House of Commons Hansard Debates for 20 Mar 1991

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some form of Eurofed or central bank in the EC. That is important, because the only alternative is to come out of the ERM altogether. The Budget will benefit business. If for no other reason than the fall in interest rates, we shall start to see business take off again, and we shall begin to come out of the recession later this year. That will be welcome and will set us back on the path of growth and economic strength which will be the foundation for great prosperity. As I and all my hon. Friends believe, that will lead us forth to a successful general election campaign when it comes.

8.42 pm

Mr. Ted Leadbitter (Hartlepool) : I have considered most of the comments made by the economic analysts in the press and other areas of information provision and concluded, after the most careful thought, that the Budget was a dog's breakfast. It does not meet, even in the slightest way, the problems of the country.

I do not have to call on Labour party opinion and policy or, indeed, any platform to underwrite what I have just said. I call in aid the report issued on 14 March of the Select Committee on Science and Technology, in another place. It said that the policies of the present Government include no commitment to industry. It is a Committee on which Conservatives are in the majority. After careful consideration and after examining witness after witness, the Committee's report said that, if the present policies were persisted with, Britain would not have any British-owned manufacturing industries. That is the risk. It also said that the Government had no strategy for industry and no policy that took into account the national interest.

This piddling little thing called the Budget--we had the usual ritual of the walk in the park before the Chancellor arrived here, and the little red box, which has more said about it than was in it--was a bit of a dog's breakfast. I call in aid another factor. In the House this afternoon, I raised a matter which is current. The calamitous news in Barrow-in-Furness will cripple the economy of that populace. I raised another matter this afternoon which is causing great concern. The Minister's answer was not much. He told me that he intended to talk to the Commissioner, Leon Brittan. I know that they deserve each other. Ministers made so much of the meeting. One might ask the Commissioner, who is a British subject, whose side he is on. I asked a question arising from Lloyd's List of 3 March, which said that there had been a calamitous decline in shipbuilding in the United Kingdom--of 80 per cent. in 10 years. Britain, which had the most magnificent shipbuilding industry in the world has experienced an 80 per cent. reduction of what was left 10 years ago. The newspaper added that Denmark, Germany and Italy have increased their share of world shipbuilding orders while Britain's share has shrunk to 0.77 per cent.

I feel a little ashamed. When I was a young lad, my father used to tell me about Britain. When I grew up, I began to learn about British-made. It was better than a handshake and a good deal done. Our word was our bond. What do we have now? We have not only a shipbuilding industry which is almost non-existent but a mere 0.77 per

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cent. share of world orders. There must be a state of madness in Government Departments to allow our great country's major industries to be in a state of decline.

Another matter which the Budget statement did not touch on was the closed Ravenscraig steelworks. Thousands of people have lost their jobs. One must apply a multiplier to the immediate unemployment created. If 2,000 jobs are lost at a factory, the multiplier, which is never less than two, makes it a loss of 4,000 jobs in the area. What a disgusting, messy nonsense it is that Black Bob--he got his name well enough as chairman of British Steel-- says that he does not intend to allow anyone to buy the works to compete with him. As in the case of shipbuilding, the British steel industry, which once accounted for 20 per cent. of steel making in the whole of Europe, has now been reduced to a size that does not reflect the significance that it once enjoyed.

Did the Budget include any reference to the dilemma faced by people who want to save communities in the coal industry ? Not very long ago we were producing 75 million tonnes of coal for the power programme. The figure is now 60 million tonnes. There is now talk of coal being imported from abroad --cheap coal extracted by cheap labour. Indeed, the privatised electricity industry is buying coal mines abroad. Is there something wrong with that ? Of course there is. It stinks. When I go abroad I want to speak well of my country ; I do not want to be reminded that the major pillars of our industrial economy have been knocked down.

