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Mr. Dafydd Wigley (Caernarfon) : The Chancellor of the Duchy of Lancaster referred to considerable improvement in unemployment levels as a justification for the Government's overall financial and economic policies. But as I said in an intervention, it is hard to believe that from my perspective. Perhaps unemployment in the constituency represented by the hon. Member for Hertfordshire, South-West (Mr. Page) is only 2 or 3 per cent.--I see the hon. Gentleman nodding--but unemployment in my constituency is approaching 20 per cent. Many hon. Members who represent other parts of Wales and north-west and north-east England, as well as Scotland, with the same problem fear that the Government are slowing down the economy when those regions have not yet caught up and do not yet benefit from any of the advantages resulting from economic improvement.
I noted with concern the words of Samuel Brittan in today's Financial Times. He says :
Column 582"even if the Treasury's real growth forecasts are right, the present level of capacity and labour utilisation could well be too high even to stabilise inflation, let alone to drive it down." He goes on :
"One alternative is a sharp and perhaps short recessionary shock, with a period of sterling overvaluation."
When such remarks are made arising out of the circumstances of the economy in the south-east, they create a shock wave in areas such as mine. Our levels of unemployment are unacceptable.
Against this background, measures such as the pensioners' earnings rule relaxation, which is welcome in itself, are irrelevant in areas such as mine, where youngsters cannot get jobs, although they might be relevant in other areas to provide incentives to work for those over retiring age.
The Chancellor replied to my intervention by referring to the importance of regional selective assistance. But we have seen only in recent weeks how that tool is not being effectively used in my constituency, when a television film studio project was discouraged from pursuing regional selective assistance, even though about 200 jobs could be created. The Government seem to have withdrawn from regional policy as part of the desire to save money in the past two to three years. The consequence is an unbalanced development of the economy, which is in itself an inefficient way to run any economy. Incidentally, in that context of the waning of regional policies, even today we hear of 60 job losses within the Welsh Development Agency. We know that the important programme of the rural conversion grant scheme was ended summarily only last month because of lack of funds to keep it going.
Therefore, we have real misgivings about the failure of the economy to provide jobs and to get economic development in areas such as mine. We need capital investment programmes to give local stimulus, programmes that can be closely directed to areas of high unemployment. Most areas need new hospitals, modernised schools, improved roads, electrified railways, and upgraded sewerage and water systems. These programmes could be used to ensure that jobs are developed in the areas where they are most needed. We greatly fear that a brake will be put on the economy before we see any real recovery in Wales.
With regard to high interest rates, which are clearly a problem for manufacturing industry as well as for home owners, I believe that if they are caused by excessive consumer spending and demand, they can be better controlled by the use of selective credit controls rather than the market place attitude of the Government. The cost of present policies is high to many families.
The main drift of Government policy over recent years seems to have supported cutting back spending and reducing services, to which the hon. Member for Livingston (Mr. Cook) referred. The increased emphasis on making profits rather than answering needs seems to have been the direction of Government thinking. That has led on to the concept of privatisation. A spiv value society is being created, which is only concerned about costs and profits, and is indifferent to needs and values.
The manifestation of that approach in my constituency is seen in all directions. Earlier this month, four hospital closures were confirmed, although there is a great need for those services. Only last week there was another school closure in Gwynedd by the Welsh Office, although the
Column 583education provided by the school was needed in that area. Those closures were designed to reduce spending by the education and health authorities.
More generally, a freeze of benefits is hitting pensioners. Those who had anything above the bare minimum pension last year, such as in heating allowances, will have no increase in their pensions this year as the transitional arrangements are eroded. Yet they face many increased bills. Not least, many council house tenants are being billed directly for the first time for their water charges. That is hitting people in our area. Pensioners living on £40 to £50 a week receive lump sum bills for £150. They do not have any money and do not know where to turn. They are required to make this payment as part of the privatisation process.
They are helping to create the £14 billion surplus which the Government announced for last year and are working to this year. We have seen the same thing in relation to charges for eye tests and prescriptions. Each man, woman and child in these islands is being required to pay £5 a week to fund that surplus. One really questions whether the Government's social objectives are right.
