is simply that part of public capital expenditure that is not financed out of the revenue surplus and capital receipts. It is a queer definition, but that is what it is, and that shows that it has very little significance.

What this means is that public authorities as a whole—the Government, local authorities and publicly owned industries—are following a course that any private firm would regard as entirely prudent: financing some part of capital expenditure out of revenue or retained profits, and the rest out of long-term borrowing. The PSBR is thus a dubious concept of very little economic significance one way or another. On top of that, however one defines it, the PSBR is a good deal lower in this country than it is in most Western democracies.

It is only by ignoring this fact that some of our muddled monetarists reach the absurd conclusion that public capital expenditure is more inflationary than private capital expenditure. If that were true, the Government could, by privatising the Royal Navy, allow the Navy to buy as many warships as it wanted, because that would not affect the PSBR. Any argument that leads to that absurd conclusion must be wrong.

Let us, therefore, sweep away for a start this obsession about the PSBR. For one delusion leads to a whole swarm of others. Perhaps the worst delusion at the moment, and one that always pops up from the Prime Minister at Question Time, is the confusion between the spending of an individual and the spending of the nation. If the individual spends more than income, his or her trouble may follow, because the individual's spending does not increase his or her income. But if the nation spends more money internally, then the nation's money income rises, and if there is more real capacity available the rise in demand generates more production of real wealth.

To put the matter briefly, in the internal economy, a nation cannot earn more than it spends. If there is spare real capacity, higher Government spending expands income, wages, tax revenue, output and employment. Even the Red Book admits: The growth of Government revenues in cash terms over the medium term will depend on the growth of incomes, spending and prices". So the truth is that all these painful cuts that we have been suffering from, far from doing any economic good, are doing actual economic harm to the nation by further cutting down incomes, spending, output and investment in the next round.

From that fallacy follows another which I also hear buzzing in the Prime Minister's head at Question Time—the belief that some economic gain is achieved by throwing people out of work and into unemployment. If the nation is fully employed, as this country was for 25 years, the release of labour from one job enables the production of something more of something else. That is a gain. If, however, people are simply thrown on to the dole, nothing is achieved. When that happens—as is largely true of the present Government's policy—one is simply paying people to do nothing rather than paying them to do a useful job of work. As a result, we have what even Mr. Sam Brittan, in the Financial Times, described, on the day after the Budget—I quote his words because I cannot improve on them—as the vast human and economic waste of unemployed resources side by side with unsatisfied needs. One always wants to congratulate the Treasury Bench on something, but I can this year congratulate the Treasury Bench on only one thing: accepting the recommendation of my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) to allow the sterling exchange rate to fall to a realistic level. That has at last given British industry some little hope.

For all these reasons, I believe that what is needed now is an internationally agreed strategy of steady expansion. I agree with the right hon. Member for Sidcup (Mr. Heath) that this is just as necessary as expansion at home. There is, after all, no point in having highly expensive summit meetings if nothing happens as a result. At home, in any case, the next step should be a much more drastic cut in interest rates nearer to the 3·5 per cent. achieved in the early 1930s which could be achieved now if the Government had not made the stupendous blunder of abolishing exchange control two years ago. That blunder, as those who read the financial press know, is forcing us to hold up interest rates whenever sterling falls. Following that, we need a steady and planned expansion in public sector spending with priority given—I agree fully with the hon. Member for Devizes—to investment and construction, which would in time stimulate private sector activity also. Building employment now is 20 per cent. lower than it was in 1979.

Indeed, so huge a proportion of our real capacity, even allowing for what has been destroyed in the last three years, now lies idle and wasted—we are probably losing £50 billion or £60 billion of potential income annually at the present rate at which the economy is running—that, at an early stage of expansion, direct restraint of prices and money incomes may not be essential. At a later stage, it certainly will be. The imperative need now, however, is to get the nation back to work and back to economic sanity, and to do so quickly.

7. 2 pm

Photo of Mr David Myles Mr David Myles , Banffshire

I am grateful for the chance to make a brief speech on a narrow constituency point. Unemployment in the Scotch whisky industry is at record levels. [Interruption.] I recognise the interest of my hon. Friend the Member for Croydon, South (Sir W. Clark) in this important constituency subject. The hon. Member for Clackmannan and East Stirlingshire (Mr. O'Neill) informed the House last Wednesday that the labour force in the Scotch whisky industry has declined by about 20 per cent. since 1979. In the first three months of this year, about 1,000 jobs have been lost, including a considerable number in my constituency. Employment in the village of Knock has virtually disappeared with the closure of the distillery. The Minister said in reply to last Wednesday's debate that Taxation is not the problem. He added that the problem is lack of demand for whisky. We have to address ourselves to the problem of finding things that people will buy"—[0fficial Report, 16 March 1983; Vol. 39, c. 314.] To claim that the problem facing the Scotch whisky industry is simply lack of demand misrepresents the position. Demand has not increased according to the industry's expectations. There are two main reasons. First, the Scotch whisky industry, like every other industry, is suffering the effects of the prolonged recession. Secondly, there is the historic policy of successive Chancellors of taxing whisky much more highly than imported drinks like sherry, port and vermouth with which whisky directly competes. I do not understand that attitude. The persistent high levels of tax on spirits have encouraged consumers to turn to less heavily taxed alcoholic drinks. Before the Budget, taxation accounted for 80 per cent. of the price of a bottle of Scotch. Although the tax on Scotch whisky has increased proportionately slightly less than the tax on other alcoholic drinks, the fact is that the tax on Scotch whisky, in real monetary terms reckoned on alcohol content, has increased more than that on other alcoholic drinks.

The tax on a bottle of wine has increased by 5p a bottle. As a bottle of Scotch whisky contains approximately three-and-a-half times as much alcohol, the industry could reasonably have expected an increase of about 18p on a bottle of whisky. The increase is approximately 25p. The Government point out that the duty on Scotch whisky has been reduced by 28 per cent. since 1975. That small step in the right direction is welcomed by the industry. However, the tax on Scotch whisky still remains disproportionately high. Sherry, port and vermouth bear only just about half the tax borne by Scotch whisky in terms of alcohol content.

All alcoholic beverages compete with one another and different levels of taxation distort competition. The policy of successive Chancellors has been to place Scotch whisky in a competitively unfavourable position, which has led to increased unemployment in the industry to the advantage of our overseas competitors.

The policy of United Kingdom Governments of taxing spirits more highly than wine or beer for no reason other than that Scotch whisky seems to be regarded as a milch cow has been followed in other countries, particularly in the EC, to the disadvantage of Scotch whisky. For example, France now taxes whisky over 40 times as heavily as wine. From 1 April, the French Government will in addition levy a wholly new tax on spirit drinks equivalent to about 76p on a bottle of Scotch whisky but none on wine or beer.

The Community wine industry is also suffering from a drop in demand. However, in contrast with the Scotch whisky industry, where decline in demand results in closures, lay-offs and redundancies, production in the wine industry is subsidised by guaranteed incomes for producers and aids for distillation. In 1982, over £200 million was given in subsidies to the wine producers.

We face a continuing prospect of high unemployment in the Scotch whisky industry. Unemployment in Scotland is more than 50 per cent. higher than the EC average. The Government must bring the taxation of Scotch whisky in the United Kingdom closer to that of competing alcoholic drinks, especially fortified wines. My hon. Friend the Member for Perth and East Perthshire (Mr. Walker) said last Thursday that the home market for Scotch can set the pattern and give a lead to the rest of the world".—[Official Report, 17 March 1983; Vol. 39, c. 421.] Even more important, the Government should be more vigorous in protecting the Scotch whisky industry against unlawful protectionism in the EC. It is unacceptable that the French Government should have been allowed to levy' more than £70 million in illegal taxes on Scotch whisky by defying a ruling of the European Court of Justice for three years. The total amount from that unlawful tax since 1 January 1978 is £250 million. How many cases of unsold whisky does that represent? If this Government take the lead in bringing the taxation on Scotch whisky and other competing alcoholic drinks into line with each other and in fighting protectionism, there is every hope of employment in the Scotch whisky industry returning to its earlier levels and perhaps showing a net increase as well as earning the undying favour of the Scottish people.

Photo of Mrs Renée Short Mrs Renée Short , Wolverhampton North East 7:11 pm, 21st March 1983

I cannot follow the hon. Gentleman in his predilection for whisky. However, I like the country he comes from, and I trust that he will not cross me off altogether. I am surprised that he did not refer to the competition that Scotch whisky distillers are facing from Japanese whisky, which is becoming available in this country and elsewhere, and ask his right hon. and learned Friend the Chancellor to impose import controls on it. Perhaps he will think about that.

I congratulate my right hon. Friend the Member for Leeds, South (Mr. Rees) who with great gusto opened the debate for the Opposition. He made some telling points. Hon. Members have heard some good Opposition speeches, especially that of my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) who made some interesting remarks when contrasting our earlier economic position to that of the present.

The Budget must be judged from its possible effect, first, on employment and, secondly, on the growth 'in the economy. The Budget assumes a continuing level of 3 million plus unemployed. I tell the Prime Minister, the Chancellor and the Secretary of State for Industry that nothing in the Budget will bring joy to the west midlands or to my constituency.

I am surprised that the Secretary of State for Industry had little or nothing to say about the construction industry. There was little hope for it in the Budget. In my constituency and in the west midlands generally 36,000 building workers are unemployed when they could be producing and repairing houses and building the new factory accommodation that is so urgently needed throughout the area. Hon. Members will have read in the press that the building trade is disappointed with the Budget. It contains nothing much for construction workers.

British cement manufacturers are worried about Britain importing cement from West Germany. For the Government to allow it to continue is appalling. There is a good case for import controls. Britain's cement manufacturers are going out of business while West German cement is allowed into the country. Foreign cement does not conform with our standards or regulations. There are possibilities of great danger if large quantities of imported cement which do not meet British regulations and safety standards are used. The Government must examine the problem rapidly and stop the import of West German cement. Britain's cement industry must be encouraged.

As many right hon. and hon. Members on both sides have said, the Government are a disaster for young people. More than 100,000 young people have been without jobs since leaving school, not this year or last autumn, but since 1980. That must surely be a major indictment against the Government. The Prime Minister's continual alibi about more schemes and more programmes for unemployed young people fools no one, least of all the young people. The right hon. Lady said: Unemployment will then not be an option for them."—[Official Report, 17 March 1979; Vol. 39, c. 345.] That is their only option at present, and it will be so until the Government are removed. There are no jobs for them and the Budget will do nothing to help.

The Government have much to answer for. There is the sapping of morale, the undermining of confidence and the sheer waste of skill, enthusiasm and endeavour that is evident among disheartened young blacks and whites alike. There is also the treatment by the Government of skilled men, fathers of families, who are losing their jobs and their self-respect. These men find themselves in a difficult position when they have to support their teenage children at schools or colleges of further education.

I do not understand how the Secretary of State can put forward his brightly painted picture that everything will he all right with the irrelevant stuff in the Budget. That will make no difference to unemployment in the west midlands or to the other black spots in the country. Families are facing difficulties in keeping their bright youngsters in education because of the cost of travelling, meals, clothing and all the rest.

New ideas for industry, commerce and science and, therefore, the creation of new jobs should be developed at our universities, including the polytechnics, our famous Government research establishments and in research establishments maintained by industry. Their contribution is of supreme importance for our economic survival, provided that the major proportion of their effort is not squandered as it is now on largely ineffectual defence research, which does not benefit the civilian population.

There is no encouragement in the Budget for industry to invest in research or, since research is relatively cheap compared with development, in the results of research for their use in industry. This latter area is where British industry is not very effective. The costs in this area can be extremely high.

Britain has, as I mentioned to the Secretary of State for Education and Science at Question Time, although he did not want to believe me, the lowest proportion of population in post-compulsory education compared with Japan, France, West Germany and Italy. Currently, 2·4 per cent. of the total population over school-leaving age is in full-time education compared with 5·8 per cent. in Japan, 5·7 per cent. in Italy—that is a surprising figure—4·1 per cent. in Ireland, 3–7 per cent. in France and 3·8 per cent. in West Germany. Britain's 0·5 per cent. figure for those at university is disgraceful compared with 1·6 per cent. in Japan and France and 1· per cent. in Italy. The encouragement given to young people to study science and technology is limited. Some of our universities have actually had the temerity to take on more students than the University Grants Committee said they should, and seven universities have been fined by the UGC for taking in too many undergraduates last autumn.

A total of nearly £250,000 is being withheld from the offending universities as a punishment for failing to cut the number of their students quickly enough. The universities being penalised are Dundee, Hull, Heriot-Watt—which has already been referred to—Swansea and Keele. They run important science courses. Heriot-Watt university in Edinburgh is, of course, closely linked to the oil industry but it is being fined £20,000 for taking on about 60 students too many in science and engineering. In a few years' time we may not have enough trained engineers for the oil industry if such nonsensical cuts are allowed to continue.

Swansea university is being fined £60,000. It admitted 120 more students than it originally planned for last autumn because it was satisfied that there was a need and that the additional 120 students would fulfil it.

Photo of Mr Nicholas Baker Mr Nicholas Baker , North Dorset

I am interested in what the hon. Lady has to say, but is she aware that the Government have ensured that any cuts in higher education will affect science and engineering less than the arts? Presumably that is what she wants.

Photo of Mrs Renée Short Mrs Renée Short , Wolverhampton North East

I was not going to say that at all. The hon. Gentleman has put words into my mouth. When everyone agrees that our input into science and technology is insufficient, it is a scandal that we should fine those universities that have taken on more students. If they are fined £250,000, they will have to raise it from somewhere. Surely that money could be used for educating students. It is the economics of bedlam, but then with this Government that is not surprising.

Experience has shown that in British industry the first victim of retrenchment in staff and expenditure is research and industrial development. How can we expect British industry to be competitive and always ahead of its foreign competitors when the level of Government support in those countries is very different? With a bit of foresight and imagination the Government could have injected the financial motivation that is so badly needed. The same applied mutatis mutandis to expenditure on research and development in universities, polytechnics and Government research establishments, which are gradually being deprived of their staff and resources. Practically every Government research establishment that is sponsored by a Department has been compelled for the past two years to cut its research staff. That is the most shortsighted policy.

The Social Services Select Committee has been extremely concerned about the cuts in expenditure on medical research and teaching staff which resulted from the UGC cuts that were announced. In December 1980, as soon as the UGC was informed of the cuts, the Government were warned of the effect on clinical medicine, but nothing was done by Ministers at the DHSS then, nor has been done by the Chancellor of the Exchequer now to put that right. Therefore, about 300 clinical academic posts will be lost by the end of this year. In the shortage specialties, such as dentistry, paediatrics and many others, that is nothing short of scandalous. A choice has then to be made between patient care and the staff's teaching responsibilities. That choice is entirely unacceptable for patients both now and in the future.

Representations have been made to me as a result of the developments taking place in many teaching hospitals. For example, at Bristol university one of the readers in perinatal medicine and paediatrics is responsible for running the neo-natal service in two major maternity hospitals which share about 10,000 deliveries a year and provide a regional service for the whole of the south-west. He also ran 12 one-month courses for 140 medical students per year. In addition, he organised and undertook research in perinatal medicine. However, he has been forced to give up all his undergraduate teaching in new-born medicine because his one university assistant has been cut. He was determined to keep patient care going, but the teaching part of his work has had to go. Thus, medical students qualifying at the university will not get the training and experience in the newborn care that they should have. That is very disturbing.

In many parts of the country the same is true of other departments. We are short of consultants in many areas of medicine. Health authorities are having to cancel their decisions to appoint additional consultants and, consequently, patients will have to wait longer to be admitted. Junior doctors are rightly heartily fed up with the long hours that they are having to work. The latest scandal to confront the Government because of their mean attitude to expenditure arises from the claim that medical students are prescribing drugs and possibly carrying out procedures which they have no right to do, are not trained to do and which they are not competent to do. That has arisen because of the lack of proper medical cover on night duty. Indeed, it was dramatically underlined by the disclosure in yesterday's edition of The Sunday Times that a man who was injured while in police custody in Coventry apparently suffered severe brain damage. When he was taken to hospital the only consultant available at the time was an orthopaedic surgeon. It was not until a week later that the man was examined by a neurosurgeon who should, of course, have seen him immediately on his admittance to hospital. By the time he was seen it was much to late and he has been kept ticking over on a life support machine.

That the Department should countenance the havoc being caused and should profess itself unable to find £10 million—the sum needed to make good the UGC cuts in medicine—and that the Chancellor of the Exchequer in the Budget should have ignored the position is, frankly, beyond belief. The damage being done both to patients and to training will be with us for a good many years yet.

The Budget is wretchedly inadequate for all those whom it should have encouraged and for all those who are suffering so bitterly after nearly four years of this Government. It does nothing to restore prosperity. The Labour party hopes very much that the Government's departure will not be long delayed. My right hon. Friend the Member for Cardiff, South-East was right to say that this Government would leave the country and its people much poorer than they found it. Four years of damage is too long. The Government should go now.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North 7:28 pm, 21st March 1983

I hope that the hon. Member for Wolverhampton, North-East (Mrs. Short) will forgive me if I do not follow her down the path she trod. However, I thoroughly enjoyed listening to the speech made by the right hon. Member for Battersea, North (Mr. Jay). I am sure that he will not be at all offended when I say that he is probably the only totally unreconstructed Keynesian left in the House and in that, at least, he has been completely consistent. I also much enjoyed listening to the speech made by the hon. Member for Bermondsey (Mr. Hughes), whom I have known personal].) for some time and welcome to the House.

Until today the section of my right hon. and learned Friend's Budget speech that attracted least attention was that devoted to the world economy. That is curious, because Britain, above all, is dependent on the state of world trade for its prosperity. We cannot now and never have been able to divorce ourselves from what is happening in the rest of the world. We are today faced with a unique crisis—a crisis not only among the developing countries but among the politicians of the West who have singularly failed to recognise the scale of the problem that confronts them.

It will be a severe test of Western democracies, and indeed of capitalism, to find a way of ensuring that we can reconstruct the debt of developing countries without putting intolerable strains on the domestic political position of those countries. It is an immense task, and I am pleased that my right hon. and learned Friend the Chancellor is already playing such a leading role. It is far too great a task to be left to the United States alone. We cannot possibly hope that increased activity in the United States will sufficiently regenerate the world economy. We need a major, sustained and imaginative initiative not only from Western countries, but from OPEC and the developing world. It is a problem which, unless we are careful, will engulf us all and make whatever we try to do at home irrelevant.

My purpose today is not to comment on the judgment that was inherent in my right hon. and learned Friend's Budget. Nowadays, the Budget debate is too late for talk about Budget judgments. One of the things that I found most surprising when I read some of the speeches from earlier days of this debate was the way in which senior Members of the House have consistently deplored comments in the newspapers about the various options that face the Chancellor. I have never understood why it is so important to have surprise on Budget day. I agree with the recommendation of the Treasury and Civil Service Select Committee that we should have more disclosure in the autumn statement and wider discussion about the various options that are available to the Chancellor. The time to debate the general judgment has come and gone. The Budget debate nowadays is a time to look at some of the details that have been put forward.

It is a trifle curious, when the Treasury apparently believes that there is some connection between the rate of growth of the monetary aggregates—whichever are chosen—and the rate of inflation, that we have almost identical targets when we have inflation of 5 per cent. as we had when we had inflation of 22 per cent. If there is ever an argument against there being a linkage between inflation and the rate of growth of monetary aggregates, it is the Treasury that has put it forward.

I particularly welcome the importance that my right hon. and learned Friend the Chancellor has given to raising the tax threshold and to increasing child benefit. That was preferable to any decrease in the basic rate of income tax. That change will be particularly helpful to the lower paid and to widows. I hope that when the next Conservative Government come to decide their economic priorities my right hon. and learned Friend will give particular attention to dealing with the unemployment and poverty traps. I hope that we shall pick up the moves that were made in that direction in the Conservative Government of my right hon. Friend the Member for Sidcup (Mr. Heath).

There has been some sniping in the press and elsewhere at the different schemes that have been put forward to assist small businesses and engineering firms. I do not share any such criticism. There is always a limited amount of Government help available for industry, and it is right that the Government should decide their priorities and ensure that the money goes to those areas.

Lastly—and I do not wish to retain the reverse feeling—I would like to give a firm welcome to the changes in oil taxation. We should remember that the work that has been going on in the oil-related industries to supply the North sea has been a major area of growth in economic activity over the past 10 years. By its nature it is employment-intensive, and there has been a considerable spin-off activity right through from simple metal bashing—or not so simple metal bashing as my right hon. Friend the Secretary of State for Industry said—to high technology. For anyone who wishes to know about the spin-off from activity in the North sea, I can recommend a book that was produced by Shell last year.

Unfortunately, the Government, like previous Governments, have tended in the past to use oil taxation rather too much in place of the old-fashioned regulator. When the Government wanted more money, it has been all too easy to raise a little more from the oil companies which have no votes and are not necessarily popular. I warmly welcome the Government's provisions which effectively reduce the burden on companies exploring and developing fields in the North sea, particularly the way in which they have successfully geared that assistance towards companies which are operating in marginal fields and areas, including the satellite fields to existing major developments. My hon. Friend the Minister of State has played a particularly constructive and helpful part in that area, together with my right hon. Friend the Secretary of State for Energy.

The Budget has been described by Labour Members as uninteresting and boring. In many ways, that is its strength. It is not a Budget to catch votes. It is not a Budget that is full of assistance in one form or another to particular parts of the country. It is a Budget that continues the path that my right hon. and learned Friend the Chancellor set. I might wish that public expenditure was somewhat higher. Nevertheless, the Budget thrust is right, and I am convinced that it will put Britain back on the road to recovery.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton 7:37 pm, 21st March 1983

I hope that the hon. Member for Enfield, North (Mr. Eggar) will forgive me if I find myself in complete disagreement with the conclusions at which he arrived. I do not propose to take up any detailed points of the Budget, because it was devastatingly condemned by my right hon. Friend the Member for Stepney and Poplar (Mr. Shore) last week, and again today in excellent speeches by my right hon. Friends the Members for Leeds, South (Mr. Rees) and for Cardiff, South-East (Mr. Callaghan), and by the right hon. Member for Sidcup (Mr. Heath). Each in his way exposed the real tragedy of the Budget.

