House of Commons Hansard Debates for 20 Mar 1990

Mr. Geoffrey Lofthouse (Pontefract and Castleford) : I agree with the hon. Gentleman's point about football clubs. Does he agree that, in the context of the Taylor report, bodies such as Rugby League clubs are being given no consideration at all, and that they really ought to be considered?

Mr. Knox : Obviously, I do not know as much about Rugby League clubs as the hon. Gentleman knows. As I have explained, I am an association football fan. However, if what he has said is correct, there is obviously a case for having something done about Rugby League clubs also.

The fourth aspect of my right hon. Friend's Budget that I commend is the incentives to savings. That is very important indeed. One of the very worrying features of

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developments in the British economy in the past few years has been the fall in personal savings. It is true that in the last 12 months there has been a slight rise, but overall the level of personal savings is still much too low. I hope that the measures that my right hon. Friend announced today will encourage the rise that has started to take place and that we can look forward to a much higher proportion of the gross domestic product being devoted to personal savings in the years ahead. My right hon. Friend said that his purpose was to encourage the culture of thrift--I particularly liked that phrase--and no doubt Members in all parts of the House would wish to encourage thrift.

This Budget will be judged not on its detailed proposals but on its effect on the British economy over the next 18 months. At present, this country faces two very serious economic problems--a massive balance of payments deficit and over-high inflation. Those two problems, like all economic problems, are related. I have no doubt that the balance of payments deficit is the more serious of the two, and that failure to correct it soon will do irreparable long-term damage, as it will transform us from being a creditor country into a debtor country. The fundamental cause of our balance of payments problem and of our inflation problem is excessive demand in the British domestic economy. The high level of home demand has resulted in increased imports and reduced exports. It has resulted in too much money chasing too few goods and, as a consequence, an unacceptably high rate of inflation.

Clearly, the level of domestic demand must be reduced if those two problems are to be overcome. This can be done in three ways--by increasing taxes, by increasing savings, and by high interest rates. All those measures reduce consumption, although probably the most sensible course is to have a combination of all three. So far, Government policy has tended to concentrate on high interest rates. Unfortunately this has not been terribly successful and it has had serious adverse side effects. High interest rates attract money into London and force sterling up to an artificially high level. As a consequence, British exports are dearer than they should be and therefore more difficult to sell in world markets, while imports are cheaper than they should be and therefore easier to sell. In such circumstances it is extremely difficult to reduce, let alone eliminate, the balance of payments deficit.

For those reasons, I am sorry that my right hon. Friend the Chancellor did not indicate that he intended to place less emphasis on interest rates as a means of resolving our economic problems, which suggests that interest rates are likely to remain at too high a level for too long. That is regrettable not only because of the effect on the balance of payments but also because of the effect on house purchasers, who are being hit particularly hard by the present level of mortgage interest rates. There should be less emphasis on interest rates and much more emphasis on taxation and saving if we are to achieve a balanced approach to the solution of our economic problems.

I welcome my right hon. Friend's recognition of the fact that higher taxation and higher saving have a part to play in dealing with our current problems. At least he is moving in the right direction, although I wish that he had gone much further in both respects. No one likes higher taxes-- I am no exception, and I wish that they were not necessary but in my view they are necessary at present as a contribution to the reduction of demand, and I am pleased that my right hon. Friend has moved at least a little in that direction in the Budget. I wonder, however,

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whether he was right to concentrate the increases on excise duties, which in effect are a form of indirect taxation. The disadvantage of increasing indirect taxes is the effect on inflation. There is an advantage in increasing direct taxes because there is no inflationary effect. Given our present inflationary problem, it would have been much better to leave indirect taxes alone and to increase direct taxes only.

I wonder also whether my right hon. Friend has gone far enough with tax increases. As they are, in effect, a substitute for high interest rates, it seems that a bigger rise in taxes would permit an earlier fall in interest rates. After all, direct and indirect taxes are a fairer means of reducing demand than interest rates, the impact of which tends to be felt disproportionately by those who are purchasing their houses by means of a mortgage. Nor do direct or indirect taxes have as great an adverse effect on investment as interest rates, and investment is, of course, in the medium and long-term interests of the country.

