That is exactly right, and the Chancellor has not allowed for the horrendous cost of unemployment. It must be costing the Exchequer about £20 billion. I do not know the latest estimate for each person out of work, but it may be £5,000 or £6,000 a year and that represents a horrendous cost to the Exchequer. The Chancellor is in that situation simply because he has run the economy for deflation and for discipline rather than for growth and expansion. The problem he should have faced is what to do now. The prescription the Chancellor should clearly have gone for is one to reduce interest rates as a central aspect of Government policy. There is no point in saying that markets decide interest rates, because interest rates are under the effective political control of the Government and can be brought down by the Government. The minimum reduction necessary is 4 per cent., which would bring us down to somewhere near the level of our competitors. It would not bring us to their level, but it would be somewhere near. That is the key to getting the pound down, because the pound is still grievously overvalued, especially against the deutschmark, where the overvaluation is about 30 per cent. To become competitive with the deutschmark we would need a devaluation of about 22 per cent.
The sterling index, at 74, is now substantially up on its low point of last year—4 per cent. up in money terms and much more in real terms because our inflation rate is that much higher. Unless we reduce interest rates and bring the pound down with them, we will not be able to participate in the world expansion. We will not be able to stem the rising tide of imports and get back into the markets we have lost overseas. That is because our export prices are now some 30 per cent. higher than they were on average for 1973 and 1976, and they were not especially competitive then. How are we to get back into the markets that we have lost without a competitive currency? That competitiveness is conditional on getting interest rates down.
The second approach of the Chancellor should have been to borrow and spend. There is nothing like public spending for stimulating the economy, creating growth and putting people back to work. I should like to offer the Chancellor Mitchell's law. If he looks at the G5 economies over the six years from 1979 to 1984 he will find a direct correlation between the increase in public spending in those economies and the level of unemployment. The biggest increase in public spending—8·6 per cent.—was in the United States, and the unemployment increase in the United States has been only 1·6 per cent.
In Britain, at the other end of the scale, the total public expenditure increase has been 3 per cent. and the unemployment increase has been 8 per cent. The other economies are ranged at intermediate levels depending on how much they have increased public spending. Public spending is the only way of using the under-used resources in our economy and the only way of giving our economy the kind of stimulus that President Reagan gave the American economy and which resulted in the creation of 8 million jobs. There is no point in saying it cannot be done, because 8 million jobs have been created in America in less than three years. That is the kind of expansion we need, spending not on the same objectives of defence and armaments but on useful public purposes.
The Labour party proposes an increase in the public sector borrowing requirement of around £6 billion. That is an increase on top of the present level plus asset sales—in other words, an increase on top of the £12 billion public sector fiscal deficit. That would put unused resources back to work. It would put building workers back into jobs and tackle the housing crisis that is building up. That is what the Chancellor should have got on with.
The third matter to which the right hon. Gentleman should have devoted some attention is clearly social justice. He should take back from the richest 5 per cent. of our population, those earning over £25,000 a year, the benefits that have been showered on them in a continuous dribble of about a dozen concessions in each Budget under this Government. There have been concessions in capital transfer tax and capital gains tax. More benefits in capital transfer tax on unearned income have been repeated today, to an amount of about £3·6 billion annually, and that has all been given to that richest 5 per cent. If that is taken back—and it can be taken back—we could use that money to increase pensions by £5 for a single pensioner and by £8 for married pensioners. We could increase child benefit by £3 and put the long-term unemployed on the long-term supplementary benefit rate, which is where they should have been all along. That would stimulate the economy, because those people spend their money on British goods and not on buying BMWs and on overseas trips. That is a stimulus and a matter of social justice that it is essential to fulfil.
The fourth purpose is an expansion of employment schemes. It is tragic to see how little has been done in the Budget for the unemployed. Why could the Chancellor not take up some of the schemes put forward in the report from the Select Committee on Employment on special employment measures and the long-term unemployed? That Committee put forward three proposals: a building improvement scheme to provide 300,000 jobs; the employment of 100,000 long-term unemployed in the social services and the National Health Service; and the introduction of a subsidy to private employers to take on long-term unemployed in addition to their existing employees. The total cost of those recommendations was only £3·3 billion.