The best economists and chancellors in the world are the housewives. The Conservative party need not think for one moment that what it is doing about the poll tax will get it anywhere. The housewife will ask, "What is it that is a charge on my domestic budget but is not being taken into account by the House of Commons?" We hear a great deal of impressive economic jargon. Hon. Members enhance their self-importance by referring to such things as the ERM. The ERM is just another name for the fixed rate. We all know the history of fixed rates in this country. The housewife, when she is talking to her husband about the week's budget, will say, "The new financial year is starting. We have been told that the price of electricity is going to rise by more than 17 per cent., and that we shall have to pay more than 12 per cent. more for water. We have been told that fares are about to go up, and that we are going to have to pay more for food and household goods. You will have to pay more for the petrol that you use travelling to work." The list goes on and on. The housewife will say, "How are we going to meet these extra costs? Those daft Members of Parliament tell us not to make wage demands, because they want to get inflation under control." Members of Parliament and other people who are well off do not have to ask how they will manage to meet the extra costs.

What of the poll tax? I chaired the Standing Committee that dealt with the poll tax legislation. Every member of that Committee expressed concern. What a stupid idea it is to try to tax at local level people who are always on the move. What an awful proposition. But now, having said time and time again over the past two years that the poll tax would work, the Government, in a panic, are doing something about it. The Ribble Valley by-election hit them on the head, and they said, "My god, we can't win an election. We had better get rid of the poll tax." So they put the extra burden on VAT.

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I have news for the Government. Value added tax--and I am talking not about zero-rated goods--represents a higher proportion of limited incomes than of higher incomes, and is therefore a regressive tax. People on family income support who are under the threshold do not have to pay poll tax, but even they--people with less than £50 a week to play with--will have to pay an extra 2.5 per cent. in VAT. It does not make sense. For those without money in their pocket, life is going to be hard.

As other hon. Members have waited a long time for the opportunity to speak, I intend to say very little more, but there is one more point that I want to make. Irrespective of whether we like it, Members of Parliament have to make political judgments. There is great concern about how to get the best response from the electorate. Sometimes we make the mistake of making promises--offering carrots. I can tell the House that the electorate will respond favourably if they see consistency of principle, if they see in Members of Parliament examples of public service. They will vote for candidates whose behaviour demonstrates that they are concerned about people. They will not be fooled by carrots--offers of concessions--in the hope that they will deliver their votes in a few weeks' or a few months' time. The public are bigger and better than that. This is Britain. There are higher standards and better examples to be found out there than in here. That had better be understood. Otherwise, something else might be at risk--democracy itself.

8.57 pm

Mr. Kenneth Hind (Lancashire, West) : I welcome the opportunity to speak in the debate. The hon. Member for Hartlepool (Mr. Leadbitter) has just made a stirring speech on behalf of the Opposition. I say to the hon. Gentleman, and to the many people who criticise the Budget from an expenditure point of view, that when the economy is not at its strongest money has to be earned. Industry has to prosper before money can be spent. That fact must be taken into account. Many of the industries to which the hon. Gentleman referred have changed in nature. They have become far more productive ; with advancing technology, there is a smaller manual element. Thus, there are fewer jobs.

The most important element of the Budget is the community charge. The public cried out to us for a remedy. Rejection of the tax was widespread. It caused low-income and middle-income families a great deal of difficulty. It eroded the disposable income of many people and the situation had to be rectified. In introducing an extremely bold policy my right hon. Friend the Chancellor of the Exchequer has addressed the problem. The community charge will be reduced by £140 a head for every payer. It is a sensible measure that will be greeted by the majority of the British people as a common sense move. My right hon. Friend has chosen to raise the money to meet the reduction in the community charge by increasing value added tax by 2.5 per cent. I have listened to the complaints about that, but the reduction of the community charge means that the average family will save £280 a year. That family will have to spend at least £11,000 a year on goods and services that attract VAT before it is worse off. That puts the issue in context.

