Amendment of the Law

Part of Budget Resolutions and Economic Situation – in the House of Commons at 6:15 pm on 20 March 1990.

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Photo of Mr Roy Hughes Mr Roy Hughes , Newport East 6:15, 20 March 1990

It is always a pleasure to be able to take up the remarks of the hon. Member for Staffordshire, Moorlands (Mr. Knox).

One of the claims to fame of the Chancellor of the Exchequer is his family's connection with the circus. I am reminded of the words of the late President Harry Truman, who said, "If you can't ride two horses at the same time, you shouldn't be in the b—circus." By common consent, the Chancellor of the Exchequer has had a difficult ride today, and in preparing his Budget after being handed the poisoned chalice by the right hon. Member for Blaby (Mr. Lawson). The City does not appear to be happy. Its attitude was summed up on the front page of The Daily Telegraph on Saturday. It appears that Mr. Peter Warburton of Robert Fleming and Co. Ltd. said that we have a grim picture of stagnant output, rising labour costs, destocking and falling profits. It is in that context that we can consider the proposals of the Chancellor of the Exchequer.

Most significant, perhaps, was the concession for the poll tax. As my right hon. Friend the Leader of the Opposition said, £16,000 in savings is not exactly a king's ransom. I feel certain that the tax will need to be greatly refined before it becomes acceptable to the British people. I welcome the concession on lead-free petrol, for environmental reasons alone. The continued differential is imperative. Likewise, I welcome the tax concessions for workplace nurseries. Married women who go out to work are now an established part of our system, and the trend is likely to continue in the years ahead.

Financial assistance is to be given to the Football Trust. Such action was vital after the Hillsborough tragedy. The additional revenue of £100 million will be most welcome. It will encourage provision to be made for more comfortable sports grounds.

The Chancellor of the Exchequer was restrained this afternoon. To return to my circus reference, he was restrained because he has three, not two, difficult horses to ride. First, there are the trade figures; secondly, there is inflation; thirdly, there are exceptionally high interest rates. In 1989, Britain had its largest ever balance of payments deficit, of over £20·4 billion. Compare that with the £50 billion surplus of West Germany.

As my right hon. Friend the Leader of the Opposition reminded the Prime Minister, there is a great deal of catching up to be done. There seems to be little improvement in 1990. The January figures show that imports were flooding in. We had the highest ever level—£10,569 million—in one month alone. Concern has been caused, too, by invisible trade, which for the last quarter of 1989 showed a deficit.

There are the joys also of Common Market membership. In 1989, we had a trade deficit with the EEC of £14·4 billion. This year, we shall contribute £4·6 billion to that organisation. That is 15 per cent. of its total revenue. There must be a moral there somewhere.

To tackle the terrible dilemma that the Chancellor of the Exchequer faces, he, like his predecessor, has relied exclusively on interest rates. That is what the right hon. Member for Old Bexley and Sidcup (Mr. Heath) has described as the one-club approach. By contrast, the shadow Chancellor, my right hon. and learned Friend the Member for Monklands, East (Mr. Smith), has consistently urged temporary credit controls and a limit on bank lending. That would be a means of curbing excess domestic demand.

The solution, nevertheless, to the trade deficit is essentially a long-term one. Investment in manufacturing industry is vital if Britain is to prosper in the decade ahead. Even the right hon. and learned Member for Surrey, East (Sir G. Howe) now recognises this fact. It is a pity that he did not realise the error of his ways way back in 1981, when he was Chancellor and so much of British industry was razed to the ground. This Government, like no Government before them, have enjoyed the untold bounty of North sea oil revenues, but the opportunity for investment has been wasted. In fact, manufacturing investment has only just returned to the level achieved by the last Labour Government.

We have had a tight Budget today, but of course it remains the Chancellor's ambition to create an economic upsurge next year to try to save the Conservative party from defeat at the polls. His announcement today certainly points in that direction. It is not difficult to realise, though, that such a short-term strategy is not in the long-term interests of this country. What the Chancellor has tried to do today is simply paper over the cracks. I repeat that the Government, and the Chancellor in particular, should directly encourage investment in manufacturing industry, new technology and the undoubted skills of our people.

Then there is inflation, which the Chancellor's predecessor called the judge and jury. It now stands at 7·7 per cent.—higher than that of any of our major competitors. For example, in Germany it is 3 per cent. and in France 3·6 per cent., while the EEC average is 5·4 per cent. This is not a happy picture, but the Government are not helping. I will give some examples.

Prescription charges have gone up again. Do hon. Members remember that, in 1979, they were 20p? On 1 April this year they will be £3·05. What a contrast that is. Then there are domestic water supplies. In 1990–91, there will be a 16 per cent. increase on the previous year's figure. Bus, tube and rail fares have all been raised above the inflation rate. Rents will rise substantially in the next months. Many Conservative-controlled authorities are imposing increases above the Government's maximum guideline of £4·50 a week. Electricity charges, on average, are up by 7·7 per cent. but in South Wales, an economically weak region, the charges are up by no less than 12·9 per cent. The poll tax is expected to raise the retail price index by 1 per cent.

I notice, too, that wages are up 9·25 per cent. for the fourth consecutive month. Last Friday, the Secretary of State for Employment was warning that big pay rises could cost jobs. Even the Prime Minister is now urging wage restraint. Yet what do we find? The bosses—by that, I mean top chairmen and chief executives—have awarded themselves salary increases of nearly 28 per cent. in the past year. That is nearly four times the rate of inflation. Some would consider that leadership is best shown by example, but here again it would appear that there is one law for the rich and another for the rest of us.

After his appointment less than five months ago, speaking of his economic medicine, the Chancellor said: "If it isn't hurting, it isn't working." There is now a more up-to-date version of those words it is hurting but it is not working. For industry, a 15 per cent. interest rate is simply calamitous, as the Confederation of British Industry readily admits. Mortgagors are facing a terrible dilemma. They just cannot meet the rocketing repayments demanded.

There are two major side effects of this situation. First, there is debt. A recent study by the Policy Studies Institute showed Britain to be drowning in a sea of debt. Nearly 2·5 million households had difficulty paying their bills last year. Wales has been particularly badly hit by mortgage misery. Cardiff city council has had to set up a special advice centre to deal with the situation.

Secondly, according to Shelter, which knows about these things, homelessness has been increasing for some time, and when the poll tax is introduced in a few weeks' time, there could be an explosion. Poll tax is a story in itself. To me it was best summed up in the words of the right hon. Member for Henley (Mr. Heseltine), the Prime Minister's likely successor, who said: I cannot remember a discussion of the option of the poll tax in which it was not rejected as expensive, ineffective and unfair. It is for those reasons, of course, that we have had this very limited concession in the Chancellor's statement this afternoon.

But it is not only poll tax; the whole range of this Government's policies are now being rejected by the electorate. The Mid-Staffordshire by-election on Thursday will be an indication of this.

I repeat that all that the Chancellor has tried to do today is paper over the cracks, in the short-term interests of the Conservative party. The Prime Minister is now under constant threat from inside her own party. There has been no economic miracle. A £20 billion trade deficit, inflation at 7·7 per cent. and interest rates at over 15 per cent.—these figures, together with the opinion polls, spell a story of disaster for the Government. The ship is sinking fast. The faster the process is completed, the better it will be for the people of this country.