Why has the Chancellor devoted so little of his Budget to the necessary objective of bringing down the horrendous level of unemployment? I concede that the Government have been absolutely brilliant at bringing down the unemployment figures, thanks to all the fiddles, manipulations, changes, doctoring, Tebbitising and sanitising that has gone on. What they have not brought down is unemployment, because it has continued to rise to a point where the long-term unemployed are now four times more numerous than they were at the height of the depression in the 1930s. That is a national tragedy and a waste of human resources, yet all the Government can do is manipulate the figures.
The Government tell us that they have created 700,000 new jobs since 1983. They do not say that most of those jobs are part-time and filled by women. They do not say that the net loss in jobs since the Government came into power is 1·1 million. Those jobs have been thrown away since 1979. Jobs lost in the whole of the Common Market for the same period have amounted to only 500,000, less than half the number of jobs lost by this Government. We have a national tragedy and a national problem because our unemployment level, disguised though it is, is now higher than that of any major industrial country. It is a horrendous burden on the productive economy and that burden must be eased, not only for social justice but for economic efficiency.
Those are the priorities that the Chancellor should have gone for. As usual, being the artful dodger of economics, he has gone for fast footwork and has held out mirages about tax cuts to come next year—the infinitely postponed and never arriving tax cuts which have been the centrepiece of the Government's dangling carrot to lure Back Benchers through to the next election.
The reduction in the oil price provided an enormous opportunity for the economy, which should have been seized in this Budget. It is equivalent to an increase in the money supply. We could have done it for ourselves six, five, four, three, two or even one year ago. We had the ability to give the same stimulus to the economy by increasing spending and even by reducing taxes when we had high oil revenues. Now the benefit is being forced on us by Sheikh Yamani, whose budget this is. We could have done it for ourselves but we had to have it forced on us by the kindly sheikh.
It is an opportunity to expand. Given the way the Government have ruined the manufacturing sector, our need to expand is more crucial and more desperate than that of any other competing economy. It is a matter of national survival. Unless we rebuild the manufacturing sector, expand industry and get the economy to grow again, how are we to pay our way in the world when the oil contribution fades away entirely? How are we to provide jobs for our young people? How are we to provide the growth to improve the standard of living, which is what the modern electorate wants? How are we to provide the public spending to improve the quality of life, which the public have a right to expect? How are we to do all those things and avoid the fate of a miserable, embittered, declining, divided society, which is where we are heading unless we expand the economy and rebuild the productive sector so that we can provide jobs and survive?
At the end of all the wasted years under this Government it will be tragic if we are to go back to the same balance of payments constraint which has strangled growth in almost every decade since the war. If the Government throw away the benefit of the oil price reduction it will be a national tragedy. To make amends to the people, the Chancellor should have done something in this Budget. Instead, with the same old irresponsibility, he is mortgaging the future by continuous and increasing asset sales; he is desperate to pay the cost of unemployment by selling off national assets. What is more, he is selling them off at a cut price.
The prices that the Government are getting are so inadequate that it is almost as if these were distress sales. A business man's Government cannot even get a good price for the assets which they are flogging. What a farce that is. They are not even making sensible use of the money they are getting from those sales. They are laying in store horrendous problems for the time when those assets will no longer produce revenue. Because of the asset sales, particularly gas, there will have to be an increase in taxation. The Government should have used the money from asset sales to deal with unemployment.
This, then, is an irresponsible Budget from an irresponsible Chancellor. The Chancellor should have taken the name of Omar Khayyam, with this Budget as his Rubaiyat. The slogan is, live for today: "Take the cash in hand and waive the rest," or, take the cash in hand and wave the Order Papers, as Conservative Members did earlier. I remind them and the Chancellor that there is still the brave music of a distant drum beating out the toll of what is to come as the oil contribution fades away and vanishes entirely. What do we do then to survive? [Interruption.] It is all right for hon. Gentlemen to make sedentary interjections about services. They will not provide jobs for kids and the wherewithal to survive We have now to provide for the hard future which is to come.
The best ephithet on the Budget comes from a compendium of abuse drawn up by the Chancellor's colleague, the Secretary of State for the Environment. It is a quotation from Kipling which sums up the Chancellor's approach and the economic strategy of the Government: