Autumn Statement

Part of the debate – in the House of Commons at 8:07 pm on 24th November 1983.

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Photo of Mark Fisher Mark Fisher , Stoke-on-Trent Central 8:07 pm, 24th November 1983

The Chancellor of the Exchequer, in introducing his autumn statement last Thursday, ended with the words: we are now enjoying low inflation combined with steady growth. This is a winning combination."—[Official Report, 17 November 1983; Vol. 48, c. 996.] What amazing complacency. I must tell the Chancellor of the Exchequer that when talking last weekend to some of the 25,000 pottery workers in Stoke-on-Trent who had lost their jobs during the period of the Conservative Government, I found that outside of his private office and economic fantasies there was a low level of enjoyment. It would be fair to say that the Government's economic policy is viewed with despair and depression. It is proving to be a total disaster for the people of this country and for our manufacturing industry'. It is causing real suffering and real hardship to millions of people.

When the Chancellor is juggling with his figures and graphs and congratulating himself on his so-called achievements, he would do well to remember the real life of people and their chances of getting a job—not only the 3 million men and women who are out of work, 1 million of whom have been out of work for more than 52 weeks, and the despair that that brings to their lives, but, most particularly, the thousands of young people who have left school and know, because they are far too intelligent not to, that the economy as run by the Chancellor and the Government offers them no hope of getting a real job. Those people are not impressed by the Chancellor's protestations that his medium-term financial strategy is working.

Let us examine the "Autumn Statement 1983" bearing in mind the Chancellor's claims of low inflation and steady growth. We must first examine growth and output. The Chancellor said that the United Kingdom's output was forecast to rise by a further 3 per cent. in 1984. He failed to explain what factors would cause it to rise and on what assumptions that assertion was based. Furthermore, he did not make it clear to the House or the country that even if he achieved that growth it would merely maintain the present disastrous level of unemployment. That is the measure of the right hon. Gentleman's failure. That level is totally unacceptable to the Opposition.

Even the modest growth that the right hon. Gentleman expects will not be led by the consumer or by home demand. If the growth will not be led in that way, presumably the Chancellor sees it being led by the company sector. If so, we must presumably regard it as being led either by stocks or by investment. Stocks in many industries are already high and there is no real sign of investment growth. Indeed, investment as a proportion of gross national product is lower than at any time in the history of this island since 1918. That is an appalling record. If there is no growth in consumer demand, why on earth should companies expand output? There can be no reason whatever for doing so.

The truth is that real disposable income is hardly rising at all and consumption is virtually stagnant. That position is bound to affect next year's GDP, all of which supports the view of the National Institute of Economic and Social Research, despite the manner in which it was dismissed in such flippant terms by the Chancellor this afternoon. It supports the institute's view that a 2 per cent. growth figure is far more realistic in the light of the Government's present policies. That is far too little growth. We must get some activity into the economy.

In short, the Chancellor of the Exchequer is confused about output. He did not even attempt to provide any evidence in his autumn statement for the growth figure that he gives for output next year. It is the same story everywhere. The autumn statement refers to a world recovery. World output certainly rose in the first half of 1983. However, the Chancellor of the Exchequer did not explain that world recovery—small though it is—is having hardly any impact on the economy of this country or on that of other EC countries. Admittedly there are opportunities for some United Kingdom exporting companies in the rest of the world, but that is offset by the fact that, as the Government do not have any policy on imports, Britain acts as a magnet, and is fair game for foreign exporters to Britain.

That is why this year's short-lived and totally artificial little election boomlet scarcely benefited United Kingdom manufacturing industry. Recently, the Chief Secretary admitted on television that he was worried about a balance of payments crisis. He obviously knew about this month's figures. Conservative Members have rightly said that we should not read too much into a single month's figures. However, the figures for a whole year make very sober reading. The balance of trade deficit on total manufactured goods in the first quarter of this year amounted to £630 million. In the second quarter of this year there was a marginal improvement and the deficit was £592 million. Therefore, this year's deficit on manufactured goods—as I mentioned in a supplementary question earlier today—is likely to be £2·5 billion.

The non-oil total trade figures are even more horrific. They were in surplus throughout the 1970s, until 1979. Since then the non-oil total trade figures have been in deficit. In 1982 the deficit on non-oil total trade was £3,297 million. This year it will be more than twice that—£8,800 million. What a horrific set of figures! The Chancellor of the Exchequer's response to that—in that he ignored it—was totally inadequate. Those figures are devastating for the future of Britain's manufacturing industry.

The Chancellor of the Exchequer puts his faith in a growth in exports, but where does he get that idea from? Who has he been talking to? He cannot have been talking to manufacturing industry. The CBI could have told him that there will not be a growth in exports next year. Indeed, it has already told him just that. So presumably he is relying on an oil-led export recovery. However, the oil figures do not support that. Although our oil exports amount to £9·5 billion, we still have £3·5 billion of oil imports. Therefore, our total net balance on oil is a credit of only £6 billion. If that is offset against the non-oil total trade figures of nearly £9 billion, one sees the measure of the problem. The Chancellor of the Exchequer is juggling with the same oil that is sustaining an exchange rate which many people believe is as much as 20 per cent. artificially over-valued against non-dollar currencies. That is making the situation very difficult for exports, and in some cases it is virtually impossible to compete in foreign markets.