In current conditions, an increase in savings can have only beneficial economic results. There are no adverse side effects. The decline in savings in recent years, to which I have referred already, has been a worrying feature of our economic performance. It has aggravated both the balance of payments deficit and inflation. This afternoon, my right hon. Friend the Chancellor has introduced several measures to encourage higher savings, and we must all hope that they will have the desired effect. I only wish that he had gone a little further. Saving is the least painful way of righting the balance of payments and fighting inflation. A dramatic rise in saving-- involving, as it would, lower consumption--would lessen the necessity for high interest rates and high taxes.

A persistent and alarming feature of the British economy is the rise in earnings above the increase in output, with its consequent inflationary effect. Despite the comparatively high level of unemployment and the freeing of the labour market which has resulted from the Government's trade union legislation, we have an overheated labour market. As unemployment has fallen--it has fallen sharply over the past three years--the overheating has intensified. It is alarming that this has happened with more than 1.5 million people out of work.

Obviously, we need better training and more measures to improve the mobility of labour. Irrespective of what action is taken, it seems inevitable that the labour market will continue to suffer from overheating even in times of high unemployment. I am afraid that we are no nearer solving the great unsolved economic problem of the past 45 years, which is how to control wage and salary cost inflation. I know that incomes policies have their weaknesses and deficiencies, but we seem not to get on very well without such policies. Is it not time that the Government took a less doctrinaire view of incomes policies? Might not an incomes policy make at least some contribution to reducing wage and salary cost inflation?

6.15 pm

Mr. Roy Hughes (Newport, East) : 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

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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

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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

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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.

6.27 pm

Sir Alan Glyn (Windsor and Maidenhead) : This is a sensible Budget and one that has been produced against a very difficult background. Nobody knew which way the deutschmark would go and and that is one of the factors that have made it extremely difficult to prepare the Budget. Nevertheless, my right hon. Friend the Chancellor has concentrated on the important things--first, the reduction of inflation and, secondly, the building up of a strong economy in this country. To do that he needed to encourage savings, and many of the measures that he has produced will do that.

I am particularly pleased that he has raised the threshold to £16, 000 for poll tax. It always seems to me to be quite incredible that we should encourage people to save and then, at the end of their lives, tell them that they cannot have any benefit because they have saved. That is a positive disincentive to saving. Savings are of the utmost importance to the country. Before the war we were always dependent on our invisibles--in other words, our investments abroad--and the same principle of savings applies today.

I am also pleased to see that my right hon. Friend has at last provided for taxing husband and wife separately and that he is encouraging the small investor and encouraging people to put more money into charities. The VAT changes will help small firms, but they will not match the increase in value that will be placed on the properties and the increase in other taxation.

My right hon. Friend the Chancellor has not been able to repay quite so much national debt as was repaid last year. People do not attach much importance to the repayment of national debt, but it saves about £150 million in interest. Reducing the debt means paying less interest, and my right hon. Friend explained how that money could

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be better spent. I have always believed that restrictions on credit cards and credit generally would be helpful, but I have been told that that would make only a small difference. The loans by big banks to South American countries are of far greater importance and should be carefully considered. My right hon. Friend has paid attention to that point.

The right hon. Member for Plymouth, Devonport (Dr. Owen) mentioned the exchange rate mechanism. I do not believe that we should move from the position that we took in Madrid, which was that we should enter the mechanism only when it suited us to do so and not when it suited others. It is for us to judge the moment when we should join. I especially welcome the increased allowance for the blind to about £1,000. We all know the difficulties that they face and the increased allowance will make a great difference to them.

I am rather divided on the question of workplace nurseries. There are two ways to view the question--first, family life, and secondly, working women. Whether we like it or not, because there is a smaller work force we must accept that there will be more women in employment, so I have no alternative but to welcome my right hon. Friend's proposal.

I say to the House, never mind the petrol, the wine or the beer : what is most important is that the Budget will lay the foundations for a nation which believes in saving, encourages people to work and at the end of their days allows them to enjoy their savings. The taxation system that we have been promised is an encouragement for the future. I am grateful to hon. Members for listening to my speech.

