The two major proposals in this No. 2 Finance Bill relate to personal pensions and profit-related pay, and the success of PRP will be judged later in the light of experience. It is a worthwhile attempt to improve the supply side of the economy, especially wage flexibility. It may not prove to be the great breakthrough that we want, and we shall have to wait to see what the take-up is and its effect on wage bargaining. Only time will tell us whether employees are prepared to recognise PRP as part of their remuneration package and not merely as a bonus.
Profit-related pay is worth a try because previous Governments of all parties have been inclined to concentrate too much on controlling aggregate demand within the economy whereas the central weakness of the British economy has been translating demand into efficient and effective supply. There has not been lack of demand. In other words, the issue has been the ability of industry and commerce to meet demand without that demand leading to higher prices or increased imports. This central fact seems now to be dimly recognised on the Opposition Benches. Recent speeches by Opposition Members suggest that they feel that there is too much demand in the economy rather than too little. We hear that private credit is too buoyant, that consumption is too high and that too many people are enjoying themselves. Instead of advice that we should be reflating we have a warning that we are about to have a balance of payments crisis. That warning figured prominently in the speeches of Opposition Members before the general election. It is of great credit to the strength of the economy that no such crisis has occurred.