House of Commons Hansard Debates for 19 Mar 1991

CHARITIES

I turn now to charities. While people's real incomes have risen by over a third since 1979, charitable giving has more than doubled, partly as a result of the measures taken by my predecessors to encourage more giving. Tax reliefs for charities are now worth at least £800 million a year. Today I have some modest improvements to announce to the tax regime for charities.

I have two measures that should boost giving by businesses. The first is a new relief from income and corporation tax to encourage business gifts of equipment to schools and to other educational establishments.

The second concerns the gift aid scheme introduced last year. This allows companies and individuals to get tax

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relief on cash donations to charities up to a limit of £5 million a year, under the gift aid scheme. Company groups have found that the division of this upper limit between them prevents them from donating as much as they would like. To overcome this problem, I propose to abolish the limit altogether from today. In recent years, there has been a remarkable increase in corporate donations to charities. I hope that this further measure will encourage companies to give even more.

I also propose to adjust some existing VAT reliefs for charities and to ease the conditions for the relief from car tax for vehicles leased to disabled people.

SPORT AND THE ARTS

I now come to a proposal to benefit both sport and the arts. Last year, my right hon. Friend the Prime Minster reduced pool betting duty, on the condition that the benefit was passed to the Football Trust. Following the success of that measure, a proposal has been put to me by one of the pools promoters for a new foundation for both sport and the arts.

League football benefited from last year's Budget measure, and racing benefits from the horse racing betting levy. This new foundation is intended to provide assistance to other sports and to the arts. It will be financed by contributions collected by the pools promoters along with the weekly pools betting stakes, and should raise some £40 million a year.

On the understanding that all the main pools companies agree to participate and that the full amount would be passed on to a new trust established on satisfactory terms, I would be willing to reduce pool betting duty a final time--from 40 per cent. to 37 per cent. These arrangements would be subject to a review in four years' time. They should make a further £20 million a year available--giving £60 million a year in total--to the foundation in order to support both sport and the arts.

EXCISE DUTIES

I now come to excise duties. First, I propose to raise the duties on alcoholic drinks to maintain their real value. That means that the duties will rise from 6 o'clock tonight by 9.3 per cent.--in line with the increase in the retail prices index in the year to December 1990. That will put about 2p on a pint of beer, 9p on a bottle of wine and around 56p on a bottle of spirits.

I will also be legislating to change the basis on which beer is taxed. The existing system of taxing the so-called "worts" was introduced by my predecessor, Mr. Gladstone. It will now be replaced by one in which the end product, the beer itself, is taxed. The new system will relate the duty more closely to the alcoholic strength of the beer--with a higher tax levied on strong lagers than on low alcohol beers.

I propose increasing all tobacco duties by 15 per cent.--well above the rate of inflation. This will add about 16p to the price of a packet of 20 king size cigarettes, and, I regret to say, around 8p to a packet of small cigars.

There are strong health arguments for a big duty increase on tobacco. In recent years, the duty has fallen in real terms, and cigarette consumption, having declined in the early 1980s, has since begun to turn up again. Raising the duty will help to counter this unwelcome trend.

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The motor car imposes large costs on others in the form of pollution and congestion. I have decided therefore to increase the duties on petrol and DERV by 15 per cent, giving the private motorist a strong incentive to choose more fuel-efficient vehicles, and ensuring that those who pollute most, pay most. This is fully in line with the policy set out last year in the Government's White Paper on the environment.

A litre of leaded petrol will rise by nearly 4p, a litre of unleaded by about 3p and a litre of diesel by just over 3p. The tax differential between leaded and unleaded will increase, giving a further boost to the take-up of unleaded. I propose to freeze vehicle excise duty for private cars and light vehicles at £100, for the sixth year running, and also to freeze VED for all heavy goods vehicles.

