Amendment of the Law

Part of Budget Resolutions and Economic Situation – in the House of Commons at 6:28 pm on 10th March 1992.

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Photo of Stuart Bell Stuart Bell , Middlesbrough 6:28 pm, 10th March 1992

I am grateful to the hon. Gentleman. Although we had no prior knowledge of the Budget's content, we anticipated some of its provisions. The 20 per cent. tax on the first £2,000 of income will affect the rest of the tax system. I take the hon. Gentleman's point that the Chancellor, by leaving the indexation of allowances at 4·5 per cent., has probably not done higher rate taxpayers a service.

My right hon. Friend the Leader of the Opposition put the Budget into perspective when he referred to the £100 billion of North sea oil revenues that have been used over the years. The hon. Member for Wycombe mentioned that a Labour Government incurred a £40 billion deficit. Our policy, right or wrong, was to borrow against oil revenues, because we did not want a slump worse than that which was already occurring because of oil price rises in 1974. We opted for a policy of borrowing against future North sea oil revenues. As it turned out, that policy was not acceptable to the IMF, and the Labour Government of the day were forced to change course. That is the context of the deficit to which the hon. Member for Wycombe referred.

It is right at a time of recession to try to stimulate the economy with fiscal measures. I recall James Callaghan saying in 1976—it was one of the first speeches that I had heard at a Labour party conference—that we could not spend our way out of recession. The days of deficit spending were over, he said.

Today we have the novel approach that we can borrow money to reduce taxation, and the claim is that somehow that will spark a consumer boom, which in turn will generate jobs and aid the economy. It is an interesting argument and, as the right hon. Member for Devonport said, it represents reducing taxation from the bottom upwards. We, too, described it as an interesting concept.

All that aside, we must consider the overall economic situation. It is clear that we have had five quarters of falling output—the longest period of falling output since the war. Although the fall has been less sharp than it was in 1980–81, the time of the first Tory recession, this is the longest recession since the 1930s.

I do not want to bore the House with statistics. Output as a proportion of GDP fell by 5 per cent. in 1980–81, compared with a 3·5 per cent. fall for non-oil GDP. The statistics come from the Bank of England. If all roads lead to Rome, all the fingers of culpability point to Her Majesty's Government, who over the years have followed false gods and prophets. For example, the Conservatives have consistently followed the false god of high interest rates as the single club policy to reduce inflation. The right hon. Member for Devonport recalled the phrase used about a high interest rate—that if it is not hurting, it is not working.

As a result of those policies, unemployment has been rising and output falling. The output of the construction industry has fallen by more than 12 per cent. since the first quarter of 1990. Our car manufacturing industry was sustained only by exports. The Chancellor said that the motor industry switched production to exports, which rose by 20 per cent. in 1991. But, because it is a world recession, those exports have fallen. This is the only aspect of a so-called world recession that affects our economy.

That is why I—I am sure that the same applies to hon. Members on both sides of the House—support the reduction of the special tax on motor cars to 5 per cent. from midmight tonight. We, too, hope that manufacturers will pass that on fully to the consumer and that, as a result, car purchases will increase in the coming days.

We are likely to hear many metaphors used in this debate. The hon. Member for Wycombe referred to hands being on the tiller. I have spoken of the Tory false god philosophy of believing that manufacturing counts less than services, even though the service sector could not sustain itself in the face of last year's increase in VAT. The effect of that increase on that sector was underestimated, as was the effect of the Gulf war on tourism.

My hon. Friends and I noticed wryly the Chancellor's statement that he had no intention of raising VAT or extending its scope. We shall keep an eye on that promise in the future. As the Leader of the Opposition pointed out, a similar promise was made by the right hon. and learned Member for Surrey, East (Sir G. Howe) in 1982 when he was Chancellor.

We are reminded of Conservative central office myths. One of them was perpetuated this morning by the right hon. Member for Croydon, South (Sir W. Clark), who is not in his place and who will be leaving us at the election. I have often heard his insistence that we should not speak from copious notes but, like the right hon. Member for Devonport, should speak, if possible, without notes. I admit that the right hon. Member for Devonport did that ably this afternoon.

The right hon. Member for Croydon, South tried to persuade us of the Conservative central office myth that in the last 13 years of Conservative rule taxation had been reduced, and the hon. Member for Wycombe developed that myth in his speech. In fact, from 1979 to date, taxation has increased across the board, from 34 to 37 per cent. Allowing for a possible adjustment downwards should the effect of today's Budget be felt in full, VAT has been increased during those years from 8 to 17·5 per cent. and national insurance contributions have gone up from 6·5 to 9 per cent.