6.32 pm

Mr. David Alton (Liverpool, Mossley Hill) : I join other right hon. and hon. Members who have thanked the Chancellor for the way in which he presented his Budget, and I congratulate him on his manner in doing so.

The right hon. Member for Plymouth, Devonport (Dr. Owen) said that he regretted the fact that the Budget contained no commitment to join the exchange rate mechanism immediately. I agree that it is a matter for regret and I hope that it will be rectified before too long. Unlike the hon. Member for Windsor and Maidenhead (Sir A. Glyn), I have an enthusiasm for the ERM as I believe it to be the correct structure and discipline within which to order our economy. However, I agree with the hon. Gentleman about the necessity to encourage saving and shall focus most of my remarks on that.

It is a curate's egg of a Budget--we all welcome parts of it, but there are other parts which will not help our constituents. The House will not be surprised to learn that I am especially pleased about the decision on pool betting duties. I represent part of the city of Liverpool, where the two major pools promoters--Littlewoods and Vernons--are based, and it will be good news for them, not least because they have supported the Football Trust for many years. I am sure that they will use their good offices to ensure that much-needed improvements are undertaken to grounds--something that Liverpool, having experienced the Hillsborough disaster, will want to see carried out with great expedition.

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I also welcome the proposals for charitable giving. It is the right approach to encourage personal generosity. Many people want to give more and it is right that the state should match that giving. As I have said, the Budget is a curate's egg. It is scandalous that the Secretary of State for Scotland was not at the Dispatch Box this afternoon to explain what the poll tax exemption would mean to those who have been paying the community charge in Scotland for the past year. The exemption is also of little use to those who do not have any savings. Many of my constituents face poll tax charges of almost £500. For them, the community charge is a regressive form of taxation. Exemptions alone will not ease their minds--they want the community charge replaced by a more equitable form of taxation based on local income tax. The absence in the Chancellor's speech of anything about collecting this tax on the basis of a person's ability to pay is an unfavourable judgment on the Budget which will be made throughout the country.

I welcome what the Chancellor said about reviving the culture of thrift. That is desperately needed. The right hon. Gentleman said that this was a Budget for savers, but it must be said that many of the problems of insidious debt which he says have to be met have been created by the very people now offering solutions.

The Chancellor said that he hoped to pay off £7 billion of public debt in the next 12 months. No hon. Member would oppose meeting some of our debt payments, and it will certainly save on interest charges, but we must contrast this with the position of local authorities. Their rate support grant--and now the community charge grant--has been reduced year by year. As a result, local authorities are encumbered by massive corporate debts. In Liverpool, a 1 per cent. increase in the interest rate means a staggering £500,000 increase in corporate debt, which now stands at more than £700 million.

The Chancellor mentioned that banks had been paying off some of the debts of Third world countries unable to meet debt charges. Again, I welcome that, but the fact is that we have been drawing more from Third world countries than we have been giving them in aid as they struggle to pay off the debt charges with which they have been saddled for so many years. Small movements in interest rates cripple those countries. The one way to stabilise our interest rates is to move rapidly into the exchange rate mechanism, and the sooner the better.

Debt is insidious and destructive--in the Third world, in many of our local communities, and nowhere more so than in its effect on family life, which in many parts of the country is collapsing. One in three marriages now ends in divorce. Marriage breakdown is 600 per cent. higher than it was in 1961, with 150,000 couples divorcing each year. It is clear that many families have great difficulty making ends meet while preserving their marriages. A major contributory factor in the corrosion of family life has been the strain imposed by crippling debt. Last November, in answer to a parliamentary question that I tabled, the Chief Secretary to the Treasury confirmed that Britain's debt now stands at a staggering £378 billion. The fact is that, the poorer the person, the more debt he faces.

Last year, more than 2 million households in England, Scotland and Wales fell behind payments and found themselves in debt. Together, their arrears amounted to £2.9 billion. Our nation of savers, as the Chancellor described it, has become a nation of debtors. What has that meant for families? Last year, more than 23,000 gas

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supplies and 73,000 electricity supplies were disconnected, 13,780 homes were repossessed and 70,480 households were in mortgage arrears by six months or more. A recent survey showed that debt led to emotional and physical problems, ranging from feelings of isolation to marital break-up and suicidal tendencies--according to the National Society for the Prevention of Cruelty to Children it is even one of the stress factors involved in child abuse.

The Office of Fair Trading says that 3.6 million people feel over-committed with credit, 4.5 million have had difficulty in the past five years with repayments and 8.2 million have taken on commitments that they now regret. Millions of families are living in the hope that something will turn up, pressurised as they are by loan sharks and greedy money-lenders charging usurious rates of interest. A court case under way in Birmingham involves an extortionate annual percentage rate of interest of 1,192 per cent.

What of the household names? Big high street stores offer their own credit arrangements. This month the annual percentage rates of credit at a sample of stores reveals that John Lewis is charging 23.8 per cent., Habitat 34.4 per cent., Marks and Spencer 34.5 per cent. and Next 39.9 per cent. Credit cards range from 22.4 per cent. on Lloyds Gold Card, plus a £30 annual fee, to 31.3 per cent. on the TSB Trustcard/Visa. Advertising continues to stimulate the demand for more credit which in turn will lead to even more indebtedness. If, along with his Budget today, the Chancellor were forced to present to Parliament an impact statement, detailing how his policies would affect families and communities, he would have to address those fundamental questions. It is families and neighbourhoods who are the foundation and cornerstone of society, not the Dow Jones index or sterling's relative strength against the deutschmark. It would stop this high street daylight robbery and help to curtail spending if we set an interest rate limit on retail sales.

I am also sorry that there was no mention in the Budget speech of credit unions, which I passionately believe should be supported. They establish saving and financial disciplines, promote saving and strengthen communities.

The Government should also consider making provision in the national curriculum for money management education. The younger people are, the more likely they are to be in debt. We should also impose a levy on institutions such as banks and building societies, forcing them to contribute to the cost of setting up proper financial counselling services. Young people especially are simply not given adequate advice. They run up massive debts which, like an albatross round their necks, encumber them for years.

Perhaps politicians should also consider how much worse matters are going to be made by the imposition of the community charge and by student loans. Taken together, these also create a situation in which people simply have to borrow--always borrowing in order to fend off the worst. That in turn puts pressure on communities and families. The Chancellor sat down at the end of his Budget oration having presented yet another Budget largely geared to the needs of money markets and financial institutions. Economics should be made to serve the people, not the other way round. Success or failure should be measured and judged in relationist terms, not merely materialistic ones. They should be judged by the impact

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that policies will have on families, communities and ordinary people. By that measure, today's Budget has not addressed any of the fundamental problems in Britain today--it has merely tinkered with the numbers.

6.43 pm

Sir Anthony Grant (Cambridgeshire, South-West) : The hon. Member for Liverpool, Mossley Hill (Mr. Alton) referred to the Chancellor's speech as being like the curate's egg, good in parts. I should like to apply the same description to the hon. Gentleman's speech because I agree with some of the things that he said and disagree with others. I wholly disagree with him on local income tax, which I happen to think a nonsense, but I have a lot of sympathy for what he said on the exchange rate mechanism.

Because banking and insurance were mentioned in the Budget, I should at once declare an interest in Barclays Bank and Bowring UK Ltd. I shall be making no direct references to those companies although they may well be affected by the Budget, as will many others, I have no doubt.

I should like to pick up a point raised by the hon. Member for Mossley Hill and by my hon. Friend the Member for Windsor and Maindenhead (Sir A. Glyn) on credit card indebtedness. As has been well acknowledged by the present Chancellor and his predecessor, it represents only 2 per cent. of total borrowing, the overwhelming majority of borrowing being represented by loans to businesses and loans for house purchase. It is as well to understand that and keep things in perspective.

The Budget is both responsible and sensitive. It was brilliantly and lucidly presented by my right hon. Friend the Chancellor. As a neighbour of his in Cambridgeshire, I was particularly proud of the way in which he undertook this daunting task, his first Budget, under the glare of the television lights and in extremely difficult times. He resisted the temptation to take the easy option ; on the other hand, he refrained from indulging in what I call the British disease.