BENEFITS IN KIND

Many motorists do not own their own cars but drive those provided by their employers. The scales for taxing the private use of company cars have been substantially increased in recent Budgets, but many employers continue to pay their employees in cars rather than in money. I propose to increase the car scales again this year by 20 per cent. This increase will yield £190 million in 1991-92 and £250 million in 1992-93.

If people are paid in kind, there is no reason why they should be taxed more lightly than people paid in cash, yet our present system also gives employers an incentive to provide employees with cars rather than cash. Under our present arrangements, they avoid making any contribution to the national insurance fund on the benefit that the employee receives from private use of a car.

I propose that company cars and fuel should now become liable for national insurance contributions, assessed according to the scale charges used for taxation. My right hon. Friend the Secretary of State for Social Security will introduce a Bill to that end. Employers will pay at the main rate, but there will be no change for employees.

Employers' national insurance contributions on cars and fuel will yield an extra £610 million a year of contributions. This will reduce an anomaly in the national insurance contributions system, making it more neutral between different kinds of payment, and will widen the national insurance contributions base.

These new arrangements will take effect from April, but contributions will be collected annually in arrears, so employers will not be asked to pay their first contribution until June 1992. They are already familiar with the scale charges used for the tax so they should be able to make the necessary calculations with the minimum of extra work. They are already familiar with the scale charges.

I turn now to what I regard as one of the greatest scourges of modern life. I refer to the mobile telephone. I propose to bring the benefit of car phones into income tax and to simplify the tax treatment of mobile phones by introducing a standard charge on the private use of such phones provided by an employer. Tax will be paid of £200 for each phone for 1991-92. I hope that, as a result of this measure, restaurants will be quieter and the roads will be safer.

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SAVING

I have already drawn attention to the imbalance between savings and investment and its effects in the late 1980s. As companies found more and more opportunities to invest, we needed more savings ; but instead, the saving ratio fell. In successive Budgets, my predecessors introduced new tax incentives to save. Many forms of saving now enjoy a highly privileged tax position.

Last year in particular, my right hon. Friend the Prime Minister announced a new scheme, the tax-exempt special savings account. TESSA has proved a spectacular success since it arrived on the savings scene nearly three months ago, and has encouraged the savings habit among ordinary taxpayers. Already, over 1.5 million people have opened accounts.

My right hon. Friend also announced in his Budget last year the abolition of composite rate tax. From 6 April, non-taxpayers will no longer have to pay tax on their accounts with banks and building societies. These are far- reaching reforms, which need time to settle down and take effect, so this is not the year to disturb the regime that we have just put in place, or to risk causing confusion with further schemes. My main concern has been to consolidate the system that we already have, although I have some modest changes to announce.

I propose to raise the capital gains annual exempt amount to £5,500 and the inheritance tax threshold to £140,000 this year in line with inflation.

National Savings continue to play an important role, particularly for small savers. This summer, I propose to introduce a new National Savings children's bond for children under 16. There will also be a new issue of fixed-interest savings certificates, with a maximum investment of £5,000 compared with £1,000 on the last issue. Other changes to National Savings products will be set out in a press release issued today.

I am also removing the restrictions on friendly societies writing tax- exempt life insurance policies for children, and increasing the limit on premiums for their tax-exempt policies generally from £150 to £200.

Personal equity plans remain an important means of promoting direct share ownership. Since their introduction in 1987, about 1.2 million PEPs have been taken out, and over £3 billion has been invested. I have some further changes to announce.

First, I intend to allow investment in European Community, as well as United Kingdom, shares both for individuals and for unit and investment trusts. Second, to promote the development of single-company PEPs, I propose to allow investors to put up to £3,000 a year in a single- company PEP, as well as up to £6,000 a year, as now, in a general plan. This will allow total investments of £9,000 a year.

While single-company PEPs are available to any investor, I believe that they provide a natural home for shares acquired under employee share schemes. I therefore propose to allow shares acquired under approved all- employee share schemes to be transferred directly into the company PEP, with no charge to capital gains tax.