I want to speak briefly of the serious danger that underlies the Chancellor's Budget philosophy, not just in the present Budget, but continuously since 1979. Perhaps the saddest part of the Budget speech was early on when the Chancellor told us that he proposed to continue the same course.

Another serious danger would arise if the promises of the alternative economic strategy were not able to be delivered because there is an alternative economic strategy. The danger of the Chancellor's Budget philosophy stems from the way in which he is misleading himself and the country into believing that to persist with the present course will improve the prospects for the sustained growth of jobs, living standards and industrial output. It is hard to believe that the Chancellor still thinks that that will happen after four years of persisting with exactly the same policies and seeing the reverse of his aims being achieved.

Few serious economic observers believe that the Chancellor is right in assuming that persisting with the existing course will achieve all that he says it will achieve. The trouble is that the Chancellor will persuade some people. I do not refer to Government Members, because I doubt whether even they believe him. The Chancellor may persuade some people that his Budget philosophy will eventually succeed in achieving growth and all the other good things that he tells us about. When that does not happen—it is not happening and it is not likely to—there is likely to be a huge explosion from a despairing and disillusioned country.

I am talking not about this Budget alone, but about the cumulation of five Budgets, all stating, on no evidence, that if inflation comes down all else will come right—output, investment, living standards and employment. Year after year we have seen that not only is it not coming right with that sustained policy, but that the situation has been getting worse and worse.

As my right hon. and hon. Friends explained today and in previous debates, we all told the Chancellor the truth way back in 1979. My right hon. Friend the Member for Leeds, South made some interesting remarks about what was done by the coalition Government during the war and about what happened before the war that made people propose such policies. That exposes clearly that a nil rate of inflation will not achieve the results that the Chancellor leads himself to believe he can achieve.

The Chancellor is unlikely to achieve success with the policies in which he is trying to persuade the country to believe. Indeed, even international competitiveness has been achieved largely, as the Government admit, by the devaluation since last November—a devaluation which the Chancellor and the Prime Minister appear to regret, although they now tell us about the beneficial effects of that devaluation. I assume from what they have said that they would rather not have had the devaluation and therefore not have had the improvement in our international competitiveness of which they now boast.

In spite of the evidence, which disproves the Chancellor's theory, and all the protestations about a cautious and sound Budget policy, the hope that the Chancellor offers carries with it serious dangers. All the better prospects that the Chancellor portrays can come on a sustained basis only from sustained and higher levels of economic growth, which are not likely to be achieved under the Chancellor's present policies.

No serious economic observer will imagine that under existing policies we can achieve a sustained rate of economic growth at much above 2 per cent. Indeed, for the next year or so, given what else has been done to the economy, it is likely that we shall not be able to sustain even that level for any length of time. That longer-term growth prospect, about which the right hon. Member for Sidcup spoke, led the Government to come to the conclusion that they should ask the Think Tank to produce its now notorious report. If we do not achieve more than a 2 per cent. sustained rate of economic growth—which seems likely under present Government policies—a Government who believe philosophically in a growth in personal income, regardless of what happens to public expenditure, will inevitably ask the Think Tank to come up with a policy that will enable them to cut taxation and to tell them what needs to be done to make cuts in direct taxation.

It is not an accident that the Think Tank report came to light. It stems from the Government's philosophy and inevitably led to the Think Tank, which is not made up of politicians worried about elections, saying that the only way to cut taxation was to destroy the welfare state. That is not surprising and I do not know why anyone was surprised. With a sustained rate of economic growth of 2 per cent. at best, and a Government who are philosophically opposed to growth in public expenditure but who want cuts in personal taxation, the people who made the proposals in the Think Tank report should not have been condemned by the Prime Minister and the Cabinet, but thanked for spelling out clearly what their policies will lead to.

Because of the political consequences, the Prime Minister immediately buried the report—after a democratic Government decision, of course. If anyone believes that that report will not be revived immediately after an election victory—which I hope will not be forthcoming—they misunderstand the Chancellor's political and economic philosophy.

If one starts from a low rate of economic growth, it is clear that there is no alternative for such a Government but to do what the Think Tank set them on the path to do. I fear that we shall return to that with all the dangers involved. It would be better for honesty in public life if the Government told the country that that is what is necessary under their policies if, as is all too likely, they do not achieve a sustained rate of growth of more than 2 per cent. a year.

The same applies to those of us who believe that there is an alternative economic strategy and that "TINA", as the Prime Minister has spelt out, is a nonsense. We also have a responsibility to spell out the dangers in parts of the alternative strategy if we do not deliver what the strategy seeks to achieve.

My right hon. Friend the Member for Stepney and Poplar is aware of the dangers. Who knows the extent to which the alternative economic strategy depends on the annual national economic assessment? If public expenditure is to be increased, particularly in the capital sphere—as it should in present circumstances—the balance remaining for increased benefits and cut taxes will be minimal, even with the considerably higher borrowing that we can afford in the present economic circumstances. That will be shown in any future economic assessment. Until we have the economic growth we shall not be able to spend on both increased expenditure and increases in personal standards and benefits.

The difference between the present despairing course and the alternative strategy is that the latter can—I emphasise the word "can"—provide the growth. Indeed, there is a simulation on page 10 of the appendix to my right hon. Friend's "Programme for Recovery" which sets out a virtuous circle of veritable Utopian proportions. It shows that at the end of five years there would be real growth, allowing unemployment to be eliminated; inflation would be at 5 per cent.; living standards would be nearly 6 per cent. higher; there would have been substantial increases in public expenditure; the balance of payments would be in surplus of £3 billion; and the public sector borrowing requirement—if by that time anybody cared about it—would have been eliminated.

The snag with that simulation is the requirement of imposed pay restraint with incomes growth declining from 5 to 1 per cent., which I believe is unobtainable. I do not know whether the nod from my right hon. Friend the Member for Leeds, East (Mr. Healey) indicates agreement or disagreement.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I assure my right hon. Friend that it is a nod of recognition.

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

I am delighted to think that my right hon. Friend can still recognise me. I do not believe that pay restraint and a decline in the growth of incomes from 5 to 1 per cent. can be achieved and I doubt whether there are many who believe otherwise. However, it is an example of what can be achieved with a degree of agreement, which, sadly, I do not think is obtainable.

If we are to achieve something that is near to that, I do not believe that we need norms. I have been reading recently that the Labour party's policy for the next election will not include norms. I have no objection to that, because I am not necessarily in favour of norms. However, I have a feeling that some of those who do not want to talk about norms of any sort are not thinking in the same way as myself. They are likely to believe that we can continue with increasing incomes, benefits and public expenditure all at the same time. I do not believe that a national economic assessment requires a norm, but, within any reasonable assessment, a substantial increase in public expenditure in any given year will mean that there will not be a great deal left to permit growth in incomes and benefit. That will be so in the early years until we achieve growth in the economy.

Photo of Mr Jock Bruce-Gardyne Mr Jock Bruce-Gardyne , Knutsford

How will that be achieved?

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

The Minister should be rather less interventionist when one remembers what he has managed to achieve as a member of the Government and as a supporter of them during the past few years. The Government have certainly not improved since he became a member of them.

Photo of Mr Douglas Jay Mr Douglas Jay , Wandsworth Battersea North

Perhaps some humility would not be amiss.

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

It is asking too much of the hon. Gentleman to show some humility. I ask him to cease interjecting, if only for the sake of his hon. Friends who wish to participate in the debate.

I do not believe that the alternative economic strategy would perform a miracle for the economy, but it could do much better than the policy that is being pursued under the Budget policy. It behoves us all to spell out the consequences of the options before us in words and ways that the public can understand. If we cannot achieve the option that is spelt out on page 10 of the appendix in the "Programme for Recovery" of my right hon. Friend the Member for Stepney and Poplar, the public should be aware at least of the alternative. The Government's alternative is the steady growth of unemployment even if they manage to achieve and sustain 2 per cent. growth. We are seeing now—it is no good the Economic Secretary to the Treasury shaking his head—that unemployment is increasing. We are told that there will be 2 per cent. growth in the coming year, but we are also told that the Treasury has given the Government Actuary an assumption that unemployment will rise by nearly 300,000. It is assumed that that will happen even with a 2 per cent. growth. If the Economic Secretary is telling me that the measures contained in the Budget mean nothing and that there will be a reduction in unemployment, I shall be prepared to take note of the shaking of his head.

For those of us who are unwilling to accept the Government's economic and political philosophy and who want to see an alternative economic strategy succeed, it is important that the dangers in the alternative strategy of pretending that all good things could be delivered in the early years are spelt out. The good things could not be delivered immediately and there would be considerable constraints. However, I have no doubt that if we told the public what could be achieved as an alternative to the present disastrous and hopeless course—we might not achieve the near Utopia to which I have referred—we could do very much better than if we followed the Government's course.

Photo of Ian Paisley Ian Paisley Leader of the Democratic Unionist Party 7:56 pm, 21st March 1983

I am sure that the right hon. Member for Heywood and Royton (Mr. Barnett) will not expect me to take up his remarks.

The Labour Government's former Prime Minister, the right hon. Member for Cardiff, South-East (Mr. Callaghan), was extremely concerned about unemployment. He said that certain factories in his constituency have shed hundreds of jobs. I represent a constituency in Northern Ireland where many thousands of jobs have been lost. Courtaulds used to employ 3,000 in my constituency. Now it employs no one. ICI employed 2,000. Now it employs no one.

I was interested in what the Secretary of State for Industry said when he opened the debate. He claimed that one of the Budget's aims was to help small businesses. I agree with the former Prime Minister of the previous Conservative Government, the right hon. Member for Sidcup (Mr. Heath), that small businesses will not solve our chronic unemployment problem. We need large businesses and large employers. However, in Northern Ireland we shall have to depend on small businesses.

An important sector of small businesses in Northern Ireland—road haulage-will be devastated by the Budget. Everyone will be aware that Northern Ireland is on the periphery of the United Kingdom and that road haulage is important. I received a letter from one of my constituents, who runs a small road haulage business, in which he set forth the position with great clarity. He wrote: At present my firm consists of six employees: myself as transport manager, four lorry drivers and one secretary. I am particularly disturbed at the proposed 3 pence increase per gallon in the price of derv and the £470 per lorry rise in the heavy vehicle road tax. The financial consequences are summarised below:A—4 lorries @ 15,000 gallons each per year = 60,000 × 3Total increase at 3p per gallon = £1,800.B—4 lorries @ £470 per lorry for heavy vehicle road tax = £1,880.Total A and B = £3,680.This will inevitably be deemed 'loss' since factory owners in Ulster are not willing to accept the necessary increase in freight rates. In employment terms three jobs will be affected; I will not be able to operate the additional vehicle originally planned, hence the loss of a 'driver' vacancy; the financial loss is equivalent to the secretary's wage so her job is in jeopardy, and the trade stimulated as a result of her employment will fall off thus putting at risk the position of one of my existing lorry drivers. A potential work force of seven is reduced to four.In the Northern Ireland context the effects for the economy and employment will be far reaching, especially since, through peripheral location and lack of local resources or market, our whole economy is based on links with the rest of the United Kingdom and Europe; links which are met mainly by road haulage. Most of this operated through 'small business private enterprise'; the sector which the government constantly emphasises is the basis of the economy and the one which they pledged to encourage. Because of the inadequacy of the government created jobs in Northern Ireland surely encouragement of firms such as mine is essential. That is a heartfelt cry from a small business man who, with many of his colleagues, will be affected by this Budget.

A Conservative Member talked about the position being exciting if it is understood. I do not find anything about unemployment in Northern Ireland exciting. I visit the homes of my constituents and speak to people who have sought to do a good day's work. Their wages are lower than those in the rest of the United Kingdom and the cost of living is higher. I feel that the House must look carefully at the position as it affects the people of Northern Ireland. I trust that those small businesses in Northern Ireland which will suffer from the Budget will receive some hope from the Minister.

I support those hon. Members who have spoken about senior citizens' pensions. Senior citizens in Northern Ireland say to Members of Parliament, "Whenever increases are announced for other sectors of the community, those increases are paid immediately. We have to wait. Why must we wait?" I hope that arrangements can be made for senior citizens to be paid their pension increase immediately so that they can enjoy what little help it may bring.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South 8:01 pm, 21st March 1983

The hon. Member for Antrim, North (Rev. Ian Paisley) made a powerful speech about the economic difficulties of Northern Ireland, as he did earlier on a Standing Order No. 9 application. We should all reflect upon the fact that the antics of certain senators and Congressmen over the other side of the water are no help to the Northern Ireland economy.

There is one central point that is important with regard to the Budget. There has been criticism in the national press and from the Opposition that the Budget contains no discernible long-term strategy. I venture to suggest that that is too facile a judgment of what my right hon. and learned Friend the Chancellor proposed in his Budget.

I know that it is unfashionable for politicians to be consistent but, having said that, my right hon. and learned Friend's strength is that he is consistent. Hon. Members would do well to remember that in the real world of the money markets people look for consistency of policy, because it is upon consistency of policy that they can plan. I believe that my right hon. and learned Friend has done a sound job in that area.

I should highlight the work that has gone on for the best part of four and a half years now in bringing back control over public expenditure. It is a delight to one who serves on the Public Accounts Committee to see that at least the Ministry of Defence is operating within its cash limits. That demonstrates the value of a consistent long-term policy.

This consistency of policy and the long-term strategy towards industry is bearing fruit, particularly in relation to North sea oil. As my hon. Friend the Member for Enfield, North (Mr. Eggar) said, this is a success story. It was disappointing that the right hon. Member for Leeds, South (Mr. Rees) could not bring himself to congratulate my right hon. and learned Friend on his proposals for North sea oil. Over the past two and a half years I have studied this industry in depth. Proposals have been put to the Treasury Bench in a measured way. I congratulate my right hon. and learned Friend and those who work with him on having listened because the United Kingdom Offshore Operators Association, the spokesman for the oil companies and affiliated industries, put forward seven proposals for consideration in the Budget. Of those, five have been met in full and two in part, with the result that the marginal field taxation position has been greatly eased, the oil companies' cash flow has improved and many of the anomalies of petroleum revenue tax have been removed. I understand that if representations as strong as those made on behalf of oil are made for gas, we can look forward to a favourable response.

By any yardstick, the Government's strength is that they have consistently made their policies clear and concise. I have praised the Front Bench, and it is perhaps appropriate that my hon. Friend the Economic Secretary to the Treasury is here because I am going to deal with VAT relief for charities. I address my remarks to my right hon. and learned Friend the Chancellor and to my right hon. Friend the Prime Minister. The Prime Minister will know that, long before she was elected, I supported and stood by her. I argued on her behalf on television before she was elected, so my loyalty to her can be in no doubt. However, on the issue of VAT relief for charities, she and my right hon. and learned Friend have it wrong, and the sooner they recognise that the better.

My hon. Friend the Member for Exeter (Mr. Hannam) and I have put the case clearly, but it has not yet got through to my right hon. and learned Friend. First, it was implicit in Mr. Barber's Budget, when VAT was first introduced, that, if there were anomalies affecting charities, the House would look to put that right. Secondly, my right hon. and learned Friend has consistently said that the cost will be £100 million, although the charities say that it will be about £10 million. I do not believe that it will cost £100 million. My right hon. and learned Friend is giving £1 billion in grants to charitable bodies. Let us take £100 million off that and see who is right.

Thirdly, the Chancellor and the Attorney-General are worried about undeserving charities, such as the Moonies. I find it ironic that the two amendments in the Budget statement—one about deeds of covenant and the other about the removal of CTT—will help the Moonies far more than they will help the normal caring charities. The action taken in the Budget seems to be directed more at the uncaring charities.

Fourthly, the Chancellor said that there are too many charities. That is a slight change of tack. On 2 July 1981 I asked my right hon. and learned Friend if he is prepared to carry out a review of the impact of value added tax on charities. The then Economic Secretary to the Treasury said: No. Comparatively few charities engage in commercial activities to the extent which requires them to register and account for tax and keep records of the incidence of VAT on their purchases. A review of the kind suggested would be onerous and unlikely to lead to any useful conclusions."—[Official Report, 2 July 1981; Vol. 7, c. 480.] There were too few then and now there are too many. The Minister must get his act together on this. There are 140,000 registered charities in England and Wales.

Photo of Mr Jock Bruce-Gardyne Mr Jock Bruce-Gardyne , Knutsford

I must make it clear that charities that are trading are entitled to recover VAT on their inputs, just like any other trading body. The then Economic Secretary was pointing out to my hon. Friend that a relatively small number of charities fall into that category. The problem arises with the vast number that do not fall into that category and cannot reclaim VAT. There is no contradiction; quite the contrary.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

I am advised that there is a contradiction, but I shall leave that for the moment.

The key point is that 70 per cent. of the 140,000 charities have not filed returns in the past five years. They cannot be considered to be active charities. Of the remaining 30 per cent., the vast majority have incomes of well under £17,000 a year. Indeed, about 75 per cent. of them have incomes of less than £1,000 a year. So we get down to a figure of about 10,000 to 15,000 eligible charities.

The Chancellor of the Exchequer makes great play of the administrative burden on the Customs and Excise, but the 1981 report of the Commissioners of Customs and Excise gave an administrative cost of 1·2 per cent. The Chancellor and other Treasury Ministers keep saying that the cost would be about 10 per cent. Their claim does not stand.

What worries me most is that the Chancellor fails to understand the impact of VAT on the larger charities—primarily those working for the disadvantaged in distressed areas. The Spastics Society, which has taken a welcome lead in saving the Tadworth Court hospital, calculates that the lack of relief costs it about £500,000 a year. I ask the Chancellor to think how many children could be taken out of long-stay hospitals and put into small hostels with that sort of money. The Royal National Lifeboat Institution claims that its loss is £300,000 a year—more than enough to provide an additional lifeboat—and so it goes on.

I know that the Chancellor has given reliefs in the past four Budgets and they are most welcome, but he still fails to understand the nature, work and sources of revenue of the modern charity. Few charities have major legacy income or substantial covenants. Most rely on small donations from the public.

I have gone on at length because this is an important issue. I appeal to my right hon. Friend the Prime Minister to show some leadership to cut through this impasse, as she has done on so many other issues. Surely she, above all, recognises that the British people, giving 10p, £1 or £5 each for a good cause, do not want it to be taxed. I shall certainly do my best to ensure that it is not taxed.

Having made my complaint, I end by saying that the general Budget strategy is sound. It reinforces the Government's removal from the backs of British industry—how quickly the Opposition forget that—and the drive to denationalisation. It also gives some help to the British people. It is not an electioneering Budget; nor should it have been.

British industry is more competitive and output is increasing. For once, British industry has increased its share of world trade. The Opposition may claim that the policies ought not to work in theory, but they are beginning to work. It is time that the Opposition faced reality.

Photo of Mr Alex Lyon Mr Alex Lyon , City of York 8:14 pm, 21st March 1983

I did not agree with any of the peroration of the hon. Member for Northampton, South (Mr. Morris), but I agree with what he said about relieving charities of VAT.

The official Opposition do not often agree with the SDP, but I hope that the House will pass the SDP amendment, because it is disgraceful that the Government have planned the Ways and Means resolutions on recent Budgets to ensure that no debate can take place on relieving charities of VAT. I hope that we shall have a substantial debate this year.

The Budget was eminently forgettable and most of its provisions have lost any minor impact that they had on public discussions. That has been particularly noticeable today, when most speeches have concentrated on the general economic situation and not on the Budget.

The most interesting part of the Budget was the reference to the assessment of inflation in November for the purpose of pension provisions. It was significant that the Chancellor had to admit that, even on his own forecasts, inflation will rise by at least 2 per cent. between the summer and November. That is the beginning of the turnround in inflation rates and provides the answer to the suggestion of the hon. Member for Northampton, South and most other Conservative Members that the travails of the past four years have resulted in a massive reduction in inflation.

When people look back, as they will in the general election campaign, to whether it was all worth it, they will have to ask what has been achieved by creating unemployment on the scale achieved by the Government, by cutting back 20 per cent. of manufacturing industry and by ruining our manufacturing base. They will have to ask what is the virtue of it all.

It is clear, not only from all the speeches made in the past four years, but from the Budget, that the Chancellor believes that inflation is the sole cause of our competitiveness difficulties and our relative decline in international industry, and that the pursuit of reduced inflation is the answer to all the criticisms of the Government's economic policy. I am sceptical about accepting such a proposition.

The Red Book shows that in the middle 1970s inflation declined at the same time as world trade and the GDPs of the six major nations rose. That belies the suggestion that inflation is counter-productive to growth. Everything depends on the relative state of inflation between ourselves and our competitors. If the world as a whole were inflating and our major competitors were inflating at the same rate as we were, inflation would have a limited effect on our competitiveness. When inflation was running at well over 100 per cent. in Israel, few inhabitants felt great effects because almost everything was indexed, including incomes, benefits and prices. That offset the effect of inflation.

I accept that if we are to compete with countries such as Japan, France and Germany, which have considerably lower inflation than our own, there will be a major problem for our competitiveness. For that reason we want to do what we can to keep down inflation, but to crucify our manufacturing base and our people in an attempt to reduce inflation, not only to single figures, but to a mere speck, is a scandalous abuse of our resources.

Let us consider the effect on the individual of unemployment. It is a scandal that 500,000 people have not worked for more than two years. Some 1,500,000 people have not worked for more than a year. The Prime Minister used to say, and still occasionally falls into the trap of saying, that unemployment is often for short periods and people are in and out of employment. However, that does not necessarily mean that people have been employed for a long time. The significant contribution by the Government to unemployment over the past 20 years is that they have created the major factor of long-term unemployment.

Let us think of the effects on the lives of those who have not worked for two years or one year. The impact on their social lives is enormous. More than that, the effect will be enormous on the country. Most of those people are aged between 16 and 25. That generation has been blighted by the Government. One can only guess at what will happen in the future. We do not know what the effect of blighting a generation will be when that generation reaches the age of 30 to 40. There may be a severe reaction affecting social harmony and peace if those people have not returned to full employment or are still feeling the effects of the present rate of unemployment.

For what has that price been paid? It has been paid so that the Government could adhere to their obsession with the inflation rate. It would not be so bad if the effect of inflation was as bad in individual cases as the Government constantly pretend. They constantly say that inflation erodes savings. For most of the population savings are an illusion. For the great majority of people who are earning their living there is little room for savings. They have to depend for their daily outgoings on what, at the margin, they can keep after the fixed costs are incurred each week. They live on that. To talk about savings for those people is nonsense.