The truth about exports and the trading figures is that, to put it politely, the Chancellor is deeply confused. It is not just a disagreement about figures with lots of noughts on the end. We are talking about the real economy. Unless those manufacturing industries can sustain growth, we shall not have a real economy. As has been said several times today, the oil boom is peaking and declining. Let us look forward 15 years to a time when we are not a serious oil exporter. What sort of future is there on those figures—whoever is in control—for our non-oil manufacturing industries?

We are looking at a horrific situation, yet the Chancellor of the Exchequer is smug about it. He does not address himself to the problem that he is administering an economy that is witnessing the withering away and collapse of our manufacturing industry. When that has gone we shall have almost nothing and will become an offshore servicing island. That is the measure of the Government's failure. In his autumn statement the Chancellor failed to face that. Instead, he clings desperately to what he considers to be his one achievement—the Government's control of inflation. That is his one success, and even that has many question marks over it.

The first question mark is that the cost of achieving that success is astronomically high. Since 1979, every 1 per cent. drop in the long-term rate of inflation has resulted in the loss of an extra 250,000 jobs. What a disaster and wrecking of people's lives.

The second question mark is the Chancellor of the Exchequer's obsession with a further reduction in the rate of inflation. His pursuit of the fantasy of zero inflation is not only in our view unnecessary and harmful to the prospects of employment, but will hinder his management of the economy in his own terms. Ironically, a pursuit of zero inflation could make it more difficult for the right hon. Gentleman to facilitate the changes in relative wages and prices that are necessary in a market economy.

The Chancellor of the Exchequer, in his single-minded obsession, continues with his policies and his obsession about cutting public expenditure, so driving any hope of growth, investment, orders or jobs into the ground. Industry and the people of this country are crying out for increased capital investment. All hon. Members know that, because when they return to their constituencies they are told that week after week. They know that there are capital investment projects in their constituencies that would greatly benefit their communities. Hon. Members know that, but they do not relate what they learn between Friday and Monday to the Chancellor of the Exchequer's performance.

The Chancellor of the Exchequer is obsessed with trying to cut the public sector borrowing requirement. I say "trying to" because he has been unsuccessful and it is a vain attempt on his part. As the right hon. Gentleman admitted this afternoon, the previous Chancellor in 1982–83 forecast a PSBR of £7·5 billion. However, the outturn was a PSBR of £9 billion. That was just thrown away by the Chancellor. He was prepared to concede that. However, that is a 20 per cent. error in forecasting.

That would be extremely worrying but for the fact that although the right hon. Gentleman would not admit it, the PSBR is not a very good definition of real budget deficit as a measure of the effect of economic policy on home demand. That is vital to any form of growth. It is not a very good definition, because the PSBR includes—and I am not sure that the Chancellor appreciates this—Government asset sales.

In the PSBR figures those sales are seen to cut the PSBR, but in fact they have no real effect on demand at all. If the Chancellor understands that, including those sales is a real fiddle. However, if he does not understand it he is deluding himself in his obsession with the PSBR. The fact that the PSBR includes them, and that the right hon. Gentleman does not appear to appreciate it, was not a problem before, because previous Governments did not seek to sell off their valuable public assets, so it was not a factor in calculating the PSBR. With asset sales about to play a growing and major role in the Government's budgeting the PSBR will, inevitably, increasingly lose touch with the real world. The only people who appear to have been fooled are the Chancellor and his followers.

The Chancellor is desperately following a road which he claims will lead to price stability. To fulfil that aim he has seen fit in his autumn statement to prey on anything that moves in the public sector.

Hon. Members have talked a great deal about housing benefit. The autumn statement referred to reductions in the coverage of help with housing costs, particularly housing benefit."—[Official Report, 17 November 1983; Vol. 48, c. 996.] That shows an amazing mastery of language. What does a "coverage of help" mean? I do not understand words like that, but it is only too easy to understand what they mean to real people. During the next few days, when right hon. and hon. Members return to their constituencies and open their constituency mail, they will find out what it means. The Chancellor, by knocking £180 million in a full year off the rental element and £50 million off the rate element of housing benefit, will affect 2·5 million households. Half a million households will lose their housing benefit altogether.

The Chancellor and the Secretary of State for Health and Social Security have given a vague impression that only the better-off people—those who can afford it—will lose a little off the margins of their income. Is a definition of "better off' a family on 72 per cent. of average earnings? Such families may be lucky to be in work, but no one can say that 72 per cent. of average earnings means that they are better off. If the rent and rates of such families are 30 per cent. above the average, they will be £5·25 a week worse off. Are they the lucky ones? Such households will soon experience the reality of the Government's economic policies, and right hon. and hon. Members will find that out in their constituency mail, because they will be inundated with complaints, worries and pleas for help.