Our press and media and, if I may say so, our Opposition--it does not matter which party is in Opposition ; we did the same when we were in Opposition--have a unique knack of denigrating and running down our country. That is immensely damaging, because it is always misunderstood overseas. The Chancellor was right to stress in his opening remarks the important factors about our economy, which is basically much stronger than some jittery folk would have one believe. He did us a great service in putting it in perspective. Nevertheless, in view of the international situation, he had to tiptoe delicately along a tightrope.

The Government have used the crude interest rate policy as their main weapon in the battle against inflation. No one in the House or outside it with any sense of responsibility would deny that our major battle is with inflation--it is a curse and a cancer, affecting everybody, from the greatest firms to the humblest citizen in the land--but when it comes to the method used to deal with it, I myself have been publicly critical of the excessive use of the interest rate policy. I dislike high interest rates, even though I recognise the necessity for them, because too great a burden is placed upon three groups of people who

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have borne the brunt of the battle against inflation. In other words, the have-nots have suffered more than the haves.

Those who suffer particularly from a high interest rate policy are the small firms, which, unlike big firms, have been unable to build up large profits and which work on very tight margins ; the small farmers, as I know from my experience in East Anglia, who depend very much upon credit and borrowing from banks ; and the new home owners, the people who bought their houses quite recently. Those are the people who have to bear a very heavy burden. So I was glad that to some extent the Chancellor recognised, with great sensitivity and sympathy, the problems suffered by those groups.

I was pleased that the Chancellor recognised the problems because, after all, inflation is the responsibility of Government. I recall very well the economic gurus of the 1970s, always telling us that inflation was Government's responsibility, that it was Government who caused it, not ordinary individuals. That being so, it is right that Government should accept a fair share of responsibility in that respect. The Chancellor himself recognised that in what he did for small firms. I was pleased with the value added tax measures, which are particularly welcome. The other tax exemptions will give great encouragement to that immensely important sector of our economy. My right hon. Friend the Chancellor gave encouraging news. After all, this is the first time in history that I can recall when 1,500 net new firms have been starting up each week. That is not the sign of an economy in depression and decay, but a sign of buoyancy and enthusiasm. It has happened under no previous Government. I was the first Minister responsible for small firms. We were David against Goliath ; we were the Cinderellas. We had little support--none at all from the Opposition or the Confederation of British Industry. In those days, nothing approaching that number of people were starting up and successfully pursuing small businesses. The Chancellor has recognised that, and I welcome what he has done to support small firms.

I am also delighted that my right hon. Friend has abolished stamp duty on share transfers. If I have a regret, it is that he could not make a reduction in stamp duty for house purchase, as that might have given a little fillip to the housing market. Stamp duty is a ridiculous tax, and I have not the faintest idea why it was ever introduced. I know that it raises considerable revenue for my hon. Friends in the Treasury, but the sooner it finally goes the happier I shall be.

Let me touch on the macro-economic position. I accept that interest rates must stay, and I appreciate the Chancellor's point that he did not want to suddenly bring them down and then have to put them up again ; that would create instability. Likewise, I hope that he has got the position right in believing that his fiscal measures are sufficient to sustain interest rate monetary policy as it is. I respect his judgment that there was no need for any stronger taxation measures than he imposed to avoid putting up interest rates in the future. I profoundly hope that that is right, but it is a tightrope along which he tiptoed with great elegance and skill, as one would expect of someone with his family background.

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For two reasons, I did not agree with my hon. Friend the Member for Staffordshire, Moorlands (Mr. Knox) when he said that it would be better not to have increased indirect taxation, but that we should have increased direct taxation. First, that would have put the basis of direct and indirect taxation out of balance, which is the last thing that we want to do.

Secondly, ever since the Government came to power, our policy has been to switch from direct to indirect taxation. Direct taxation is a tax on effort, enterprise and work, whereas indirect taxation is a tax on spending. At this time it was necessary to curb spending, but not necessary to impose a burden upon work and enterprise. Therefore, I support the Chancellor's increase in excise duties--quite apart from the alleged effects on health of smoking and drinking.