Of course, for those who have a source of savings, the few who can live on their savings, inflation is of considerable importance, but by and large those people are at the top end of the income scale in our society. It is significant that for those people the reduction in inflation will result in an improvement in their standard of living. It is particularly significant that it does not mean an improvement in the standard of living of those at the bottom end of the scale.

A reduction in housing costs has been brought about by the reduction in the mortgage rate for those who are buying their own homes, but for people living in council houses there has been a significant increase in their cost of living because of the imposition of higher rents, which were desired by the Government and not required by the local authority. The contrast between the costs for council housing and private housing and the costs of running a motor car and travelling on public transport is significant. Work done by the Low Pay Unit shows that the people on low pay at the bottom end of the scale have not benefited from the cut in the rate of inflation. There has been a substantial increase in their cost of living. They have not benefited from the measures taken by the Government.

On the whole, the improvements such as they were have been relatively poor for those at the lower end of the scale. People on unemployment benefit have suffered a substantial fall in benefit compared with those whose incomes have increased substantially because of the cuts in the rate of income tax.

As a result of the Government's obsession with the inflation rate there has been a polarisation of the poor from the rich. A woman who came to my surgery on Saturday said that she had voted Conservative all her life. I expected her to take that view. However, now she is on supplementary benefit and is finding it difficult to live. She asked me in anguish what those concerned thought they were doing to us. Such cries are being heard all over the country. The series called "The Boys from the Blackstuff", which is about unemployment in Liverpool, reflected the public mood because so many people are suffering such deprivation. It is all over the north. It is widespread in the midlands. The problem is that it has not been felt so strongly in the south, which is the area from which the Government draw their main support.

Because of that polarisation there is a sense in public comment, in the media and elsewhere that somehow or other the country does not care. The country does care. It cares immensely. The Government will reap the whirlwind at the next election. However, if, against all the indicators, they were to win, the impact of another term of office would be so immense that the fabric of our society could not hold together.

We have paid a price that was unaskable and unpayable to reduce the rate of inflation by two or three points. When the Government leave office the rate of inflation will be only a point or so behind where it was when they took office. It is absurd that all that anguish and travail have been caused simply to do that. We should get back to a saner Government.

Photo of Mrs Jill Knight Mrs Jill Knight , Birmingham, Edgbaston 8:28 pm, 21st March 1983

One has to admire the consistent ability of Opposition Members to believe not the facts but what they wish to believe. If the hon. Member for York (Mr. Lyon) really believes what he has been saying, particularly about public opinion, he has not read a poll for the past four or five months.

It amazes me how many Opposition Members talk about unemployment in Britain as if it were solely and completely the responsibilty of the Conservative Government, who are said to be blighting the lives of the unemployed. Opposition Members never look overseas. If they did so, they would see that unemployment is just as bad there. If they believe that unemployment is the Government's fault, who did they blame when they were in office, when unemployment started to take off? We should forget about trying to heap blame for unemployment on one Government or the other. Instead, we should concentrate on the misery that unemployment brings to those who are not fortunate enough to have a job.

We are nearing the end of four days of debate on the Budget. My right hon. and learned Friend the Chancellor had a plethora of advice beforehand, and he has certainly had a torrent of words since. Not all has been congratulatory. Some newspapers have complained that the Budget was a lacklustre Budget, and others said that it was unexciting. I am far from convinced that twinkle, lustre and thrills by the minute are wise yardsticks by which to judge the efficacy of a Budget. I would far rather have what we have got—a steady, entirely honest Budget, with advantages that, although not large, were spread widely.

I welcome the changes such as help for the unemployed, invalid pensioners, widows, and one-parent families, and the raising of child benefit. I am delighted at the rise in the threshold at which tax is paid. I marvel at the Opposition, who can look at all this and say that it is a Budget only for the rich.

I appreciate the help given to industry over a wide spectrum. I shall not repeat all that has been said earlier. I very much hope that the instigation of free ports comes to fruition. My right hon. Friend the Secretary of State for Industry earlier made it plain that he well understands the problems faced by the west midlands and the real and stark difficulties faced by industries there. I hope that he will ally that to the fact that Birmingham has an airport, an excellent rail link, a first-class road service and an excellent exhibitions facility. Given all those factors, together with his knowledge of the difficulties faced by the west midlands, I very much hope that one of the free ports will be located there.

I must record my disappointment with two aspects of the Budget. First, nothing has been done to alleviate the burden of rates. I well understand that if industry is relieved of rates the money must be found elsewhere. However, I and my hon. Friends who represent the west midlands have repeatedly drawn to the Government's attention the appalling difficulties that excessive rate burdens have placed on the shoulders of west midlands industries. We have talked about the roofs coming off factories because firms simply cannot afford to pay the void rate. In this respect, we have received a large benefit from the Conservative-controlled Birmingham city council. Would that the Labour-controlled West Midlands county council had also had some consideration for industry. But no, the burden that it has heaped on west midlands industry has been increased.

Rate bills can certainly mean the collapse of a firm, which in turn means more unemployment, which undeniably means more cost to the Government. We used to have industrial derating, and we managed perfectly well with it. The time is well past when we should have considered some form of rating help for industries in the west midlands, and I am sorry that that was not done in the budget.

My other grumble is that the Government have not taken the opportunity offered in the Budget to give positive tax incentives to those who are prepared to take responsibility for their own health care. As my right hon. Friend the Secretary of State for Social Services reminded us only last Thursday, the NHS now spends £14·5 billion of taxpayers' money annually. That is a gigantic sum by any standards.

Leaving aside the important question whether every penny or even every last £1,000 is well spent, any hon. Member could point to ways in which we could spend even more money on the Health Service to provide top grade medical care for every sick person. We could greatly improve the standard of care if the NHS had fewer sick people to look after.

It would greatly help the numbers game and reduce waiting lists if more people took out private medical insurance. The Opposition are interested only in establishing a uniform standard of health care for everyone and they do not mind if the standard is low. Like the Government, I believe that if a sizeable group of patients removed themselves from the list we should have more money to treat those who remained.

In the debate on Thursday my right hon. Friend the Secretary of State for Social Services said: It makes no sense to ignore that extra health provision that can be provided in the private sector any more than it does to ignore the provision that can be made by voluntary organisations. It is only by partnership involving the different sectors—the public sector, the voluntary sector and the independent sector—that we can tackle the social and health problems of the 1980s."—[Official Report, 17 March 1983; Vol. 39, c. 361.] I presume that it was that sensible conclusion that led the Government, as one of their first actions on taking office, to restore an element of tax relief to health insurance premiums paid by employers on behalf of staff earning less than £8,000 per annum. The cost of the premium is an allowable expense against corporation tax. That is fine when people are at work, but then they retire. As they get older they are more likely to need health care, but the help given to the employer on their behalf is stopped. They are less well able to afford help which they are more likely to need. Pensioners have to pay their subscriptions out of their taxed income. Surely it would be fairer to the taxpayer and far more beneficial to the NHS if we encouraged more people to take private medical insurance.

Finally, I voice my disgust at a reaction which takes the cake for illogicality and inaccuracy—the accusation that the Government are cheating the pensioners and clawing back pension money. Unless we have completely abandoned definitive English, "clawing back" means taking something away. One has a vision of a poor little pensioner trembling while a great bird with the Chancellor's face swoops down and snatches away what the pensioner has. Nothing could be further from the truth.

I resent the fact that those who are out to make political points have frightened pensioners with the idea that part of their pension is to be removed. Only last week I received a letter on that point from a very worried constituent. Nothing is to be taken away. The increases later this year may not be so high as they were last year, but as the rate of inflation is falling that is not unreasonable. It is quite extraordinary to say that the Government are clawing back pensions when no pensioner will have anything whatever taken from him.

I give the Budget an almost wholehearted welcome. Having entered those two caveats, I wish the Chancellor well and thank him on behalf of the people of this country for all that he is doing for our future security and prosperity.

Several hon. Members:

rose

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. I understand that the Front Bench spokesmen wish to begin winding up this important debate at 9 o'clock. Five hon. Members are anxious to take part in the debate, so I hope that hon. Members will bear in mind the time available.

Photo of Mr Robert Hughes Mr Robert Hughes , Aberdeen North 8:39 pm, 21st March 1983

I shall certainly bear that in mind, Mr. Deputy Speaker, and watch the clock carefully. I promise not to speak beyond nine o'clock.

Budgets used to be such grand affairs, even when I came to the House in 1970. The hon. Member for Birmingham, Edgbaston (Mrs. Knight), who is now leaving, said that she did not think that sparkle was necessary in a Budget. That may be so, but there is no doubt that when I first came to the House Budget day was a great day. Members used to compete to see who could turn up in the most esoteric suit or dress and the finest and biggest hat—not all at the same time, of course, even in these enlightened times—but even that little bit of excitement has gone.

The mystique has gone out of Budget day and Budget debates, largely, I believe, because the Budget options are picked over, chewed over, examined and debated—there are almost panel games on the subject—constantly by every television channel and every branch of the media. The fact that the Budget options are so widely discussed outside the House affects the way in which we discuss the Budget here. There is almost a sense of boredom. One wonders whether the Chancellor actually set out to produce it. In addition, there are mini-Budgets between main Budgets to make so-called fine adjustments, to such an extent that people become bored to death with Budgets and with the matters that govern their lives.

The Budget should be the centrepiece of Government policy. It should show how the Government intend to proceed in the next few years. To be fair, the Chancellor says that he has been carrying out the same simple strategy from the beginning. There has been no change of course. Everything is exactly the same. But there is nothing in the Budget to stimulate business or trade to get employment moving again.

The hon. Member for Edgbaston said that she did not wish to assign blame for unemployment. Of course she does not, because she is an honourable lady, and she has left the Chamber because she is thoroughly ashamed of the disgraceful posters put up in May 1979.

Photo of Mr Arthur Lewis Mr Arthur Lewis , Newham North West

My hon. Friend should be fair, as I know that he is a fair man. The hon. Member for Birmingham, Edgbaston (Mrs. Knight) is simply following the wonderful example of all Privy Councillors. The are all called and they all walk out afterwards and do not put in another appearance.

Photo of Mr Robert Hughes Mr Robert Hughes , Aberdeen North

I accept that mild rebuke from my hon. Friend. We seem to be getting very slack. When I first came to the House an hon. Member who left the Chamber immediately after speaking would not be called the next time he tried to catch Mr. Speaker's eye and he would be told why. I have therefore condemned myself to sitting through the speech of my right hon. Friend the Member for Leeds, East (Mr. Healey) by speaking at this stage in the debate. I hope that my right hon. Friend will not take that comment amiss.

I shall deal with the matter more widely and not confine my comments to the hon. Member for Edgbaston. Every Tory Member is thoroughly ashamed of the posters put out in May 1979. They did not even use out-of-work actors to provide the long, sinuous queue disappearing into the distance to illustrate the caption, "Labour isn't working." The Government came to power on the basis that unemployment was too high due to the Labour Government's policies and that the Conservatives would do something about it. None of us thought for a moment that they would set out to make the dole queues even longer and then turn round, after almost four years in power, and say that it was not their fault.

The Government say that the Chancellor is doing his best, the Prime Minister is doing her best, the Secretary of State for Employment is doing his best, they are all doing their best, so it must be someone else's fault and it is all outside their control. It is no wonder that we become angry when Conservative Members say that they do not wish to assign blame for unemployment. Blame can be firmly attached to the Government and their policies, because unemployment is still growing.

The city of Aberdeen, part of which I represent, is reckoned to be one of the industrial and commercial Eldorados of the country because many head offices of companies exploring North sea oil are there. Nevertheless, unemployment there is rising quickly because industries and companies are closing down almost every week, certainly every year. They are being driven out of business by events. No one says anything about it and no one seems to care because it is an oil-rich capital. The idea that some people are putting around—that one of the answers to unemployment in Aberdeen or elsewhere is free ports—is utter nonsense. I hope that the Economic Secretary to the Treasury will nod his agreement with that.

Free ports provide nothing which, apparently, is not already available elsewhere if one tackles the Inland Revenue properly. I understand that free ports are almost like bonded warehouses. Perhaps that is a poor example, as even goods in bonded warehouses are liable to tax to be paid in advance. The principle is that if goods come in to be processed and are shipped out normal tax does not apply because the goods do not go into internal circulation. I understand that at the moment a company that wants such a facility can get it from the Inland Revenue. Perhaps the Revenue is a little too stringent in its dealings with such cases. If that is so, it should be told bluntly not to be so obstreperous. The fancy idea of free ports is merely a con to make people think that they are getting something great.

My worry about free ports is that they will go further and that not only will taxation not be paid, but that normal safety and planning regulations and other legislation, which would normally apply in factories, will disappear and we shall end up, not with free ports, but with areas in which piracy takes place. The Economic Secretary to the Treasury shakes his head. I know that that is not what he intends, but I know that there are people who want that to happen.

If one examines the Government's strategy, one sees two things. First, they are happy to see unemployment rise and, secondly, where there have been Budget changes, they have hit people on the lowest incomes and the worst off. Many hon. Members will have seen the survey carried out by the Institute of Fiscal Studies, which was published in The Sunday Times, which shows that a jobless man with a family, who used to be a local authority manual worker, receives an extra 38p a week as a result of this year's magnificent Budget. Since the Government came to power that same man has become £15·30 worse off. That means that £795 a year has been taken off him, in that two years ago he would have received the full employment benefit and earnings-related supplement which are no longer available. At the other extreme, a company director earning £44,700 a year, after four years of the present Chancellor, has gained £14,370. Yet the Chancellor has taken £800 away from an unemployed person. That is a disgrace and the Government know it.

When we become the Government—that is what will happen at the next general election—we shall be determined to look after our friends, working-class people and poor people who have been done down by the Government, in exactly the same way and with the same strength of purpose as the Government have looked after their friends. If the Prime Minister has taught me and many others in the Labour party a lesson, it is to pursue our policies with equal, if not greater, strength of purpose than she has done. I assure the Minister that we shall see a Labour Government dedicated to carrying out their policies, and as a result working people will be better off.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel 8:50 pm, 21st March 1983

I agree with the hon. Member for Aberdeen, North (Mr. Hughes) that the speculation about the Budget and the sense of déjà vu present a problem. However, my right hon. and learned Friend the Chancellor was right to remind the House that, by giving information at half-yearly intervals, he gives people the opportunity to speculate with more intelligence than in the past. On balance, it is a good policy, and a movement away from the mini-Budget concept is excellent.

I appreciate what my right hon. Friend the Secretary of State for Industry said when outlining the industrial package more generally today, and I especially welcome the fact that the national insurance surcharge is moving further down the road to abolition. That is a direct benefit both to large and small industries.

More than half of the electorate in my constituency are pensioners, and I unequivocally welcome the historic uprating of pensions. I defend that with every justification. It is a much better principle, and my right hon. Friend the Member for Sidcup (Mr. Heath) was a little over-dramatic in wondering how we could argue the case for it politically. It is a better move all round.

My right hon. and learned Friend was right to be cautious in his judgment on the variables of oil prices and sterling. Another variable, about which there was not much speculation in this Budget and which did not form the main part of the Chancellor's remarks, affects the way in which the Budget will work in practice. It involves the financial results and the management structure of nationalised industries, and their relationship with the Government. The future structure and the financial performance of the public sector are interdependent, and I am worried that much of the rethinking in that area seems to have run into the sand. The latest initiative comes from the House in the form of a Bill introduced by my right hon. Friend the Member for Chelmsford (Mr. St. John-Stevas). Although I welcome some aspects of the Bill—I am glad to see present the right hon. Member for Heywood and Royton (Mr. Barnett), who I know is actively pursuing these matters—the measure is tackling the wrong problem. The basic problem remains: what is to be done about the nationalised industries and their relationship with the Government of the day?

The present position has both direct and indirect difficulties. One direct difficulty seen from the Red Book is that of moving away from an external finance limit of between £2 billion and £2·5 billion, despite the Government's commitment to move to positive inflow when they came to office. The £500 million shortfall in capital expenditure in the public sector is highlighted in the Red Book. An indirect problem is the constant subsidy and topping up in search of viability. Although I welcome the fact that the British Steel Corporation, British Shipbuilders and British Leyland are moving on the downward path, we must remind ourselves that, in contrast, the private sector has not the same opportunity to prevent bankruptcy in that way. It is fair to say that we still suffer from a form of industrial class division.

I hope that the Chancellor will take the opportunity to give us his assessment of how he sees the changes in the relationship between Government and the nationalised industries, and those that are publicly funded, over the coming year. We are not short of analysis. We have the National Economic Development Office report of 1976, the Central Policy Review Staff report in 1981 and the Professor John Heath article about the concept of Government and conglomerates. Out of all these studies, and particularly out of the last CPRS report, I had hoped to see somewhat more progress.

It is crucial that the problem, which has been highlighted, of the appointment of chairmen and board structure should be attended to. Some progress could and should be made. The strength of the non-executive board appointments is significant, and we have not made enough progress on that. Those non-executive directors should form the basis for the selection committee which should look to management succession at the higher level generally and the appointment of the chairmen in particular. From within that quorum of non-executive directors, I should look for possible successors to the chair, and certainly to provide a chairman on an emergency basis if the need arose. That would help the Government of the day, because there is no doubt that one often faces a difficult problem when the reappointments come roaring along and a positive scrum takes place with a number of the sponsoring Departments fishing in the same pool. There is often a sense of crisis that should be avoided.

Some opportunities are still being missed in the way that chairmen appointments are made. For example, there is a worry that not enough internal promotion is being encouraged by the present circumstances. Even if it were by circulation or advertising, the chance to make it plain that there is an open opportunity for people to apply for senior posts in nationalised industries would be helpful. I have had some experience in making these appointments, both in Government and as a head hunter, and that experience suggests that often much talent is hidden in one's organisation that will come to the surface when such opportunities are provided. I do not claim that that will necessarily be the appointment that one will make, but people like to put down markers. I know that the hon. Member for Colne Valley (Mr. Wainwright) takes an interest in this and I am glad to have his support.

These are important factors in the examination of the way that boards interrelate through the chairmen to the Government of the day. We should also give attention to how chairmen could be replaced. It is reasonable for the Government of the day to engage in service contracts and proper co-operation and to seek to carry out policy on agreed lines. I hope, too, that my right hon. and learned Friend the Chancellor will say a word or two about clear financial targets and policy objectives. That was one part of the CPRS report on which there has been progress. It is ironic that it should have taken a Conservative Government to clarify much of the confusion and misdirection that applies to nationalised industries, but we all recall what happened to Lord Shinwell when he went down to try to find out about the plan for coal, so it has always been.

The Chancellor has shown great interest in the past in decentralisation and I hope that my right hon. and learned Friend will not rule out opportunities of moving in that direction, because that would not only strengthen the ways in which management development can take place but would allow a more effective growth in much of the state sector industry, and pave the way for opportunities to privatise.

It is worth repeating just one or two of the achievements that privatisation has brought about. The House knows of my interest in Cable and Wireless and British Aerospace, but the change in attitude at all levels in those companies is remarkable. If we take further opportunities to move in that direction, and to provide employee shareholding, companies will recognise, on an apolitical basis, that leaving the public sector with the PSBR and gaining access to the capital market is an attraction. On the other hand, where there is a genuine state commitment, as in the case of British Aeropspace and defence, and Cable and Wireless in relation to other Governments, these are matters that can fairly be brought to bear within the 50–50 public-private mix.

I should think that some Opposition Members would see the virtue of that depoliticisation. It is a far better balance than would be achieved by suggestions for freezing what are currently regarded as the public and private sectors. These are possibilities, I believe, that will help us to study how the public sector can become a more effective and healthy part of the British economy. I urge my right hon. and learned Friend the Chancellor, who has shown steadfastness and courage in his Budget judgment, to carry his reforms further and to look to the nationalised industries as an area where he can make his mark. My right hon. and learned Friend will certainly not receive much help from the Opposition Benches.

9 pm

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

Today has been an exceptionally interesting finale to the usual week of Budget debates. There have been many powerful and interesting speeches. I shall not be alone, I think, in mentioning those of my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) and the right hon. Member for Sidcup (Mr. Heath). Indeed, they displayed a broad area of agreement that has not always been so obvious in earlier years. Opposition Members appreciated particularly the lightness and wit with which the right hon. Member for Sidcup spoke, although his wit, I notice, was not so greatly appreciated by Ministers.

The House also heard a fluent and lively maiden speech from the hon. Member for Bermondsey (Mr. Hughes). I hope that there will be many more opportunities for the House to hear the hon. Gentleman in the coming weeks or months, depending on the Prime Minister.

The main interest today and, indeed, during the five days of debate has not been the Budget. The Budget sank like a lead balloon in the City, on the foreign exchange markets, on both sides of industry and, indeed, in Darlington. The interest has centred on the graveyard of the Government's economic strategy, of which the Budget is just another tombstone.

In spite of all the fiddling of the figures, which has left much uneasiness among stockbrokers, there is general agreement that the Chancellor, basically, is once more simply rearranging the deck chairs on the Titanic. The effect of his measures on the growth of national wealth in the coming year is unlikely to be more than 0·5 per cent. and some economists have estimated that it will be as low as 0·1 per cent. Yet this follows four years of Conservative Government in which national wealth has fallen by 6 per cent., unemployment has increased threefold to over 4 million and there have been record bankruptcies. The number of bankruptcies is increasing year by year. Inflation, according the Government's own figures, is set to rise again in the second half of this year. The once-for-all gain in productivity petered out a year or so ago, and, according to the Government's own projections, is now back at the normal average level of annual increase enjoyed in post-war years.

Against this background, the most startling speech in the debate was that of the Secretary of State for Industry. His departmental responsibility is for that part of our economy that has carried almost the whole burden of this experiment that failed. The right hon. Gentleman made a speech of stupefying complacency. As the late and great Ernest Bevin used to say, cliche after cliche—he pronounced the word "clitch"—tumbled out of his departmental word processor. Many of his platitudes expressed sentiments with which most hon. Members will agree. Of course, all those sentiments have been contradicted by the Government's actions.

