In contrast to the hon. Member for Leeds, West (Mr. Battle), whom it is always a great pleasure to follow, I must make it clear that I believe that the 1989 Budget and Finance Bill will be seen in retrospect as fundamental to securing good economic performance and rising living standards in the 1990s, as well as to securing a soft landing later this year.
I have read with great interest the report of the Treasury and Civil Service Select Committee. It refers to the loose monetary policy adopted in the wake of the October 1987 stock market crash and says that it is now clear that nearly all conventional wisdom underestimated the tremendous strength of the British and other economies. However, it certainly did not look like that at the time. Perhaps the Select Committee allowed itself just a touch of the Monday morning footballer syndrome.
Earlier in the debate the Chairman of the Select Committee, my right hon. Friend the Member for Worthing (Mr. Higgins), seemed to concede as much. I hope that my right hon. Friend will not mind if I quote his words to the House on 5 November 1987 in the debate on the financial markets. In stressing the importance of effective action he said:
The response of the Chancellor in reducing interest rates following recent events was the right one.
He then went on to say:
However, there is still further scope for us to reduce interest rates …"—[Official Report, 5 November 1987; Vol. 121, c. 1134.]
I make that point to underline the fact that to have done otherwise at that time would in the short term have been extremely dangerous, would have flown in the face of conventional wisdom, and might well have precipitated a yet greater and more prolonged crisis of confidence in the market.
Clearly we still live with the effects of that decision, but we also live with the specific difficulties of a dynamic economy whose supply side has been transformed and where progress has been so rapid and marked that change and growth pains are endemic and unavoidable. Unemployment has been markedly reducing, yet we now face serious skill shortages. The problem is turning on its head as a result of the growth in our economy.
We should be very wary of knee jerk and over-simplistic reactions to the size of the deficit. Certainly it is extremely high and we want to see a change in trend. I have no doubt that change will come as a result of our very high current interest rates, but the present high level of demand and credit is a consequence of other aspects of our economic success. We should be very wary of further rises in interest rates before the present level has been allowed time to achieve the necessary result.
Much has been said in this context about the performance of the Government's statistics office. I welcome the intention now to get to grips with these difficulties by placing at least part of the Central Statistical Office under the wing of the Treasury. I am sure that this will lead to more accurate statistics being made available. However, the inability to explain the £15 billion hole in the accounts is rather disturbing. Perhaps much of it is unrecorded exports. There is a revaluation at the end of each year of the export figures; they are adjusted and normally turn out to be much more favourable. The various measures of gross domestic product simply do not add up. Tomorrow dealers in the City will be staring lugubriously at their screens awaiting the trade figures and subsequently making judgments about our economic performance based on unreliable figures. We should pay far less attention to those figures and accept that a deregulated, dynamic, free enterprise economy such as ours is extremely difficult for the CSO to monitor effectively.
Following last year's Budget, which accomplished so many historic necessities at one go—the tax emancipation of women, the ending of confiscatory income tax rates, the translation of the PSBR into a PSDR—it was inevitable that this year's Budget would be lower key and more technical.
This year's Finance Bill underlines that. It can hardly be described as a user-friendly document—perhaps it never is—but it is certainly a considerably more challenging document than last year's Finance Bill, which I had the good fortune to examine in Committee. I fear that its comprehension and interpretation will provide a very good living for many City lawyers and accountants for the next few years. Nevertheless, if its complexity was foreshadowed, many of the Budget's measures themselves were not.
I believe that there will be radical effects on the savings market as a result of this Budget. The Chancellor has made a major contribution to the development of employee share ownership by allowing the contributions of a company towards an ESOP to qualify for corporation tax relief. It is encouraging to know that our representations to the Chancellor last year during the Committee stage, and particularly those of my hon. Friend the Member for Esher (Mr. Taylor), who is currently detained overseas on parliamentary business, have been noted and heeded.
The measures which affect profit-related pay and employee share schemes will also be extremely helpful in promoting genuine employee participation in the enterprises for which they work. It is this Conservative approach to encouraging harmony and productivity in commerce and industry which is itself a landmark in industrial relations and which will have the most far-reaching and profound effects over the long term.
The measures for promoting personal equity plans are equally significant. They too will not only encourage savings and share ownership but will have a significant effect on the mortgage market. The financial institutions may well be able to demonstrate that a PEP mortgage is at least as competitive as an endowment mortgage and thereby wake up a rather sleepy corner of the market to the great benefit of the consumer both in terms of choice and competition.
As the reasonable man surveys this Bill and the Budget which forms its foundation, it will be hard to find much wrong with it. Certainly the abolition of the earnings rule and changes in national insurance contributions are pivotal. I particularly salute the Economic Secretary in his work on the promotion of lead-free petrol. I am delighted to see Gedling, as so often in other matters, leading the way in this. In my constituency now practically all garages supply lead-free petrol; one petrol station has 16 out of 20 pumps supplying it.
I do not wish to insult the ingenuity of the shadow Opposition Treasury team but, with the exception of the health proposals, there is very little they will be able to complain about in Committee. Yet those health proposals were announced in January and their announcement was therefore not part of the Budget. More important surely is the overall perspective on health. Our successful economic policies have provided for unprecedented increases in health spending, but throwing money at the Health Service is not a sufficient discharge of our public duty. We are now reforming its structure to ensure value for money and value for the taxpayer. That surely is our duty.
It is because the 1980s have seen such a fundamental change in our economic performance—indeed, it is no exaggeration to say that the 1980s are the decade of the supply side revolution—that the future needs of the National Health Service, and indeed of the rest of the public sector, can continue safely to be met by this Government.
I support the Bill and look forward to its rapid implementation.