Orders of the Day — Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 7:44 pm on 23rd March 1987.

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Photo of Alistair Burt Alistair Burt , Bury North 7:44 pm, 23rd March 1987

I congratulate the hon. Member for Truro (Mr. Taylor) on his maiden speech. I know that he cannot be in the Chamber all the time, but he will probably read my remarks tomorrow. It is a special pleasure for me to welcome an hon. Member who is actually younger than I am. We both had the pleasure, when elected, of being able to choose to come to the House or go on a Club 18–30 holiday. I also endorse the remarks about his predecessor, whose loss was deeply felt in the House. I wrote to my local paper that David Penhaligon gave politicians a good name. We would all covet that simple memorial.

The hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) said precious little about the Budget. The only substitution effect that I have noticed recently is the rapid substitution of his own party by the alliance as the official Opposition of the country. I suspect that, as Labour Members ramble on, they will find that substitution occurring more often and in more places.

I congratulate the Chancellor on the Budget. The touchstone of success for the Budget in my constituency will be as it has been in previous years—its long-term impact on unemployment. I have made little secret of my concern that the Government's policy in the recent past did not appear to make the reduction in unemployment as passionate a cause as some others that they have taken up. I still consider that the Government are seen as underplaying unemployment, but clearly they are underplaying it much less than they did in the past.

In the past 10 years or so, the arguments on unemployment have changed. or at least they have changed in the real world, although not on Labour Benches. We have recognised that the present chronic unemployment is more likely to have been caused by longterm problems rather than short-term cyclical ones. We have accepted that there are no easy answers and have questioned the seemingly ready solution that Governments should somehow create more jobs. A mood of realism has settled on the issue, but I counsel colleagues that it is not a content mood. My constituents want things to improve. Often, they are angry and frustrated, for the pain of unemployment is barely lessened by an intellectual appreciation that its causes are deep and its cure is uncertain. The appreciation that the country's economic long-term health is so much more important to their own and their children's employment than short-term heart-on-the-sleeve measures has got home, and with it a lower regard for the easy and false options of Opposition parties.

It is in that context that Bury, North views the Budget. Unemployment in the constituency is now down from its high point of 4,798 to 4,171 last month, a rapid drop that was achieved in the past 17 months, which is most welcome. The constituency now has unemployment at about 9 per cent. A number of Budget measures seem certain to enable that trend to continue. The first measure relates to interest rates. That matter was gently glossed over by the right hon. and learned Member for Monklands, East (Mr. Smith) when he dealt with Labour's borrowing and spending plans.

Prudent management of borrowing means that interest rates will fall, and the first effects have already been seen. There is a tone in the Government's handling of the economy to which interest rates are now appearing to respond, which will come as welcome news to the Manchester chamber of commerce and industry, which was quoted gleefully and rather selectively by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). In its most recent survey of 31 December 1986 it referred to: "a more optimistic note showing distinct improvements in the figures for deliveries and orders in both home and export markets."

It went on to state: as 81 per cent. of respondents see lower interest rates as necessary to improve business prospects, it must remain a matter of conjecture whether the improvement will continue into 1987 without a fall in real interest rates.

Let us hope that the fall in interest rates, precipitated by the Budget, continues. It will be a gain for industry, for home owners and for the economy in general. I also add a plea for stable exchange rates through our early joining of the European monetary system.

Secondly, on inflation, it is a remarkable measure of how far we have come that so little space and attention is now given to inflation, with its crucial effect on industry, wages and fixed incomes — particularly those of the elderly. The same industrial survey of our region makes it clear how important inflation still is to local industry. The Government are entitled to credit for reducing inflation. The Opposition's cavalier disregard of the danger of inflation ought to be remembered by those whom they purport to champion, particularly by the old who were viciously affected by inflationary rises under the last Labour Government.

Thirdly, the release of small businesses from VAT is particularly welcome in a constituency such as mine. It is an important market and retail centre. Cash flow is the bane of so many lives. In an economy where encouragement is being given to the development of small businesses that are providing so many jobs, the Budget measures will help to improve their prospects further.

Fourthly, on income tax the Government must confront head on a seeming paradox. In 1979, the level of income tax and the desire for its reduction was a major electoral concern. Eight years later, the expectation of a reduction has meant that tax cuts are now greeted with almost a Gallic shrug. But there is no paradox. Other dangers now face the economy. People's attention has naturally shifted. Some two and a half years ago I counselled caution on this issue, believing that at a time of rising unemployment the suspicion was easily bred that one man's tax cut was achievable only at the expense of another man's job and that it was vital for a long-term, month-by-month and steady reduction in unemployment to occur to confirm the success of the Government's economic policy and to give it credibility. Slowly but surely, this argument has gained strength. My right hon. Friend the Chancellor of the Exchequer is now more entitled to refer to the advantages of a low tax economy, and we must press this home. The argument has been made easier by the obvious fall in unemployment and the Government's welcome acknowledgment that some public expenditure is very good—hence the welcome mood of the "Autumn Statement" of 1986.