Employee share schemes and PEPs have encouraged individuals to become shareholders, but many people have bought their first shares in big offers, mainly privatisations. The first of these to catch the public's imagination

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was British Telecom. The Government currently still own some 48 per cent. of the shares, and I can announce today that I intend to sell part of this holding in the coming year.

Privatisations have been a great success. The next step is to encourage people to invest in shares more generally. One problem is that, to the small investor, the stock market can seem remote, intimidating and somewhat expensive. The development of a genuine retail market for shares in high streets up and down the country would be highly desirable.

To give this the boost it deserves, the Government are considering a change in the way in which they market privatisations. For future large flotations, I am today inviting proposals from the private sector for arrangements to distribute shares directly to the public through high street retail networks.

I hope that there will be proposals both from financial institutions--banks or building societies--and from companies outside the financial sector. If satisfactory proposals can be developed in time, I will consider using such a high-street network in the sale of British Telecom shares.

Such a high street network could be used for primary issues, not only by the Government but by private sector companies and, in the longer term, it could provide a cheap and accessible way for individuals to buy and sell in the secondary market.

MORTGAGE INTEREST RELIEF

The measures that I have just announced will encourage people to save, but there is another side to the story, for the fall in the saving ratio at the end of the 1980s was a result not of a fall in gross savings so much as an increase in borrowing, particularly mortgage borrowing.

In part, that reflected the remarkable increase in home ownership over the last decade. That has been, and remains, a key objective of policy for the Government. A less desirable development, however, was the dramatic boom in house prices during the late 1980s, which fuelled borrowing and helped boost inflation. Many first-time buyers found prices rising much faster than their incomes. We need to do all we can to ensure that, when recovery comes, it is not accompanied by another bout of house price inflation, with the unwelcome consequences that that would have for inflation and interest rates. I propose to leave the ceiling for mortgage interest relief unchanged at £30,000, but from 6 April 1991 I propose that relief should be allowed only at the basic rate. That will yield £220 million in 1991-92 on the basis of current interest rates, and £420 million in 1992-93.

I recognise that some people have arranged their affairs on the assumption that higher rate relief will continue. Therefore, to reduce the amount of extra tax they have to pay, I propose to increase the starting point for higher rate tax from £20,700 to £23, 700, £1,000 more than required to match inflation. That will keep the number of higher rate payers broadly stable and mean that a married man will not become liable to higher rate tax until his earnings rise to nearly £29,000.

My objective is to reduce the tax subsidy to borrowing without significantly increasing the average tax burden on higher rate taxpayers. Taking those changes with the changes to the personal allowances that I am about to

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announce, the typical increase in liability for a higher rate taxpayer with a £30,000 mortgage will be only around £1 a week. Of course, the main determinant of the cost of a mortgage is not tax relief, but interest rates. For a higher rate taxpayer with a £50,000 mortgage, the fall in the typical mortgage rate that has already taken place since last autumn fully offsets the change that I am making to mortgage interest relief.

INCOME TAXES

I now come to income tax. Income tax is never welcome, but paying tax unexpectedly is even less so. That is the position facing employees who were working in Kuwait and Iraq at the time the Gulf crisis began. They may now become liable to pay United Kingdom tax on their foreign earnings which they had expected to be exempt. I propose that employees who had intended to work in Kuwait or Iraq for a year or more but were forced to return home earlier by the crisis should not be taxed on their foreign earnings.

I have no changes to make to either the basic rate or the higher rate of income tax. Our objective remains to move towards a basic rate of 20p, but I cannot make further progress towards it this year. Our priority must be to reduce taxes on business.

I propose this year to uprate the personal allowance in line with inflation. It will rise by £290 to £3,295. The personal allowance for the over-65s will increase by £350 to £4,020, and for those aged 75 and over by £360 to £4,180. The married couple's allowances for the elderly will also be increased in line with inflation, from £2,145 and £2,185 to £2,355 and £2,395. The income limit for the allowances for the elderly will increase by £1,200 to £13,500.

