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Madam Deputy Speaker : Order. The hon. Member for Ogmore (Mr. Powell) is in the Chamber and he should take his seat.
Mr. Irvine : The level at which the community charge benefit cut-off was fixed was widely seen as unfair, and I am glad that the Government were wise enough to listen to the representations made to them by many hon. Members and to act accordingly.
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Another group of people are affected by the community charge in conjunction with high mortgage interest rates. I am concerned about young couples where the wife has stopped work to look after the children. Mortgage interest rate increases hit such couples hard and the community charge reinforces the impact of that, particularly when the husband is the only earner in a family with an income just above the cut- off point at which he would be entitled to a rebate. There is a good deal of force in the argument that wives and mothers in such families have made to me--that the Government are moving towards independent income tax for women but that, when it comes to qualifying for community charge rebates, the women's income is not considered in isolation but is taken together with her husband's. There is a risk of such couples facing considerable hardship. I hope that the Treasury Ministers and my right hon. Friend the Secretary of State for the Environment will take account of that.In my constituency, the community charge is £440, and it will be no surprise to hon. Members to learn that there is a Labour borough council. It is true that the county council is Conservative, but the county council's budget is only 9 per cent. above the standard spending assessment. Yet Labour-run Ipswich borough council's budget is 96 per cent. above the standard spending assessment--the second largest percentage overspend in the country.
Mr. Janman rose --
Mr. Irvine : I am afraid that I do not have time to give way. Although that degree of overspend is very much the fault of the local authority, it does not mitigate the hardship that families such as I have mentioned may suffer.
One welcome item of news in my right hon. Friend's Budget and one which will certainly receive great praise in Ipswich was the generous and well judged financial boost to the game of football. The Taylor report and its implications were bound to put heavy burdens on the finances of football. I know that my hon. Friend the Economic Secretary to the Treasury was also a supporter of Ipswich Town football club, and perhaps he still is, despite his move to the constituency of Mid-Norfolk. It is important that the Government have listened to the representations on behalf of the game of football, because that welcome boost of what is calculated over the next five years to be £100 million will make a significant difference to the game's well being.
By and large, I share the view that the Budget has the balance about right. My right hon. Friend the Chancellor confronted dangers from both sides. There was the danger of being too easy on inflation. Some of the financial markets yesterday showed that they thought that he had fallen into that trap, but they were wrong and, judging from their much steadier performance today, it looks as though they have altered their judgment.
My right hon. Friend could also have fallen into the trap of overkill. Not only are interest rates high, but he is also running a pretty tight fiscal policy. The combination of those two factors is already beginning to work its proper and intended effect.
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The magnificent surge in investment by British industry during past years is beginning to show in the immensely encouraging export figures-- [Interruption.] Contrary to the jibes and jests of Opposition Members, there are definite and significant signs that things are coming right. My right hon. Friend the Chancellor has got it about right--the balance is correct--and in the coming months and years we shall see the benefit of his wisdom and the correctness of his fine tuning.8.25 pm
Mr. Tony Banks (Newham, North-West) : It is interesting to follow the hon. Member for Ipswich (Mr. Irvine), who is another Conservative Member who has suddenly discovered that the impact of the poll tax is not all good when examined against the detailed problems in a particular constituency. He was right to express concern about those families he described, but he should also realise that the Government have got the facts and figures wrong in their peculiar standard spending assessment system. The idea of blaming the local authority because it has spent over and above the Government's recommended expenditure is to miss the target. The real target should be those in Marsham street who got the SSA wrong in the first place.
I wonder how much longer we shall have debates like this, when we go though an annual parliamentary ritual. The Budget is largely irrelevant in terms of setting the economic scene for the year ahead. We then have three and a half days, after the Budget has already been analysed to death by the commentators, in which to debate it in Parliament. I wonder whether that is the best use of our parliamentary time. On a night such as this, I begin to feel like one of the last few guests left at a boring party. The days have gone when Mr. Gladstone used to stand at the Dispatch Box and speak for seven hours, often without notes. The sort of things he said then would clearly affect the economy in the next 12 months and influence future events.
When I heard the Chancellor of the Exchequer speak, I thought that he was delivering his speech with his fingers crossed. He would have to do that, because what happens in the British economy is determined far more by what happens in Tokyo, Frankfurt, Washington and other capital cities around the world than what is said in the Budget speech at the Dispatch Box. Budgets are becoming rather like yesterday's newspapers--forgotten almost as soon as the Chancellor utters the last words.
I was amused by the right hon. Member for Blaby (Mr. Lawson), the former Chancellor, sitting during the Budget speech like the ghost of Christmas past. He had given the present Chancellor many of his problems by virtue of the enormous tax cuts that he handed out to the rich in 1989. He had a bit of a cheek to turn up to see his successor clear up the mess.
It would be churlish not to congratulate the present Chancellor, who is a former distinguished member of Lambeth borough council. Indeed, he is one of a group of ex-Lambeth councillors in the House, including myself, my hon. Friend the Member for Brent, East (Mr. Livingstone) and my hon. Friend the Member for Stoke-on-Trent, North (Ms. Walley). Of those Members, the Chancellor has done the best--so far. The rest of us
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stand around with our fingers crossed, just as the Chancellor did when he was making his speech on Tuesday.What the Chancellor presented was a Budget for the party. His purpose was to stimulate the party, to try to do something about the depression that now sits on Government Members. That is why they were all waving their Order Papers at the end. It was a Budget for the party, not a Budget for the country. Most Conservative Members are grateful just to wake up in the morning and find that they are still Members of Parliament. So long as that is the case, they will remain cheerful. But they are living very much on borrowed time, just like the Chancellor of the Exchequer and the economy. As has been said, the Chancellor tinkered with the problems of the British economy ; deserves to be called Tinkerbell.
The Budget did not address the underlying structural weaknesses of the economy. The skids are under this Government. It is obvious to everybody, inside and outside the House, that they are out of touch with reality. When a Government get totally out of touch with the outside world, one knows that they are finished. They start to believe their own propaganda. In the speeches that we have heard tonight, there has perhaps been more realism, but some things that Ministers have said, and certainly what the Secretary of State for Trade and Industry said today, might lead one to believe that we have an economic miracle on our hands, that our problems are the problems of success. A £21 billion balance of trade deficit, including a deficit of £16 billion on manufactured goods, is some miracle. There was a time when this country, decade after decade, ran a surplus in manufactured goods. In fact, it was a Conservative Government who took us into deficit for the first time since the Napoleonic wars. In the past, people would say, "Never mind--the invisibles are saving us." But the invisibles, too, are now disappearing. The situation is going from bad to worse. Our inflation rate of 7.7 per cent. is double that in the major countries with which we compete, and there is talk of a dramatic increase of up to as much as 10 per cent. We have the highest interest rates in Europe. We have heard the litany many times, but what we have heard is true ; these are all facts. If this is what the Tories call a miracle, I urge caution on any of them before they attempt to walk on water. The only miracle that I can see is the disappearance, over the past 10 years, of £84 billion of North sea oil revenues, £27 billion of privatisation receipts, and £24 billion from land sales--a massive total of £135 billion. In exchange for that, after 10 years, we have one of the worst economies in the EEC. We have seen poverty and homeless double. We have transport chaos all around us, particularly in London ; we have a crumbling infrastructure in the country as a whole ; and we have stunning growth in social and economic division. It takes enormous skill for a Government to take in such resources and squander them. Without North sea oil revenue, the continuing crisis in the British economy would have become a calamity of proportions not seen in Europe since the 1930s.
I take no pleasure in saying these things. People involved in party politics experience some warmth from seeing their political opponents in real trouble, but I think about the impact that all these problems--the problems that these statistics reveal--create for the people in the London borough of Newham, which I represent. It is not
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the Chancellor who will have to live with the consequences of his Budget decisions ; it is the people in the country. He has been getting it wrong in the same way as the Government have been getting it wrong almost every year since 1979.The Secretary of State for Trade and Industry claimed that we had a success story in achieving last month a balance of payments deficit of £1.4 billion. That is now success for this Government. The figure has gone down from £2 billion to £1.4 billion. Anywhere else in the EEC, figures of that sort would be considered absolutely disastrous, but in Britain in 1990 a Tory Government claim that they are somehow a mark of success. The whole economic language has been totally distorted by this Government. It is "Maggie in Wonderland" : words mean exactly what she wants them to mean. That is the reality of our economy in 1990.
The City did not like the Budget very much. But, of course, I do not like the City very much. I have never been particularly keen on people who simply make money out of money. There is no patriotism in capitalism. Hot money follows the highest returns. The Government have had to make sure that in this country the highest returns can be obtained through high interest rates.
The Chancellor and other Ministers claim that the purpose of high interest rates is to control inflation, but high interest rates themselves create inflation by putting up prices, especially for industry. High interest rates are really needed to prop up the pound. Our economy does not have the structural strength to entice people with money to invest it here on the grounds that they will get a good return. Money is here only to earn high interest, and as soon as interest rates come down, the money goes elsewhere. There is more certainty in the economic strength of other European economies. The hon. Member for Fulham (Mr. Carrington) referred to the more restrictive nature of the German economy. He talked in particular about the banking system in Germany. It is certainly true that the system there is far more restrictive than the system in this country, but that is also true of the Japanese economy and banking system. The hon. Gentleman knows far more about banking than I do, but I should think that the same is probably true of virtually every other European economy also. The Prime Minister has made it a boast that we have the most open economy in Europe, but because of all the structural weaknesses, an open economy, as she describes it, is a source of difficulty. It is rather like having a patient on a life support system and leaving all the windows open and hoping that somehow the patient will recover.
Mr. Carrington : Do the hon. Gentleman's remarks imply that he would advocate the return by his party to exchange controls?
Mr. Banks : Straight away I say yes, but the party does not say yes. That is the big difference. I want to give an honest answer to the question. The leadership of the Labour party must think about what will happen when there is freedom to move money out. I did not see the centre pages of the Daily Express , but I heard something about them on the radio. Apparently the Daily Express said that, had there been a Labour Government, even more billions would have gone out of the country because of the freedom of exchange. That is a problem that we must address.
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I am quite sure that the leadership of my party is as acutely aware of it as are the leader writers of the Daily Express , and far more aware of it than I am, and I am quite sure that they will address it in terms of their preparedness to act when we win the next election. But I say again that my answer is that I should support a return to exchange controls.In Newham last night, I did a bit of research into reaction to the Budget. I must confess that my methodology was not based on scientific sampling techniques ; actually, it was based on some discussions in a snug at my local pub , the Builder's Arms. The Budget did not go down very well in the Builder's Arms. The beer did, but the Budget did not. The Chancellor said-- and it has been repeated--that this is a savers' Budget, but the point that was made to me in the pub last night is that we do not have very much in the way of savings. Fares have gone up by 15 per cent. ; rents are going up by about 27 per cent. as a result of the provisions of the Local Government Act 1988 ; gas, electricity and water charges have gone up. Mortgage repayments have gone up by £153 a month on average since June 1988. Poll tax, of course, will add about 0.75 per cent. to 1 per cent. to the retail prices index.
Those are all Government own goals in the stoking up of inflation. They all represent charges on people's income or supplementary benefit moneys, for example. People do not have money left at the end of the week, or month, to put into new and fancy forms of saving. Will the Budget measures tempt people to save or will they merely ecourage savers to switch their savings from one form of savings to another.
The people in Newham do not choose between expenditure and savings. They do not say at the end of the week or the month, "We have this amount of money left over so we shall put it into savings." They will not examine all the savings plans that are available before opting for the one which the Chancellor of the Exchequer says offers the best return. Instead, they have used their savings to finance day-to-day expenditure. Most of them do not have any money left at the end of the week or the month to put into savings.
The Chancellor of the Exchequer presented a tinkering Budget. It has been described as neutral, but I would say that it is largely irrelevant to the real problems of the economy. It seems that Britain is heading pell mell towards the status of a banana monarchy but without the benefit of bananas. I suppose that a banana monarchy would be the best description of a country that is led by a semi-demented petty tyrant in No. 10 Downing street. Fortunately, the skids are under her, and that started tonight.