The Government's ethos is seen in other directions. The cuts affect other areas of social policy. The police are not getting the resources they need to do the job. There are even reductions in water bailiffs on our rivers. They fear for their lives in doing their jobs. The need to spend money on reducing environmental pollution in the air, on beaches and in rivers is manifest in all directions. People keep reminding us of the need to improve standards, but we are cutting costs.
The cutting of costs is an attitude that can go in very dangerous directions. One thinks of the dangers on the railways recently. Although we do not know the reasons for these tragedies, the cutting of costs can sometimes lead to disaster. One also thinks of food safety and the danger from the closure of research centres. One wonders whether we are being penny wise and pound foolish. Service after service is being privatised, but the major privatisation is the privatisation of public debt--the reduction of the national debt at the expense of creating the massive hike in private debt, which many people face.
I was a little surprised by what the Leader of the Opposition, the right hon. Member for Islwyn (Mr. Kinnock) said in his reply to the Budget. He referred to the Government's taxation policies and criticised the Government for having placed the highest tax burden in peace-time history on the people of this country. He said : "This Budget will not lessen the burden either on the family or on the national income."-- [Official Report, 14 March 1989 ; Vol. 149, c. 311.]
I suggest, however, that that is not what Opposition Members should be looking for. If we believe in public expenditure and public services, we must will the taxation to do that. We are not taking up an exceptional moral position by criticising the Government for their taxation levels when that taxation is needed to maintain services. Indeed, I should have liked to see the indexation of duties on alcohol and tobacco, because the money that would be raised by those methods could better be spent on services that are needed by ordinary people. People in receipt of attendance or mobility allowances are losing their benefits, although their conditions are worsening, because of the need to make cuts in expenditure.
Mr. Wigley : No, I will not. I am about to run out of time. If there was a surplus of £14 billion, would it not have been sensible to provide £4 or £5 a week extra to pensioners and disabled people? Surely that would not have affected the balance of payments or seriously fuelled inflation. It would have been a worthwhile step which we could have afforded and would have been of benefit. We welcome the incentive to use unleaded petrol, the VAT relief for charities, in so far as it goes, and the relief from car tax for cars leased to disabled people. Those are relatively small measures. We are worried about the lack of underlying strategy and of solutions to the unemployment problems of areas such as mine.
Mr. Michael Jopling (Westmorland and Lonsdale) : I am pleased with the Budget, but few Opposition Members will hold that view. I know that it is fashionable to try to sum up a Budget in a phrase. My summing up would be that for the majority of people it was a something-for-nothing Budget.
In the debates since the statement made by my right hon. Friend the Chancellor, Opposition Members--especially Labour Members--have found it extremely difficult to criticise the Budget. Listening to the hon. Members for Livingston (Mr. Cook) and for Ashfield (Mr. Haynes), one might have been excused for thinking that one had stumbled into a debate on the National Health Service. We have heard little from Opposition Members about the Budget. Being slightly more charitable, one could say that Opposition Members, including the hon. Member for Caernarfon (Mr. Wigley), have confused the Budget debate with one on the public expenditure White Paper. It is time that we returned to the Budget.
I began by saying that I was pleased with the Budget, and I shall briefly pick out five matters--there are many others--that pleased me. I was most pleased by, at long last, the abolition of the earnings rule for old-age pensioners. I cannot think of anything that has more irritated my constituents than this rule. People have never understood why they were fined for working, or why reductions had to be made in what they thought they had earned and paid for, merely because they wished to continue to work for the good of their health and the good of the nation. It is the best measure in the Budget. The second matter that pleases me is that the Treasury appears determined not to let up in the fight against inflation. All Conservative Members share discomfort and considerable surprise that we are on the threshold of an 8 per cent. inflation rate. I say to the Treasury that this is not why Conservative Members were elected. Once again, inflation seems to have become the No. 1 priority of the Treasury ; it is essential that it remains so. I hope that it will ensure that nothing stands in the way of reducing the inflation rate to manageable proportions.
The third matter that pleases me is the way in which the Government have dramatically started to repay the national debt. I was always brought up to believe--as, I suspect, were other hon. Members--that the national debt was a burden imposed on current and future generations by previous ones. I was brought up to believe--and I have some experience because this is the 25th Budget to which I have listened--that the national debt is something with which we must live. Until the past few years, even given the
Column 585Goverment's outstanding record on the economy under this Chancellor and his predecessor, I never thought that we would get round to paying it off. The news that we heard this week--that at the end of the coming financial year we shall have paid off 16 per cent. of it and shall save £3 billion a year in interest charges--was a revelation. I hope that in the next Budget, and in subsequent ones, Conservative Chancellors will tell us some of the measures that have been made possible by the money saved from interest payments that would otherwise have had to be made.