However, I am not proposing to increase the married couple's allowance for couples under 65 or the allowances that are linked to it. They will stay at £1,720.

I know that there is a widespread view in the House and in the country that more should be done to help families with children. I propose to use the resources released by not increasing the married couple's allowance for that purpose.

There are some, I know, who advocate the reintroduction of child tax allowances. I have looked at that option carefully, but I am clear-- especially following the introduction of independent taxation--that it would not be an effective way of channelling resources to those who need them. A better way of directing help straight into the pockets of mothers, whether they choose to work or not, is child benefit. It goes to all families--to the children of non-taxpayers as well as the children of taxpayers.

I therefore propose to increase child benefit from 7 October by £1 a week for the first eligible child in each family, and by 25p a week for other children. These rises come on top of the increase announced by my right hon. Friend the Secretary of State for Social Security last autumn, which will be paid from 8 April. This means that, in October this year, a benefit of £9.25 a week will be payable for the first child, and £7.50 for each subsequent child.

We will ensure that the increases benefit not only taxpayers but the very poorest families--those on income support and family credit. These increases will help 6.8 million families, and 12.3 million children. I should add

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that the Government have decided that the new levels of child benefit will be uprated in line with inflation next April and in subsequent years.

CENTRAL AND LOCAL TAXATION

The measures that I have announced today maintain a responsible fiscal policy, while giving help to industry and families. They also include some important reforms to the tax system. However, my Budget would not be complete if it did not address one other issue, which has attracted a certain amount of attention recently.

My right hon. Friend the Secretary of State for the Environment will be annoucing very soon the conclusions of our review of local government. I do not propose to anticipate his statement, but there is one announcement I want to make today.

In January, we announced a £1 billion package to reduce the community charge for more than half of all charge payers. Since then, I have been considering whether the impact of local expenditure on the local taxpayer is too great for any system of local taxation to bear.

I have concluded that local taxes are being asked to bear too large a burden, and that the level of the community charge is still too high. However, if local taxes are to fall, and if the standard of local services is to be maintained, taxes elsewhere must rise. I propose, therefore, to make a substantial switch from local taxation to central taxation. This will amount to about £4 billion in the coming financial year--1991-92- -and will reduce the net yield of local taxation to about £7 billion. This large reduction in local taxation will take it to a level that the Government believe should be sustainable in the longer term.

We shall introduce a Bill in the next few days to authorise payments of extra grant to local authorities, and to ensure that community charge payers will reap the full benefit in reduced charges in the coming year-- 1991-92. The money will not be available to increase local authority spending. Domestic rate bills in Northern Ireland will be reduced as well.

The Bill will also ensure that charge payers do not have to start paying their charges until the new and lower charges have been introduced. Later today, my right hon. Friend the Lord President of the Council will make a statement about the arrangements for the Bill. The switch requires a substantial increase in central taxation. I have decided that this should be achieved by raising indirect taxes--that is to say, taxes on spending.

I am proposing, therefore, from 1 April to increase the standard rate of value added tax by two and a half percentage points to 17 per cent. VAT is a broadly based tax which falls on consumers rather than producers. Since much consumer spending is zero-rated, it bears less heavily on poorer households than on the better-off, so raising VAT is not only an efficient but also a fair way to raise the necessary finance ; and raising taxes on spending rather than taxes on income will be better for savings, and consistent with our strategy for tax reform, first set down by my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) in his 1979 Budget. Raising VAT will increase some prices, but the reduction in the community charge will more than offset that effect, so the switch will actually reduce the retail prices index. As a result of these changes, the community charges recently announced in England, Wales and Scotland will be cut by £140. On average, the headline

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charge will be reduced from about £390 to about £250 in both England and Scotland, and from about £260 to about £120 in Wales, while the amounts people actually have to pay, after allowing for relief and benefits, will fall to under £175 in Great Britain. The charge in Shetland will fall to under £1.