8.41 pm
Mr. James Cran (Beverley) : It is a stated truism that it would not have made any difference what Budget the Government had introduced. Like Pavlov's dogs, the Opposition would have done entirely the predictable. They have attacked the Budget, and they would have attacked any other Budget that my right hon. Friend the Chancellor of the Exchequer had introduced. We all know why that is so. It is clear that some Opposition Members do not like the Budget, but the Opposition's profession is to run down the United Kingdom's economy. That sort of cynicism in
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British politics has been punished before, and I have a suspicion that it will be punished yet again. We all know that what we have heard over the past two days from the Opposition has been uttered merely for electoral reasons.My right hon. Friend the Chancellor of the Exchequer was correct when he said :
"During the last year, business confidence in Britain has remained a good deal stronger than many expected."--[ Official Report, 20 March 1990 ; Vol. 169, c. 1010.]
It is certainly a good deal stronger than the Opposition wanted it to be. The economic facts of life have been blithely ignored by every Opposition Member whom I have heard this evening. The technique of politics would appear to be to ignore facts and to pour out unsubstantiated opinions.
Mr. Battle : Will the hon. Gentleman give way?
Mr. Cran : No. I know that some of my hon. Friends wish to contribute to the debate.
My right hon. Friend the Chancellor of the Exchequer was correct to underline the fact--it has been ignored by the Opposition this evening-- that new business formation is at a record level. The number of those who are in employment is, again, at a record level. It is astonishing that 27 million men and women are employed.
I was astonished when I heard the hon. Member for Warrington, North (Mr. Hoyle), who is a member of the Select Committee on Trade and Industry, as I am, say that business investment is low. In fact, it is at a record level. So is company profitability, but I must say to my hon. Friend the Financial Secretary to the Treasury that although it may be at a 20-year high, it is not high enough by international standards. We would want to see it improved.
I am prepared to be lectured by those who have done better than the record that the Government can present, but I must stress that that does not include the Opposition. When they had the opportunity, they failed dismally and entirely. I see no reason to suppose that they would do anything different if they ever had responsibility in future, although I doubt very much that they will have.
Opposition Members have ignored what is happening in the regions, especially in the northern regions. They know as well as I do that we have seen something which has not been evident before in post-war years. The northern economies have been recovering far faster than anyone expected, and in some instances faster than the southern regions. That includes, definitely, Yorkshire and Humberside, the region which I come from.
Mr. Battle : Will the hon. Gentleman give way?
Mr. Cran : No. Some of my hon. Friends wish to speak, and I wish to allow them to do so.
I do not expect Opposition Members to accept what I say. That being so, I am happy for them to adopt that approach. Let us remember, however, what was said at the Yorkshire and Humberside council of the CBI, which was reported on 14 March 1990, which means that the quotation is entirely up to date :
"the general picture is of employment prospects and investment holding up well. From its current firm base, the Yorkshire and Humberside economy can now be expected to begin to grow more quickly."
That runs contrary to the rubbish which I have been hearing all evening from Opposition Members. They say what they do because they want to win the next general election. That is why they ignore the facts.
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Mr. Battle : Will the hon. Gentleman give way?Mr. Cran : No. Sit down and listen to some of the truth, for a change.
Opposition Members might believe what is said by the Labour leader of the Humberside county council. At the end of last year, he said : "Humberside continues to receive record levels of investment enquiries, many from overseas companies For example, planning applications for industrial and commercial floorspace are up on last year's total by 20 per cent."
For the purpose of my argument, he neatly added :
"And it should be remembered that we are building upon a record year in 1988."
Let us examine what the largest company in my constituency, British Aerospace, is doing. A news release from 14 March 1990, says that 1989 has been
"another record year for profits and turnover During 1989, 60 per cent. of British Aerospace sales were overseas and in the last 10 years the direct contribution to the UK balance of payments was over £20 billion."
That is the proper argument, not the nonsense that I have heard from Opposition Members about the rundown of British manufacturing. The progress that we are seeing in the country generally, and especially in Yorkshire and Humberside, would go out of the window if inflationary pressures were allowed to get out of hand.