I cannot impress on hon. Members too strongly the importance to our constituents of the balance and the combination between tax cuts and public expenditure—not the over concentration on one rather than the other. The Opposition parties are incredible to people, as they concentrate solely on expenditure, coyly refusing to make it clear who will pick up the bill. Nobody is fooled. The voters know who will pick up the bill. We had honest David Blunkett at last year's Labour party conference to thank for that.

The new balance that this Government have achieved and that they spelt out in the "Autumn Statement" and the Budget is to be welcomed. I see it as a necessary change in emphasis which my part of the country, blessed as it is with good and honest public servants in all their many vocations, will welcome. They will also welcome the concentration of attention on the lower end of tax allowances, though I ask my right hon. Friend to continue in his next Budget the policy of raising the tax threshold by more than inflation, thereby taking more of the lower paid out of tax. The 1·4 million fewer taxpayers since 1978–79 will welcome what has already been done, but I hope all hon. Members agree that that number should be added to.

Let me caution the official Opposition that their promise to add back to the tax bill of the lower paid what the Chancellor has already taken away is for those whose incomes have risen quite a different question from whether they may have wanted a reduction in their tax in the first place. What one does not have, one never misses. People want, quite naturally, the best of both worlds. They realise that it is only a sound economy—not a re-vamp of the IMF-ridden public expenditure-slashing old guard—that provides that chance.

A second touchstone of the success of this Budget is likely to be its ultimate impact on the north-south divide. Here—let us again be honest — is another seemingly intractable problem that has affected Governments of different persuasions since the first world war. All too often the arguments about the north and the south are oversimplified. It is not a simple problem. I hear with some sympathy the genuine cries of some Opposition Members. I know for the most part what inspires those cries, but increasingly those areas are represented by my hon. Friends whose sympathy is no less but whose realism is greater, which keeps them from the undesirable siren call of easy and false policy options.

This Budget will work for the north for the same reasons as it will work for the economy as a whole. However, I urge my right hon. Friend the Chancellor of the Exchequer to devote more of his considerable energies to this problem in his next Budget. It is time to be imaginative and perhaps iconoclastic in dealing with it. I have not always been the first on my feet to praise my right hon. Friend in the past, but I bow to nobody in my appreciation of him as his own man, untrammelled by convention and determined to pursue his own way of dealing with problems. In dealing with the north-south divide that approach is needed.

A Budget looking at the north-south divide would not devote itself to an older and in some ways discredited view that public expenditure on projects is the answer. Instead it would look at whether the fiscal structure could be altered in some way to assist the growth of businesses and new enterprises in the north. If it is fair to ask for differential pay in different parts of the country, perhaps it is also fair to ask for differential tax rates in different parts of the country.

But let us be absolutely frank. Ultimately, the north-south issue will be resolved not by Governments but by pure common sense. One day, some bright spark will wake up down here, in this over-priced, over-rated and congested hell hole of the south of England and say, "Blow this for a game of soldiers; I'm off." People will realise, as the price of land and houses continues to rocket, as their own and their families' quality of life suffers from ridiculous commuting decisions, that there is a decent alternative. We should be emphasising the positive side of the north-south divide. The positive side does not rely solely on public expenditure; it relies also on private expenditure. They both have a part to play. What so depresses me about the arguments of Opposition Members about the north is their appalling lack of belief in their own people and in their own areas. They have hardly a good word to say for them; they moan on and on. How many people outside the House, hearing that image of the north, will be attracted to go there, set up in business and fight for the future? I believe that the north and those who live in the north can produce industry, enterprise and jobs. Magic handouts did not work in the past and they will not work in the future. A different approach is needed.

The north-south divide will be reversed. Folk will realise that away from all this high-cost everything in the south-east is a beautiful part of the country. It is situated in the north-west, with fabulous road, rail, air and sea connections. It is handily placed in the centre of the country, with good state and private schools on the edge of a major city, with all the necessary commercial infrastructure to support successful business initiatives. This place is called the metropolitan borough of Bury. People ought to wake up to what will happen in the southeast in the next 20 years and get out fast. If anybody wants further details about Bury, my telephone number in the House is 219 6320. I shall be glad to tell people about the metropolitan borough of Bury.

This Budget is a responsible continuation of certain policies and an acknowledgment of an equally responsible change in others. The Chancellor has done well. The underlying strength of the economy is sound and people's response to a realistic Budget will be equally realistic. They will vote for it and give us the opportunity to continue to improve. Above all, they will give us the responsibility to continue in future the vital job of reducing unemployment.