Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 7:32 pm on 23rd March 1987.

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Photo of Mr Brian Sedgemore Mr Brian Sedgemore , Hackney South and Shoreditch 7:32 pm, 23rd March 1987

The Chancellor's critics have been unfair to him. They have failed to realise his undoubted talents. In particular, the Chancellor has an outstanding ability to play word games in which he says the opposite of what he means. Most of us play those games at Christmas, but the Chancellor plays them at Budget time. When he tells us that the economy is undergoing some kind of economic miracle, he is really Humpty Dumpty telling us that the manufacturing base has been devastated by the Government. When he says that exports are improving, he is the March Hare who is telling us that there has been an import surge and that the impending balance of payments crisis is likely to be so disastrous that he could not give us the bribes that he had originally promised us. When he tells us that he believes in business integrity, he is really the Knave of Hearts who has created a free enterprise culture in which for too many people in the City of London the only principle is lack of a principle.

e have now had nine wasted Tory Budgets and they have combined to produce a free enterprise charter in which too many business men feel that it is better to make money than to make things. In those nine wasted Tory Budgets, successive Chancellors have trumpeted free enterprise. For the most part, it has been a disaster. For some, it has been death. This winter during the cold spell hundreds and possibly thousands of people died of hypothermia because they could not afford the heating, the food with enough calories and the clothing to stay alive. Every winter, according to doctors in Shoreditch, old people die before their time because they are thrust from the National Health Service and the community services cannot help. In those nine wasted Tory Budgets, breathing the spirit of free enterprise, the Government have left us with 100,000 families without a home, 4 million people without a job and, in a tragedy unparalleled in the Western world, one fifth of our population living on or below the poverty line. Nine million people have been thrown away like empty husks into the dustbin of free enterprise. In the future, historians will shake their heads and wonder how society became so barbaric that it could allow that to happen.

Parliamentarians have a responsibility to examine the moral, economic and intellectual basis of these Budgets and the Tory concept of freedom, which it defines in terms of free markets, consumerism and the ability to pay. The Chancellor justifies the death and destruction of these Budgets in terms of Friedmanism or monetarism, an ideological creed which curiously has existed entirely outside empirical evidence. When monetarism was monotheistic, the Chancellor and his family used to go every Sunday to St. Paul's in the City, and they worshipped the one true god — M3. Then, when monetarism became pantheistic, he and his family went along to St. Paul's in the City and worshipped M0, M1. M2, M3, PSL1, PSL2, DCE, broad money, narrow money, seasonally cyclically, psychically adjusted. In this Budget we have seen the slaughter of all the gods in the monetarist pantheon and the Chancellor has revealed himself to be a heathen who worships plastic—plastic Access, plastic Visa, plastic American Express. Plastic—the ultimate symbol of a throw-away society which inevitably and inexorably will eventually crush us all beneath the weight of our personal debt.

The other justification which the Chancellor gives us for his economic policies is that his tax policies will create incentives. They will make people work harder. If so, why has he increased the tax burden overall? If it is true that top people respond to tax cuts by working harder, why does not the Chancellor argue that working people will respond to wage rises by working harder? If it is true that this theory is based on the notion, as the economists tell us, that the substitution effect outweighs the income effect, is there no empirical evidence to support it? We do not have to look at the recent survey by Professor Brown. Ever since Adam Smith published "The Wealth of Nations" 211 years ago, economists in all countries have been searching for this evidence that the substitution effect outweighs the income effect. They cannot find it. I should have thought that, having got this bright bunch of academics together in 1776, 211 years on, when they can find no evidence to support their case, they might drop the research project.

But not a bit of it—they cannot find any evidence in this country, so little Matthew Parris who used to be a Conservative Member, went wheedling off to America last weekend. I saw him talking to some professor sitting beside a television set which had to have a computer to make him look intelligent. He was preaching the kind of guff and garbage which one hears in this country only when Chancellors have come here since 1979 to produce their Budgets. There is no foundation for the monetarist theory and no empirical evidence to support the incentives theory.