I am clear in my mind, as my right hon. Friend the Chancellor of the Exchequer is in his, that inflation is public enemy No. 1. When I was the northern director of the CBI, based at Newcastle from 1979 onwards, I saw at first hand what inflation does to a regional economy, to the companies in that economy and, unfortunately, to the work force. Jobs were like snow on a spring day--here today and gone tomorrow. I left an extremely demoralised region. That is not the position now. Opposition Members should go to the north-east to see what is happening there now.
My right hon. Friend the Chancellor is absolutely correct to put the control of inflation at the top of his list of priorities. It is therefore axiomatic that high interest rates are indispensable. I do not need lectures from Opposition Members or anyone else to tell me that high interest rates are unpopular ; my mail tells me so. Mortgagors do not like the present level of mortgages, and I understand that. It is understandable that small businesses do not like high interest rates because of the money they have to borrow. I am afraid that I must tell them quite simply that it is better for their budget to be stretched now than for them to have no budget at all in the future, because that is what would happen if inflation were allowed to get out of control. Opposition Members are experts at allowing inflation to get out of control ; their record on that is second to none, and we should lose no opportunity of reminding them and the British people of that.
I entirely accept that fiscal policy has a supporting role. I also accept that the stance that my right hon. Friend the Chancellor has adopted is a tight one. I just wonder whether it is tight enough, and I slightly reserve my position. Having said that, I echo the words of other Conservative Members : the reaction of the City yesterday was histrionic and totally unjustified. Happily, that has been rectified today, and I think that it will continue to be so.
On the subject of business taxation, I have one carp--I could go on a lot longer, but I know that other Government Members would like to speak--which is a
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question mark over corporation tax. In 1983 -84, corporation tax was under £8 billion ; in 1988-89, it was £18 billion. The Financial Secretary would say--indeed I will do it for him--that that reflects growing profitability. So it does. Under this Government, companies have actually been allowed to make profits to invest, and that is why we have 27 million people in work.The Opposition totally failed to do any of those things. Nevertheless, when the opportunity occurs, I think that the business community is looking for those rates to be re-examined because, as a proportion of GDP, our corporation tax levels are the highest in Europe. I do not think that they should remain there.
The Budget has been innovative in the encouragement of savings, but I am cynical about whether it will have the desired effect. I am a cross between a Scotsman and a Yorkshireman, a devastating combination as far as the saving ethic is concerned. I have been saving since I was so high because it was inculcated in me ; my parents insisted that I save threepenny Post Office savings stamps. That has all gone, for reasons that I am not sure I entirely understand. My savings ratio is such that, if it were repeated by everybody else, we would have very high levels of unemployment--so I do not suggest that others follow in my footsteps.
While I wholly accept what the Chancellor says about the need to encourage saving, I am bound to say that, if one cannot persuade people to save at present high levels of interest, I wonder if they will be encouraged to save by the introduction of the TESSA scheme. I hope that it will work, but I just wonder whether it will. With those few caveats, I am very supportive of my right hon. Friend's Budget and I congratulate him on it. Yesterday, the shadow Chancellor appeared to me rather like a Church of Scotland minister, giving a sermon which was rather too trite for me and rather too trite for the British people. There was a smirk on his face which I have a feeling he will regret when the Budget bears fruit in coming years and we win the next general election.
8.54 pm
Mr. Malcolm Bruce (Gordon) : I notice that the hon. Member for Beverley (Mr. Cran) has not lost his combative style, which I first encountered when we were candidates for our respective parties in 1983. It is appropriate that I speak after him because, not surprisingly, being the leader of my party in Scotland I cannot speak on this Budget without making some reference to the poll tax. In my constituency, Conservative councillors will have some difficulty in resigning because there is only one left--and the hon. Member for Beverley may soon find himself in the same situation, the way things are moving.
The statement on Tuesday was extraordinary, but what is even more extraordinary was that the Chancellor, who admittedly is always cool and impassive, seemed totally oblivious of the reason why heat was being generated on the Opposition Benches and north of the border. The idea that there should be some increase in the capital exemption below which people qualify for benefits was trailed in the press and generally acknowledged as something that the Government were planning to do, so it cannot have been a surprise. I even had letters from constituents last week, saying that, if such a relief were brought in, they hoped that I would do my best to ensure that the Scots were
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treated equally with the English, and I did --the tragedy for the Conservative party is that the Secretary of State for Scotland did not.In consequence, the Secretary of State for Scotland has a considerable amount of egg on his face. He failed to defend Scottish interests in the Cabinet. He then compounded the felony, having apparently--although it is not clear--been hauled over the coals by the Prime Minister, by insisting yesterday that it was quite impossible for any retrospective measure to be introduced in Scotland. Then, at half-past two this afternoon he tells a packed press conference that he has found the money and is going to introduce a retrospective scheme.