The Chancellor described this as a savings Budget, and it was right and proper for him to do so. At a time such as this--when there was room for manoeuvre, and when taxation was constrained and had to be neutral--the one thing that we had to do was encourage savings. He has done that splendidly, with some novel ideas. I am especially attracted by the tax-exempt special savings account, known as TESSA--I know that that will appeal to my hon. Friend the Member for Billericay (Mrs. Gorman)--which will be especially attractive to small or first-time savers. It will appeal to a wide range of people who perhaps had not thought of saving hitherto.

I was especially pleased with what the Chancellor did for unit trusts and employee share ownership, as I was a founder member of the wider share ownership movement before I entered the House. With the late Maurice Macmillan--the son of Viscount Stockton--I formed the movement, and we had a great deal of help from Lord Lever and Richard Wainwright. It was an all- party movement. We struggled desperately to get it going, as successive Governments put more burdens in the path of those who would like to invest in shares. We bumped along against a lack of Government enthusiasm, but our philosophy always remained the same : a desire to spread the wealth of the nation throughout the people.

Many Opposition Members do not understand the need to spread wealth, wanting to collect it into the hands of the state. My desire is always to distribute it, and that is why I support the privatisation programme and home ownership. I hope that that continues and has not been damaged too much by high interest rates. When people acquire savings and earners are turned into owners, they acquire a degree of independence and a stake in their country that they could never have if everything were vested in the central hands of the state. I congratulate the Chancellor on doing what he did.

One of the most creditable features of the Government is that, for the first time in living history, there are more individual shareholders than trade union members. That is a most healthy development, as it has given independence to people, enabling them to stand tall and to own a bit of our economy. That should be encouraged. I wonder whether the Chancellor had a chance to study--if not for this Budget, then perhaps for a future one--the work of the Invest in Britain Campaign. A phrase from the memorandum that it sent him said :

"They sought tax relief on U.K. equity investments up to an agreed ceiling held for a minimum of 12 months and the rollover of capital gains tax liability while the funds remain in U.K. equities."

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Perhaps the Chancellor did not go as far as the organisation would like, but his thinking was along those lines. I hope that that will be the theme for the future : the spread of ownership is essential if we are to remain a free society.

I agree with the hon. Member for Mossley Hill on the exchange rate mechanism. We are already in the European monetary system, I understand, but the exchange rate mechanism is the question mark. I understand that a decision was made at the Madrid summit to which the Chancellor, the Government and the Prime Minister are committed. Nevertheless, the sooner we can join the exchange rate mechanism the better it will be for Britain, for our economy and for business generally.

When I talk to business men, I find above all that they want stability of currency. As our erstwhile colleague Sir Leon Brittan--now a European Commissioner--said in a remarkable speech, it is heartbreaking for businesses to work out their activities, to produce things at the right cost, to allow for a sensible profit, to have people working on a scheme and to arrange exports, and then suddenly to find that they are blown off course by a weird movement of currency over which they have no control. As the CBI says, they would welcome an early entry into the exchange rate mechanism. They would accept that there is a discipline attached, and that it is not an easy, soft option.

When the late Lord Stockton urged entry of the Common Market, he said that it was not a warm Turkish bath, but a cold bracing shower. However, for the sake of stability, a degree of discipline is acceptable. So we should look again at the Madrid summit conditions and, if they seem excessively rigid, reconsider the situation, if that means a chance of us getting early into the exchange rate mechanism and securing stability for the future.

I believe that this will prove to be a remarkably successful Budget in difficult circumstances and that the Chancellor will prove to be one of the great Chancellors of our age.

Debate adjourned.-- [Mr. Sackville.]

Debate to be resumed tomorrow.

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Redbridge London Borough Council Bill

Order for Third Reading read.

7 pm

Mr. Neil Thorne (Ilford, South) : I beg to move, That the Bill be now read the Third time.

This Bill is promoted by the council of the London borough of Redbridge. It would authorise the establishment of a market on a site near Ilford town centre. Following a long local inquiry, the council in 1980 adopted a local plan for the town centre.