What are the main essentials for a family? When we answer that question we take into consideration items that are zero-rated, such as children's clothes and shoes, fuel

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for heating and housing costs. Those are essential items that form the basis of the bills that face every family. As they do not attract VAT, it is clear that the majority of families, including pensioners, single parents and those who are unemployed, will be better off as a consequence of the policy that my right hon. Friend the Chancellor of the Exchequer has produced.

I say in a jocular sense that I look forward to the other half of the Budget, as I see it, which will be introduced tomorrow afternoon when my right hon. Friend the Secretary of State for the Environment tells us exactly what he plans to do in the long term. Many of us appreciate that that will lead to the abolition of the community charge.

It is important to understand that we are discussing a Budget for business. Certain factors are not understood by Opposition Members. I listened with interest to the members of the Opposition's team of polytechnic lecturers who speak from the Opposition Front Bench on Department of Trade and Industry matters. They tell us how we should run the economy, but they have never had to worry about where wages come from, about the cash flow of a company or how they will ensure that their workers have training and expertise. These Front-Bench Opposition spokesmen have no experience of those matters. I am a barrister, the chairman of one company and the director of another, and I have relevant experience, as do my colleagues who sit on the Government Front Bench.

There will be cuts in corporation tax and additional help with bad debts. The cost of those measures will total £570 million. That sum will find its way into long-term investment, including the creation of new jobs that will be available when we see the upturn in the economy, which I am sure will come.

We cannot ignore the small business element. The Budget will lead to changes in the collection of tax and to national insurance relief. It will raise the limit of VAT registration to £35,000. The submission of small business accounts will be by way of statement when there is a turnover of only £10,000. These are major improvements that will be greeted with enthusiasm by those who run small businesses. They will work their way through in economic activity and job creation throughout the country. The theme that is forgotten is the overall downward thrust on inflation which in the next few months will lead to a reduction in interest rates. The present level of those rates is the major complaint of every business throughout the country and their reduction is the key to our future prosperity.

We took a bold decision to go into the exchange rate mechanism. It seems clear that the decision made on the value of sterling when we entered the mechanism will be sustained. That in itself will bring a downward pressure on interest rates. Who else will benefit from a reduction in interest rates? The answer is the 65 per cent. of British people who own their own houses and who pay mortgages. A reduction in interest rates will put more money into their pockets. That will lead to their having a greater disposable income and that benefit will work its way back into the economy.

Another important element is the green policy contained within the Budget. I make no apology to those who complain that the price of cigarettes will be increased. How much money do we spend on the national health service year on year to enable it to deal with

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smoking-related diseases? The hon. Member for Brent, South (Mr. Boateng) laughs, but we are spending millions of pounds on cancer research and treating people for heart disease within the NHS, much of which is related to the amount of smoking that takes place in society. We all received a letter from Action on Smoking and Health last week. That organisation is concerned about the increasing numbers of young girls at school and of married mothers at home who are smoking. An increase in the duty on cigarettes will be a major deterrent that will lead to an improvement in the health of the nation.

The same can be said of alcohol. Drinks that contain high levels of alcohol will bear the greatest amount of duty. My right hon. Friend the Chancellor of the Exchequer has rightfully decided that low-alcohol beers should attract a smaller amount of duty. We have a major problem with the greenhouse effect, so we are encouraging lean-burn engines. It will cost more for petrol, but the encouragement is for lean-burn, smaller engines for the future. It is not without significance that, overall, Britain has the lead in lean-burn technology. As time goes on we shall probably benefit from that ; the cars of the future will have smaller engines and will consume less petrol.

Although I believe that child allowances in tax terms should be the way to target money at the most needy, I know that the increase in child benefit will be greatly appreciated by the vast majority of families.

This is a diverse Budget which deals with a good many difficulties. It is imaginative and it attacks the major problems that face us today. I have no doubt that it will be greeted warmly by the vast majority of people.