My hon. Friend the Member for Pontypridd (Mr. John), in a superb speech, said that people did not understand housing benefit. He was referring to the technical complexities of the benefit. Hon. Members should return to their constituencies and talk to the rating departments and town clerks who must administer this benefit and who have been forced again to change the system. It will be extremely expensive in overtime costs to adapt the computers to cope with new demands when they have only just learnt how to cope with the first system.

Officials in my constituency and, I believe, in others, are still having teething problems. People may not understand the technical complexities of housing benefit, but they will certainly understand them when their housing benefit is cut and they cannot find out why. They will attribute that to the Chancellor's policy. The measure will cause hardship this winter to people in every constituency.

The statement does not specifically mention gas and electricity prices, but it is widely believed that they will increase. It does not seem to matter that such increases contradict the policies and the commercial advice of the chairmen of those industries. It does not matter that the gas industry last year made £663 million profit. Nor does it matter that these increases contradict the Government's philosophy, which, in theory, is to allow nationalised industries to operate in response to consumer demands in the realities of the market place. There would be no price increase in the market place in industries that were creating such profits. This is a good case for a price cut.

The Chancellor has said that he needs the money to balance his books and that he will have a gas tax. This tax is not only regressive, because it hits the old, the disabled, the weak and those on low incomes far harder than it hurts any hon. Member, but is self-destructive because, inevitably, it will hit industry. It will certainly hit the pottery industry in my constituency, where most kilns are fired by gas. It will increase unit costs and make industry less competitive at a time when the Chancellor claims that he is seeking more money to make industry more competitive. This tax is not only vicious, but incredibly stupid.

My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) pointed out in his opening address that the proportion of national income paid in tax has risen from 39·6 per cent. in 1979 to 45·7 per cent. in 1982. It matters not that the Government's tax take keeps going up. They are determined to take that regressive and self-destructive tax from the gas users. That is a terrible shame and something about which Conservative Members ought to be extremely concerned.

It is on such arbitrary and ill-considered actions that the Chancellor has financed his recession. He is driving us further into recession by those actions and his amazing inability to distinguish between capital and revenue expenditure. He will use the capital receipts from the sale of publicly owned assets, such as British Telecom, to underpin the revenue implications of his policies. Last week, in a question on the autumn statement the right hon. Member for Surrey, South-West (Mr. Macmillan) in a telling phrase that should ring a bell at least with the Prime Minister because it is a domestic image, said: We shall be selling the furniture to pay for the food".—[Official Report, 17 November 1983, Vol. 48, c. 1000.] What greater stupidity could there be in people's personal lives and in the Chancellor's management of the economy.

It is interesting—nay, worrying—that in his autumn statement the Chancellor attributes only £1·9 billion to the sale of Government assets. The sale of BT this year is intended to raise £4 billion. I hope that the Chief Secretary will explain today whether that sale is to be further discounted by means as yet undecided because the Government are so anxious to sell the shares, so that instead of £4 billion the sale will raise only £1·9 billion, or whether only part of the 51 per cent. shareholding will be disposed of in the next financial year. The Chief Secretary must clarify the Government's intention now.

The autumn statement ignores the implications of the Chancellor's own policy. Cuts in public expenditure damage private industry as much as anything else. Private industry relies heavily on the public sector for subcontracts. Cuts in the PSBR strangle rather than strengthen the economy. Productivity and unit costs are not just crude reflections of a low-wage policy. They are far more complex matters which are significantly affected by design research, the price of raw materials, development costs and especially capital investment.

The Chancellor ignores all those inevitable implications of his policy. Most crucially, he fails to recognise the fatal flaw at the heart of his strategy, which is that cuts lead to reduced economic activity and thus to reduced Government expenditure and, as inevitably as night follows day, to further and further cuts. The Chancellor is determined to draw us even further into that declining cycle and it can cause only havoc and misery. That is the burden, in every sense of the word, of the Chancellor's autumn statement. His policies of economic stagnation will lead, as he says himself, to some net increase in taxes in next year's Budget—and thus to less consumer demand, less savings, less investment, less economic activity and less economic prosperity. They can never lead to real growth and recovery.

The Chancellor's autumn statement forecasts a winter of economic immobility because the Government are more interested in pursuing their own financial mirages than in coming out into the real world where companies are going bankrupt because of collapsing order books, although in many cases their products are well made and competitively priced. The real world is the one in which people are being made redundant when industry is crying out for their skills. It is the one in which old people this winter will sit beside unlit gas fires although they want and need heat because they cannot afford to turn the gas fire on. The real world is the one in which millions live in unmodernised and inadequate housing while 250,000 construction workers stand idle in the dole queue, paid by the Government not to build houses. That is the real world and those are the real problems to which the Chancellor's autumn statement fails to address itself.

Not once in his statement, in his introduction last week or in his speech today did the Chancellor mention the implications of his economic policy for real people. That is the measure of his failure and the Government's failure, and that is why the Opposition utterly oppose the autumn statement.