PERORATION

The measures I have announced are designed to meet the three main requirements of any Budget. First, they represent sound finance, and contribute to a firm counter-inflationary policy. My predecessors transformed public finances in the 1980s ; my proposals will keep us on track to balance the budget over the 1990s. Secondly, they respond to the economic needs of the moment. I have cut taxes on business, both this year and next, to help it to weather the recession and take advantage of the upturn later in the year. Thirdly, they continue the reform of the tax system to improve the working of the economy in the longer term. In addition, in a year when resources are tight, I have been able to give additional help to families with children. Finally, I have made a decisive reduction in the burden of local taxation across the country, and cut community charges in the coming year by £140.

This Budget is good for business, good for families, good for charge payers and good for the country. I commend it to the House.

Provisional collection of taxes

Motion made, and Question,

That, pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions :--

(a) Spirits (motion No. 2) ;

(b) Beer (rate of duty) (motion No. 3) ;

(d) Cider (motion No. 6) ;

(e) Tobacco products (motion No. 7) ;

(f) Hydrocarbon oil (motion No. 8) ;

(g) Vehicles excise duty (rates) (motion No. 9) ;

(h) Vehicles excise duty (exemptions : 1) (motion No.l0) ; and (i) Value added tax (penalty for serious misdeclaration) (motion No. 15).-- [Mr. Norman Lamont]

put forthwith, pursuant to Standing Order No. 50 (Ways and Means Motions), and agreed to.

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Budget Resolutions and Economic Situation

AMENDMENT OF THE LAW

Motion made, and Question proposed,

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance ; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide--

(a) for zero-rating or exempting any supply ;

(b) for refunding any amount of tax, otherwise than by virtue of goods or services supplied to one person being treated for the purposes of section 14(3) of the Value Added Tax Act 1983 as supplied to another person ;

(d) for relief other than relief applying to goods of whatever description or services of whatever description.-- [Mr. Norman Lamont.]

[Relevant document : European Community document No. 4433/91 on the Annual Economic Report 1990-91.]

4.49 pm

Mr. Neil Kinnock (Islwyn) : As is customary and traditional, I begin by congratulating the Chancellor of the Exchequer on the way in which he delivered his Budget speech. My congratulations are even warmer than they would otherwise have been because he has provided us with what must be the biggest climb-down in modern political history. After two years of wasting £10 billion on the misery, injustice and inefficiency of the poll tax, we find the Government backing off that which was, but less than a year ago, their flagship. There will, however, be less rejoicing over the fact that the right hon. Gentleman proposes to collect more in VAT ; despite his protestations, that is not a fair way to collect additional taxation. By definition, the tax is regressive--for people on average incomes and low incomes. [ Hon. Members :-- "No, it is not."] Oh yes it is. It takes a disproportionate amount from those on average and lower incomes, and everybody knows it.

Not content with a debate over whether we were to have a head tax or a granny tax or a bedroom tax, the right hon. Gentleman introduces a system of raising taxation to pay for local government services which will tax even children's sweets. It is hard to imagine a tax with a broader scoop-- and all to try to bail the Government out of the stupidity of the poll tax mess that they have created.

That is not to mention all the disasters that will be inflicted--this is not an overstatement--on the cash flow of local government as it tries to cope with an entirely different system of providing the revenue to pay for local services. We shall watch the system and examine it in close detail, and we shall be amazed if the Chancellor gets from the British public the response that he seeks. They hated the poll tax and they will hate this con just as much. There are elements in the Budget that we have cause to welcome. As my right hon. Friends remarked during the speech, there will be dancing in the streets of Islwyn, Sparkbrook and Monklands, East in the wake of the imposition of taxes on mobile phones--which the Chancellor described as attacking what he called one of the greatest scourges of modern times. He must have a peculiar perspective ; when he said that I imagined he was about to deal with all the iniquities of the poll tax.