The fourth matter that pleases me is the accent that the Chancellor has put on savings. I share the concern of my right hon. Friend the Member for Guildford (Mr. Howell) about the lamentably low level of savings. Clearly something had to be done, especially in this period of inflation.
In his speech, my right hon. Friend the Chancellor mentioned his brainchild --the introduction of personal equity plans. It was a brilliant scheme and it is disappointing that it has not succeeded as much as it deserves to. I hope that the new steps that the Chancellor has taken to breathe life into PEPs will be successful and that he will not hesitate to make them more attractive. It was a highly imaginative idea and everything should be done to encourage it. The final matter that pleases me is the Chancellor"s freeze on excise duties, which will please many people. I notice that already a torrent of abuse is coming from that vociferous group whose business it is to tell us that more or less everything that we want to drink, eat or inhale is bad for us. Most of us are coming to the conclusion that they should be completely ignored, and I hope that the Chancellor will ignore all those who are criticising him so firmly for freezing excise.
I shall end on an important note of caution. I am concerned about the current balance of payments deficit. I heard the comments made about it by my right hon. Friend the Chancellor and my right hon. Friend the Chief Secretary to the Treasury yesterday and my right hon. Friend the Chancellor of the Duchy of Lancaster today. I hope that, with the greatest charity in the world, they will understand when I say that they tend rather to shrug off the current balance of payments deficit in a sentence or two. I am bound to say that I have considerable anxieties about it. It is hideously large and I hope that the Chancellor will reconsider the need to encourage endeavour in making import savings.
The Treasury should understand that revenues and production from domestic oil and gas supplies will soon be running down. All the reports produced on the subject bear that out, and in future we shall need to import much more energy, which is likely to bring us to a structural balance of payments problem similar to the problems with which we were so familiar in the pre- North sea era.
It is not good enough to wait until that happens ; the Chancellor should be looking now at ways in which import saving endeavours could be stimulated. Over the years, one of the great opportunities for stimulation was provided by British agriculture. That opportunity was grasped in recent years, but nowadays, given that we are much more self-sufficient in foodstuffs and that there are massive European Community surpluses, there is much
Column 586less opportunity to do so. However, there are still many opportunities to prepare for the time when we may run into balance of payments problems much more serious than we have been used to over the past 10 years. There are ways of doing this, and they ought to be thought through now. The Government ought to begin to make arrangements, because we shall need them before very long. 6.51 pm
Mr. Tom Pendry (Stalybridge and Hyde) : The right hon. Member for Westmorland and Lonsdale (Mr. Jopling) said that the Government had not been elected to preside over an inflation rate of 8 per cent. That is true, but why did the right hon. Gentleman stop there? The list is endless : the Government were not elected to preside over the current unemployment rate ; they were not elected to see the rundown of our National Health Service ; they were not elected to see the rundown of our housing stock. I think the right hon. Member was rather too kind to the Government and their Budget.
The Budget was a disappointment for some, but for many it was little short of disastrous. It was out of touch not only with the realities of the British economy in 1989, but with the vast majority of the British people as well. It was a hands-off Budget, at a time when the economy is running out of control and is in desperate need of a firm steer from our helmsman. I am sure that, in making that point, I will have the support of the former skipper of Morning Cloud.
At 4.30 pm on Tuesday I was reminded of a saying that I learned as a lad, when I was evacuated to the north-east during the war : "When in doubt, do nowt." I have to say that my hon. Friend the Member for Easington (Mr. Cummings) would do more justice to that saying, but, while I may not have the accent right, I am sure that the meaning is clear. The Chancellor did not do very much that was relevant, and that Geordie sentiment sums up this particularly boring of all this Government's boring Budgets.
