I am grateful to you for calling me, Mr. Speaker. In this, my maiden speech, I shall first pay tribute to my predecessor who represented Stratford-on-Avon, Sir Angus Maude. En not one but two generations, Sir Angus was one of the leaders of the intellectual life of the Tory party. After the war he was a founder of the One Nation group and joint author with distinguished Members, past and present, of the pamphlet entitled "One Nation", which is one of the great Conservative texts. In 1975 he became chairman of the Conservative research department, to play once again a critical part, which was entirely consistent with his earlier career, during a major period of philosophical reappraisal and policy development in his party. Having had the privilege of being the director of the Conservative research department, I regard Sir Angus as one of my principal teachers in politics, and it is therefore a special delight for me to follow him as the Member for Stratford-on-Avon.
Sir Angus's political career offers the encouraging demonstration that someone whose continuing independence and originality of mind have been such as to cause the brows of those on high from time to time to furrow rather deeply can yet make a central contribution to the life of his party and hold high office. At the time of Suez, Sir Angus found himself profoundly at odds with the leadership of his party and had the courage to act on that conviction, yet in the fullness of time he served, like Edmund Burke, as Paymaster General. Although he has now left the House, Sir Angus's political journalism remains required reading. I hope that he will have many platforms from which to instruct and interest us for years to come.
Sir Angus was for 20 years a devoted servant of his constituents in Stratford-on-Avon. The town of Stratford, together with the 120 villages, the farms and countryside of south Warwickshire make up the heart of England. My constituency is not only singularly beautiful but combines depth of national tradition with a great range of modern life. I am fortunate to represent such a constituency, and I shall do my best to do so worthily.
I am fortunate, too, to have the opportunity to make my maiden speech on the Second Reading of the Finance Bill because this occasion is at the heart of parliamentary government. The right of the House of Commons to determine the nature and level of taxation is the key to our constitutional liberties. Fortunately, too, the Finance Bill, in conjunction with the Finance Act earlier this year, marks an alleviation of the burden of taxation, which was earned and justified by the financial discipline of the previous Conservative Government. On 9 June, the British people emphatically expressed their continuing support for policies of realism in our national finances, as in our national defences.
I hope that you will not think it controversial or mere rhetorical indulgence, Mr. Speaker, if, as the hon. Member for Stratford-on-Avon, I quote from Shakespeare, from Henry VI, Part II. The policies put forward by the leader of the Labour party at the general election were no different from the policies of Jack Cade in Henry VI:
There shall be in England, seven halfpenny loaves sold for a penny … all the realm shall be in common … And, when I am king, (as king I will be) … all shall eat and drink on my score; and I will apparel them all in one livery, that they may agree like brothers".
The right hon. Gentleman, who is a literary man, will recognise the quotation.
The Liberal and Social Democratic parties also live in a world of make-believe. It is only the presentation of the alliance parties that has changed; their policies are unreconstructed. They are a latter-day expression of the 1960s notion that by well-meaning Government meddling here, there and everywhere, and always spending just a little more money than we can afford, our problems will be dealt with.
The Conservative party has a different approach and the Finance Bill takes its place as part of the medium-term financial strategy that has achieved a reduction in inflation that the country profoundly values. But inflation, even at 3·7 per cent., means prices doubling in 19 years, and I have no doubt whatever that the country will wish to see the effort maintained to reduce inflation further.
I hope that it will be generally acknowledged that in all parties we are intensely and sincerely concerned to find remedies for the grave problem of unemployment. There are right hon. and hon. Members who still suggest, however, that we should make a choice between policies to deal with inflation and policies to alleviate unemployment. The truth surely is that by destroying the real profitability of firms and eroding their capacity to reinvest, and more generally by undermining business confidence, inflation is the arch destroyer of jobs.
Let us look for a moment at the parallel, and intimately related, upward marches of inflation and unemployment in Britain. Between 1951 and 1964 — they were good years—the average inflation each year was 3·5 per cent. and unemployment on average was 330,000. Between 1964 and 1970, average inflation was 4·75 per cent. and average unemployment 500,000. Between 1970 and 1974, inflation ran at 9·5 per cent. on average and unemployment at 750,000. From 1974 to 1979, inflation ran at 15 per cent. on average and unemployment at 1·25 million. That was our inheritance in 1979, and the further distressing increase in unemployment that has followed has been in large part the consequence of the inflation that had so debilitated our economy over many years.