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Nevertheless, there is much agreement on, for instance, the assistance to be given to small businesses. We called last year for the VAT relief on bad debts of more than a year, and we give it all the warmer a welcome for that. Raising the VAT threshold to £35,000 for small businesses is also welcome. The Opposition have joined small businesses and many Conservative Members in urging that. The simplification and reduction of small firms' corporation tax liabilities are sensible.

The only problem with the other changes that the Chancellor proposes to make in the corporation tax of firms of a variety of sizes is that, although they certainly need relief because of the difficulties that they have experienced in recent years--it amounts to £380 million this year, says the Chancellor, and £800 million in future years--we must make the point that if the Chancellor had such resources they could have been better used on capital allowances which would in turn encourage the movement of more investment into manufacturing industry. That point will be the subject of further debate between the two sides of the House.

We warmly welcome the announced limitation of mortgage tax relief to the basic rate of income tax. That has been our policy for several years now, and the Chancellor--inadvertently, I am sure--has made our job much easier when we form the Government after the next general election.

By way of a final immediate response to the Budget I must mention the changes announced in respect of child benefit. Judging from the hype, I had thought that the right hon. Gentleman would perform another spectacular somersault in this area and that he would roll back the years of the former Prime Minister and previous Chancellors during which the value of child benefit was significantly reduced. I had expected from a family man some understanding of just how significant child benefit is to large numbers of families on average and below average incomes. Instead we are given the postponed payment of an extra £1 for the first child and 25p for other children. I wonder that the right hon. Gentleman had the gall to come and announce 25p. He must have some idea, even on his income, of the expenses involved in bringing up children. His failure to recognise what those expenses mean for working families and families without jobs shows a contempt for their interests.

To restore child benefit to its level when the Government froze it, the Government would have had to increase it by £2.30 for children other than the first child and by £1.30 for the first child. Their failure to do that shows that they are continuing their bias of 12 years' standing against people on modest incomes and in favour of the best-off people in the country.

This is the Chancellor's first Budget and it is also the first since Britain became an exchange rate mechanism economy. This Budget is presented just 21 months before the completion of the single market in the European Community. It is also being presented in a recession. Given those dominating factors, it was only reasonable to expect that the Chancellor would deal with them directly in the Budget. We expected him to face up squarely to the challenges posed by the conditions that our economy faces. He did not. Instead, he dodged ; he gave us a short-term Budget--a tinkering Budget. It will not stop

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the slump. It will not help to build strength for the future. It will do nothing to enhance the competitiveness of British industry. As the completion of the single market draws nearer, we see in the economies of our competitors economic growth and investment performance that vastly exceed those of this country, under this Government. The Chancellor spoke of recession everywhere, but let us put that into perspective. In Italy, growth is running at 2.4 per cent. and investment at 4.1 per cent. In France, growth is at 2 per cent. and investment at 3 per cent. In Germany, growth is running at 4.8 per cent. and investment at 5 per cent. In Britain, after 12 years under this Government, growth is minus 2 per cent. and overall investment is minus 3.4 per cent. In a country that used to be the workshop of the world, manufacturing investment essential to any future success of our economy is falling by 15 per cent. year on year. Yesterday's figures on manufacturing output showed a fall of 8 per cent. this year.

The Chancellor should have made a statement of shame about such figures and such a performance. Nothing like that is occurring in any comparable economy. Other countries are building up their economies in the approach to 1992 whereas the Government are running down the British economy. The Budget will not help to get Britain back to the growth or investment levels of our competitors before the single market is completed.

Last week, the Prime Minister said that he wants Britain to be "where we belong, at the very heart of Europe".