Hundreds of thousands of people were crying out for some fairness and help following last year's unbalanced Budget. As a NUPE-sponsored Member of Parliament, who represented many thousands of low-paid workers in the public sector before coming to this House, I know that this Budget leaves them as badly off as ever--and that is badly off. That a married couple on one third of average earnings will benefit by £2 a week, compared with the £7.40 that a couple on five times average earnings will gain, shows what this Chancellor's priorities really are. In his speech he claimed that his Budget had eased the poverty trap. That is complete nonsense, particularly in my patch of north-west England. It simply is not the case. Earnings of £60 a week will no longer face a marginal tax rate of 25p plus 5p national insurance ; the rate will rise to 25p plus 9p, making those people much worse off.
Labour Members, and, indeed, the low-paid, had hoped that the Budget would lead to an attack on poverty. Of course, it will not. The few crumbs given out by the Chancellor will be clawed back by his ministerial colleagues through family credit. It is high time the Government started to help the 300,000 people in the north-west alone, and many thousands more in the country at large, who do not earn enough even to pay tax.
Column 587An increase in child benefit--long acknowledged as the best way to attack poverty--would have been very welcome indeed to those people. I wish now to address my comments to a group who, sadly, have once again been neglected by the Government--the pensioners, whom, strangely, the Chancellor thinks he has helped in large measure. There are now some 10 million pensioners in this country--almost one in five of our citizens are over retirement age--yet this Budget does nothing for the two thirds of pensioners who do not have sufficient income to be liable for income tax. More than four fifths of our pensioners rely, for the vast majority of their income, on state pension and housing and other benefits. The much-publicised abolition of the earnings rule, which we certainly welcome, will affect just 200,000 of our elderly. Welcome though that measure is, it will leave the other 9.75 million pensioners no better off. We have to see the measure in that context.
Likewise, the tax relief on private health insurance now on offer says far more about the Government's lack of commitment to the National Health Service than about caring for pensioners. All that the change will do is reduce the tax base for funding the National Health Service, while demonstrating once again the Government's lack of faith in a properly funded National Health Service for all. What is more, the Government do not even understand the private health sector. Both BUPA and Private Patients Plan make it clear that they are not interested in having long-term elderly ill people on their books--they are much more for the quick buck and the easy operation. Many pensioners are more alarmed than ever about the future. The Chancellor admitted that inflation would top 8 per cent., yet pensions will rise this year by just 5.9 per cent., leaving the pensioners worse off than ever. The pensioners whom I know have long memories. My 96- year-old mother still remembers the day in 1980 when the split was made between pensions and earnings. She and millions of other pensioners have cursed that day ever since. As Age Concern points out, the pension is now worth just 80 per cent. of its 1980 value, and will be worth even less by the end of 1989. Given that the pension increase is based on the rate of inflation last October, and not the current rate, the real value of the next pension increase will have been eroded even before the money is paid out.
The inadequacy of the state pension means that more and more pensioners have to rely on means-tested state benefits. More than 5 million senior citizens now receive income support or housing benefit, yet 34 per cent. of pensioners do not claim the supplementary benefit to whch they are entitled, and a further 19 per cent. do not claim housing benefit. The cuts that the Government make in housing benefit hit those who can least afford them, while this Budget does nothing to help the self same elderly people. The latest change in housing benefit cost over 2.5 million pensioners some cash, and some 750,000 further senior citizens lost all their entitlement. This is against a background of five successive changes since 1983, which have cost more than a million pensioners real money.
It is no wonder that pensioners are now standing up and being counted. It is not just national organisations, such as Age Concern and the National Pensioners Convention, that are voicing their grievances so clearly ; there are now many local groups that are becoming very effective. The pensioners action committee in my own area of Tameside is active. This week, knowing that the Budget
Column 588was coming, it lobbied me about the rights of its members. Local vocal leaders, like Tameside's Judith Clayton, come and lobby me actively. There are many Judith Claytons, and if they are not already making their presence felt in the constituencies, they certainly soon will be.
I conclude by referring to two letters that I received recently, which give some indication of that feeling. One senior citizen, from Dukinfield, writes :
"When we served in the Army we fought for a first-class Health Service to keep us fit to fight for Britain, and they did not count the cost of the bullets.
"Now that we are not fit to work, through no fault of our own, they are counting the cost of keeping us from pain and suffering, let alone dying."
The second letter says :
"I have voted Conservative for 55 years I am no longer a Conservative and will in future turn my allegiance to your party. I trust Mr. Kinnock will be more sympathetic to us pensioners, who will be the turning point in the next election. Ten million are a hell of a lot of votes, and I am convinced most of them will be on your side."