In accordance with the proposals in that plan, the council has revitalised Ilford town centre by the construction of a relief road diverting the A118 round the town centre, providing service roads and the pedestrianisation of part of the High road. As a consequence, a pleasant environment has been created in Ilford town centre for workers, residents and shoppers.

That has led to considerable investment in the town centre, and the Prudential Corporation and the Norwich Union Insurance Group are currently constructing a £100 million retail development, known as the Exchange at Ilford. That will provide 51,000 sq m of new shopping floor space together with a 1,200-space car park.

The plan proposed the development of a site in Ilford town centre for a substantial shopping development, to be combined with an expanded and more attractive covered retail market as a vital feature of the improved shopping centre. Since the adoption of the plan, about 250 people have shown a desire to take stall holdings in the market.

The council believes that a market established on the proposed site, which it owns, in Ilford town centre would provide an additional and attractive facility for shoppers and would complement the Exchange at Ilford development. The council has the support in that matter of the Redbridge chamber of trade and commerce, the Ilford Traders Association, the Prudential Corporation and the Norwich Union Insurance Group. Planning permission will be sought separately for the establishment of the market if the Bill is successful. The London borough of Havering has two markets at Romford, one on a Wednesday and one on a Friday, which I believe are protected by charter or lost modern grant within a distance of six and two thirds miles and that it would be in contravention of that protection to establish the proposed market at Ilford. Havering has a third market at Romford, operated by it in exercise of its powers under part III of the Food Act 1984. The Romford markets contain about 600 pitches on each of those days.

Havering council petitioned against the Bill, and the issues between the two councils were dealt with by an Opposed Bill Committee. Evidence was brought by the two parties and the Committee decided on a compromise by which the Bill was allowed to proceed, subject to certain amendments for the benefit of Havering borough council, including a special provision for compensation.

The Bill having reached this stage, it having been properly contested in an Opposed Bill Committee, and the House having allowed the measure to proceed thus far, I hope that hon. Members will tonight grant it a Third reading so that it may proceed on its way.

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7.4 pm

Mr. Robin Squire (Hornchurch) : To hon. Members who are not acquainted with Redbridge or Havering, the events which we are now discussing will appear to contrast with the preceding debate. Indeed, some hon. Members may find it difficult to relate the importance of this measure to the international importance, as it were, of the previous matters with which we were concerned.

Hon. Members whose constituencies come within the area of the Bill accept that we are dealing with extremely important matters, as I shall show. The Bill could also have a major impact on many other constituencies not specifically mentioned in the measure. Those constituencies, by clear and obvious linkage, would be affected by similar legislation, were it to be introduced.

I begin, not for the first time, by congratulating my hon. Friend the Member for Ilford, South (Mr. Thorne) on the way in which he has conducted the proceedings on the Bill. He knows that my opposition to it in no way affects my personal friendship with him. It is simply a question of each of us seeking to do our duty, as we see it, by our constituents.

I must also mention my hon. Friend the Member for Romford (Mr. Neubert), the Parliamentary Under-Secretary of State for Defence Procurement, within whose constituency is situated Romford market, around which the resistance to the Bill coalesces. He is prevented, by his duties in government, from contributing to these proceedings, but he has been present on each occasion when we have debated the Bill.

We are at the final stage of a hard-fought battle over the measure. It may be worth at the outset detailing the main changes that have occurred compared with the version of the Bill that was originally deposited, because those changes highlight a central message that I am anxious to convey to the House. Most important among the changes has been the removal of the possibility, originally set out in the Bill as deposited, of having two markets unlimited as to size and certainly not tightly drawn as to location.

Havering welcomes the fact that the compensation provisions have been substantially rewritten, to the benefit of the existing Romford market. The transfer or disposal of market rights created by the Bill can now take place only with the consent in writing of Redbridge council.

I could detail other changes, but in fairness to the House and the wish that hon. Members must have to proceed, I shall limit myself to those three main ones, which are all significant and which set out clearly the fact that the opposition of Havering council has secured a transformation in the original Bill.

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