9.5 pm

Mr. George Walden (Buckingham) : I congratulate my right hon. Friend the Chancellor of the Exchequer on a highly intelligent and socially sensitive Budget. I also congratulate the Chief Secretary on his typically meaty contribution to the debate, and remark in parentheses that the broadcasting authorities and interests who have good reason to be grateful to him for his sensible and enlightened conduct of the Broadcasting Bill are lucky to have someone in the Treasury who will be sensitive to their concerns when these matters raise their heads again.

My main point concerns something that other hon. Members--I apologise for my temporary absence earlier this evening--have not addressed : housing. My right hon. Friend the Chancellor, in deciding to reduce the 40 per cent. mortgage tax relief to a flat rate of 25 per cent. for everyone, mentioned his desire to avoid another upsurge in the housing market.

We are in a curious situation in the House when it comes to housing. Whatever subject one may care to take, hon. Members on one side or the other, Labour, Liberal Democrats or ourselves, will tell the public the truth about the situation. It is all too rare for this to happen with housing, particularly with mortgage tax relief. Nothing should be taboo for discussion in the House, yet somehow we all know that there is something fundamentally, culturally wrong with housing finance. If one were to lock the Conservative, Labour and Liberal Democrat leaders in a room for half an hour and tell them that they must agree on one thing that would benefit the economy of the

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country in the longer term, however controversial it might be politically, they would all come out with the same answer : the total abolition of mortgage tax relief.

Let us not forget that this problem has a history. It is not so much a cultural history, it is a cult of house ownership. When the Government talk about encouraging further house ownership, it may be electorally appealing in the immediate future but it is also financially and economically damaging. How far do we want to go? We have nearly 70 per cent. house ownership now. Do we want 100 per cent. house ownership with all the immobility of labour that it implies? Have we spared a glance for the position in some other countriess, the economies of which tend to be in better shape than ours and where there is a healthier mixture of ownership, rental and state provision? It seems that there is something wrong and unhealthy with the state towards which we are heading, with 70 per cent. house ownership and beyond, because so much of that is based on state subsidy. It is no good arguing that the £30,000 tax relief limit is withering away, when the actual cost to the Treasury is going up by leaps and bounds. It has gone up by about 50 per cent. during the past few years and now stands at £8 billion. With my own little interest in education, I note that that is precisely the same sum as the cost of teachers' salaries--an interesting little side point. The enormous figure of £8 billion which is coughed up by the Treasury does not help people to gain their houses or help first-time buyers, but, as everyone outside the House knows and says, it inflates the price of houses. The result in my constituency, which is rural, is that people born in villages cannot afford to buy houses in them. It is important for the subject to be debated honestly in the House. I understand perfectly well why the Government find it difficult to be as frank as they might be inclined to be on the subject, and I am tempted to say that I understand why the Opposition are a little reticent. However, it is important for us to confront the public with the realities of the inflated cost of housing. One of the many distortions to which this state leads is in the private rented market. The Government have rightly introduced legislation to liberalise the private rented market, but no one in his right mind will rent a house if he can receive Government subsidy, in the shape of mortgage tax relief, to buy one. That is one reason why the private rented market has not taken off and remains at the stultified and completely artificial level of about 9 or 10 per cent., despite the Government's best efforts to improve it.

We could develop the subject ad nauseam. The Organisation for Economic Co- operation and Development has said that the existence of mortgage tax relief in the British culture of house ownership distorts the relationship between productive and non-productive investment--in bricks and mortar, money under the floorboards--to an enormous degree. It distorts the mentality of people's financial planning. Extraordinary figures show that the average mortgage indebtedness of individuals in this country is about double that of analogous countries. The culture of house ownership distorts our wage-claim philosphy. As soon as interest rates go up after a housing boom, people feel that they are entitled to ask for a wage rise to compensate them because their financial philosophy is based on mortgage tax relief and the extent to which they have got themselves artificially indebted because of their mortgage commitments.