Pensioners like these will not lightly forgive the Government, and they look to the Labour party to fulfil their just needs after the next election.
Mr. Christopher Gill (Ludlow) : I salute the Chancellor. As another former naval person, I appreciate the slogan of the Budget, which is, "Steady as she goes." That is good news for the good ship Great Britain.
We still have too many taxes. I join other hon. Members in applauding the fact that the earnings rule for pensioners has been done away with. We still have too many taxpayers. Too many of the best brains in the financial circles of this country are employed on tax matters. That is because, regrettably, our taxes remain too complicated. Many of them are beyond the intellectual capacity of the majority of taxpayers.
The Budget is realistic, prudent and thrifty. "Thrifty" is an important word, because, try as we may, we cannot encourage prosperity by discouraging thrift. Since the Government came to office in 1979, thrift has been encouraged in the public sector. It is now firmly established. We have a balanced Budget, and buoyant revenues and, what is more, we are repaying debt.
What is to be done about encouraging thrift in the private sector, where experience is altogether different? We are living beyond our means and borrowing more than we can afford. My right hon. Friend the Member for Guildford (Mr. Howell) drew attention to the low level of savings in the country today. It is self-evident that savings--thrift, if hon. Members want to use another word--are more difficult and relatively unattractive when they must come out of taxed income, especially when the products of such savings in turn are taxed. When the Government came to office in 1979, they did two things. First, they dramatically reduced taxation rates. Secondly, they instituted a major shift towards indirect taxation. I urge my right hon. Friend to accelerate that process.
Direct taxation is an enemy of thrift. Direct taxes--that is, taxes on income--are taxes on hard work and honest endeavour. Taxes on income, at whatever rate and for whichever group of workers we are considering-- whether they are blue collar or white collar workers--are disincentives. They always have been and they always will be. They are disincentives to thrift, saving and risk-taking. I want my right hon. Friend to consider the many
Column 589substantial benefits of shifting more of the burden of our taxation on to an indirect basis. One virtue of that is that we would give the average citizen greater self-esteem. The majority of our citizens enjoy greater freedom to determine their own priorities. We have proved beyond any doubt that, when we give individuals greater responsibility for their actions it works--and I want to see more of it.
It is easier and cheaper to collect indirect tax, and there are fewer opportunities for evasion and avoidance. Many hon. Members are aware of the black economy. More important, as we shift the burden of taxation on to an indirect basis, we put savings on the same basis as any other disbursements. Again, that encourages thrift. But, equally important, by shifting the burden of taxation on to an indirect basis, we would shift the burden from production, where it currently lies, on to the consumer. That is important. Direct taxes--taxes on wages and salaries--are taxes on production, which is inconsistent and incompatible with the aspirations of a manufacturing nation trying to regain its confidence, its competitiveness and its capacity, to become once again the workshop of the world.
Mr. Ron Leighton (Newham, North-East) : I will not waste breath on this frightened and timid Budget. Gone is the swagger and braggadocio of last year's Budget. Because of the mistakes then, we have virtually a non- Budget. Last year's Budget was for the rich. This year, some expected a Budget for the poor, but it was not to be. I shall say a few words about the effect on employment and training. At the last election, the Labour party suggested that we should invest £6 billion, mainly in the public services, to create 1 million jobs. The Conservatives said that that was wildly irresponsible and even inflationary. But in the last Budget £4 billion was given to the rich. The message was, "The good times are here, so spend, spend, spend, and borrow to do it." With unprecedented competition between banks and building societies to lend, credit was thrown at the public, and never have so many been able to borrow so much. About £40 billion was borrowed. Instead of £6 billion, more than £40 billion was spent as a private sector, not public sector, borrowing requirement. It spilled over into a new breakneck consumer boom, and it has had two effects.
First, as Labour said it would, it brought down unemployment. Secondly, as the extra demand did not go where Labour wanted--that is, into investment in industry, research and development, education, training, housing, schools, and the environment--but into the consumer boom, it was not sustainable. The weakened, ravaged supply side of the British economy could not cope, so private borrowing sucked in imports, and we had the catastrophic deficit in our balance of payments of about £15 billion. In addition, because of the extra demand, producers were able to put up their prices, hence the big rise in inflation. The so-called blip is still with us, and it is rising.