It is a commendable aspiration, which is shared by many of us. The trouble is that, after these Tory years, we shall be not at the heart of Europe, where we belong, but at the tail of Europe, where the Government have put us. The Budget will not stop that occurring. In the wake of the Budget, unemployment will continue to rise, firms will continue to close and businesses will continue to fail. The cut in interest rates that we expect today, before the end of the week or some time next week, should help to mitigate all the pressure of the slump. However, although the cut is necessary and welcome, it will not be enough to stop the recession spreading and deepening. The damage that the Government's policies have done to the economy, to industry and to services is so deep and wide that the effects of a slump made in Downing street will continue for a long time to come. In Britain now, 3,000 jobs are being lost and a hundred businesses fail every day. But industries and firms that go out of production today are unlikely to reappear tomorrow. There is a permanent loss of industrial capacity. Since the second world war, Britain has been through that experience only once before--in the last Tory slump, less than 10 years ago.

The Chancellor said that recessions are always painful. Our only experience of recessions is under Governments whom he supports. It is no accident. The genuine worldwide slump in the wake of oil price rises in the mid-1970s hit every industrial country--indeed, every country. It is more than a coincidence that the only two other recessions that we have experienced since 1945 have been under Conservative Governments. The difference between the last recession and this one is that this time the Government's policies are even killing off the survivors. Companies that managed to pull through the last recession have been unable to beat this one, and enterprises formed and built since the last recession have been wiped out.

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Firms of all sizes are burdened by debt, including so-called distress borrowing, which now runs at over £20 billion--some say as much as £25 billion. Companies are borrowing to survive, not for investment, development or expansion. Redundancy notices and bankruptcy lists are not confined to the so-called old or traditional industries, but have affected electronics and aerospace, machine tools and textiles, software, construction and engineering industries. Well-managed, progressive and forward-looking companies are going down. Unemployment is gripping the south and the midlands, just as it is going up, yet again, in Scotland, Wales and the north of England.

So many of the people who are victims of the recession were promised an economic miracle. The Government encouraged them to borrow and spend and told them that they were part of an "enterprise society". Those people testify daily to the fact that they have been deceived and betrayed by a Government for which many of them voted. In his economic survey this afternoon--his Budget retrospective--the Chancellor hardly gave a word or a thought to those people or to their jobs, industries or futures. If he had made an extensive reference to them and their difficulties, he would have had to say how deep the recession really was and where it came from. If he had done that, he would have had to condemn the ex-Chancellor, his right hon. Friend the Prime Minister.

That is not simply my judgment. An experienced commentator recently reported :

"The Chancellor is tightly boxed in by factors not so much of his own making, but that of his predecessor--and his predecessor but one".

That was said by the right hon. Member for Chingford (Mr. Tebbit), who was reporting--and no doubt earning a few bob in the course of doing so--in the Daily Express. No one could describe him as unfavourable to the Prime Minister because he was among the first to say that the present Prime Minister was the most natural successor to the right hon. Member for Finchley (Mrs. Thatcher).

I suppose that the Chancellor, the Prime Minister and the rest of the Government would like to be remembered as the people who took on rising inflation and pushed it down, but there are two big blemishes in their record. First, they brought the inflation in the first place. Secondly, the very same policies that they used to squeeze demand and inflation are also the policies that are crushing firms, industries and jobs. If the Government want to claim credit for combating inflation, they must also take the blame for causing the slump. No one else deserves the blame.

The right hon. Member for Shropshire, North (Mr. Biffen) said two weeks ago :

"After 12 years in office there are no Conservative alibis". That is certainly true, but it is also true that, if the Government were to have more time in power, they would continue to do the same thing. They would eventually float the economy out of a slump simply by relying on a rise in credit-financed consumption, and would try to tackle the resulting inflationary pressures in the economy with high interest rates. They have no other policies for a recovery, as they have shown before. That would push up prices, debts and wage claims, push down investment and output and wipe out industrial capacity, yet again. They have done that not just once in the past decade, but twice. They have not changed their policies, and they have still not learnt.

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