Budget Resolutions and Economic Situation

Part of the debate – in the House of Commons at 8:16 pm on 1st December 1994.

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Photo of Richard Spring Richard Spring , Bury St Edmunds 8:16 pm, 1st December 1994

This morning, when I looked at my mail, I found a Budget commentary from the Trustee Savings bank. It summed up its opinion of the Budget as follows: On reflection, this was probably a good Budget and entirely appropriate for the current economic circumstances. It should create a climate of stability which is necessary for long-term sustainable recovery. I entirely agree with those sentiments, and I very much welcome the Budget as announced by my right hon. and learned Friend the Chancellor of the Exchequer.

The background is truly remarkable. We have low inflation, we have manufacturing growth and productivity at record levels and of course we have an export boom. However, in the past few weeks, in what has been something of a feeding frenzy by the media, everything has been concentrated on the negative. Unless, in the Budget, something fresh and exciting in their terms was produced, they tended to dismiss it.

I shall therefore examine what is happening in the real world, in my constituency. My constituency is still substantially agriculture-based. It is one of the prime cereal-producing areas of the country. When I went to the Royal Smithfield show a few days ago, the transformation in that sector was obvious for all to see. Skill and innovation in agricultural machinery is making that entire sector of the British economy dynamic. Britain exports more tractors, for example, than any other country in the European Union.

In Newmarket, the bloodstock industry is in very considerable recovery. It is one of the main employers in East Anglia. Prices of bloodstock are increasing and employment is returning to that vital part of the employment picture in my constituency.

Small family businesses are the lifeblood of west Suffolk. We are witnessing considerable improvement and optimism, as manifested in the fact that there are many new shops in the towns of Newmarket and Bury St. Edmunds—the main two towns in my constituency. Over the past 18 months, unemployment in my constituency has fallen by a third, and in Bury St. Edmunds it is under 5 per cent.

Budgets address great macro-economic cycles and look at the big picture. But of course economics is about real people and employment and decent living standards. Such conditions are manifestly coming to pass in my constituency. I applaud the aim at the heart of the Budget, which is to continue to reduce debt. That is being done in a way that makes us unique among our European competitors.

An extraordinary feature of the economic recovery and one of its main elements is the exceptional export performance. The Budget reinforces what is essentially an export-led recovery. Low corporate taxation and the low social cost of employment give Britain a unique competitive position compared with the rest of Europe. We are a trading nation par excellence, and we export more per capita than even the Japanese.

Every time since the war that Britain has had an economic recovery as powerful as the current one, there has been a balance of payments crisis, but this time precisely the reverse is the case. Like a record that is stuck in a groove, the Opposition launch totally misplaced attacks on manufacturing industry. It is true that some old industries have disappeared, but new ones are developing and many of them are based on high technology. Britain is in a virtuous circle brought about by low interest rates, moderate wage settlements and cost control. All that has been helped by the Budget.

In the past three months, export volumes have risen by nearly 3 per cent. This year, exports to the Pacific rim countries and Latin America have gone up by a third. It is significant that much of that export success and employment is being created by the former nationalised industries. Those industries, which were once such a huge drain on the British taxpayer, are now at the forefront of teaching the rest of the world how to privatise and are role models of how to operate. People from many countries visit Britain to see those ptivatised companies whose export success is extremely noteworthy. While Labour continues to thrash around looking at and debating clause 4, we are getting on with an export drive that is based on new technologies developed in Britain.

In the past, recoveries have been based on a soufflé-like property boom. That is no more, because the current recovery is based on exports and investment, and everything flows, from that. Britain is a world leader in industries such as telecommunications, pharmaceuticals and chemicals. The business-friendly environment that the Budget has projected opens further export possibilities, and business success and employment will flow from that. By cutting the PSBR, the Budget ensures that interest rates will remain low. Sound money and stable finances are the routes to business success and continuing employment.

I welcome the additional boost to exports provided by the cut of some 10 per cent. in the export credits guarantee insurance scheme. That is a logical extension of our trade promotion efforts. In countries such as India and South Africa, where we have strong and historic commercial ties, the cut will give our business men the chance to create welcome export opportunities. I hope that, instead of what has gone on so remorselessly in the past, our balance of payments in future will be permanently in the black, and will be based on the competitiveness that the Budget will effectively help to bring about.

I am privileged to be the vice-chairman of the Small Business Bureau. For many years, we have tried to put ideas to the Chancellor about how to improve the lot of small businesses. Therefore, I wholeheartedly welcome my right hon. and learned Friend's proposals to raise the VAT registration threshold, the transitional business rates relief scheme and quarterly VAT payments.

Another helpful feature is the review of procedures for insolvent companies. Every hon. Member knows of constituents who have had their businesses taken away from them during the recession, perhaps by the too quick action of the banks. The Budget proposes a 28-day period during which banks, creditors and business men can sit down together to try to work out a scheme to ensure that small businesses under threat can survive. That will prove to be one of the most significant and constructive innovations in the Budget.

I spoke about our propensity in the past to go for bricks and mortar. I welcome the fact that next year the tax concession on mortgage relief will be reduced to 15 per cent. I hope that that concession will eventually be phased out. I should like to fly a kite for the future. In his reforms, Lord Lawson of Blaby introduced a capital gains tax rate of 40 per cent. In an era of low inflation, that needs to be looked at again. Although indexation has proved helpful, Britain is now in a different inflation scenario. I hope that capital gains tax will be phased out and that people in private companies will not have to pay any capital gains tax on their shares in unquoted stock.

The Budget is a watershed. Every Chancellor is tempted to court short-term popularity. There have been a number of important policy innovations—