Because of the resulting high inflation, high balance of payments deficit and high interest rates, the engines have been put into reverse. The punitive interest rates signal
Column 590stop, not go. Instead of flying, we are to have either a soft or hard landing, and growth is to be cut by more than half next year. If that policy succeeds, the fall in unemployment will stop and be reversed.
There is nothing in the Budget about training. That is a major reason for the weakness of British industry and for the balance of payments deficit. After 10 years of this Government, we have one of the worst trained work forces in the world, yet there is nothing in the Budget about encouraging training. As soon as we get growth, we run into skill shortages. They are a major restraint on Britain's ability to grow and compete. We have a yawning skills gap. Unless and until that is transformed, we shall be trapped into a low skills equilibrium, with our enterprises having poorly trained managers and workers producing low-quality, low-value, goods and services, and earning low pay. We already have the cheapest labour in Europe. We are falling behind even countries such as Korea and Taiwan. We have a market failure, and it cannot be left to market forces. We need greater public financial commitment to encourage investment in training. The money exists- -£14.5 billion--yet the opportunity has been thrown away. The Chancellor is afraid to spend, because of the inflation that he stoked up. Investment in training is
non-inflationary. It is counter-inflationary. It would aid the supply side and enable us better to compete in the markets of the world and diminish the trade deficit.
Let us examine the much-vaunted employment training scheme. It is grossly underfunded. The Government instructed the Training Agency to put twice as many people on ET as on previous programmes but for the same amount of money. One does not need to be a genius to realise that it was an impossible task and that the programme would be crippled by that handicap.
The Select Committee on Employment has been studying the matter. On 15 June 1988, it examined the Training Agency on the failure of the previous programme, the job training scheme. It told us that the JTS target was 232,000 adults in 1987-88, and 110,000 at any given time. The programme ended with only 30,000 people on it, and only about 100,000 had entered--in other words, less than half the expected number. It was such a failure that it spent only 42 per cent. of the original financial provision. There was a massive underspend and a massive failure. Why was that?
We were told in the Select Committee on Employment that there were four lessons to learn. There had to be, first, realistic targets and numbers and, secondly, adequate financial incentives ; thirdly, the programme should be sold better to employers, and, fourthly, it was important to secure the co-operation of the partners needed for the delivery of the programme--that is, the local authorities, the trade unions, the voluntary organisations and the employers.
None of those lessons has been learnt and the same mistakes have been repeated, with predictable results. The whole programme is going off at half cock. The financial incentives are inadequate. I suggested doubling the £10 above benefit, which was a modest proposal that would have cost £180 million. The Government said no. As a result, the programme is not attractive to the unions, which did not support it, and largely because of that the local authorities did not either. The Secretary of State for Employment gloried and rejoiced in that and he hurried to expel the trade unions from the Training Agency. But the
Column 591programme can succeed only with the co- operation of the unions and local government. We need consensus and agreement, not conflict. Because of that fundamental blunder, the programme is failing. On 15 June, Roger Dawe, the director-general of the Training Agency, told the Select Committee on Employment :
"350,000 is the number of entrants we expect to come in between 5 September and the end of the financial year."
He told us that he expected 45,000 a month. On 22 June Geoffrey Holland, the permanent secretary, said :
"In the scheme at any one time there will be about 300,000 places in total."
When, on the same day, I asked the Minister of State, Department of Employment whether those figures were realistic, he said that they were, because he had had bids for 700,000 places from training managers. What has really happened? The latest figure is 157,000, which is half. Because of that failure, there will be a massive underspend.
A fortnight ago, the Select Committee went to Scotland to look at these matters. We were told there by the Training Agency that its target was 41,000 by the end of the financial year. How many are there? On 24 February, there were only 18,000, plus 3,000 on community programme pay, so the agency had only half the expected number. The reason was that the local authorities did not join the programme. They rely on the partners for the delivery of those programmes and it is essential to bring them in for success. We must enlist their co-operation and not antagonise them.
In Dundee, we learned that, of those referred by the employment service, 53 per cent. had dropped out by the time they reached a training agent and 35 per cent. had dropped out by the time they reached a training manager. The average across Scotland was that only about 25 per cent. of those referred actually completed six days with a training manager. That can only be described as shambolic. Even after that, I have been told in answers to parliamentary questions that tens of thousands have dropped out nationally thereafter. That is ludicrously inadequate for the nation's training needs. After 10 overlong years of this Government, we are falling further and further behind. It is a scandal that, with a Budget surplus of £14.5 billion the Government are unwilling to invest more in the training of our people.