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This is a fundamental problem in the British economy which, uniquely, cannot be frankly discussed by the Government or the Opposition and so is rarely talked about in this place. However, every responsible economist outside the House and every major, quality newspaper, including The Times this morning--which asked why the Chancellor of the Exchequer had not done away with the whole damned thing while he was about it--agrees that this is a pernicious system that is damaging to the British economy, housing interests in general and home buyers.

There are paradoxes here. I recognise all the politial problems of doing away with mortgage tax relief. They are common to hon. Members on both sides of the House. We all understand the difficulties of presentation to the public. But if mortgage tax relief were done away with, the first thing that would happen would be that house prices generally would fall. In my personal estimation, they would fall by more than the tax relief in question. It is exactly like going to Harrods or any other shop during the sale--people tend to buy things that they do not need. In just the same way, the very existence of mortgage tax relief encourages people to pay more for their houses than they should.

The paradox--it is an important economic paradox is that if mortgage tax relief were done away with or phased out, house prices would be reduced by more than the tax relief is worth. The result of that--this is the important point--would be that people's mortgages would be less than they are at present.

Since I am making a bit of a virtue of being honest, let us be honest about the repercussions of that. The general level of house prices would stagnate or perhaps even subside. Therefore, people's sense of what they owned in terms of capital might stagnate or subside. But we must be frank and honest about that. Is it a good thing for Britain's future economy that people should have a permanently inflated sense of the value of their property? I rather doubt whether that is so. In this, as in other elements of the Government's policy over the past 10 years, realism and honesty are probably the best policy, particularly in terms of Conservative philosophy. We cannot say that our philosophy in economic matters is based on choice and at the same time say that the be-all and end-all of a person's economic existence is house ownership. There is a fundamental contradiction there.

Economic choice in the housing market means a choice between buying and renting. It is as simple as that. But the market is skewed by the fact that we spend £8 billion a year--I repeat, the total cost of teachers' salaries propping up artificial prices in the housing market. Our philosophy is skewed and contradictory and, while that goes on the private rented market in Britain will never take off in the way that the country needs, both to expand that stunted market and to create a level playing field in housing terms.

We are all grown-up people and no one, other than misguided individuals such as myself, talks about such matters before an election. But this is a fundamental problem which will not go away. That is why I am taking this opportunity to make some remarks that will be highly unpopular among many people in the country and which will marginally embarrass members of the Government Front Bench, except that they know that what I say is true and that the remedies that I advocate are the right ones. I suspect that the Opposition know that perfectly well, too.

I conclude with the perhaps slightly excessive remark that the continued existence of mortgage tax relief, which

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inflates prices, distorts the economy and contributes indirectly to the appalling problem of homelessness, is to some extent due to a conspiracy of silence in the House among all political parties. However, I have enough residual political realism to realise that nothing will be said or done about the problem this side of an election.

9.19 pm

Mr. Paul Boateng (Brent, South) : On the eve of the Chancellor's statement, the country looked to him for a Budget for manufacturing industry, for training and employment, for mother and child, for sustained and sustainable investment, and for growth and recovery within a decent environment.

Yesterday, the House and the country got a Budget born out of desperation and rooted in failure. The desperation prompted a squalid political bribe of unsurpassed proportions to be delivered, in an unprecedented fashion on the back of an unparalleled transfer from local to central taxation, by a substantial addition to the rate of value added tax. The failure was a failure in the economy. In his opening remarks, the Chancellor paid a somewhat surprising, but nevertheless heartfelt, tribute to his predecessor, the right hon. Member for Blaby (Mr. Lawson). In so doing, he invited a comparison between the right hon. Member and himself that I think the Chief Secretary to the Treasury will well understand--a comparison in performance. I shall try to explain it. I said that I believed that the Chief Secretary would understand it because the English National Opera company--of which I am director--has a reason to be thankful to him in another incarnation and I know that he is a great lover of the lyric verse.

The best way to describe the performance of the right hon. Member for Blaby on these occasions used to be "bravura". The performance of the Chancellor was much more "sotto voce", more of an Italianate tenor--a lightweight Figaro. That is how I would describe him, as a deft but lightweight Figaro whose bits of business--we all know what a great one Figaro was for bits of business--were not designed simply to enhance one's understanding of the piece, although it must be said that they were ingenious bits of business and brought cheer to some of the audience who feared that they might otherwise lose their seats. Nor were his bits of business even designed to take the action forward, which is always a good excuse for a bit of business in opera. No, on this occasion they were designed to keep the set from falling down on the heads of the players.

That was the point of all of those ingenious little steps, although some were large, histrionic steps--consider the hike in the rate of VAT. We shall remember that performance. However, the failure is a serious matter.

Mr. Mellor : What about Brunhilde?

Mr. Boateng : No, Brunhilde is in the past. She has had her day and has been disposed of in the most unpleasant and Wagnerian fashion. The Chief Secretary must not be naughty, although his role in those matters is suspected, if not known. I want us to consider the failure that necessitated the bits of business. One hundred business failures, 4,000 job losses and 150 house repossessions every working day : that is the extent of the failure. The CBI's

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optimism indicator--an interesting criterion by which to judge a Conservative Government--is at its lowest since 1980, at minus 51 per cent.

Moreover, we must not forget the figures that the Chancellor left out yesterday. Fixed investment, predicted last year to fall by 1 per cent., is now predicted to fall by 10 per cent. Manufacturing output, predicted last year to fall by 1 per cent., is now predicted to fall by 5 per cent.

What we encountered was a phenomenon to which Opposition Members have grown accustomed. We encountered it last year with the former Chancellor, the present Prime Minister ; even the right hon. Member for Blaby was given to using this simple device from time to time when he had cause to do so. The device to which I refer is best illustrated by a comparison with a certain cynical, indolent servant of the state--a figure whom the Chancellor, whose love of the cinema is well known, is bound to recognise. Hon. Members will remember the part played by Claude Rains in the movie "Casablanca". Whenever things got out of control and he--through his own indolence or unwillingness--was not able to put them right, he would latch on to the device of rounding up the usual suspects. "Round up the usual suspects!", he would say, and a few tattered figures would be drawn from the casbah.

Hon. Members will remember the scene. Time and time again, throughout the movie, the same thing happened--and that is what has happened in successive Budget speeches over the years. Who, then, are the suspects? It seems that the basic cause of the problem is the same everywhere. We hear of cyclical influences, global phenomena and--I think that this is the best of all-- recession, the inescapable feature of the market economy. That is rich, coming from a party that has told us year in, year out, to worship at the feet of this Moloch. "Round up the usual suspects!"

I was a little worried by the fact that, this year, the usual suspects appeared to be pretty thin on the ground. I see the Chancellor craning his neck to see what is coming next. After a while, of course, all the suspects disappear ; they are not so obliging in coming forward. The Secretary of State for Trade and Industry and aficionados of late-night debate will recall his contribution last year, when he was, if memory serves me right, Financial Secretary to the Treasury. It was a startling contribution. This year, however, he was clearly a little concerned that the usual suspects would not be readily to hand. From an article in the Financial Times of Monday 11 March--and a good read it was--

Mr. Nigel Griffiths (Edinburgh, South) : I remember it well.

Mr. Boateng : --we were to discover a new batch of "usual suspects" : highly unusual suspects, in view of the Conservative party's composition and policy. We were told that our problems arose because "we have an over- developed finance function, vis-a-vis the production function."

We could have told him that. Indeed, the last time I saw that phrase used was in the New Left Review. The correspondent with the Financial Times felt obliged to point that out.-- [Interruption.] I see that the Minister of State, Treasury read the same letter as I did.