Interestingly, the right hon. Gentleman found the money because his colleagues in the Cabinet had abandoned him to his fate ; they had decided that on this occasion the Secretary of State for Scotland would not have the support of the Cabinet and that he must get out of a mess of which he had failed to warn them in advance. Consequently, although it is welcome news for up to 20,000 people in Scotland who will benefit from the change, the fact remains that these social security benefits will have to be financed out of the Scottish Office budget. That is extraordinary when, in England and Wales, the benefits will effectively be financed out of the Department of Social Security budget. Such a precedent will create problems in future. The shambolic consequences of the poll tax, of which this is just the latest twist, only reinforce my view that it will eventually have to be swept away because it is so inefficient, ultimately to be replaced by a local income tax which is a much simpler administrative system and also takes proper account of ability to pay. But that will have to await even more shocks for the Government and, I suspect, the annihilation of the Conservative party north of the border. Today's debate, at least as far as the Front Bench spokesmen are concerned, relates to trade and industry. The Secretary of State had the audacity to come to the Dispatch Box and announce a £1.4 billion deficit as good news. He is the only member of the Cabinet who could have done that, completely insensitive to the reactions of everyone around him.
Despite the best endeavours of Conservative Members, it cannot be claimed, and the Government do not claim, that the economy is in the best shape. The Government maintain that they have it under control and that it will all come right, but they cannot blame our current problems on the Labour Government. It is not my task to defend the Labour party, but after 11 years in office the Government must explain the current position in terms of their own record. There are one or two points that the country should address in greater detail and to which all parties should give more thought. I welcome the Chancellor's positive measures to encourage savings and thrift. No one disputes that they are desirable. We have an open, free market system with a minimum of regulation and control, in which companies can sell and be sold, be broken up, bought, amalgamated or merged with far greater freedom than in other countries.
The only other major economy to operate in that way is the United States, and it is interesting to note that the
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United Kingdom and the United States both operate major balance of payments deficits. In contrast, West Germany and Japan, which operate on an institutional basis with a high savings ratio and a high degree of thrift and long-term commitment, have the strongest balance of payments surpluses.It is all very well for Conservative Members to denounce what they regard as the rigid stranglehold of the banks on the German economy, but one of the beneficial effects of the structure of the German and Japanese economies is that it creates a climate in which long-term investment is positively encouraged and financiers and the financial backers of industry share that commitment because they are part of the process and are locked into the system. They are usually major shareholders and they usually participate in the board and its decision making.
That is the fundamental difference between our economy and the German economy. We are driven by short-termism, which often undermines investment generally and investment in training and in research and development in a way that the German system does not. If Germany is moving in our direction, we should also be moving in its direction if we are to ensure that in the long term we have the necessary savings, investment and long term commitment.
It is important that we see workplace nurseries not just as a benefit to women as individuals but as a vital first step in enabling the British economy to continue to operate effectively. We shall have to have more women in the work force so that we can make full use of their skills. However, there is a case for going much further than the Chancellor has done. For example, vouchers for workplace nurseries might be a way forward. That would ensure that all women would benefit, either by enabling employers to group together to provide nurseries, for example on an industrial estate, or by enabling small businesses to provide a voucher which will enable women to take advantage of it.
The hon. Member for Kilmarnock and Loudoun (Mr. McKelvey) made a lengthy point about the implications of the increased duty on spirits. However, whisky is different from all other spirits, since it is a statutory requirement that it should mature for three years before it can be marketed as Scotch. Since the abolition of stock relief, it has been the constant complaint of the industry that it has been at a disadvantage compared with its competitors. In those circumstances, the case for a statutory maturation allowance, for which the industry has been campaigning, has been strengthened by the Chancellor's determination to index the duty on spirits by more than the current rate of inflation. Whisky's contribution to the United Kingdom economy is of such importance and its importance in Scotland is so great, that it is time that serious consideration was given to that.