Given that the twin moral pillars of the Budget are greed and selfishness, I should have thought that the Chancellor might take the opportunity to give us measures to encourage financial rectitude—for example, to help minority shareholders stamp out fraud. That issue has been taken up recently by the Financial Times. The problems stem from the difficulties which minority shareholders had in a company called Film Finances Ltd. when they discovered alleged serious frauds and a prime facie breach of section 42 of the Companies Act 1981.

Hon. Members who have closely followed the Guinness scandal will realise that section 42 of the Companies Act 1981 refers to companies using their own money to buy their own shares illegally. One of the companies with shares in Film Finances Ltd. is Wren Trust Ltd., the wholly-owned subsidiary of Gresham Trust plc. As it happens, the chairman of Gresham Trust plc is Sir Jasper Hollom, who is also chairman of the takeover panel. When minority shareholders tried to bring a civil action for fraud, Sir Jasper, the chairman of the takeover panel, blocked it. In 1985, when professional advisers requested Sir Jasper to remove a secret cheque book in the possession of the finance director of Film Finances Ltd., Sir Jasper refused to do so. Sir Jasper said that he did not want an action for fraud to go ahead because he thought that considerations of profit and commerce were more important than considerations of the law.

I have the company minutes of Gresham Trust plc for 6 March 1986, Sir Jasper Hollom, chairman of the takeover panel, in the chair. Speaking of this case, the minutes state: the directors could only have regard to the effect of the present proceedings upon its investment (held by its wholly owned subsidiary Wren Trust Limited) in Film Finances Limited. If, for the reasons set out in the Affidavits, already sworn by Mr. Carr and Mr. Baldock, the Board considered that there were good commerical reasons why the proceedings were not in the best interest of Film Finances Limited, then it should resolve to support Film Finances Limited's application to dismiss the proceedings".

I am bound to say that I find that odd, coming from the chairman of the takeover panel. Surely the Government Front Bench will agree that the right course for the chairman of the takeover panel was, first, to allow the civil action to proceed and, secondly, to report each and every allegation of fraud and breaches of section 42 to the Department of Trade and Industry and to the fraud squad. Quite frankly, it is outrageous that one so eminent as the chairman of the takeover panel can put profit before the law.

On commercial grounds, I have no doubt that the directors of Guinness would have liked not to have had an inquiry because it would not suit them. The hon. Member for Tayside, North (Mr. Walker) quite rightly complained that he had warned the takeover panel that things were going wrong in the Guinness affair. The hon. Member could not have known that there was nothing that Sir Jasper could do about it. At the very time that he was complaining about what was going on in Guinness—note the date of the minute to which I referred, which was exactly the time that the Guinness shenanigans were at their height — Sir Jasper was seeking to cover up an investigation into an almost identical crime in relation to his own companies.

If only the directors of Johnson Matthey Bankers could have said, "On commercial grounds, we do not want an inquiry," I am sure that they would not have had one. If only the directors of Minet Holdings could have said in relation to the PCW syndicate, "On commercial grounds, we do not want an inquiry," I am sure that they would not have had one. There is a lesson for the Government Front Bench. That is, having created the atmosphere in which the most eminent people in the City of London can no longer tell the difference between right and wrong, the Chancellor should, first, tonight telephone the Governor of the Bank of England to secure the immediate resignation of the chairman of the takeover panel. Secondly, when he comes to the House with his Finance Bill, he should say that he will introduce measures to allow minority shareholders to bring fraudsters to book.

I feel a bit of a fool over the matter. I have twice in the House defended the takeover panel. I have said, "There are some people in the City that one cannot trust, but one can trust the takeover panel." Now my hon. Friends say to me, "But it was you, Sedgemore, who told us that we could trust the people on the takeover panel." I am bound to say unequivocally that I apologise to every hon. Member. I trusted those people too much. In future, I shall let my natural cynicism outweigh the desires of my heart, which always see the best of other people, whether they are in the City of London or anywhere else.

The Budget is a graceless epitaph for the Chancellor and the Government. Like the Chancellor, it lacks moral, economic and intellectual integrity. For that reason, the decent, thinking people in the House will not support it tonight.