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Why should we be surprised that those views have been espoused? After all, the Conservative party chairman felt it necessary to refer to the interesting concept of the social market economy in no less a publication than Marxism Today. If that is the vehicle of the chairman of the Conservative party, why should not the New Left Review be something from which the Secretary of State for Trade and Industry culls his new ideas?

He went on to say--this is where the "usual suspects" appear--that "We have 120,000 accountants compared with 7,000 in Germany. The inevitable thing in a company dominated by financial people is an excessive preoccupation with succeeding in making deals rather than the predilection of the production manager and the engineer to proceed by organic growth."

We now have a new batch of "usual suspects"--accountants. If there is a profession more populous among the new breed of Conservative Members than estate agents, it is accountants. In their desperation, the Government have turned on the accountants. However, I do not want us to become too hung up on the accountants. We should look at what the engineers have said about the Budget.

Mr. Walden rose --

Mr. Boateng : I shall give way later.

The Chief Secretary trotted out a series of favourable reviews. However, he overlooked the review by Ian Thompson of the Engineering Employers Federation--an engineer. That will please the Secretary of State for Trade and Industry because he is not yet among the "usual suspects". That review said that the Budget was

"not an adequate response to the problems of United Kingdom industry and does not address the problems of companies not having enough cash to invest for the future."

That was the judgment of the engineers. This afternoon, we heard the judgment of the accountants, and we all know where they stand on the issue. We must look to Mr. Thompson and the Engineering Employers Federation to find the true reflection of the Budget's worth. Concern has been expressed by many hon. Members about the belief that the engineering and manufacturing industries were not getting the deal that they deserved from the Budget. The hon. Member for Saffron Walden (Mr. Haselhurst) rightly said that he believed that the Government might have difficulty in making stick the view that this was a Budget for business. At least he was frank. The hon. Member for Fulham (Mr. Carrington) was less frank. He said that there is no doubt that it is a Budget for business. There was an ambivalence on the part of Conservative Members, and with good cause, because the Budget does not meet--as we would have it meet--the deep-seated needs of the British economy.

In the Budget statement and the Red Book which supports it we find a number of unlikely assumptions and false forecasts that lead us to believe that the Budget is about electoral considerations and short-term political advantage rather than about meeting the immediate needs of our economy.

The Chancellor said in his Budget statement :

"If I may confess it, I do not believe in miracles".--[ Official Report, 19 March 1991 ; Vol. 188 c. 166.]

Remember the economic miracle to which my right hon. and learned Friend the Member for Monklands, East (Mr. Smith) had cause to refer time and again? It is an albatross around the Government's neck. We are told that the Chancellor does not believe in miracles, yet we are asked

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to believe in a Budget that is constructed around a number of assumptions whose plausibility looks dubious even now and will look increasingly dubious in future. The Budget deficit of £8 billion must be delivered without spending cuts in the next autumn statement. Inflation must fall to 4 per cent. by the fourth quarter of 1991, and interest rates must fall dramatically. All that must be achieved within the ERM and in an uncertain world.

If we are to achieve 2 per cent. growth between this summer and next, interest rates will have to fall and stay down. The United States economy will have to recover and drive world growth. United Kingdom companies will have to disavow reductions in investment, jobs and stocks. Will that happen? Will the hon. Member for Derbyshire, South (Mrs. Currie) take a vow of silence? Will the hon. Member for Billericay (Mrs. Gorman), who has gone off in a huff, suddenly convert to the command economy? Will it happen? Will it hell.

Mr. Walden : Will the hon. Gentleman give way?

Mr. Boateng : I promise that we shall hear the apologia for the accountants in due course.

We can therefore be forgiven for being somewhat sceptical about the assumptions that lie behind the Budget.

Mr. Walden : The hon. Gentleman's speech is more entertaining than enlightening. Why does he not recognise that three of his favourite foxes-- child benefit, mortgage interest tax relief and the community charge--have been shot, leaving him bugling away to the empty air? Will he now tell us exactly what he would do?