The Secretary of State for Industry invited the House to examine what the Government had done, not what people said. He said that our prosperity depended on our capacity to supply demand. I agree. That capacity has been cut by 20 per cent. by the Government's actions over the past four years. According to the OECD, 10 per cent. of our industrial capacity has been destroyed for ever. Many factories have gone bankrupt in the past four years and sold their machinery, often to Sweden, Germany or France. Those businesses will not be in existence when the upturn comes. In the industrial desert, those firms which still survive will have carried out almost no new investment, no industrial training and no research and development during the past four years.

The Secretary of State for Industry told the House that our greatest natural resource was our people. That was an astonishing statement from a Minister in a Government who have denied 4 million of our men and women I he right to work and made certain that those still in work have had little or no industrial training in the skills required in the new technologies of which the right hon. Gentleman spoke in such glowing terms.

My right hon. Friend the Member for Heywood and Royton (Mr. Barnett), whose cheery face enlivened my own departmental career for so many happy years, pointed to some of the constraints that would face this country when it finally embarked on recovery. There is no doubt in my mind that the most serious restraint and the most difficult to deal with will be that created by the loss of capacity, the disappearance of firms on which other firms depend for components, and the risk of overheating which could develop unless the Government are prepared to take the initiative to remove those bottlenecks.

The Secretary of State talked a great deal about this country's need to rely on the ability of small businesses to meet the strains imposed by the current recession. As I have said, he has been responsible for a record number of bankruptcies. Indeed, the number has been rising every year since the right hon. Gentleman became a member of the Government. He then had the impudence to remind us that in the west midlands small businesses must depend largely on the success of British Leyland—a shining example of public enterprise and Government subsidies. Hon. Members must examine the other large private firms in our economy.

Mr. Graham, the industrial expert of the Midland Bank, warned today that many famous names may disappear altogether in the next few weeks or months unless the Government step in to help them as they were compelled to help British Leyland. The startling nature of the Secretary of State's remarks, which I have already quoted, was nothing to what he said about our prospects for future growth. He rested his confidence on the recovery of our economy—a recovery that has been coming for 12, 24 or 36 months, according to Government spokesmen, but has not yet arrived—on the fall in the pound, the fall in interest rates and the fall in oil prices. Let hon. Members examine each of those in turn.

Opposition Members are grateful to the Secretary of State for the complete somersault that the Government have turned on the fall of sterling. Not many weeks ago the Government were telling hon. Members that we were committing a sin against the Holy Ghost by suggesting that sterling was overvalued, but in the past six months sterling has fallen by 13 per cent.—a fall that some hon. Members thought would take 12 months. Of course, that fall—as the Chancellor told us many times in those debates—is a judgment by the market on the economic fundamentals of the British economy as it is being operated by the Conservative Government. There has been a fall of 13 per cent. in sterling in under six months. That fall will help our businesses in the longer term, although it will certainly increase the rate of inflation and produce perverse results in the short term—the famous J-curve effect.

The last time sterling fell, the Chancellor of the Exchequer intervened. He took advantage of the Prime Minister's absence in the Falkland Islands to raise interest rates in order to break sterling's fall.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I do not know. If she stays out much longer, the Chancellor of the Exchequer may raise interest rates again, and that would be terrifying for all of us.

Last time, the Chancellor raised interest rates to break sterling's fall. There was no excuse in terms of monetary policy for raising them then, because—as I pointed out in the last debate—it is only in the past few months that the Government have had the money supply under control. In the Government's first two and a half years the Prime Minister printed as much money—the great sin, she tells us—as the Labour Government printed in five years. However, the money supply is now under control. There is no domestic monetary reason for raising interest rates.

I hope that the Chancellor of the Exchequer will assure us—and the markets would like to hear him do so—that if, because of the magic of the market place and its judgments about the fundamentals of our economy, sterling should fall further in the coming weeks or months, he will not interfere in the market and that we shall not see his all-too-visible hand playing with the controls in the Bank of England. I hope that he will assure us that he will allow sterling to fall as the market wishes, and will not raise interest rates again to choke off the pallid, limping and spasmodic increase in output that the Government have told us they expect this year.

The second ground that the Secretary of State for Industry cited for confidence in recovery was the fall in interest rates. That has substantially relieved the immediate cash burden on British industry. However, interest rates have not fallen anything like as fast as the rate of inflation. Real interest rates in Britain today are higher than they were when the Chancellor raised the nominal interest rate to 17 per cent. in his first year in office. Nominal rates in Britain are still higher than those in the United States of America. Indeed, real interest rates today are not only very much higher than they ever were under the Labour Government, but are roughly three times as high as the real return on capital. Therefore, we cannot expect any investment in new capacity until interest rates have come down much further.

We shall, of course, continue to get some investment in machinery which enables firms to lay off people. We shall see some investment in labour-saving or unemployment-creating machinery, but there is no reason to expect significant investment in new capacity as long as the real rate of interest is three times as high as the real return on capital. Nor can we expect very much research and development. I notice that innovation in about three quarters of British firms takes only 1 per cent. of the value of their turnover. In other words, the amount of money spent in Britain on developing new products—which must form the basis of our recovery—has become minuscule in relation to the need.

The third factor on which the Secretary of State relied for recovery was the fall in oil prices—[Interruption.] It may be boring to Conservative Members, but they know all too well that what I say is true. Indeed, what I say proves that the whole of the Government's economic policy is based on false hopes and beliefs that have no chance of fulfilment.

This afternoon the right hon. Gentleman relied for his third element in recovery on the fall in oil prices. He said that the lower they are, the better.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I shall give way in a moment.

There has been little fall so far. Oil would have to fall to $16 a barrel to get back to where it was in 1978, before the war between Iran and Iraq when it stood, in nominal terms, at just over $13 a barrel. Since then the loss of oil supply from Iran and Iraq has been more than made up from increased supplies of oil from other parts of the world. If oil falls below $20 a barrel, all the Chancellor's calculations so far will be thrown into confusion. In his Budget speech he promised to take the necessary action to restore the PSBR to the level that he planned for it. We can expect large increases in taxation.

We know that the Secretary of State for Industry would like a big fall in oil prices to help British industry. What is the Secretary of State for Energy doing? Is he still leading for the fall in oil prices, as he did a month ago, or is he joining the OPEC cartel to break the fall in oil prices? I should not entirely blame him if he did because, as the right hon. Member for Sidcup said, a sudden and sharp fall in oil prices to below $20 could have serious consequences and lead some of the big oil-producing countries to default on their debts. But the Chancellor should tell us and the markets, on whose benevolence he now relies almost completely in his economic policy, the Government's real policy for oil prices. Will it lead them down to help British industry or will it keep them up to help British banking?

The fourth source of recovery, according to the Secretary of State, is the recovery in the United States. Here, indeed, we have seen a big change in the Government's attitude since the Chancellor made his first Budget speech on 12 June 1979 when he told us—how oddly this rings in our ears after all we have heard in recent months and years from him and the Prime Minister—that it would be very dangerous if preoccupation with this or that world crisis—the oil crisis, the dollar crisis or whatever—led us to believe that our economic troubles could be blamed mainly on the outside world."—[Official Report, 12 June 1979; Vol. 968, c. 238.]

Photo of Mr Patrick Jenkin Mr Patrick Jenkin , Redbridge Wanstead and Woodford

Before the right hon. Gentleman proceeds further, perhaps he will accept that I said nothing whatever about the United States in the course of my speech.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I must have heard so many echoes of earlier speeches in the debate when the right hon. Gentleman was speaking that I may have attributed to him views expressed by the Chancellor, who certainly did refer to it in his opening speech.

The Government have been telling us for the past two or three years that unemployment is the fault of the world recession—that it must be laid at the doors of other Governments who have not followed the example set by the British Government and must not be attributed to the British Government at all. However, the plain fact is that other countries have learnt the error of our ways faster than we have. The recovery in the United States that is now expected to lead to growth of 4 or 5 per cent. this year is due to the fact that it realised the appalling error that it made in adopting what it called Thatcherism. Last summer it decided to relax control of the money supply and its fiscal stance. It has always had a much looser fiscal stance than the British Government, although its economy has been working at a higher capacity.

At the moment the Americans have adopted the first law of holes. I wish that the Government would adopt that law, too. The first law of holes is that when someone is in one he stops digging. The American Government have, thank God, stopped digging. It is still unclear what they do now that they have dropped Reaganomics, or Thatcherism as originally defined. They know that their recovery could peter out in 12 months unless they make massive cuts in the defence budget. The Administration are deeply divided over whether to ask Congress to make such cuts.

The American Government, like ours, rely too much on factors such as interest rates and the price of oil which are likely to rise once recovery is under way. The United States Administration have at least in recent months developed one insight of great value to themselves and to the world. The United States now recognise that the West as a whole must make growth the priority in economic policy—certainly no less than inflation. Secretary of State Schultz made that clear in an eloquent speech the other day. One of the reasons why the American Government have taken that view is that they know that the Western banking system is being kept together by sticking plaster and various forms of first-aid. I congratulate the Chancellor on being skilful and adroit in the application of sticking plaster, but that first-aid is not enough to save the Western banking system from collapse without substantial growth.

The magic of the market place, which the Chancellor so much admires, has produced a private banking system in the Western world which can survive only by lending more and more to bad debtors. Many Third world countries have become bad debtors because the industrial world has chosen policies of recession which prevent them from earning enough money to pay the interest or repay the principal on their loans. Unless world demand rises and they can export more at higher prices, the Western banking system is likely to collapse, whatever the IMF, the International Bank or the Bank of International Settlement may do.

The high priest of monetarism in the United States, Secretary Beryl Sprinkel, recently called for the United States, Britain, Germany and Japan—countries with low inflation rates—to lead the world to higher growth by reflating demand. The Chancellor turned that down flat in two icy sentences in his opening speech. He said: it is sometimes suggested that countries which have made most progress against inflation should speed the recovery process by a resort to reflation. But nothing could be more dangerous to recovery."—[Official Report, 15 March 1983; Vol. 39, c. 135.] The chanting that I hear from the Government Front Bench is the funeral dirge of the Western world's banking system.

Photo of Mr William Clark Mr William Clark , Croydon South

I am sure that all right hon. and hon. Members realise that the right hon. Gentleman is making a good political attack. Can he say where my right hon. and learned Friend's policies have failed and why, if they have failed, he has not been to the IMF cap in hand?

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

It is easy for a Government prepared to throw 4 million people out of work, create record bankruptcies, and cut the national wealth by 6 per cent. when we have an historic advantage of North sea oil which no other Government have had. The Chancellor has not gone to the IMF, because he has £12 billion help for the balance of payments from North sea oil alone and has received £7·5 billion this year in revenue from North sea oil. If it were not for that, he would have been grovelling to the IMF years ago, The real problem that we all face is to increase demand worldwide, not only in Britain. The Government—the chanting on the Government Front Bench demonstrated this more clearly than any argument of mine—are trying to deny any connection between demand and output. However, sometimes the truth will out, and it is out in the Government's Red Book. Paragraph 3.37 states: Treasury forecasts of manufacturing output have generally proved over-optimistic, to a considerable extent because the demand for manufactures in total was overstated. In other words, those who write the Red Book know perfectly well that there is a direct connection between output and demand. However, because the Government will not act on that knowledge, they have condemned Britain to industrial decline, mass unemployment and social divisions such as we have not known for many years.

As the Secretary of State for Industry told us, the Government allowed for a small increase in demand which, in net terms, will be about £1,600 million this year. The right hon. Gentleman claimed that that meant that the Budget was expansionary. In other words, he was claiming that the increase in demand would produce expansion. Unfortunately, the increase, which is far too small, is concentrated in the areas least calculated to increase output and reduce unemployment. If the Chancellor thought that that was all the money that he had to give away, he should have concentrated it on public spending on construction and the economic infrastructure where there i5 the minimum import content, the maximum impact on jobs and the maximum stimulus to private industry. He chose instead to concentrate his stimulus overwhelmingly on cuts in income tax.

Photo of Mr Leon Brittan Mr Leon Brittan , Cleveland and Whitby

Is the right hon. Gentleman in favour of indexing allowances?

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I am certainly in favour of doing that. I am in favour of increasing allowances. I am also in favour of large increases in public spending, to which I have referred. I believe in a much greater stimulus to demand than that which the Government allowed themselves. There are many who feel that it will prove to be larger in any event.

This is an election year. The Government thought that there was at least one promise that they had made to the electorate that they had broken and should do something to restore. Therefore, they concentrated the stimulus on tax cuts. They did so in ways that have increased the inequality that is already dividing our society. The poor are already more highly taxed in Britain than anywhere else in Europe. Last week, in a speech of unctuous complacency, the Prime Minister said: The Government cannot please everyone, but you can be fair to everyone. Were the Government fair to everyone in the Budget? A business man on £45,000 a year will be £120 better off but an unemployed family will be £15 a week worse off.—[Interruption.] The detailed calculation, which appears in the document prepared by the Institute of Fiscal Studies, takes into account the increase in the prices index for those on that level of earnings and the loss of earnings-related benefit.

Since the Government took office, those on two thirds of average earnings have lost £45 a year in real terms and those with earnings over £30,000 a year have made £3,650. The poverty trap today is deeper and broader than ever before.

Worst of all, the Government have perpetrated a squalid fraud on our old age pensioners. A married couple in receipt of the retirement pension will be robbed of over £1 a week in November because the Government are basing the increased pension on the freak month of May, when for one month in the life of the Government inflation may be down to 4 per cent. before rising, on the Government's own calculation, to 6 per cent. or more.

The Government are ending as they began. As my right hon. Friend the Member for Heywood and Royton said, they are not just leaving the country poorer and the poor poorer still, but they are dividing a country which has always led the world in consensus; they have destroyed the dignity of 4 million men and women who want the right to earn their living; and they have thrown away the one chance of restructuring our industry given by North sea oil. Their economic record is one of unalloyed disaster. The Budget is the last nail in their coffin. I call upon all hon. Members to join us in the lobbies in expressing our disgust.

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey 9:30 pm, 21st March 1983

I begin by congratulating the right hon. Member for Leeds, East (Mr. Healey) at least on the vigour of his speech. It is interesting to watch him perform beside his right hon. Friend the Leader of the Opposition, almost, one might say jostling him. One knows how important it is for the right hon. Member for Leeds, East to try once again to make his mark over the next six months. I suspect that the right hon. Gentleman has been studying with some care the remarks I made at the beginning of the debate about the extension of the job release scheme which enables men over 62 who so wish to choose to retire early and thus to make room for someone else who wants a job. I commend it to the right hon. Gentleman's attention, but I suspect that he has already commended it to the attention of his right hon. Friend the Leader of the Opposition.

I shall deal, first, with the amendment moved by the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) on behalf of his party. It seeks to leave out paragraph (a) of the amendment of the law resolution. The effect of that would be to open the way to detailed, selective, amendments to VAT and make the debate on the Finance Bill unrestricted. I remind the right hon. Gentleman that the practice of restricting the scope of the resolution so as to preclude selective changes in VAT goes back to the inception of that tax. It does no more than follow the practice adopted before in respect of purchase tax and the selective employment tax. The practice reflects the view generally accepted over the years that it is undesirable that such taxes should, during the course of the Finance Bill debates, be subject to piecemeal amendments that can affect the balance of the tax.

I remind the right hon. Member for Hillhead that when he stood in this place he moved an amendment more than once in precisely the same form restricting debate in exactly the same way, not merely in relation to purchase tax but also in relation to selective employment tax, the import deposit scheme and the betterment levy. The resolution is founded on a sensible precedent. I commend the resolution rather than the amendment to the House.

I want to deal with the point raised by the right hon. Member for Leeds, East, the right hon. Member for Hillhead and my right hon. Friend the Member for Sidcup (Mr. Heath). They suggested that there is some doubt about the method by which I have settled for the year ahead on a PSBR of £8 billion, in particular, by an undue reduction of the contingency reserve or an unjustified increase in the allowance for shortfall.

The contingency reserve for 1982–83 was set at £2·4 billion; for 1983–84 it has been reduced to £1·5 billion. There is a simple reason for that. The year 1982–83 was the first year of cash planning and it was sensible and necessary to be cautious in setting the contingency reserve for that year. As things turned out, although the reserve was set at £2·4 billion, there were fewer claims on it than expected and, even after including the costs of the Falklands campaign, only £1·4 billion has been required.

No doubt falling inflation was part of the reason for that. For 1983–84, the Chief Secretary and I took the view that we could safely operate with a smaller reserve, of about that size. As a matter of record, the decision to fix the reserve at about £1½ billion was taken provisionally in the autumn and that figure, which comes as such a surprise to some people today, appeared in the autumn statement. Nothing has happended to alter our view, so that figure is retained in the Red Book.

The other suggestion is that we have mysteriously invented a new quantity called "shortfall" and have used it suddenly to reduce the PSBR. That suggestion also has no foundation. All Chancellors have to take a view at Budget time about the extent to which there may be underspending within the plans, and in seven of the past nine public expenditure White Papers there has been a general allowance for shortfall in one form or another. The same is true of the financial statement and Budget Report this year. It shows that the total shortfall for the current year, compared with the plans announced in the 1982 budget, is likely to be £2·2 billion. For 1983–84, the allowance is about £1 billion less.

There is always likely to be some shortfall as spending managers try to keep within their cash limits. In addition, it may take time for our measures aimed at reducing capital underspending by local authorities and nationalised industries to have their full effect. I am satisfied that the allowances both for shortfall and contingencies are justified.

I start my reply to the substance of the debate by joining the right hon. Member for Leeds, East in congratulating the hon. Member for Bermondsey (Mr. Hughes) on a combative, yet courteous, maiden speech in which he spoke effectively on behalf of his constituents. I gladly endorse the hon. Gentleman's tribute to his predecessor, who gave many years' distinguished service in the House and continues to serve the people of docklands on the London Docklands Development Corporation. The hon. Gentleman's speech brought the House face to face with the impact of unemployment in his constituency. The general topic has rightly recurred, not just in this debate but in many other recent debates in the House.

The right hon. Member for Cardiff, South-East (Mr. Callaghan) gave examples of the impact of unemployment in his native south Wales and the city of Cardiff. You, Mr. Speaker, and I have undimmed memories of the impact of unemployment on that part of the country. as had the late Alec Jones, whose recent death saddened the whole House. He was a distinguished and characteristic representative of the Welsh Labour movement and the whole House misses him greatly.

In our different ways, all of us remember the human and moral impact of unemployment. I remember it from my childhood in circumstances that were not explosive, and I also remember how easy it is to overlook the human impact of unemployment. When I left south Wales for the first time and went to the south of England, I met people who said that they had never understood the problem of unemployment and what it really meant. Because I represent Surrey, East, I bear that in mind. I understand the problem of unemployment as does every hon. Member. We do not forget.

Among the reminiscences—I use that word without disrespect—that the House has heard today, we have been reminded of the different nature of the current unemployment problem facing not just this country but the world.

The right hon. Member for Cardiff, South-East spoke of unemployment in the 1930s. The right hon. Member for Leeds, South (Mr. Rees), in a distinguished and thoughtful speech on the same subject, referred to the lessons that might be learnt from the 1944 White Paper. However, those lessons derive from a time that was different from today, when prices were falling and when, as the right hon. Member for Cardiff, South-East reminded us, there was a true deflation taking place when prices were falling. That was in the 1930s.

I shall come forward to the 1960s and 1970s, when I had the privilege to serve in the Government of my right hon. Friend the Member for Sidcup, and when we were both facing what seemed to be a shocking level of unemployment. At that time, before the oil shock, when the right hon. Member for Cardiff, South-East also grappled with the problem as Chancellor and as Prime Minister, it was still legitimate and natural to strive, as the right hon. Gentleman said he did, for the four prizes together—balance of payments stability, real growth, full employment and stable prices. In those days we talked about stability of prices and meant one per cent., two per cent. or three per cent. We were grappling with circumstances that were quite different from those that we face today.

Today, all that has changed. As the right hon. Member for Leeds, South said, technological change is massive. It creates problems, but it creates opportunities as well. The oil upheavals have disturbed the whole world. Inflation worldwide has reached terrifying levels. The problem truly is worldwide. That is why in so many contributions not just today but throughout the debate hon. Members have reminded the House of the international setting of our considerations. I have read and noted the many contributions made by hon. Members on both sides of the House on previous days. I listened to the speeches made by my right hon. Friend the Member for Sidcup and the right hon. Member for Hillhead. All that has been very much in my mind during the past 48 hours, which I have spent in Brussels. [HON. MEMBERS:"Where is the Prime Minister?"] The Prime Minister is now at the European Council. That is why she is not in the House now.

During that time one could not fail to be conscious of the impact on all one's colleagues, the Finance Ministers in the European Community, of unemployment in their countries. We met in Brussels. In Belgium the unemployment level is a little higher than our own. It was against that background that we met for that protracted meeting, when I was glad to be able to play some part in helping to find an agreement on the future of the European monetary system.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

The right hon. and learned Gentleman referred to the traditional four prizes of post-war economic policy. Are we correct to infer from what he said that one of those four prizes has now been abandoned by the Government, for the reasons that he has stated, and that the one prize that has been dropped is full employment?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

The right hon. Gentleman's question does not do credit to his normal balance in these matters. Of course, that prize has not been dropped. It must be manifest to the right hon. Gentleman that for any Government in today's circumstances to capture all four prizes is a formidable task. His Government failed to achieve full employment. His Government failed to achieve success against inflation. I should have thought that this was a matter of common ground. I come back to the fact that the work that was done in Brussels this weekend demonstrates the need—and there is something to fulfil it—for greater convergence of the economic policies of industrialised countries. That need and the policy consequences that flow from it are as fully recognised in Paris as in the other capitals in the European Community. In their present policies all the European Governments share our concern about unemployment. They share the consensus with the United States as well as ourselves that, if we are to achieve success against unemployment, we must follow prudent monetary policies and curtail the size of borrowing that threatens those monetary policies, which provides the key to lower inflation and to lower real interest rates in due course, leading to more investment and so more jobs.

I shall return to the Labour party's policies. It is worth noting that its prescriptions are out of line with that international consensus. There is not a Government of any political complexion in western Europe or north America who are trying to spend or borrow their way out of recession. There was an interesting contrast between what the right hon. Member for Leeds, East said about the United States and what the right hon. Member for Cardiff, South-East said. The right hon. Member for Cardiff, South-East rightly identified as one of the four or five hazards that he spoke of to the future of world economic growth the size of the United States' federal deficit.