Possibly in the short term a sharp boost to the economy, which the Opposition parties advocate in varying degrees, would generate a few new jobs, but that reflation would at the same time precipitate inflation. The various devices that it is claimed might prevent that being so — a national economic assessment, incomes policies, statutory, flexible or whatever—are not remotely convincing, and renewed inflation would very quickly destroy not just the few new jobs but very many others too.
The Government are right to keep the defeat of inflation at the centre of their policies. Inflation is the most profoundly divisive and destructive force. Inflation characteristically hits hardest those who are least able to take care of themselves. Notoriously, for example, it destroys the savings of pensioners. By provoking aggressive pay demands, inflation sets people against one another — workers against management, unionised workers against non-unionised workers, the employed against the unemployed, the working generations against the school leaver and the pensioner generations.
Money, after language, is our most basic means of exchange. When people can no longer trust something as fundamental as money, they become insecure, and insecurity breeds aggression. It was when prices had doubled in five years that we reached the winter of discontent and the brink of social disintegration. As we hauled ourselves back from that abyss, we resolved as a country that we must conquer inflation.
Inflation is fairly and squarely the responsibility of Governments. Inflation sets in when Governments contract the habit of spending more than they dare raise in taxes. Once they are any distance down that road, Governments resort to monetising their debts and inflating their way out of burdens that otherwise become insupportable.
Therefore, it is my hope that, as he unfolds the medium term financial strategy beyond its present horizon, my right hon. Friend the Chancellor of the Exchequer will in due course bring us to a balanced Budget. By balancing the Budget I mean that the Government should progressively reduce their financial deficit to the point that public expenditure—other than capital investment by the nationalised industries — is fully matched by taxation over the course of the business cycle.
The benefits of a balanced Budget would be very great. It would be a better beacon to financial markets and wage bargainers than the obscurities of the medium term financial strategy. It would make good sense politically, reinforcing the themes of honest money and good housekeeping. A commitment to a balanced Budget would be the safest guarantee against inflation.
Our objective has to be zero inflation. It is perfectly feasible to achieve broadly static prices in Britain, and we should see zero inflation not as a zero option but as a necessity. There will, of course, be all the familiar difficulties in the way of reaching that highly desirable state of affairs. The recent money supply figures and the expected rise in prices over the corning year vividly illustrate both the difficulty of the task and its necessity.
Public expenditure will never be easy to control, although round after round of belt tightening or reductions in social security benefits — if such were to be contemplated—are not the most imaginative approach to public expenditure. Why should we not look more positively at ways to encourage people to opt away from dependence on public provision? As it is, Government Departments seem to have embarked on a spree at the end of the last financial year, and the newspapers are thick with the usual seasonal rumours that spending Departments will be trying to extract an extra £5 billion out of the Exchequer in the coming year. There is a pressing need for the local authorities, as well as the nationalised industries, to spend more on capital investment.
More worryingly, the recovery in the United States' economy, while vigorous at the moment, is of doubtful staying power. The combination of monetary relaxation since last summer, and the failure of the Administration and the Congress between them to grapple effectively with excessive public expenditure, could well result in a return to stagflation. If the American recovery is abortive, prospects for growth in our own economy, and for buoyant tax revenues to float us off some of the more awkward public expenditure rocks, will deteriorate.
Dwarfing even those problems is the gigantic problem of world debt. There is a fairly persuasive view that sustained growth in the OECD countries in the 1980s of about 3 per cent. a year will be necessary to avert financial catastrophe precipitated by major default. The pressure to achieve such growth may drive other OECD countries—as it has already driven the United States of America—to take large risks in an inflationary direction. Therefore, I draw encouragement from the commitment in the Queen's Speech to our Government promoting international recovery on a non-inflationary basis.
We have become so punch-drunk with the inflationary experience of the 1970s that it seems to many people too good to be true that there should be non-inflationary growth. Admittedly, non-inflationary growth presupposes a degree of self-discipline that democracies since the war have not found it easy to muster, but non-inflationary growth was the normal pattern for hundreds of years between the development of modern capitalism and the moment in the 20th century when politicians got hold of the idea that deficit financing could be a short cut to a good society.
The dynamics of non-inflationary growth are human aspiration and the profit motive, the improvement of markets, and the growth of productive capacity—capital accumulation, technical innovation, education and training, and productivity. The task of Government is to clear away the obstacles to growth, not to inject inflationary boosts to demand. It is open to us, if we will, to return to non-inflationary growth and the enlargement of social possibilities that goes with it. In the meantime, the provisions of the new Finance Bill are a valid component of the financial strategy that will lead us in the right direction.