There is a major gap in the Budget--the omission of taxation measures designed to have a beneficial environmental impact. The absence of such measures shows that the Government are in considerable trouble in terms of reconciling the Prime Minister's rhetoric on environmental matters with their record on environmental matters. That reinforces something that I have noticed in the past year--that the Secretary of State for the Environment does not carry the Cabinet with him and is not getting his message across to his Cabinet colleagues so that they understand how pervasive environmentalism has to be if it is to be effective.
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The Chancellor made no acknowledgment of his potential to influence things in a positive direction. He could, for instance, have introduced changes in vehicle excise duty to take account of the size of engines. That would encourage people to use more efficient engines, and would benefit people on low incomes in rural areas, who could switch to lower-taxed smaller cars from higher-taxed large cars. He should also have proceeded rapidly with the abolition of company car privileges, which are one of the main reasons why London's roads are choked. That would have resolved two problems in one.The Chancellor should also have introduced tax incentives for catalytic converters, and he should have heralded grants for specific environmental projects--for example, grants to recover
chlorofluorocarbons, both in industry and privately, and grants for energy efficiency. One thing that my party believes that he should have done was to introduce emission ceiling licences for toxic emissions. That must be implemented if we are to achieve real reductions in carbon dioxide and sulphur dioxide emissions. We cannot wait for the White Paper, or for next year's Budget. Plainly, although the Secretary of State for the Environment makes good speeches, his Cabinet colleagues do not listen to them.
9.6 pm
Mr. Tim Janman (Thurrock) : It would be tempting to go over some of the empty rhetoric and lectures that we have heard from Opposition Members tonight about how to run an economy. The Leader of the Opposition seems to think that he can run a capitalist economy better than the party that believes in capitalism. Sincere though they may be in their views on the current position, the Opposition Members who have spoken tonight came into politics not because of their commitment to capitalism or free markets but to try to disrupt that mechanism and to drag the country in exactly the direction from which the Soviet Union, East Germany, Hungary, Romania and others are running away as quickly as they can. That will become extremely obvious to the electorate at the time of the next general election. I want to concentrate on the monetary policy in the Budget. I agree with my hon. Friend the Member for Beverley (Mr. Cran)--although he was talking about the fiscal aspects, and I believe that the monetary aspects are more important--in that I share his slight scepticism as to whether the Budget is tight enough.
On page 12 of the Red Book, under the section on monetary policy, there is a nice little graph that charts narrow money and broad money growth from 1974 to 1989. It is noticeable that the narrow money line is in dark ink, whereas broad money is represented by a much fainter dotted line. That tells the reader how much importance the Treasury attaches to the two measures. The graph is rather meaningless, because it does not contain the line that it should have to show what the retail prices index was doing over a similar period. Anyone looking at the graph cannot see the relationship between narrow and broad money and what is happening to inflation.
If we were to plot the retail prices index on an annual basis for that period, and draw it on the graph, it would be clear that there is a firm relationship not only between narrow money--M0--and inflation, but between broad
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money and inflation--allowing for the 18 to 24 months time lag that inevitably occurs between what is happening to broad money and what is happening to inflation.Dividing the graph into five periods shows that the excessive broad money growth between 1972 and 1973--the period of history just before the graph starts--caused the high inflation of 1974-75. A tighter broad money policy between 1974 and 1975 led to much lower inflation in 1976-78. Given the shambles that the Labour Government of the time had got the economy into, we then had one of the most hard-line monetarist Budgets of the past 15 to 20 years, which succeeded in bringing inflation down.
With the general election of the late 1970s approaching, broad money growth was relaxed again in late 1977. That led to much higher inflation from late 1979 through to early 1981. Then broad money was tightened again, and between 1979 and 1985 a fairly firm grip on broad money was kept in the United Kingdom. It produced quite a long period of low inflation, from 1981 to 1986.
Since 1985, an ever more relaxed attitude to broad money growth in the United Kingdom's economy has been adopted. As a result, since 1986 we have once again had higher inflation than we had in the early and middle 1980s.