Photo of Mr Denis Healey Mr Denis Healey , Leeds East

I have had the chance of discussing this with Mr. Feldstein and Mr. Volcker in the last week—[HON. MEMBERS: "Name dropper".] The plain fact is that the United States Administration is running a deficit which, as a percentage of GDP, is very much higher than ours, and no one in the United States thinks it necessary to cut it. They are worrying about how the deficit will increase in the following years unless they either cut spending or raise taxes. That is what the argument is about. They have relaxed monetary and fiscal policy to a level which the British Government have never attempted, and that is why they now expect higher growth than they did a few months ago.

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

I dare say that I could drop the names of some people with whom I have discussed the United States economy. I dare say that I can, and shall, answer the right hon. Gentleman's argument. If there is one fear more dominant than any other affecting the prospects for United States recovery—it is manifested by the tendency of interest rates to rise and the difficulty of getting them to fall—it is that the United States federal deficit will remain on too high a path and that insufficient action is being taken to get it down.

In fact, in other respects the international community been taking a number of steps that are necessary to put itself in a more secure condition. First, major rescue operations have been undertaken for countries in difficulty. Secondly, those operations have been accompanied by adjustment programmes worked out by the International Monetary Fund. Thirdly, a major new development is that the fund has mobilised effective contacts with the commercial banks. Fourthly, the international community has managed to reach agreement on a substantial replenishment of the fund's resources, so that the funds available to help with the international adjustment process have been substantially increased.

A number of hon. Members also asked whether more could be done in response to the call for a new Bretton Woods to achieve greater international stability in exchange rates. I wish the House to be in no doubt about the importance that I attach to that objective. When one rejects the call for a new Bretton Woods, it is because a common feature of such calls—even highly placed people succumb to this—is that people make them for their own sakes, but the role of the institutions of which they dream and the objectives of the conference for which they call are left undefined.

Through the steps that can sensibly be taken, we are seeking to secure greater convergence between the economic policy performance of different countries, and by that and other means to achieve greater success in bringing interest rate volatility to a lower level. That is, of course, important, and we shall continue the work.

At home as well as abroad, lower inflation will in the end pave the way to more jobs. That has been commended by Conservative Members many times. My hon. Friend the Member for Croydon, South (Sir W. Clark) commended it clearly, and that is the answer to his worries about the role played by indexed debt.

This is not just a matter of theory, because this has already begun to happen. Last year, domestic demand grew by 2½ per cent. to 3 per cent. The prospects for the growth of real demand in the year ahead are even better. Critics sometimes fail to see the answer to their own charge. I noticed that my right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour)—and he is not alone—urged me to increase demand but at the same time denounced me for having launched a consumer boom. This is not a serious proposition. I give just one clear example of the way in which real demand is expanding. In January this year, we had the highest ever figure in any January for the sale of motor cars. For the rest of this year, we have a forecast for the second highest ever demand for motor cars, and the highest since 1979. Why is that happening?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

I am grateful to the right hon. Gentleman for being such an adept examinee. One of the reasons for such a high level is that, among the many other regulations that we have swept away, we were glad last summer to sweep away the hire purchase regulations.

The substantive reason is that inflation is falling. Consumer confidence is rising. The consumer sees less need to save to repair the ravages of rising prices. The result is that consumer spending was rising by 3 per cent. in real terms at the end of last year, and is likely to continue buoyant in the year ahead.

It is now up to British industry to translate that higher demand into higher output and more jobs. That, too, is happening. In the first two months of 1983 import penetration was lower than in the average month last year, and it is likely to fall further in the year ahead. In the three months to February, car production—let alone car sales—was 8·5 per cent. greater than in the previous three months. British industry is in a better condition to meet the rising demand—once again because of lower inflation and lower interest rates. Each 1 per cent. fall in interest rates boosts company cash flow by £300 million in a full year.

Lower inflation is helping to keep down other costs as well. It has helped to bring common sense back to pay bargaining. Pay settlements are now running at more than 10 per cent. below their level of three years ago. People are beginning to understand that the only way to secure rising living standards and more jobs is to secure an improvement in competitiveness.

There are plainer examples. Many people are concerned about the construction industry. In the last quarter of last year, output in that industry was up by 6 per cent. on a year earlier. Private housing is up by 33 per cent. on a year ago, with more than 13 per cent. more housing starts. According to the building and civil engineering EDC, housing investment in the year ahead is likely to rise by up to 17 per cent.

That is happening not because we have given an artificial boost to demand but because inflation and interest rates have fallen. The 5 per cent. fall in the mortgage interest rate since November 1981 is the equivalent of a pay rise of about 10 per cent. to the average mortgagor. More houses are being bought and more houses are being built. Demand is increasing because inflation is falling. In the same way, lower inflation has allowed us to reduce the cash plans for public spending—meaning lower taxes—and still leave room for a real increase in what those plans will buy.

For all those reasons, falling inflation is bringing and will bring more output and more jobs. That is why confidence is improving, why industrial profits are improving, and why overall investment rose last year by 3 per cent. and is expected to rise by more this year. To those who ask for more demand, I say that the best assurance of rising real demand and real output is lower inflation. That is the only safe assurance that we shall see more jobs.

Photo of Mr Peter Shore Mr Peter Shore , Tower Hamlets Stepney and Poplar

There is an important point to be made about the relationship between the falling rate of inflation and the increase in demand. The right hon. and learned Gentleman has just quoted some figures connected with house building, which he says has risen by 17 per cent. because of the fall in inflation. Four or five years ago, when the rate of inflation was higher, was not the rate of private and public house building very much higher than it is now or will be after the increase of 17 per cent.?

Photo of Mr Geoffrey Howe Mr Geoffrey Howe , East Surrey

That is not the point. Those conditions, accompanied by the inflationary conditions which followed, led to the problems from which we are now emerging. Time and again, this country and others have sought to remedy the situation by reflation, but reflation has become inflation and has led to more unemployment.

That is not the only way in which we can improve the prospects for industry. We have improved them as well by the immense progress that we have made in cutting the tax on jobs imposed by the Labour party.

Since we came to office, the burden of national insurance contributions and surcharge has been reduced from 13·5 per cent. to 11·5 per cent. The national insurance surcharge—the tax on jobs specially invented by the right hon. Member for Leeds, East—has been cut by 3·5 per cent. to 1 per cent. and the burden on private sector employers reduced by no less than £2 billion as a result. That compares with the record of the Labour Government who introduced the surcharge in April 1977 and 18 months later increased it to 3·5 per cent. from October 1978. That is not all. When they came to office the combined burden of the national insurance contribution and national insurance surcharge was 8·5 per cent. By the time they left office it was 13·5 per cent. They increased the tax burden on business by no less than £4 billion at today's prices and raised the job tax burden on employers by 5 per cent. We have reduced it by 2 per cent. That is the right kind of progress to achieve success in getting unemployment to come down.

We have taken steps to carry forward the Government's strategy in a number of other ways. The Budget carries forward the strategy for recovery that we have persistently pursued in the past four years. That is in sharp contrast with the proposals put forward by the Opposition. Proposals have been suggested by representatives of the alliance, but it is difficult to know where they stand on the need for pay restraint or an incomes policy, as they would describe it. Such a policy featured prominently in many of their proposals in the past, but they are now singularly diffident about suggesting it.

There is an even more remarkable inconsistency about the size of the alliance's so-called reflationary packages. Not so long ago, near the time of its birth, all the talk from the alliance was of sober, moderate reflation. Last September alliance Members were talking about a package with a £3·25 billion cost to the PSBR in its third year. By January this year the net cost of their proposals was down to £3 billion or £4 billion per year over two years. Their latest proposal is presented as an increase of £3 billion in the year ahead, but that is not the half of it. Taking into account the cost of their programme in a full year, the figure is more than double that.

The right hon. Member for Hillhead has some experience of making Budgets. I do not know how much he had to do with the latest alliance proposals, but I note that the Financial Times referred to them as sad work for a former Chancellor". It is very difficult to detect the authentic voice of the so-called alliance. The voter who says, "Take me to your leader" is faced with the curious job-splitting arrangement between the right hon. Member for Hillhead and the right hon. Member for Roxburgh, Selkirk and Peebles (Mr. Steel). It is no wonder that people find it difficult to know what the alliance really wants. Unless and until it can bring itself to make the truly agonising choice between the two kilted heroes, it will remain impossible for the voter to know who is the true king over the water—the young pretender from Roxburgh or the old pretender from Hillhead. Either way, we shall be glad to recognise one or other of them as a more worthy and effective Leader of the Opposition than the leader of the Labour party.

The right hon. Member for Stepney and Poplar (Mr. Shore) has been consistent by contrast with his colleagues. He has been consistent in calling for massive boosts in reflationary spending, massive increases in borrowing, massive printing of money and deliberate devaluation as a source of growth. He has been equally consistent, however, in his failure to learn from the experience of other countries or indeed from his own experience. Moreover, he has consistently taken a line entirely inconsistent with that propounded and practised by his right hon. Friend the Member for Leeds, East in the last three years of the Labour Government. He has also taken a line entirely inconsistent with the views now being commended to the people of France who, after less than two years of a Socialist Government, are being advised to reduce inflation, reduce interest rates, reduce money growth, reduce the deficit, raise taxes and cut spending. That is what lies at the end of the road that we shall take if the Labour party ever comes into office. It is a measure of the folly that would follow a Budget that was introduced by the right hon. Member for Stepney and Poplar. I invite the House to reject any such proposition and I commend my own Budget to the House.

Question put, That the amendment be made:—

The House divided: Ayes 226, Noes 297.

Division No. 93][10 pm
AYES
Abse, LeoCant, R. B.
Allaun, FrankCarmichael, Neil
Alton, DavidCarter-Jones, Lewis
Anderson, DonaldCartwright, John
Archer, Rt Hon PeterClark, Dr David (S Shields)
Ashley, Rt Hon JackClarke,Thomas(C'b'dge, A'rie)
Ashton, JoeCocks, Rt Hon M. (B'stol S)
Atkinson, N.(H'gey,)Cohen, Stanley
Barnett, Guy (Greenwich)Coleman, Donald
Barnett, Rt Hon Joel (H'wd)Concannon, Rt Hon J. D.
Benn, Rt Hon TonyCook, Robin F.
Bennett, Andrew(St'kp't N)Craigen, J. M. (G'gow, M'hill)
Bidwell, SydneyCrawshaw, Richard
Booth, Rt Hon AlbertCrowther, Stan
Bottomley, Rt Hon A.(M'b'ro)Cryer, Bob
Bray, Dr JeremyCunliffe, Lawrence
Brown, Hugh D. (Proven)Cunningham, G. (Islington S)
Brown, Ronald W. (H'ckn'y S)Dalyell, Tam
Brown, Ron (E'burgh, Leith)Davidson, Arthur
Buchan, NormanDavis, Clinton (Hackney C)
Callaghan, Rt Hon J.Davis, Terry (B'ham, Stechf'd)
Campbell, IanDeakins, Eric
Campbell-Savours, DaleDean, Joseph (Leeds West)
Canavan, DennisDewar, Donald
Dobson, FrankMarshall, Dr Edmund (Goole)
Dormand, JackMartin, M (G'gow S'burn)
Douglas, DickMason, Rt Hon Roy
Dubs, AlfredMaxton, John
Duffy, A. E. P.Maynard, Miss Joan
Dunwoody, Hon Mrs G.Meacher, Michael
Eadie, AlexMikardo, Ian
Eastham, KenMillan, Rt Hon Bruce
Ellis, R. (NE D'bysh're)Mitchell, Austin (Grimsby)
Ellis, Tom (Wrexham)Mitchell, R. C. (Soton Itchen)
English, MichaelMorris, Rt Hon A. (W'shawe)
Ennals, Rt Hon DavidMorris, Rt Hon C. (O'shaw)
Evans, Ioan (Aberdare)Morton, George
Evans, John (Newton)Moyle, Rt Hon Roland
Faulds, AndrewNewens, Stanley
Field, FrankOakes, Rt Hon Gordon
Flannery, MartinOgden, Eric
Foot, Rt Hon MichaelO'Halloran, Michael
Ford, BenO'Neill, Martin
Forrester, JohnOrme, Rt Hon Stanley
Foulkes, GeorgeOwen, Rt Hon Dr David
Fraser, J. (Lamb'th, N'w'd)Paisley, Rev Ian
Freeson, Rt Hon ReginaldPalmer, Arthur
Freud, ClementPark, George
Garrett, John (Norwich S)Parker, John
George, BruceParry, Robert
Gilbert, Rt Hon Dr JohnPavitt, Laurie
Golding, JohnPendry, Tom
Grant, John (Islington C)Pitt, William Henry
Grimond, Rt Hon J.Powell, Rt Hon J.E. (S Down)
Hamilton, James (Bothwell)Powell, Raymond (Ogmore)
Hamilton, W. W. (C'tral Fife)Prescott, John
Harrison, Rt Hon WalterPrice, C. (Lewisham W)
Haynes, FrankRace, Reg
Healey, Rt Hon DenisRadice, Giles
Heffer, Eric S.Rees, Rt Hon M (Leeds S)
Hogg, N. (E Dunb't'nshire)Richardson, Jo
Holland, S. (L'b'th, Vauxh'll)Roberts, Albert (Normanton)
Home Robertson, JohnRoberts, Allan (Bootle)
Horam, JohnRoberts, Ernest (Hackney N)
Howells, GeraintRoberts, Gwilym (Cannock)
Hoyle, DouglasRobinson, G. (Coventry NW)
Huckfield, LesRooker, J. W.
Hudson Davies, Gwilym E.Ross, Ernest (Dundee West)
Hughes, Robert (Aberdeen N)Ross, Stephen (Isle of Wight)
Hughes, Roy (Newport)Rowlands, Ted
Hughes, Simon (Bermondsey)Ryman, John
Janner, Hon GrevilleSandelson, Neville
Jay, Rt Hon DouglasSever, John
Jenkins, Rt Hon Roy (Hillh'd)Sheldon, Rt Hon R.
John, BrynmorShore, Rt Hon Peter
Johnson, James (Hull West)Short, Mrs Renée
Johnson, Walter (Derby S)Silkin, Rt Hon J. (Deptford)
Jones, Barry (East Flint)Silkin, Rt Hon S, C. (Dulwich)
Jones, Dan (Burnley)Silverman, Julius
Kerr, RussellSkinner, Dennis
Kilroy-Silk, RobertSmith, Cyril (Rochdale)
Lambie, DavidSmith, Rt Hon J. (N Lanark)
Lamond, JamesSnape, Peter
Leadbitter, TedSoley, Clive
Leighton, RonaldSpearing, Nigel
Lestor, Miss JoanSpellar, John Francis (B'ham)
Lewis, Arthur (N'ham NW)Spriggs, Leslie
Lewis, Ron (Carlisle)Stallard, A. W.
Litherland, RobertSteel, Rt Hon David
Lofthouse, GeoffreyStoddart, David
Lyon, Alexander (York)Stott, Roger
Lyons, Edward (Bradf'd W)Straw, Jack
McDonald, Dr OonaghSummerskill, Hon Dr Shirley
McElhone, Mrs HelenThomas, Jeffrey (Abertillery)
McGuire, Michael (Ince)Thomas, Mike (Newcastle E)
McKay, Allen (Penistone)Thomas, Dr R.(Carmarthen)
McKelvey, WilliamTilley, John
MacKenzie, Rt Hon GregorTorney, Tom
Maclennan, RobertVarley, Rt Hon Eric G.
McMahon, AndrewWainwright, E.(Dearne V)
McNamara, KevinWainwright, R.(Colne V)
McTaggart, RobertWalker, Rt Hon H.(D'caster)
Magee, BryanWardell, Gareth
Marshall, (G'gow S'ton)Watkins, David
Weetch, KenWilson, William (C'try SE)
Welsh, MichaelWinnick, David
White, Frank R.Woodall, Alec
White, J. (G'gow Pollok)Woolmer, Kenneth
Whitehead, PhillipWrigglesworth, Ian
Whitlock, WilliamWright, Sheila
Wigley, DafyddYoung, David (Bolton E)
Willey, Rt Hon Frederick
Williams, Rt Hon A.(S'sea W)Tellers for the Ayes:
Wilson, Gordon (Dundee E)Mr. John Roper and
Wilson, Rt Hon Sir H.(H'ton)Mr. A. J. Beith.
NOES
Aitken, Jonathandu Cann, Rt Hon Edward
Alexander, RichardDunn, Robert (Dartford)
Alison, Rt Hon MichaelDurant, Tony
Amery, Rt Hon JulianDykes, Hugh
Ancram, MichaelEden, Rt Hon Sir John
Arnold, TomEdwards, Rt Hon N. (P'broke)
Aspinwall, JackEggar, Tim
Atkins, Rt Hon H.(S'thorne)Emery, Sir Peter
Atkins, Robert(Preston N)Eyre, Reginald
Baker, Kenneth(St.M'bone)Fairbairn, Nicholas
Baker, Nicholas (N Dorset)Fairgrieve, Sir Russell
Banks, RobertFaith, Mrs Sheila
Beaumont-Dark, AnthonyFarr, John
Bendall, VivianFenner, Mrs Peggy
Benyon, Thomas (A'don)Finsberg, Geoffrey
Benyon, W. (Buckingham)Fisher, Sir Nigel
Berry, Hon AnthonyFletcher, A. (Ed'nb'gh N)
Best, KeithFletcher-Cooke, Sir Charles
Bevan, David GilroyFookes, Miss Janet
Biffen, Rt Hon JohnForman, Nigel
Biggs-Davison, Sir JohnFowler, Rt Hon Norman
Blackburn, JohnFraser, Rt Hon Sir Hugh
Blaker, PeterFraser, Peter (South Angus)
Body, RichardFry, Peter
Bonsor, Sir NicholasGardiner, George (Reigate)
Bottomley, Peter (W'wich W)Gardner, Sir Edward
Bowden, AndrewGarel-Jones, Tristan
Boyson, Dr RhodesGilmour, Rt Hon Sir Ian
Braine, Sir BernardGlyn, Dr Alan
Bright, GrahamGoodhart, Sir Philip
Brinton, TimGorst, John
Britten, Rt. Hon. LeonGow, Ian
Brooke, Hon PeterGower, Sir Raymond
Brotherton, MichaelGray, Rt Hon Hamish
Brown, Michael(Brigg & Sc'n)Greenway, Harry
Browne, John (Winchester)Griffiths, E.(B'y St. Edm'ds)
Bruce-Gardyne, JohnGriffiths, Peter (Portsm'th N)
Bryan, Sir PaulGrist, Ian
Buchanan-Smith, Rt. Hon. A.Grylls, Michael
Buck, AntonyGummer, John Selwyn
Budgen, NickHamilton, Hon A.
Burden, Sir FrederickHamilton, Michael (Salisbury)
Butcher, JohnHannam, John
Butler, Hon AdamHaselhurst, Alan
Carlisle, John (Luton West)Hastings, Stephen
Carlisle, Kenneth (Lincoln)Havers, Rt Hon Sir Michael
Carlisle, Rt Hon M. (R'c'n)Hawkins, Sir Paul
Chalker, Mrs. LyndaHawksley, Warren
Channon, Rt. Hon. PaulHayhoe, Barney
Chapman, SydneyHeath, Rt Hon Edward
Churchill, W. S.Heddle, John
Clark, Hon A. (Plym'th, S'n)Henderson, Barry
Clark, Sir W. (Croydon S)Hicks, Robert
Clarke, Kenneth (Rushcliffe)Higgins, Rt Hon Terence L.
Clegg, Sir WalterHogg, Hon Douglas (Gr'th'm)
Cockeram, EricHolland, Philip (Carlton)
Colvin, MichaelHooson, Tom
Cormack, PatrickHordern, Peter
Corrie, JohnHowe, Rt Hon Sir Geoffrey
Costain, Sir AlbertHowell, Rt Hon D. (G'ldf'd)
Cranborne, ViscountHowell, Ralph (N Norfolk)
Critchley, JulianHunt, David (Wirral)
Crouch, DavidHunt, John (Ravensbourne)
Dickens, GeoffreyHurd, Rt Hon Douglas
Dorrell, StephenIrvine, Rt Hon Bryant Godman
Douglas-Hamilton, Lord J.Irving, Charles (Cheltenham)
Dover, DenshoreJenkin, Rt Hon Patrick
Johnson Smith, Sir GeoffreyPorter, Barry
Jopling, Rt Hon MichaelPrentice, Rt Hon Reg
Joseph, Rt Hon Sir KeithPrice, Sir David (Eastleigh)
Kaberry, Sir DonaldPrior, Rt Hon James
Kellett-Bowman, Mrs ElaineProctor, K. Harvey
Kimball, Sir MarcusRaison, Rt Hon Timothy
King, Rt Hon TomRathbone, Tim
Kitson, Sir TimothyRees-Davies, W. R.
Knight, Mrs JillRenton, Tim
Knox, DavidRhodes James, Robert
Lang, IanRhys Williams, Sir Brandon
Langford-Holt, Sir JohnRidley, Hon Nicholas
Latham, MichaelRidsdale, Sir Julian
Lawrence, IvanRifkind, Malcolm
Lawson, Rt Hon NigelRippon, Rt Hon Geoffrey
Lee, JohnRoberts, Wyn (Conway)
Le Marchant, SpencerRossi, Hugh
Lennox-Boyd, Hon MarkRost, Peter
Lester, Jim (Beeston)Royle, Sir Anthony
Lewis, Sir Kenneth (Rutland)Rumbold, Mrs A. C. R.
Lloyd, Ian (Havant & W'loo)Sainsbury, Hon Timothy
Loveridge, JohnSt. John-Stevas, Rt Hon N.
Luce, RichardScott, Nicholas
Lyell, NicholasShaw, Giles (Pudsey)
McCrindle, RobertShaw, Sir Michael (Scarb')
Macfarlane, NeilShelton, William (Streatham)
MacGregor, JohnShepherd, Colin (Hereford)
MacKay, John (Argyll)Shepherd, Richard
Macmillan, Rt Hon M.Silvester, Fred
McNair-Wilson, M. (N'bury)Sims, Roger
McNair-Wilson, P. (New F'st)Skeet, T. H. H.
McQuarrie, AlbertSmith, Tim (Beaconsfield)
Madel, DavidSpeed, Keith
Major, JohnSpeller, Tony
Marland, PaulSpence, John
Marlow, AntonySpicer, Michael (S Worcs)
Marshall, Michael (Arundel)Sproat, Iain
Marten, Rt Hon NeilSquire, Robin
Mates, MichaelStainton, Keith
Maude, Rt Hon Sir AngusStanbrook, Ivor
Mawby, RayStanley, John
Maxwell-Hyslop, RobinSteen, Anthony
Mayhew, PatrickStevens, Martin
Mellor, DavidStewart, A.(E Renfrewshire)
Meyer, Sir AnthonyStewart, Ian (Hitchin)
Miller, Hal (B'grove)Stokes, John
Mills, Iain (Meriden)Stradling Thomas, J.
Mills, Sir Peter (West Devon)Tapsell, Peter
Miscampbell, NormanTaylor, Teddy (S'end E)
Moate, RogerTebbit, Rt Hon Norman
Monro, Sir HectorTemple-Morris, Peter
Montgomery, FergusThomas, Rt Hon Peter
Moore, JohnThompson, Donald
Morgan, GeraintThorne, Neil (Ilford South)
Morris, M. (N'hampton S)Thornton, Malcolm
Morrison, Hon C. (Devizes)Townend, John (Bridlington)
Morrison, Hon P, (Chester)Townsend, Cyril D, (B'heath)
Mudd, Davidvan Straubenzee, Sir W.
Murphy, ChristopherVaughan, Dr Gerard
Myles, DavidViggers, Peter
Neale, GerrardWaddington, David
Needham, RichardWakeham, John
Nelson, AnthonyWaldegrave, Hon William
Neubert, MichaelWalker, Rt Hon P.(W'cester)
Newton, TonyWalker, B. (Perth)
Normanton, TomWalker-Smith, Rt Hon Sir D.
Nott, Rt Hon Sir JohnWall, Sir Patrick
Onslow, CranleyWaller, Gary
Oppenheim, Rt Hon Mrs S.Walters, Dennis
Page, John (Harrow, West)Ward, John
Page, Richard (SW Herts)Warren, Kenneth
Parkinson, Rt Hon CecilWatson, John
Parris, MatthewWells, Bowen
Patten, Christopher (Bath)Wells, John (Maidstone)
Patten, John (Oxford)Wheeler, John
Pattie, GeoffreyWhitney, Raymond
Pawsey, JamesWickenden, Keith
Peyton, Rt Hon JohnWiggin, Jerry
Pink, R. BonnerWilliams, D.(Montgomery)
Pollock, AlexanderWinterton, Nicholas
Wolfson, MarkTellers for the Noes:
Young, Sir George (Acton)Mr. John Cope and
Younger, Rt Hon GeorgeMr. Alastair Goodlad.