Mr. Nicholas Budgen (Wolverhampton, South-West) : The hon. Member for Newham, North-East (Mr. Leighton) was right at the beginning of his remarks to draw attention to the credit boom which has been such an important part of the cause of the Government's present difficulties. I want to make a point about the Government's relations with the level of the stock market at present. I am sure that the hon. Gentleman will agree with me that credit had much expanded before the last election in June 1987. Many of us who managed to keep our mouths more or less shut during the election hoped that that credit would be much reduced immediately after the election. It was not. I suggest that the reason was that the Government were interested in the level of the stock market because they hoped to float BP shares on a high and rising market.
The Government then found themselves caught in the stock market crash of October 1987. My right hon. Friend the Chancellor now says that it was both inevitable and
Column 592necessary that further liquidity should be put into the market. If I may be pompous, I said at the time and I say again that it was not necessary and that there was no proper comparison between October 1987 and the autumn of 1929, for 1929 was a time when there had been a long period of tight credit. There had been high inflation at the end of the 1914-18 war and that had been corrected by high interest rates. There had been a progressive squeeze from 1922 until 1929 and the authorities were mistaken in further contracting credit in 1929. But in October 1987 there had been a year of lax monetary policy and that was then greeted with yet further laxity.
Why do I say that that particular mistake needs to be borne in mind at present? The reason is that there is every sign that the Government are, once again, concerned about the level of the stock market. It is, of course, inevitable that once a Government become involved in the level of any market, they give that market particular tax concessions. When we consider, for example, the proposals for the personal equity plans or the proposals by which employees will be able to save on advantageous terms and to purchase shares in their own concerns, it is obvious that the Government are anxious to channel savings into concerns that have been privatised and to encourage employees to buy those shares, even at a substantial discount.
You will have noticed, Madam Deputy Speaker, that employees may be given the opportunity to buy shares in the water concerns at a discount now increased to as much as 20 per cent. I am not making a point about that, because it seems inevitable that, if the Government are interested in the gilts market, for example, tax advantages will be given to the gilts market. If the Government are interested in privatised shares, it is the nature of government that tax advantages will be given to shares in privatised concerns.
But I want to make it plain that I do not agree with Mr. Sam Brittan in today's Financial Times that it would not be the end of the world if, at the end of this Parliament, the underlying rate of inflation were 5 per cent. I make that point because I know that Mr. Brittan often speaks with the voice of my right hon. Friend the Chancellor. One of the principal reasons why this Administration attained power in 1979 was that it was believed that they would eventually and properly restore sound money. It would not, of course, be the end of the world if the underlying rate of inflation were only 5 per cent., but it would be a sad letdown for all those who voted in 1979 and later for a Conservative Administration. Inflation at 5 per cent. would be a major cause of social disruption and unease. Those of us who believe ourselves to be not so much Gladstonian Liberals as Tories, believe in social cohesion. The enemy of social cohesion is inflation--perhaps at 5 per cent.
I hope that, when the time comes to float the shares in the water companies, it will not be thought wise to let up on the present restriction on credit simply to ensure that asset prices go up. That will not be a genial mistake that is easily understood by historians, who may say that the present Chancellor of the Exchequer lost the only chance in the electoral cycle of getting on top of inflation simply because he wanted to ensure that water shares were floated on an attractive market in the way that he certainly wanted to float the BP shares back in the autumn of 1987.
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I always consider that in these debates we are usually discussing how best we can operate the present economic system. The right hon. Member for Guildford (Mr. Howell) put his finger on it when he said that he passionately believed in people's capitalism, a share-owning democracy. I find it difficult to adjust my mind to such debates because I think that the system of society we operate is ludicrous, selfish, greedy and beneficial to small groups of people but not to the mass of ordinary people. Therefore, I have some difficulty in relating to the discussion in this House.
The fissures opened up again this evening. We have seen the more moderate Tories who, of course, have rejected the full-scale monetarist position and who are not too happy about the way in which the Government are moving, and we have had other Tory Members who have supported the Government, but who perhaps have thought that they are not going far enough. We are back to discussing the nature of society and the best way to run it.
