Amendment of the Law

Part of Budget Resolutions and Economic Situation – in the House of Commons at 5:57 pm on 10th March 1992.

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Photo of Dr David Owen Dr David Owen , Plymouth, Devonport 5:57 pm, 10th March 1992

There was constant reiteration of the problem of borrowing to reduce taxation. By implication, he said that the borrowing requirement was too great and, therefore, would have to be restricted. However, we await his Budget.

If we are to keep unit costs down, the section of the labour force who do not have large earnings must be given the greatest relief. That means concentrating tax relief on not only the lower paid but those who receive average pay in manufacturing industry. It is from that section that the pressure always comes to pay ourselves more than can be justified by increases in productivity. This is where we come to the reduced rate band.

In redistribution policy, the best way of helping the poorest section who pay tax is undoubtedly to raise personal tax allowances and take people out of paying tax altogether. However, experience shows that that has little effect on the bargaining position of people in work. They do not feel that they have had a tax reduction when personal tax allowances are raised. A reduced rate band is an interesting way of grappling with the problem of keeping down unit costs and keeping wages in line with productivity.

The Chancellor seemed to suggest in his speech that he intended to use a reduced rate band as a structural mechanism for taking income tax down from 25p to 20p in the pound. Obviously, there are several options, but I hope that he will take that one. I know that it is difficult technically, but I hope that the Chancellor will gradually take more people into the 20p rate band but come at it from below—from the lower paid up through the system. We have never done it like that before. We have simply taken slices of 1p or 2p off the standard rate. Such a reduced rate band would be an interesting development and one to be welcomed.

I am pleased that the Chancellor did not shift the married man's tax allowance. If the tax and benefits systems are to be integrated, the allowance will have to go. The only acceptable way to do that is to allow it to wither on the vine and not to increase it.

In the past two years the Government have shown themselves ready to see child benefit increase. The hon. Member for Eltham described a child cash allowance. That was a good description of the system that we must move towards. We must put child benefit into the tax system but retain the advantage of paying it to the woman, usually the wife, in cash.

To the business community, the alleviations in the Budget are extremely helpful. The one that I am most pleased about is the reduction by 5 per cent. of the new car tax. I should like to see the whole thing go, but it is very expensive and it will already cost more than £600 million to take it down by 5 per cent. The car industry has been preferentially hard hit and therefore needed preferential help. The measures on the unified business rate, VAT and others are small, but they have been sensibly designed to ease where the shoe is pinching in business and to give small businesses in particular, which have certainly felt the recession quite acutely, some welcome alleviation.

Those matters are all small in comparison with cuts in interest rates. If we continue having to keep our interest rates as high as we had to keep them throughout 1991, the recession will bite very deeply in this country. It is already biting harsher than in many other countries. I assume that the Chancellor is confident that, although the Treasury forecasts of coming out of recession have been too optimistic, there is now a real prospect of coming out of the recession in the second half of next year. I hope that that will happen, but the world is still in a difficult state to make any prediction, not least because of the protectionist pressures that are building up.

We have still failed to have a successful general agreement on tariffs and trade negotiation—it hangs over us. There are already in the United States, as evidenced in the presidential elections, very strong protectionist measures. As yet there has been little sign of the European Commission being ready to make the necessary changes in our GATT negotiating position in relation to agriculture. The GATT negotiations are probably the single most crucial matter in ensuring that the world economy starts to move forward.

For all those reasons, we cannot and should not have expected too much from the Budget. This is a difficult time. There is no doubt, too, that, while an election hangs in the air, there is, in terms of international confidence, a tendency to hold back until the election is over. It is probably true that, whatever the result of the election, the markets will view the British economy in a more settled way after it.

This is the last time on which I shall speak to the House, and I do so with a certain sadness but also with the belief that it is high time I went. No right hon. or hon. Member can leave the House without paying tribute to his or her constituency. I was born in the city of Plymouth, and I have represented it in the House for nearly 26 years. That has been a great privilege and something on which I shall always look back with pride. I have also managed to beat the record of Nancy Astor, and I am now the longest serving Member of Parliament in Plymouth's history.

My great gratitude to my constituency goes back to one single thing. The House was brought up on a dictum that Disraeli apparently taught about politics—"Damn your principles and stick to your party." That dictum has obviously been successfully followed by many people. I have turned it upside down, and I have no regrets about that. The House and parliamentary democracy survive because, from time to time, people understand that issues and principles go far beyond party and go to the root of how we regard representation in the House. It should be about how we regard and represent the best interests of our country. That must always come before our constituencies. However, at the end of the day, we must justify those decisions to our constituencies. The one thing that I shall always hold dear is that, when in 1983 my constituency was asked to endorse my decision to put what I thought were my principles before my party, it endorsed me.