Question accordingly negatived.

Main Question put:

The House divided: Ayes 297, Noes 225.

Division No. 94][10.13 pm
AYES
Aitken, JonathanDurant, Tony
Alexander, RichardDykes, Hugh
Alison, Rt Hon MichaelEden, Rt Hon Sir John
Amery, Rt Hon JulianEdwards, Rt Hon N. (P'broke)
Ancram, MichaelEggar, Tim
Arnold, TomEmery, Sir Peter
Aspinwall, JackEyre, Reginald
Atkins, Rt Hon H.(S'thorne)Fairbairn, Nicholas
Atkins, Robert(Preston N)Fairgrieve, Sir Russell
Baker, Kenneth(St.M'bone)Faith, Mrs Sheila
Baker, Nicholas (N Dorset)Farr, John
Banks, RobertFenner, Mrs Peggy
Beaumont-Dark, AnthonyFinsberg, Geoffrey
Bendall, VivianFisher, Sir Nigel
Benyon, Thomas (A'don)Fletcher, A. (Ed'nb'gh N)
Benyon, W. (Buckingham)Fletcher-Cooke, Sir Charles
Berry, Hon AnthonyFookes, Miss Janet
Best, KeithForman, Nigel
Bevan, David GilroyFowler, Rt Hon Norman
Biffen, Rt Hon JohnFraser, Rt Hon Sir Hugh
Biggs-Davison, Sir JohnFraser, Peter (South Angus)
Blackburn, JohnFry, Peter
Blaker, PeterGardiner, George (Reigate)
Body, RichardGardner, Sir Edward
Bonsor, Sir NicholasGarel-Jones, Tristan
Bottomley, Peter (W'wich W)Gilmour, Rt Hon Sir Ian
Bowden, AndrewGlyn, Dr Alan
Boyson, Dr RhodesGoodhart, Sir Philip
Braine, Sir BernardGorst, John
Bright, GrahamGow, Ian
Brinton, TimGower, Sir Raymond
Brittan, Rt. Hon. LeonGray, Rt Hon Hamish
Brooke, Hon PeterGreenway, Harry
Brotherton, MichaelGriffiths, E.(B'y St. Edm'ds)
Brown, Michael(Brigg & Sc'n)Griffiths, Peter (Portsm'th N)
Browne, John (Winchester)Grist, Ian
Bruce-Gardyne, JohnGrylls, Michael
Bryan, Sir PaulGummer, John Selwyn
Buchanan-Smith, Rt. Hon. A.Hamilton, Hon A.
Buck, AntonyHamilton, Michael (Salisbury)
Budgen, NickHannam, John
Burden, Sir FrederickHaselhurst, Alan
Butcher, JohnHastings, Stephen
Butler, Hon AdamHavers, Rt Hon Sir Michael
Carlisle, John (Luton West)Hawkins, Sir Paul
Carlisle, Kenneth (Lincoln)Hawksley, Warren
Carlisle, Rt Hon M. (R'c'n)Hayhoe, Barney
Chalker, Mrs. LyndaHeath, Rt Hon Edward
Channon, Rt. Hon. PaulHeddle, John
Chapman, SydneyHenderson, Barry
Churchill, W. S.Hicks, Robert
Clark, Hon A. (Plym'th, S'n)Higgins, Rt Hon Terence L.
Clark, Sir W. (Croydon S)Hogg, Hon Douglas (Gr'th'm)
Clarke, Kenneth (Rushcliffe)Holland, Philip (Carlton)
Clegg, Sir WalterHooson, Tom
Cockeram, EricHordern, Peter
Colvin, MichaelHowe, Rt Hon Sir Geoffrey
Cormack, PatrickHowell, Rt Hon D. (G'ldf'd)
Corrie, JohnHowell, Ralph (N Norfolk)
Costain, Sir AlbertHunt, David (Wirral)
Cranborne, ViscountHunt, John (Ravensbourne)
Critchley, JulianHurd, Rt Hon Douglas
Crouch, DavidIrvine, RtHon Bryant Godman
Dickens, GeoffreyIrving, Charles (Cheltenham)
Dorrell, StephenJenkin, Rt Hon Patrick
Douglas-Hamilton, Lord J.Johnson Smith, Sir Geoffrey
Dover, DenshoreJopling, Rt Hon Michael
du Cann, Rt Hon EdwardJoseph, Rt Hon Sir Keith
Dunn, Robert (Dartford)Kaberry, Sir Donald
Kellett-Bowman, Mrs ElainePrior, Rt Hon James
Kimball, Sir MarcusProctor, K. Harvey
King, Rt Hon TomRaison, Rt Hon Timothy
Kitson, Sir TimothyRathbone, Tim
Knight, Mrs JillRees-Davies, W. R.
Knox, DavidRenton, Tim
Lang, IanRhodes James, Robert
Langford-Holt, Sir JohnRhys Williams, Sir Brandon
Latham, MichaelRidley, Hon Nicholas
Lawrence, IvanRidsdale, Sir Julian
Lawson, Rt Hon NigelRifkind, Malcolm
Lee, JohnRippon, Rt Hon Geoffrey
Le Marchant, SpencerRoberts, Wyn (Conway)
Lennox-Boyd, Hon MarkRossi, Hugh
Lester, Jim (Beeston)Rost, Peter
Lewis, Sir Kenneth (Rutland)Royle, Sir Anthony
Lloyd, Ian (Havant & W'loo)Rumbold, Mrs A. C. R.
Loveridge, JohnSainsbury, Hon Timothy
Luce, RichardSt. John-Stevas, Rt Hon N.
Lyell, NicholasScott, Nicholas
McCrindle, RobertShaw, Giles (Pudsey)
Macfarlane, NeilShaw, Sir Michael (Scarb')
MacGregor, JohnShelton, William (Streatham)
MacKay, John (Argyll)Shepherd, Colin (Hereford)
Macmillan, Rt Hon M.Shepherd, Richard
McNair-Wilson, M. (N'bury)Silvester, Fred
McNair-Wilson, P. (New F'st)Sims, Roger
McQuarrie, AlbertSkeet, T. H. H.
Madel, DavidSmith, Tim (Beaconsfield)
Major, JohnSpeed, Keith
Marland, PaulSpeller, Tony
Marlow, AntonySpence, John
Marshall, Michael (Arundel)Spicer, Michael (S Worcs)
Marten, Rt Hon NeilSproat, Iain
Mates, MichaelSquire, Robin
Maude, Rt Hon Sir AngusStainton, Keith
Mawby, RayStanbrook, Ivor
Maxwell-Hyslop, RobinStanley, John
Mayhew, PatrickSteen, Anthony
Mellor, DavidStevens, Martin
Meyer, Sir AnthonyStewart, A.(E Renfrewshire)
Miller, Hal (B'grove)Stewart, Ian (Hitchin)
Mills, Iain (Meriden)Stokes, John
Mills, Sir Peter (West Devon)Stradling Thomas, J.
Miscampbell, NormanTapsell, Peter
Moate, RogerTaylor, Teddy (S'end E)
Monro, Sir HectorTebbit, Rt Hon Norman
Montgomery, FergusTemple-Morris, Peter
Moore, JohnThomas, Rt Hon Peter
Morgan, GeraintThompson, Donald
Morris, M. (N'hampton S)Thorne, Neil (Ilford South)
Morrison, Hon C. (Devizes)Thornton, Malcolm
Morrison, Hon P. (Chester)Townend, John (Bridlington)
Mudd, DavidTownsend, Cyril D, (B'heath)
Murphy, Christophervan Straubenzee, Sir W.
Myles, DavidVaughan, Dr Gerard
Neale, GerrardViggers, Peter
Needham, RichardWaddington, David
Nelson, AnthonyWakeham, John
Neubert, MichaelWaldegrave, Hon William
Newton, TonyWalker, Rt Hon P.(W'cester)
Normanton, TomWalker, B. (Perth)
Nott, Rt Hon Sir JohnWalker-Smith, Rt Hon Sir D.
Onslow, CranleyWall, Sir Patrick
Oppenheim, Rt Hon Mrs S.Waller, Gary
Page, John (Harrow, West)Walters, Dennis
Page, Richard (SW Herts)Ward, John
Parkinson, Rt Hon CecilWarren, Kenneth
Parris, MatthewWatson, John
Patten, Christopher (Bath)Wells, Bowen
Patten, John (Oxford)Wells, John (Maidstone)
Pattie, GeoffreyWheeler, John
Pawsey, JamesWhitney, Raymond
Peyton, Rt Hon JohnWickenden, Keith
Pink, R. BonnerWiggin, Jerry
Pollock, AlexanderWilliams, D.(Montgomery)
Porter, BarryWinterton, Nicholas
Prentice, Rt Hon RegWolfson, Mark
Price, Sir David (Eastleigh)Young, Sir George (Acton)
Younger, Rt Hon GeorgeMr. John Cope and
Mr. Alastair Goodlad.
Tellers for the Ayes:
NOES
Abse, LeoGilbert, Rt Hon Dr John
Allaun, FrankGolding, John
Alton, DavidGrant, John (Islington C)
Anderson, DonaldGrimond, Rt Hon J.
Archer, Rt Hon PeterHamilton, James (Bothwell)
Ashley, Rt Hon JackHamilton, W. W. (C'tral Fife)
Ashton, JoeHarrison, Rt Hon Walter
Atkinson, N.(H'gey,)Haynes, Frank
Barnett, Guy (Greenwich)Healey, Rt Hon Denis
Barnett, Rt Hon Joel (H'wd)Heffer, Eric S.
Beith, A. J.Hogg, N. (E Dunb't'nshire)
Benn, Rt Hon TonyHolland, S. (L'b'th, Vauxh'll)
Bennett, Andrew(St'kp't N)Home Robertson, John
Bidwell, SydneyHoram, John
Booth, Rt Hon AlbertHowells, Geraint
Bottomley, Rt Hon A.(M'b'ro)Hoyle, Douglas
Bray, Dr JeremyHuckfield, Les
Brown, Hugh D. (Provan)Hudson Davies, Gwilym E.
Brown, Ronald W. (H'ckn'y S)Hughes, Robert (Aberdeen N)
Brown, Ron (E'burgh, Leith)Hughes, Roy (Newport)
Buchan, NormanHughes, Simon (Bermondsey)
Callaghan, Rt Hon J.Janner, Hon Greville
Campbell, IanJay, Rt Hon Douglas
Campbell-Savours, DaleJenkins, Rt Hon Roy (Hillh'd)
Canavan, DennisJohn, Brynmor
Cant, R. B.Johnson, James (Hull West)
Carmichael, NeilJohnson, Walter (Derby S)
Carter-Jones, LewisJones, Barry (East Flint)
Cartwright, JohnJones, Dan (Burnley)
Clark, Dr David (S Shields)Kerr, Russell
Clarke.Thomas(C'b'dge, A'rie)Kilroy-Silk, Robert
Cocks, Rt Hon M. (B'stol S)Lambie, David
Cohen, StanleyLamond, James
Coleman, DonaldLeadbitter, Ted
Concannon, Rt Hon J. D.Leighton, Ronald
Cook, Robin F.Lestor, Miss Joan
Craigen, J. M. (G'gow, M'hill)Lewis, Arthur (N'ham NW)
Crawshaw, RichardLewis, Ron (Carlisle)
Crowther, StanLitherland, Robert
Cryer, BobLofthouse, Geoffrey
Cunliffe, LawrenceLyon, Alexander (York)
Cunningham, G. (Islington S)Lyons, Edward (Bradf'd W)
Dalyell, TamMcDonald, Dr Oonagh
Davidson, ArthurMcElhone, Mrs Helen
Davis, Clinton (Hackney C)McGuire, Michael (Ince)
Davis, Terry (B'ham, Stechf'd)McKay, Allen (Penistone)
Deakins, EricMcKelvey, William
Dean, Joseph (Leeds West)MacKenzie, Rt Hon Gregor
Dewar, DonaldMaclennan, Robert
Dobson, FrankMcMahon, Andrew
Dormand, JackMcNamara, Kevin
Douglas, DickMcTaggart, Robert
Dubs, AlfredMagee, Bryan
Duffy, A. E. P.Marshall, D(G'gow S'ton)
Dunwoody, Hon Mrs G.Martin, M(G'gow S'burn)
Eadie, AlexMason, Rt Hon Roy
Eastham, KenMaxton, John
Ellis, R. (NE D'bysh're)Maynard, Miss Joan
Ellis, Tom (Wrexham)Meacher, Michael
English, MichaelMikardo, Ian
Ennals, Rt Hon DavidMillan, Rt Hon Bruce
Evans, Ioan (Aberdare)Mitchell, Austin (Grimsby)
Evans, John (Newton)Mitchell, R. C. (Soton Itchen)
Faulds, AndrewMorris, Rt Hon A. (W'shawe)
Field, FrankMorris, Rt Hon C. (O'shaw)
Flannery, MartinMoyle, Rt Hon Roland
Foot, Rt Hon MichaelNewens, Stanley
Ford, BenOakes, Rt Hon Gordon
Forrester, JohnOgden, Eric
Foulkes, GeorgeO'Halloran, Michael
Fraser, J. (Lamb'th, N'w'd)O'Neill, Martin
Freeson, Rt Hon ReginaldOrme, Rt Hon Stanley
Freud, ClementOwen, Rt Hon Dr David
Garrett, John (Norwich S)Paisley, Rev Ian
George, BrucePalmer, Arthur
Park, GeorgeStallard, A. W.
Parker, JohnSteel, Rt Hon David
Parry, RobertStoddart, David
Pavitt, LaurieStott, Roger
Pendry, TomStraw, Jack
Pitt, William HenrySummerskill, Hon Dr Shirley
Powell, Raymond (Ogmore)Thomas, Jeffrey (Abertillery)
Prescott, JohnThomas, Mike (Newcastle E)
Price, C. (Lewisham W)Thomas, Dr R.(Carmarthen)
Race, RegTilley, John
Radice, GilesTorney, Tom
Rees, Rt Hon M (Leeds S)Varley, Rt Hon Eric G.
Richardson, JoWainwright, E.(Dearne V)
Roberts, Albert (Normanton)Wainwright, R.(Colne V)
Roberts, Allan (Bootle)Walker, Rt Hon H.(D'caster)
Roberts, Ernest (Hackney N)Wardell, Gareth
Roberts, Gwilym (Cannock)Watkins, David
Robinson, G. (Coventry NW)Weetch, Ken
Rooker, J. W.Welsh, Michael
Roper, JohnWhite, Frank R.
Ross, Ernest (Dundee West)White, J. (G'gow Pollok)
Ross, Stephen (Isle of Wight)Whitehead, Phillip
Rowlands, TedWhitlock, William
Ryman, JohnWigley, Dafydd
Sandelson, NevilleWilley, Rt Hon Frederick
Sever, JohnWilliams, Rt Hon A.(S'sea W)
Sheldon, Rt Hon R.Wilson, Gordon (Dundee E)
Shore, Rt Hon PeterWilson, Rt Hon Sir H.(H'ton)
Short, Mrs RenéeWilson, William (C'try SE)
Silkin, Rt Hon J. (Deptford)Winnick, David
Silkin, Rt Hon S. C. (Dulwich)Woodall, Alec
Silverman, JuliusWoolmer, Kenneth
Skinner, DennisWrigglesworth, Ian
Smith, Cyril (Rochdale)Wright, Sheila
Smith, Rt Hon J. (N Lanark)Young, David (Bolton E)
Snape, Peter
Soley, CliveTellers for the Noes:
Spearing, NigelDr. Edmund Marshall and
Spellar, John Francis (B'ham)Mr. George Morton.
Spriggs, Leslie

Question accordingly, agreed to.

Resolved,That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of—

  1. (a) any amendment with respect to value added tax so as to provide—
    1. (i) for zero-rating or exempting any supply;
    2. (ii) for refunding any amount of tax, otherwise than by a provision relating to supplies to, and importation by, a government department, within the meaning of section 19 of the Finance Act 1972;
    3. (iii) for varying the rate of that tax otherwise than in relation to all supplies and importations; or
    4. (iv) for any relief other than relief applying to goods of whatever description or services of whatever description; or

Description of wineRates of duty per hectoliter
£
Wine of a strength—
not exceeding 15 per cent.… … … … … …113·00
exceeding 15 but not exceeding 18 per cent. …145·90
exceeding 18 but not exceeding 22 per cent. …171·70
exceeding 22 per cent. … … … … … … …171·70 plus
£15·19 for every 1 per cent. or part of 1 per cent. in excess of 22 per cent.;
each of the above rates of duty being, in the case of sparkling wine, increased by £24·80 per hectolitre.

(b) any amendment relating to the surcharge imposed by the National Insurance Surcharge Act 1976 and applying to some only of the persons by or in respect of whom the surcharge is payable, other than—

  1. (i) an amendment providing for a different rate of surcharge to be paid by the bodies specified in section 143(4) of the Finance Act 1982; and
  2. (ii) an amendment relating to the Commission to be established under the Act resulting from the National Heritage Bill [Lords].

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I am now required, under Standing Order No. 94(2), to put successively without further debate the Questions on Ways and means motions Nos. 2 to 31, on the three motions on procedure and on the Finance [Money] motion on all of which the Finance Bill is to be brought in. To help the House I shall take them in groups, but read out their titles. If any hon. Member wishes to divide the House, I am sure that he will make it clear.

2. SPIRITS

Motion made, and Question,That, as from 16 March 1983, the rate of duty specified in section 5 of the Alcoholic Liquor Duties Act 1979 shall be increased from £14·47 per litre of alcohol in the spirits to £15·19 per litre of alcohol in the spirits.And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

3. BEER

Motion made, and Question,That, as from 16 March, 1983, the rates of duty specified in section 36 of the Alcoholic Liquor Duties Act 1979 shall be increased—

  1. (a) from £20·40 for each hectolitre to £21·60 for each hectolitre; and
  2. (b) from £0·68 for each additional degree of original gravity exceeding 1030 degrees to £0·72 for each such additional degree.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions) and agreed to.

4. WINE

Motion made, and Question,That, as from 16 March 1983, the rates of duty under section 54 of the Alcoholic Liquor Duties Act 1979 shall be as follows—

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.] put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

Description of made-wineRates of duty per hectolitre
£
Made-wine of a strength—
not exceeding 10 per cent. … … … … … …79·30
exceeding 10 but not exceeding 15 per cent. …109·80
exceeding 15 but not exceeding 18 per cent. …135·20
exceeding 18 per cent. … … … … … … …135·20 plus
£15·19 for every 1 per cent, or part of 1 per cent, in excess of 18 per cent.;
each of the above rates of duty being, in the case of sparkling made-wine, increased by £11·35 per hectolitre.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.] put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

6. CIDER

Motion made, and Question,That, as from 16 March 1983, the rate of duty specified in section 62(1) of the Alcoholic Liquor Duties Act 1979 shall be increased from £8·16 per hectolitre to £9·69 per hectolitre.And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

7. TOBACCO PRODUCTS

Motion made, and Question,That, as from 18th March 1983, for the Table in Schedule 1 to the Tobacco Products Duty Act 1979 there shall be substituted the following Table—

"TABLE
1. Cigarettes … … … …An amount equal to 21 per cent, of the retail price plus £21·67 per thousand cigarettes
2. Cigars … … … …£40·85 per kilogram
3. Hand-rolling tobacco … …£35·40 per kilogram
4. Other smoking tobacco and chewing tobacco … …£24·95 per kilogram"

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

8. BINGO DUTY

Motion made, and Question,That new provision may be made with respect to bingo duty.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

9. HYDROCARBON OIL

Motion made, and Question,

5. MADE-WINE

Motion made, and Question,That, as from 16 March 1983, the rates of duty under section 55 of the Alcoholic Liquor Duties Act 1979 shall be as follows—

That, as from six o'clock in the evening of 15 March 1983, the rates of duty specified in section 6(1) of the Hydrocarbon Oil Duties Act 1979 shall be increased—

  1. (a) in the case of light oil, from £0·1554 a litre to £0·1630 a litre; and
  2. (b) in the case of heavy oil, from £0·1325 a litre to £0·1382 a litre.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act l968—[Sir Geoffrey Howe.]