Contrary to what the Treasury says, it is therefore clear that there is a relationship between narrow money and inflation and between broad money and inflation. That means that the Chancellor is absolutely right to set a target of between 1 and 5 per cent. annual growth for narrow money and to reduce that target range from 1 to 5 per cent. to zero to 4 per cent. in the years ahead. How can my right hon. Friend the Chancellor, however, be so confident that with an annual growth in broad money of about 18 per cent. we can reach the sort of inflation targets that our party wants to reach?
Furthermore, given that the broad money supply is important and related to inflation, why cannot we have some reduction in the standard rate of income tax? A cut in tax merely transfers money, and hence spending power, from the state to the individual. I hope that the Minister will address that point when he winds up the debate and that he will explain why that transfer is inflationary. After all, it is not only the notes and coins in circulation that are important for future inflationary trends ; it is the total amount of money in the economy as measured by M4 or any other broad money measure. This has been a good and responsible Budget, which will steer the economy through the present fairly choppy waters back into the calm sea of the growth of the past few years. I ask my right hon. Friend the Chancellor once again to examine the importance of broad money and determine that there is a relationship between it and inflation. If broad money continues to grow at an annual rate of 18 per cent., my right hon. Friend will not meet the important inflation targets that he gave the House two days ago.
9.15 pm
Mr. Allen McKay (Barnsley, West and Penistone) : The hon. Member for Thurrock (Mr. Janman) began by talking about Socialists and Socialism, and it sounded as though he had lifted his remarks straight from a Conservative Central Office publication. I will explain to him why I became a Socialist many years ago. I saw people clearing snow because they had no alternative- -they were
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obliged to do it or they would not receive any unemployment or other benefit. I saw people going without food, children without shoes and youngsters without trousers. I discovered that Tories, Tory politics and Tory policies had caused that situation, and I determined to do something about it when I could.I looked for the best party to help me to ameliorate those conditions. I examined the Communist party, but resolved that it was too rigid. The Labour party, I thought, had the right policies, attitudes and sensitivity. It was clearly the right party for me and for the people whom I later represented.
I fear that those days would return. I am not referring to the precise circumstances that I saw all those years ago, but to a return to the type of Tory philosophy which caused that state of affairs to arise. I accept that people are not in those dire straits, although in some areas they are getting close to it.
The hon. Member for Beverley (Mr. Cran) talked about Yorkshire and Humberside, when he should have talked about his constituency in that whole area. He should not have included my constituency by lumping the region under the title of Yorkshire and Humberside. I say that because my constituency has 14.1 per cent. male unemployment and 5.9 per cent. female unemployment. The unemployment rate among females is rising, against the national trend. If the hon. Gentleman studies the statistics for the whole area, he will see that the situation in south Yorkshire is totally different from the rest of Yorkshire. That is why he should not lump Yorkshire and Humberside together. The Government have got the poll tax issue all wrong. To begin with, the standard spending assessment is calculated on figures that were used for the rate support grant, and those figures were wrong in many respects. Two years ago, I told my constituents what the rate of poll tax would be and I was only £7 out, although I was £122 out, according to the Government.
If we have to abide by the standard spending assessment that has been laid down, we shall have to close every nursery school, dismiss every home help, serve no meals on wheels and get rid of every non-statutory obligation that we are undertaking.
Mr. Janman indicated dissent .
Mr. McKay : It is no use the hon. Gentleman shaking his head. What I say is true. If he doubts it, I will provide him with the facts and figures. I fear that, by dissenting in that way, he wishes to return to the days and events which led me to become a Socialist. He does not know what he is talking about, and by dissenting in that way he is showing his insensitivity. That is typical of the Tories, and the people are fed up with them.
The hon. Gentleman will recall that, when we first started to discuss the poll tax, my hon. Friends and I offered--because we knew that the Government were wrong--to have discussions about alternatives to the rating system, but our suggestion was turned down. The Chancellor has raised the savings limit up to which benefit can be received to £16,000, and I am grateful for that. But he omitted to tell people that, because of the way in which the taper will work between £3,000 and £16,000,
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