Sometimes some of my hon. Friends use phrases such as, "The Government have failed," or "The Government should have done this," or "They should have done that." I do not think that the Government have failed. In running the capitalist system in the interests of the small group or class that they represent--the big business interests of the City of London--they have done pretty well. They cannot be accused of failure, because the rich have done exceedingly well out of this Government.
The rich did particularly well in the last Budget, when the poor did very badly. This time the poor are hardly getting anything out of the Budget, and although the rich are not getting as much as they might have wanted, they are not unhappy, as could be seen in the reaction of the City of London immediately the Budget was announced. Business men in the City sat and drooled. They were as happy as Larry saying, "How good it is for the City. We're not unhappy with this Budget."
The Government are very much a class party. Their Budget proposals are beneficial to their class and it is about time that we, the Opposition, began to think seriously about an alternative strategy to eliminate this type of society which the Government think is getting stronger and less and less helpful to ordinary people.
The top 10 per cent. have gained more from the Budget than the whole of the bottom 50 per cent. The bottom 30 per cent. received only 5 per cent. of the total tax reduction. The only point that I could make when I shouted out during the Chancellor's speech--it is a rule that Chancellors do not give way when making their Budget speech--was, "It is all right for the rich," and the Budget is certainly very good for the rich.
The Budget proposals, or rather the failure to uprate personal allowances and the threshold in earnings, mean that 160,000 families on low incomes will pay tax when previously they did not. That is an example of the class nature of the Budget.
Let us see who has not been helped in the Budget, despite all the talk from the Government Front Bench about helping the low-paid. The unemployed and pensioners living on state pensions are not helped in this
Column 594Budget. Women receiving child benefit will not be helped either. It is a fact that 48.1 per cent. of women full-time workers earn less than £100 per week.
Look at what happened with the bonanza last time. A person earning £100,000 a year was given £260 a week. That underlines the nature and character both of the Government and of the sort of Budgets they introduce. This year, the gains for the majority of ordinary working-class families will be only £1 or in some cases £3 a week. However, that gain will quickly be lost if they have to pay the high mortgage rates. I remember when I had a mortgage. It seemed as if the burden got bigger every year, although I was supposed to be paying it off. I shall never forget it--it was a dreadful business--and that is the position for the majority of people in this country.
This capitalist system, with its selfishness for the few at the expense of the majority, is basically an evil system. I use the word "evil" because to me it is evil that small groups of people can become exceedingly wealthy under a Government who help them to become even wealthier, when the mass of the ordinary people are not receiving their rights.
We had an example of those differences in attitude when the Prime Minister recently came to Liverpool. She went to the Birds Eye Foods factory which has been in Liverpool for 35 years. She said that it was closing down--this is what the firm told her--because of the lack of productivity. She did not say that the company had been building another factory on Humberside for the past two years. She did not say that what worried the workers at Birds Eye was losing between 300 and 400 jobs. In an area where 18,000 people have been out of work for over five years--on Merseyside as a whole, well over 100,000 are out of work--the loss of one more job is an extra burden. What the workers felt was compassion. They believed in putting the needs of their fellow workers before the profit concept and the profit-making system that we have in this country.
I know that I must bring my speech to a fairly quick close, but I should like to comment on what I often hear--that unemployment has been going down under this Government. I for one do not deny that, because our system of society has booms and slumps. Sometimes there are booms and almost full employment, but at other stages of the capitalist system there are slumps where thousands of workers are out of work. Despite what the Government say, they have never yet got the level of unemployment to as low as it was when the Labour Government left office in 1979.
Those are the facts. According to a report published by the Organisation for Economic Co-operation and Development, we still have the highest level of unemployment--apart from France, which might be the same--of any nation in Europe. That is the reality and as long as we have a system where profit is the motive for production, there will inevitably be unemployment.
When taking about the Budget and the future of our industries, it is time that we had a new concept of industry being for the benefit of the mass of the people. Why do we not, for example, talk about reducing hours of work? Why are we not talking about workers having longer periods off with full pay? Why are we not talking in those terms? We do not, because the profit motive is the basis of this society.
I would have liked to say a great deal more than I have had the time to say. If we look closely at the Budget, we see that there are certainly some measures in it to which no