Put forthwith pursuant to Standing Order No.94 (Ways and Means motions):

The House divided: Ayes 297, Noes 226.

Division No. 95][10.26 pm
AYES
Aitken, JonathanBrotherton, Michael
Alexander, RichardBrown, Michael(Brigg & Sc'n)
Alison, Rt Hon MichaelBrowne, John (Winchester)
Amery, Rt Hon JulianBruce-Gardyne, John
Ancram, MichaelBryan, Sir Paul
Arnold, TomBuchanan-Smith, Rt. Hon. A
Aspinwall, JackBuck, Antony
Atkins, Rt Hon H.(S'thorne)Budgen, Nick
Atkins, Robert(Presfon N)Burden, Sir Frederick
Baker, Kenneth(St.M'bone)Butcher, John
Baker, Nicholas (N Dorset)Butler, Hon Adam
Banks, RobertCarlisle, John (Luton West)
Beaumont-Dark, AnthonyCarlisle, Kenneth (Lincoln)
Bendall, VivianCarlisle, Rt Hon M. (R'c'n)
Benyon, Thomas (A'don)Chalker, Mrs. Lynda
Benyon, W. (Buckingham)Channon, Rt. Hon. Paul
Berry, Hon AnthonyChapman, Sydney
Best, KeithChurchill, W. S.
Bevan, David GilroyClark, Hon A. (Plym'th, S'n)
Biffen, Rt Hon JohnClark, Sir W. (Croydon S)
Biggs-Davison, Sir JohnClarke, Kenneth (Rushcliffe)
Blackburn, JohnClegg, Sir Walter
Blaker, PeterCockeram, Eric
Body, RichardColvin, Michael
Bonsor, Sir NicholasCormack, Patrick
Bottomley, Peter (W'wich W)Corrie, John
Bowden, AndrewCostain, Sir Albert
Boyson, Dr RhodesCranborne, Viscount
Braine, Sir BernardCritchley, Julian
Bright, GrahamCrouch, David
Brinton, TimDickens, Geoffrey
Brittan, Rt. Hon. LeonDorrell, Stephen
Brooke, Hon PeterDouglas-Hamilton, Lord J.
Dover, DenshoreLawrence, Ivan
du Cann, Rt Hon EdwardLawson, Rt Hon Nigel
Dunn, Robert (Dartford)Lee, John
Durant, TonyLe Marchant, Spencer
Dykes, HughLennox-Boyd, Hon Mark
Eden, Rt Hon Sir JohnLester, Jim (Beeston)
Edwards, Rt Hon N. (P'broke)Lewis, Sir Kenneth (Rutland)
Eggar, TimLloyd, Ian (Havant & W'loo)
Emery, Sir PeterLoveridge, John
Eyre, ReginaldLuce, Richard
Fairbairn, NicholasLyell, Nicholas
Fairgrieve, Sir RussellMcCrindle, Robert
Faith, Mrs SheilaMacfarlane, Neil
Farr, JohnMacGregor, John
Fenner, Mrs PeggyMacKay, John (Argyll)
Finsberg, GeoffreyMacmillan, Rt Hon M.
Fisher, Sir NigelMcNair-Wilson, M, (N'bury)
Fletcher, A. (Ed'nb'gh N)McNair-Wilson, P. (New F'st)
Fletcher-Cooke, Sir CharlesMcQuarrie, Albert
Fookes, Miss JanetMadel, David
Forman, NigelMajor, John
Fowler, Rt Hon NormanMarland, Paul
Fraser, Rt Hon Sir HughMarlow, Antony
Fraser, Peter (South Angus)Marshall, Michael (Arundel)
Fry, PeterMarten, Rt Hon Neil
Gardiner, George (Reigate)Mates, Michael
Gardner, Sir EdwardMaude, Rt Hon Sir Angus
Garel-Jones, TristanMawby, Ray
Gilmour, Rt Hon Sir IanMaxwell-Hyslop, Robin
Glyn, Dr AlanMayhew, Patrick
Goodhart, Sir PhilipMellor, David
Gorst, JohnMeyer, Sir Anthony
Gow, IanMiller, Hal (B'grove)
Gower, Sir RaymondMills, Iain (Meriden)
Gray, Rt Hon HamishMills, Sir Peter (West Devon)
Greenway, HarryMiscampbell, Norman
Griffiths, E.(B'y St. Edm'ds)Moate, Roger
Griffiths, Peter (Portsm'th N)Monro, Sir Hector
Grist, IanMontgomery, Fergus
Grylls, MichaelMoore, John
Gummer, John SelwynMorgan, Geraint
Hamilton, Hon A.Morris, M. (N'hampton S)
Hamilton, Michael (Salisbury)Morrison, Hon C. (Devizes)
Hannam,JohnMorrison, Hon P. (Chester)
Haselhurst, AlanMudd, David
Havers, Rt Hon Sir MichaelMurphy, Christopher
Hawkins, Sir PaulMyles, David
Hawksley, WarrenNeale, Gerrard
Hayhoe, BarneyNeedham, Richard
Heath, Rt Hon EdwardNelson, Anthony
Heddle, JohnNeubert, Michael
Henderson, BarryNewton, Tony
Hicks, RobertNormanton, Tom
Higgins, Rt Hon Terence L.Nott, Rt Hon Sir John
Hogg, Hon Douglas (Gr'th'm)Onslow, Cranley
Holland, Philip (Carlton)Oppenheim, Rt Hon Mrs S.
Hooson, TomPage, John (Harrow, West)
Hordern, PeterPage, Richard (SW Herts)
Howe, Rt Hon Sir GeoffreyParkinson, Rt Hon Cecil
Howell, Rt Hon D. (G'ldf'd)Parris, Matthew
Howell, Ralph (N Norfolk)Patten, Christopher (Bath)
Hunt, David (Wirral)Patten, John (Oxford)
Hunt, John (Ravensbourne)Pattie, Geoffrey
Hurd, Rt Hon DouglasPawsey, James
Irvine, Rt Hon Bryant GodmanPeyton, Rt Hon John
Irving, Charles (Cheltenham)Pink, R. Bonner
Jenkin, Rt Hon PatrickPollock, Alexander
Johnson Smith, Sir GeoffreyPorter, Barry
Jopling, Rt Hon MichaelPrentice, Rt Hon Reg
Joseph, Rt Hon Sir KeithPrice, Sir David (Eastleigh)
Kaberry, Sir DonaldPrior, Rt Hon James
Kellett-Bowman, Mrs ElaineProctor, K. Harvey
Kimball, Sir MarcusRaison, Rt Hon Timothy
King, Rt Hon TomRathbone, Tim
Kitson, Sir TimothyRees-Davies, W. R.
Knight, Mrs JillRenton, Tim
Knox, DavidRhodes James, Robert
Lang, IanRhys Williams, Sir Brandon
Langford-Holt, Sir JohnRidley, Hon Nicholas
Latham, MichaelRidsdale, Sir Julian
Rifkind, MalcolmTemple-Morris, Peter
Rippon, Rt Hon GeoffreyThomas, Rt Hon Peter
Roberts, Wyn (Conway)Thompson, Donald
Rossi, HughThorne, Neil (Ilford South)
Rost, PeterThornton, Malcolm
Royle, Sir AnthonyTownend, John (Bridlington)
Rumbold, Mrs A. C. R.Townsend, Cyril D, (B'heath)
Sainsbury, Hon Timothyvan Straubenzee, Sir W.
St. John-Stevas, Rt Hon N.Vaughan, Dr Gerard
Scott, NicholasViggers, Peter
Shaw, Giles (Pudsey)Waddington, David
Shaw, Sir Michael (Scarb')Wakeham, John
Shelton, William (Streatham)Waldegrave, Hon William
Shepherd, Colin (Hereford)Walker, Rt Hon P.(W'cester)
Shepherd, RichardWalker, B. (Perth)
Silvester, FredWalker-Smith, Rt Hon Sir D.
Sims, RogerWall, Sir Patrick
Skeet, T. H. H.Waller, Gary
Smith, Tim (Beaconsfield)Walters, Dennis
Speed, KeithWard, John
Speller, TonyWarren, Kenneth
Spence, JohnWatson, John
Spicer, Michael (S Worcs)Wells, Bowen
Sproat, IainWells, John (Maidstone)
Squire, RobinWheeler, John
Stainton, KeithWhitney, Raymond
Stanbrook, IvorWickenden, Keith
Stanley, JohnWiggin, Jerry
Steen, AnthonyWilliams, D.(Montgomery)
Stevens, MartinWinterton, Nicholas
Stewart, A.(E Renfrewshire)Wolfson, Mark
Stewart, Ian (Hitchin)Young, Sir George (Acton)
Stokes, JohnYounger, Rt Hon George
Stradling Thomas, J.
Tapsell, PeterTellers for the Ayes:
Taylor, Teddy (S'end E)Mr. John Cope and
Tebbit, Rt Hon NormanMr. Alastair Goodlad.
NOES
Abse, LeoCunningham, G. (Islington S)
Allaun, FrankDalyell, Tam
Alton, DavidDavidson, Arthur
Anderson, DonaldDavis, Clinton (Hackney C)
Archer, Rt Hon PeterDavis, Terry (B'ham, Stechf'd)
Ashley, Rt Hon JackDeakins, Eric
Ashton, JoeDean, Joseph (Leeds West)
Atkinson, (H'gey,)Dewar, Donald
Barnett, Guy (Greenwich)Dobson, Frank
Barnett, Rt Hon Joel (H'wd)Dormand, Jack
Beith, A. J.Douglas, Dick
Benn, Rt Hon TonyDubs, Alfred
Bennett, Andrew(St'kp't N)Duffy, A. E. P.
Bidwell, SydneyDunwoody, Hon Mrs G.
Booth, Rt Hon AlbertEadie, Alex
Bottomley, Rt Hon A.(M'b'ro)Eastham, Ken
Bray, Dr JeremyEllis, R. (NE D'bysh're)
Brown, Hugh D. (Provan)Ellis, Tom (Wrexham)
Brown, Ronald W. (H'ckn'y S)English, Michael
Brown, Ron (E'burgh, Leith)Ennals, Rt Hon David
Buchan, NormanEvans, loan (Aberdare)
Callaghan, Rt Hon J.Evans, John (Newton)
Campbell, IanFaulds, Andrew
Campbell-Savours, DaleField, Frank
Canavan, DennisFlannery, Martin
Cant, R. B.Foot, Rt Hon Michael
Carmichael, NeilFord, Ben
Carter-Jones, LewisForrester, John
Cartwright, JohnFoulkes, George
Clark, Dr David (S Shields)Fraser, J. (Lamb'th, N'w'd)
Clarke, Thomas(C'b'dge, A'rie)Freeson, Rt Hon Reginald
Cocks, Rt Hon M. (B'stol S)Freud, Clement
Cohen, StanleyGarrett, John (Norwich S)
Coleman, DonaldGeorge, Bruce
Concannon, Rt Hon J. D.Gilbert, Rt Hon Dr John
Cook, Robin F.Golding, John
Craigen, J. M. (G'gow, M'hill)Grant, John (Islington C)
Crawshaw, RichardGrimond, Rt Hon J.
Crowther, StanHamilton, James (Bothwell)
Cryer, BobHamilton, W. W. (C'tral Fife)
Ounliffe, LawrenceHarrison, Rt Hon Walter
Healey, Rt Hon DenisMason, Rt Hon Roy
Heffer, Eric S.Maxton, John
Hogg, N. (E Dunb't'nshire)Maynard, Miss Joan
Holland, S. (L'b'th, Vauxh'll)Meacher, Michael
Home Robertson, JohnMikardo, Ian
Horam, JohnMillan, Rt Hon Bruce
Howells, GeraintMitchell, Austin (Grimsby)
Hoyle, DouglasMitchell, R. C. (Soton Itchen)
Huckfield, LesMorris, Rt Hon A. (W'shawe)
Hudson Davies, Gwilym E.Morris, Rt Hon C. (O'shaw)
Hughes, Robert (Aberdeen N)Moyle, Rt Hon Roland
Hughes, Roy (Newport)Newens, Stanley
Hughes, Simon (Bermondsey)Oakes, Rt Hon Gordon
Janner, Hon GrevilleOgden, Eric
Jay, Rt Hon DouglasO'Halloran, Michael
Jenkins, Rt Hon Roy (Hillh'd)O'Neill, Martin
John, BrynmorOrme, Rt Hon Stanley
Johnson, James (Hull West)Owen, Rt Hon Dr David
Johnson, Walter (Derby S)Paisley, Rev Ian
Jones, Barry (East Flint)Palmer, Arthur
Jones, Dan (Burnley)Park, George
Kerr, RussellParker, John
Kilroy-Silk, RobertParry, Robert
Lambie, DavidPavitt, Laurie
Lamond, JamesPendry, Tom
Leadbitter, TedPitt, William Henry
Leighton, RonaldPowell, Rt Hon J.E. (S Down)
Lestor, Miss JoanPowell, Raymond (Ogmore)
Lewis, Arthur (N'ham NW)Prescott, John
Lewis, Ron (Carlisle)Price, C. (Lewisham W)
Litherland, RobertRace, Reg
Lofthouse, GeoffreyRadice, Giles
Lyon, Alexander (York)Rees, Rt Hon M (Leeds S)
Lyons, Edward (Bradf'd W)Richardson, Jo
McDonald, Dr OonaghRoberts, Albert (Normanton)
McElhone, Mrs HelenRoberts, Allan (Bootle)
McGuire, Michael (Ince)Roberts, Ernest (Hackney N)
McKelvey, WilliamRoberts, Gwilym (Cannock)
MacKenzie, Rt Hon GregorRobinson, G. (Coventry NW)
Maclennan, RobertRooker, J. W.
McMahon, AndrewRoper, John
McNamara, KevinRoss, Ernest (Dundee West)
McTaggart, RobertRoss, Stephen (Isle of Wight)
Magee, BryanRowlands, Ted
Marshall, D(G'gow S'ton)Ryman, John
Marshall, Dr Edmund (Goole)Sandelson, Neville
Martin, M(G'gow S'burn)Sever, John
Sheldon, Rt Hon R.Wainwright, H.(Colne V)
Shore, Rt Hon PeterWalker, Rt Hon H.(D'caster)
Short, Mrs RenéeWarden, Gareth
Silkin, Rt Hon J. (Deptford)Watkins, David
Silkin, Rt Hon S. C. (Dulwich)Weetch, Ken
Silverman, JuliusWelsh, Michael
Skinner, DennisWhite, Frank R.
Smith, Cyril (Rochdale)White, J. (G'gow Pollok)
Smith, Rt Hon J. (N Lanark)Whitehead, Phillip
Snape, PeterWhitlock, William
Soley, CliveWig ley, Dafydd
Spearing, NigelWilley, Rt Hon Frederick
Spellar, John Francis (B'ham)Williams, Rt Hon A.(S'sea W)
Spriggs, LeslieWilson, Gordon (Dundee E)
Stallard, A. W.Wilson, Rt Hon Sir H.(H'ton)
Steel, Rt Hon DavidWilson, William (C'try SE)
Stoddart, DavidWinnick, David
Stott, RogerWoodall, Alec
Straw, JackWoolmer, Kenneth
Summerskill, Hon Dr ShirleyWrigglesworth, Ian
Thomas, Jeffrey (Abertillery)Wright, Sheila
Thomas, Mike (Newcastle E)Young, David (Bolton E)
Thomas, Dr R.(Carmarthen)
Tilley, JohnTellers for the Noes:
Torney, TomMr. Frank Haynes and
Varley, Rt Hon Eric G.Mr. George Morton.
Wainwright, E.(Dearne V)

Question accordingly agreed to.

10. VEHICLES EXCISE DUTY

Motion made, and Question,That the Vehicles (Excise) Act 1971 and the Vehicles (Excise) Act (Northern Ireland) 1972 shall have effect with the amendments set out below.But this Resolution shall not authorise the making of amendments which would result in different provisions being in force in different parts of Great Britain.And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.(1) In the said Acts of 1971 and 1972, for the provisions of Part II of Schedules 1 to 5 (annual rates of duty) there shall be substituted the provisions set out below:

PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE I TO ACT OF 1971 AND ACT OF 1972
Description of VehicleRate of Duty
£
1. Bicycles and tricycles of which the cylinder capacity of the engine does not exceed 150 cubic centimetres … … … … … … … … … …8·50
2. Bicycles of which the cylinder capacity of the engine exceeds 150 cubic centimetres but does not exceed 250 cubic centimetres; tricycles (other than those in the foregoing paragraph) and vehicles (other than mowing machines) with more than three wheels, being tricycles and vehicles neither constructed nor adapted for use nor used for the carriage of a driver or passenger … … …17·00
3. Bicycles and tricycles not in the foregoing paragraphs … … … …34·00
PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 2 TO ACT OF 1971 AND ACT OF 1972
Description of VehicleRate of Duty
£
Hackney carriages.… … … … … … … … …42·00
with an additional 85p for each person above 20 (excluding the driver) for which the vehicle has seating capacity.
POVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 3 TO ACT OF 1971
Weight unladen of vehicleRate of duty
1.2.3.4.5.
Description of vehicleExceedingNot exceedingInitialAdditional for each ton or part of a ton in excess of the weight in column 2
££
1. Agricultural machines; digging machines; mobile cranes; works trucks; mowing machines; fishermen's tractors14·00
2. Haulage vehicles, being showmen's vehicles7¼ tons137·00
7¼ tons8 tons164·00
8 tons10 tons193·00
10 tons193·0030·00
3. Haulage vehicles, not being showmen's vehicles2 tons163·00
2 tons4 tons293·00
4 tons6 tons424·00
6 tons7¼ tons553·00
7¼ tons8 tons676·00
8 tons10 tons676·00115·00
10 tons906·00130·00
POVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 3 TO ACT OF 1972
Weight unladen of vehicleRate of duty
1.2.3.4.5.
Description of vehicleExceedingNot exceedingInitialAdditional for each ton or part of a ton in excess of the weight in column 2
££
1. Agricultural machines; digging machines; mobile cranes; works trucks; mowing machines; fishermen's tractors14·00
2. Haulage vehicles, being showmen's vehicles7¼ tons137·00
7¼ tons8 tons164·00
8 tons10 tons193·00
10 tons193·0030·00
3. Haulage vehicles, not being showmen's vehicles2 tons147·00
2 tons4 tons262·00
4 tons6 tons374·00
6 tons7¼ tons489·00
7¼ tons8 tons603·00
8 tons10 tons603·00130·00
PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 4 TO ACT OF 1971 AND ACT OF 1972
TABLE A
RATES OF DUTY ON RIGID GOODS VEHICLES EXCEEDING 12 TONNES PLATED GROSS WEIGHT
GENERAL RATES
Plated gross weight of vehicleRate of duty
1.2.3.4.5.
ExceedingNot exceedingTwo axle vehicleThree axle vehicleFour or more axle vehicle
tonnestonnes£££
1213410320320
1314500320320
1415610320320
1516670320320
1617780320320
1718380320
1819440320
1920500320
2021580320
2122660390
2223740470
2324920560
24251,150660
2526770
2627880
27281,010
28291,140
29301,500
3030·491,990
TABLE A(1)
RATES OF DUTY ON RIGID GOODS VEHICLES EXCEEDING 12 TONNES PLATED GROSS WEIGHT
RATES FOR FARMERS' GOODS VEHICLES
Plated gross weight of vehicleRate of duty
1.2.3.4.5.
ExceedingNot exceedingTwo axle vehicleThree axle vehicleFour or more axle vehicle
tonnesTones£££
1213135120120
1314140120120
1415145120120
1516165125120
1617180130120
1718135120
1819140120
1920145125
2021150130
2122155135
2223160140
2324180145
2425210150
2526160
2627180
2728200
2829215
2930275
3030·49340
TABLE A(2)
RATES OF DUTY ON RIGID GOODS VEHICLES EXCEEDING 12 TONNES PLATED GROSS WEIGHT
RATES FOR SHOWMEN'S GOODS VEHICLES
Plated gross weight of vehicleRate of duty
1.2.3.4.5.
ExceedingNot exceedingTwo axle vehicleThree axle vehicleFour or more axle vehicle
tonnestonnes£££
1213135120120
1314140120120
1415145120120
1516165125120
1617180130120
1718135120
1819140125
1920150130
2021160140
2122165150
2223175160
2324210165
2425250180
2526200
2627220
2728245
2829265
2930340
3030·49430
TABLE B
SUPPLEMENTARY RATES OF DUTY ON RIGID GOODS VEHICLES OVER 12 TONNES USED FOR
DRAWING TRAILERS EXCEEDING 4 TONNES PLATED GROSS WEIGHT
GENERAL RATES
Gross weight of trailerDuty supplement
ExceedingNot exceeding
tonnestonnes£
4870
81090
1012115
1214160
14300
TABLE B(1)
SUPPLEMENTARY RATES OF DUTY ON RIGID GOODS VEHICLES OVER 12 TONNES USED FOR
DRAWING TRAILERS EXCEEDING 4 TONNES PLATED GROSS WEIGHT
RATES FOR FARMERS' GOODS VEHICLES
Gross weight of trailerDuty supplement
ExceedingNot exceeding
tonnestonnes£
4870
81090
1012115
1214160
14300
TABLE B(2)
SUPPLEMENTARY RATES OF DUTY ON RIGID GOODS VEHICLES OVER 12 TONNES USED FOR
DRAWING TRAILERS EXCEEDING 4 TONNES PLATED GROSS WEIGHT
RATES FOR SHOWMEN'S GOODS VEHICLES
GROSS WEIGHT OF TRAILERDUTY SUPPLEMENT
EXCEEDINGNOT EXCEEDING
£
70
TABLE C
RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT
AND HAVING ONLY 2 AXLES
GENERAL RATES
Plated train weight of tractor unitRate of duty
1.2.3.4.5.
ExceedingNot exceedingFor a tractor unit to be used with semi-trailers with any number of axlesFor a tractor unit to be used only with semi-trailers with not less than two axlesFor a tractor unit to be used only with semi-trailers with not less than three axles
tonnestonnes£££
1213420420420
1314470420420
1415510420420
1516560420420
1617610420420
1718660420420
1819710420420
1920770420420
2021830470420
2122830520420
2223950590420
23241,020660420
24251,090740420
25261,090830500
26271,090940590
27281,0901,040680
28291,1501,150780
29301,3901,390890
30311,6001,6001,000
31321,8201,8201,110
3232·522,2902,2901,600
32·52332,2902,2901,840
33342,2902,2902,140
34352,4502,4502,450
35362,6102,6102,610
36372,7302,7302,730
37382,9402,9402,940
TABLE C(1)
RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING ONLY 2 AXLES
RATES FOR FARMERS' GOODS VEHICLES
Plated train weight of tractor unitRate of duty
1.2.3.4.5.
ExceedingNot exceedingFor a tractor unit to be used with semi-trailers with any number of axlesFor a tractor unit to be used only with semi-trailers with not less than two axlesFor a tractor unit to be used only with semi-trailers with not less than three axles
tonnestonnes£££
1213135135135
1314140135135
1415145135135
1516150135135
1617155135135
1718160135135
1819160135135
1920165135135
2021170135135
2122175140135
2223180145135
2324190150135
2425200155140
2526200160145
2627200170150
2728200180165
2829200195175
2930235235195
3031265265210
3132300300230
3232·52370370305
32·5233610610610
3334710710710
3435810810810
3536860860860
3637900900900
3738970970970
TABLE C(2)
RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING ONLY 2 AXLES
RATES FOR SHOWMEN'S GOODS VEHICLES
Plated train weight of tractor unitRate of duty
1.2.3.4.5.
ExceedingNot exceedingFor a tractor unit to be used with semi-trailers with any number of axlesFor a tractor unit to be used only with semi-trailers with not less than two axlesFor a tractor unit to be used only with semi-trailers with not less than three axles
tonnestonnes£££
1213135135135
1314140135135
1415145135135
1516150135135
1617155135135
1718160135135
1819160135135
1920170145145
2021180150150
2122195155155
2223210160160
2324220170165
2425235180165
2526235195175
2627235215185
2728235230205
2829245245220
2930295295240
3031335335260
3132375375285
3232·52465465385
32·5233750750750
3334880880880
34351,0001,0001,000
35361,0701,0701,070
36371,1201,1201,120
37381,2001,2001,200
TABLE D
RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING 3 OR MORE AXLES
GENERAL RATES
Plated train weight of tractor unitRate of duty
1.2.3.4.5.
ExceedingNot exceedingFor a tractor unit to be used with semi-trailers with any number of axlesFor a tractor unit to be used only with semi-trailers with not less than two axlesFor a tractor unit to be used only with semi-trailers with not less than three axles
tonnestonnes£££
1220420420420
2021470420420
2122520420420
2223590420420
2324660420420
2425740420420
2526830420420
2627940420420
27281,040420420
28291,150490420
29301,390550420
30311,600610420
31321,820680420
3232·522,290920420
32·52332,2901,080420
33342,2901,350520
34352,2901,630670
35362,2901,930790
36372,2902,240980
37382,5902,5901,180
TABLE D(1)
RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING 3 OR MORE AXLES
RATES FOR FARMERS' GOODS VEHICLES
Plated train weight of tractor unitRate of duty
1.2.3.4.5.
ExceedingNot exceedingFor a tractor unit to be used with semi-trailers with any number of axlesFor a tractor unit to be used only with semi-trailers with not less than two axlesFor a tractor unit to be used only with semi-trailers with not less than three axles
tonnestonnes£££
1220135135135
2021135135135
2122140135135
2223145135135
2324150135135
2425155135135
2526160140135
2627170150135
2728180160145
2829195170155
2930235190165
3031265205185
3132300225205
3232·52370300220
32·5233370355220
3334445445270
3435535535350
3536635635410
3637740740510
3738855855615
TABLE D(2)
RATES OF DUTY ON TRACTOR UNITS EXCEEDING 12 TONNES PLATED TRAIN WEIGHT AND HAVING 3 OR MORE AXLES
RATES FOR SHOWMEN'S GOODS VEHICLES
Plated train weight of tractor unitRate of duty
1.2.3.4.5.
ExceedingNot exceedingFor a tractor unit to be used with semi-trailers with any number of axlesFor a tractor unit to be used only with semi-trailers with not less than two axlesFor a tractor unit to be used only with semi-trailers with not less than three axles
tonnestonnes£££
1218135135135
1819135135135
1920140140135
2021145145135
2122155150135
2223160155135
2324170160135
2425180160145
2526195170155
2627210180160
2728230200170
2829245215190
2930295235205
3031335255230
3132375280250
3232·52465375275
32·5233465440275
3334550550335
3435665665435
3536790790515
3637915915635
37381,0601,060765
PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 5 TO ACT OF 1971
Description of vehicleRate of day
£
1. Vehicles not exceeding 7 horse-power, if registered under the Roads Act 1920 for the first time before 1st January 1974 … … … … … … … …60·00
2. Vehicles not included above … … … … … … … … … … …85·
PROVISIONS SUBSTITUTED FOR PART II OF SCHEDULE 5 TO ACT OF 1972
Description of vehicleRate of duty
£
1. Vehicles first registered under the Roads Act 1920 before 1st January 1947, or which, if its first registration for taxation purposes had been effected in Northern Ireland would have been so first registered as aforesaid under the Act as in force in Northern Ireland:
(i) not exceeding 6 horse-power … … … … …… … … …51·00
(ii) exceeding 6 horse-power but not exceeding 9 horse-power—for each unit or part of a unit of horse-power… … … … … … …8·50
2. Other vehicles… … … … … … … … … … … … …85·00

(2) In sections 2(1)(c) of the Act of 1971 and 2(1)(d) of the Act of 1972 (seven day licences for certain vehicles), for subparagraphs (i) and (ii), there shall be substitute—

  1. "(i) in respect of which duty is chargeable by reference to an annual rate applicable to haulage vehicles in accordance with the second and third categories in Part II of Schedule 3 to this Act or applicable to goods vehicles in accordance with Schedule 4 to this Act: and
  2. (ii) the unladen weight of which exceeds 11,176·5 kilogrammes;".
(3) In subsection (5) of section 16 of the Act of 1971 (rates of duty for trade licences), including that subsection as set out in paragraph 12 of Part I of Schedule 7 to that Act, for "£40" and "£8" there shall be substituted, respectively, "£42" and "£8·50".(4) In subsection (6) of section 16 of the Act 1972 (rates of duty for trade licences), including that subsection as set out in paragraph 12 of Part I of Schedule 9 to that Act, for "£40" and "a" there shall be substituted, respectively, "£42" and "£8·50".(5) In Part I of Schedule 4 to the Acts of 1971 and 1972 (annual rates of duty on goods vehicles)—
  1. (a) in paragraph 1(1), for "£170" there shall be substituted "£150";
  2. (b) in paragraph 2, for "£360" there shall be substituted "£320";
  3. (c) in paragraph 5, in sub-paragraph (3)(b), for "32 tonnes" and "32·52 tonnes" there shall be substituted, respectively, "37 tonnes" and "38 tonnes";
  4. (d) in paragraph 6—
    1. (i) in sub-paragraph (1), for "£60" there shall be substituted "£63";
    2. (ii) in sub-paragraph (2)(a), for "£100" there shall be substituted "£90";
    3. (iii) in sub-paragraph (2)(b), for "£130" there shall be substituted "£115";
    4. (iv) in sub-paragraph (4) for "£100" there shall be substituted "£90";
  5. (e) in paragraph 7, for "£80" there shall be substituted "£85"; and
  6. (f) after paragraph 14 there shall be inserted the paragraphs set out below.

PARAGRAPHS INSERTED AFTER PARAGRAPH 14 OF SCHEDULE 4 TO ACT OF 1971 AND ACT OF 1972

Tractor units having two axles used with semi-trailers having two axles when duty paid by reference to use with semitrailers having not less than three axles

14A.—(1) This paragraph applies in any case where—

  1. (a) a vehicle has been taken out for a tractor unit having two axles which is to be used only with semi-trailers with not less than three axles; and
  2. (b) the rate of duty paid on taking out the licence is equal to or exceeds the rate of duty applicable to a tractor unit having two axles—
    1. (i) which has a plated train weight equal to the maximum laden weight at which a tractor unit having two axles may lawfully be used in Great Britain with a semi-trailer with two axles; and
    2. (ii) which is to be used with semi-trailers with not less than two axles.
(2) If, in a case to which this paragraph applies, the tractor unit is used with a semi-trailer with two axles and, when so used, the laden weight of the tractor unit and the semi-trailer taken together does not exceed the maximum laden weight mentioned in sub-paragraph (1)(b)(i) above, the tractor unit shall, when so used, be taken to be licensed in accordance with the requirements of this Act.

Tractor units having three or more axles used with semi-trailers having only one axle when duty paid by reference to use with semi-trailers having more than one axle

14B.—(1) this paragraph applies in any case where—

  1. (a) a vehicle licence has been taken out for a tractor unit having three or more axles which is to be used only with semi-trailers with not less than two axles; and
  2. (b) the rate of duty paid on taking out the licence is equal to or exceeds the rate of duty applicable to a tractor unit having three or more axles—
    1. (i) which has a plated train weight equal to the maximum weight at which a tractor unit having three or more axles may lawfully he used in Great Britain with a semi-trailer with a single axle; and
    2. (ii) which is to be used with semi-trailers with any number of axles.
(2) If, in a case to which this paragraph applies, the tractor unit with a semi-trailer with a single axle and, when so used, the laden weight of the tractor unit and semi-trailer taken together does not exceed the maximum laden weight mentioned in subparagraph (1)(b)(i) above, the tractor unit shall, when so used, be taken to be licensed in accordance with the requirements of this Act.(6) In paragraph 5(1) of Part I of Schedule 4 to the Act of 1971 (special types of vehicles) for the words from "vehicle—" to "(c)" there shall be substituted "vehicle (other than, in the case of a vehicle falling within paragraph (a) below, one of a prescribed class) which has an unladen weight exceeding 1,525 kilograms; and
  1. (a) which has, for the purposes of this Schedule, a plated gross weight or plated train weight by virtue only of paragraph 9(2A)(c) below; or
  2. (b) ".
(7) for paragraph 5(1) of Part I of Schedule 4 to the Act of 1972 (special types of vehicles) there shall be substituted the following paragraph—(1) This paragraph applies to a goods vehicle
  1. (a) which has an unladen weight exceeding 1,525 kilograms; and
  2. (b) which is for the time being authorised for use on roads by virtue of an order under Article 29(3) of the Road Traffic (Northern Ireland) Order 1981 (authorisation of special vehicles).".
(8) In paragraph 9 of Part I of Schedule 4 to the Act of 1971 (plated and unladen weights)—
  1. (a) in sub-paragraph (1)(a), for the words from "plated weight" to "Act 1972" there shall be substituted the word "weight" and at the end there shall be inserted the words "as indicated on the appropriate plate";
  2. (b) in sub-paragraph (1)(b), for the words "a plated gross weight" there shall be substituted the words "such a plate"; and
  3. (c) in sub-paragraph (2), for the words from "plated weight" to "Part II" there shall be substituted the word "weight" and at the end there shall be inserted the words "as indicated on the appropriate plate".
(9) In the said paragraph 9 there shall be inserted, after subparagraph (2), the following sub-paragraph—(2A) In this paragraph 'appropriate plate', in relation to a vehicle or trailer, means—
  1. (a) where a Ministry plate (within the meaning of regulations made under section 40 or 45 of the Road Traffic Act 1972) has been issued, or has effect as if issued for the vehicle or trailer following the issue or amendment of a plating certificate (within the meaning of Part II of that Act), that plate;
  2. (b) where paragraph (a) does not apply, but such a certificate is in force for the vehicle or trailer, that certificate; and
  3. (c) where neither paragraph (a) nor paragraph (b) above applies but the vehicle or trailer is equipped with a plate in accordance with regulations made under section 40 of the Act of 1972, that plate."
(10) The provisions set out in this resolution as be iii. substituted for provisions of Schedule 4 to the Act of 1972 shal I have effect in that Act with the substitution for any reference to a plated gross weight of a reference to a relevant maximum weight and for any reference to a plated train weight of a reference to a relevant maximum train weight.(11) Paragraphs (1) to (10) above apply in relation to licences taken out after 15 March 1983.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

11. VALUE ADDED TAX (DISCRETIONARY REGISTRATION)

Motion made, and Question.That provision may be made as to discretionary registration under Part I of the Finance Act 1972.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

12. INCOME TAX (CHARGE AND RATES FOR 1983-84)

Motion made, and Question,That—(1) Income tax for the year 1983-84 shall be charged at the basic rate of 30 per cent. and—

  1. (a) in respect of so much of an individual's total income as exceeds £14,600 at such higher rates as are specified in the Table below; and
  2. (b) in respect of so much of the investment income included in an individual's total income as exceeds £7,100 at the additional rate of 15 per cent.

Table
Part of excess over £14,600Higher rate
The first £2,60040 per cent.
The next £4,60045 per cent.
The next £7,10050 per cent.
The next £7,10055 per cent.
The remainder60 per cent.

(2) Section 24(4) of the Finance Act 1980 (increase of basic rate limit, higher rate bands and investment income threshold) shall not apply for the year 1983-84.(3) This Resolution shall not require any change to be made in the amounts deductible or repayable under section 204 of the Income and Corporation Taxes Act 1970 (pay as you earn) before 11 May 1983.And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

13. INCOME TAX (PERSONAL RELIEFS)

Motion made, and Question,

That—

  1. (1) Section 24(5) of the Finance Act 1980 (increase of personal reliefs) shall not apply for the year 1983-84.
  2. (2) In section 8 of the Income and Corporation Taxes Act 1970 (personal reliefs)—
    1. (a) in subsection (1)(a) (married) for "£2,445" there shall be substituted "£2,795";
    2. (b) in subsection (1)(b) (single) and (2) (wife's earned income relief) for "£1,565" there shall be substituted "£1,785";
    3. (c) in subsection (1A) (age allowance) for "£3,295" and "£2,070" there shall be substituted "£3,755" and "£2,360" respectively;
    4. (d) in subsection (1B) (income limit for age allowance) for "£6,700" there shall be substituted "£7,600".
  3. (3) This Resolution shall not require any change to be made in the amounts deductible or repayable under section 204 of the Income and Corporation taxes Act 1970 (pay as you earn) before 11 May 1983.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing order No. 94 (Ways and Means motions), and agree to.

14. INCOME TAX (WIDOW'S BEREAVEMENT ALLOWANCE)

Motion made, and Question,That—

  1. (1) In section 15A of the Income and Corporation Taxes Act 1970 (widow's bereavement allowance) for the words "for that year" there shall be substituted the following paragraphs—
    1. "(a) for that year of assessment, and
    2. (b) unless she marries again before the beginning of it, for the next following year of assessment".
  2. (2) In section 36(8)(b)(i) of the Finance Act 1976 (deductions which are not transferable between husband and wife) for the words "and 14" there shall be substituted the words "14 and 15A".
  3. (3) Paragraph (1) above has effect in any case where the widow's bereavement occurred or ocurs in the year 1982-83 or in any subsequent year of assessment and paragraph (2) above has effect for the year 1983-84 and subsequent years of assessment.
  4. (4) This Resolution shall not require any change to be made in the amounts deductible or repayable under section 204 of the Income and Corporation Taxes Act 1970 (pay as your earn) before 11 May 1983.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect inder the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

15. RELIEF FOR INTEREST (LIMIT FOR 1983–84)

Motion made, and Question,

That, for the year 1983–84—

  1. (1) The limit imposed by paragraph 5 of Schedule 1 to the Finance Act 1974 shall, subject to any reduction to be made under that paragraph, be £30,000 and, accordingly, for any reference in sub-paragraph (1) of that paragraph to £25,000 there shall be substituted a reference to £30,000.
  2. (2) For any reference in paragraph 24(3) of that Schedule to £25,000 there shall be substituted a reference to £30,000.
  3. (3) This Resolution shall not require any change to be made in the amounts deductible or repayable under section 204 of the Income and Corporation Taxes Act 1970 (pay as you earn) before 11 May 1983.
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

16. CORPORATION TAX (CHARGE AND RATE FOR FINANCIAL YEAR 1982)

Motion made, and Question,

That corporation tax shall be charged for the financial year 1982 at the rate of 52 per cent.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions)

17. ADVANCE CORPORATION TAX (RATE FOR FINANCIAL YEAR 1983)

Motion made, and Question,

That the rate of advance corporation tax for the financial year 1983 shall be three-sevenths.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motion), and agreed to.

18. CORPORATION TAX (SMALL COMPANIES)

Motion made, and Question,

That—

  1. (a) the small companies rate for the financial year 1982 shall be 38 per cent.; and
  2. (b) the fraction by reference to which corporation tax charged on income is reduced under section 95(2) of the Finance Act 1972 shall for that financial year be seven two-hundredths.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

19. ASSIGNED LIFE POLICIES AND ANNUITY CONTRACTS

Motion made, and Question,

That charges to income tax may be imposed by provisions about life policies and annuity contracts, the rights conferred by which are or have at any time been assigned for money or money's worth—[Sir Geoffrey Howe.]

put forwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

20. BENEFITS IN KIND

Motion made, and Question,

That charges to income tax may be imposed by provisions relating to—

  1. (a) the application of Chapter II of Part III of the Finance Act 1976 to scholarship income; and
  2. (b) loans obtained by reason of a person's employment—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

21. PAY As You EARN (NON-DEDUCTED SUMS)

Motion made, and Question,

That charges to income tax may be imposed by provisions relating to tax required to he deducted under section 204 of the Income and Corporation Taxes Act 1970.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

22. PROFIT SHARING SCHEMES (INCREASE OF MAXIMUM SHARE APPROPRIATION

Motion made, and Question

That in Chapter III of Part HI of the Finance Act 1978 (approved profit sharing schemes)—

  1. (a) with respect to shares appropriated on or after 6th April 1983, subsections (1) and (2) of section 58 (shares in excess of initial market value of £1,250) shall have effect as if for "£1,250" there were substituted "the relevant amount";
  2. (b) with effect from 6th April 1983, paragraph 1(4) of Schedule 9 (maximum initial market value of shares appropriated to one participant yearly) shall have effect as if for "£1,250" there were substituted "the relevant amount"; and
  3. (c) "the relevant amount" referred to in paragraphs (a) and (b) above shall be, in relation to a participant, an amount which is not less than £1,250 and not more than £5,000 but which, subject to that, is 10 per cent. of his salary for the year of assessment in question or the preceding year of assessment, whichever is the greater; and, for this purpose, a participant's salary for a year of assessment shall mean such of the emoluments of the office or employment by virtue of which he is entitled to participate in the scheme as are liable to be paid in that year under deduction of tax pursuant to section 204 of the Income and Corporation Taxes Act 1970 (pay as you earn) after deducting therefrom amounts included by virtue of Chapter II of Part III of the Finance Act 1976 (benefits derived by directors and others from their employment).
And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

23. PROFIT SHARING SCHEMES AND SHARE OPTION SCHEMES (APPROVAL)

Motion made, and Question,

That provision may be made for varying the conditions for giving approval to, and withdrawing approval from, schemes under Schedule 9 to the Finance Act 1978 (profit sharing schemes) and Schedule 10 to the Finance Act 1980 (savings-related share option schemes).—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

24. RELIEF FOR INVESTMENT IN CORPORATE TRADES

Motion made, and Question.

That provision may be made with respect to relief from income tax under Chapter II of Part IV of the Finance Act 1981.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

25. GROUP RELIEF

Motion made, and Question,

That charges to corporation tax may be imposed by amendments relating to group relief.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means Motions), and agreed to.

26. CAPITAL ALLOWANCES FOR DWELLING-HOUSES LET ON ASSURED TENANCIES

Motion made, and Question,

That charges to income tax, corporation tax and capital gains tax may be made by provisions relating to allowances under Schedule 12 to the Finance Act 1982.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 24 (Ways and Means motions), and agreed to.

27. CAPITAL GAINS

Motion made, and Question,

That charges to capital gains tax and corporation tax may be imposed by provisions—

  1. (a) repealing sections 6, 8 and 9 of the Capital Gains Tax Act 1979;
  2. (b) relating to the case where a person becomes absolutely entitled to settled property as against trustees who are neither resident nor ordinarily resident in the United Kingdom;
  3. (c) relating to the meanings of "settlement", "settlor" and "settled property" for the purposes of sections 80 to 84 of the Finance Act 1981; and
  4. (d) with respect to disposals after 31 March 1982, enabling elections to be made that certain holdings of securities of the same class shall be treated as single assets.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), and agreed to.

28. CAPITAL TRANSFER TAX (BURDEN OF TAX AND PAYMENT BY INSTALMENTS)

Motion made, and Question,

That charges to capital transfer tax may be imposed by provisions relating to—

  1. (a) the burden of capital transfer tax on the value transferred by a chargeable transfer made on death; and
  2. (b) the payment of tax by instalments.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), agreed to.

29. OIL TAXATION (RECEIPTS DERIVED FROM, AND EXPENDITURE IN CONNECTION WITH, CERTAIN ASSETS)

Motion made, and Question,

That provision may be made for bringing into charge to petroleum revenue tax certain sums received or receivable after 30th June 1982 in respect of assets used in connection with oil fields and for altering the reliefs available for certain expenditure incurred in connection with such assets.—[Sir Geoffrey Howe.]

put forthwith pursuant to Standing Order No. 94 (Ways and Means motions), agreed to.

30. OIL TAXATION (ABORTIVE EXPLORATION EXPENDITURE)

Motion made, and Question,

That provision may be for the replacement, with respect to expenditure incurred after 15 March 1983, of the allowance under section 5 of the Oil Taxation Act 1975 in respect of abortive exploration expenditure and for the recovery of excess allowances given in respect of such expenditure.—[Sir Geoffrey Howe.]