Mr. Boateng : I do not have a favourite fox, but those among my acquaintances are very fit and will yet outrun Conservative Members. In the moments that remain to me, however, let me seize with both hands the opportunity to examine what we believe needs to be done. We have outlined it clearly enough, but I am only too happy to reiterate it. We believe that it is important that the Government should reverse the cuts that they have made in employment training and youth training. We are disappointed that all we had from them was the paltry £20 million-worth of allowances. [ Hon. Members :-- "Paltry?"] Yes, it is paltry when compared with the £245 million that the Government have cut from the youth training and employment training budgets. That cut should be reversed. We believe that there should be a temporary work programme for the long-term unemployed and we have called for a specific programme to achieve that.

We believe that, in regard to child care and support for children and mothers, the proposals in the Budget about child benefit are completely inadequate. Child benefit should have been increased to £9.55 a week for all children and we entirely accept the point made most cogently by the right hon. Member for Chesham and Amersham (Sir I. Gilmour). It makes no sense to distinguish between the first child and any subsequent children. This year, a two-child family will lose £154.70 as a result of the Government's failure to upgrade child benefit.

We believe that more should have been done in relation to the environment. To describe what the Government have done as a green tinge is a misuse of language. The Government had an opportunity, which they failed to take, to begin to create conditions that would have a real

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impact on the misuse of the car through the use of differential VAT and differential vehicle excise licensing, but they failed to take that opportunity.

We believe that it is important to emphasis research and development and to use capital allowances imaginatively and progressively to achieve that end. That was the call made by the Confederation of British Industry and by the engineers.

The Budget is a wasted opportunity. The Government have failed the country and they have failed to meet the challenge of the times. In due course, they will pay the price of that failure.

9.41 pm

The Financial Secretary to the Treasury (Mr. Francis Maude) : This has been an enjoyable debate. It is some time since I had the pleasure of taking part in a Budget debate and this has been a spirited and delightful day. I very much enjoyed the speech made by the hon. Member for Brent, South (Mr. Boateng). It was strong on style although a bit short on content. It was good on opera and films, but a little light on economics. It may be a pedestrian view, but I believe that a debate on the Budget should at least touch lightly on economics at some point. None the less, the hon. Member for Brent, South made a very good speech and we all enjoyed it.

My right hon. Friend the Chancellor of the Exchequer has not been with us in the Chamber for much of this debate. However, I suspect that his ears were burning as a result of the large number of compliments that were paid to his Budget. I will spare his blushes by not listing all the plaudits.

Mr. Nigel Griffiths : Go on, list some.

Mr. Maude : Very well, I will. My right hon. Friend the Member for Chesham and Amersham (Sir I. Gilmour) described the Budget as civilised and intelligent. Many of my right hon. and hon. Friends used other adjectives. Very few of my right hon. and hon. Friends found anything to cavil at in the Budget. It was slightly disappointing that the hon. Member for Hartlepool (Mr. Leadbitter) chose to describe it as a dog's breakfast. If that is right, it is some dog and it must be a very filling and nutritious breakfast. To paraphrase my hon. Friend the Member for Saffron Walden (Mr. Haselhurst), he pleaded that we should be nice to manufacturing industry. I believe and hope that we are. Perhaps I can say something nice about one particular part of manufacturing industry which has been the subject of much comment--the car industry. The car industry did astonishingly well during the past year-- [Interruption.] Opposition Members may laugh, but it is an important matter. They may like to listen. In the past three months motor vehicle exports from this country rose by 50 per cent. over the equivalent period a year before. Opposition Members may think that that is funny, but we think that it is to be commended.

Mr. Hind : My hon. Friend makes a very good point. Is it not a credit to the fact that Britain has been prepared to invite inward investment from Nissan, Toyota and so on? People are building cars in this country and exporting them to the European Community, and that plays a major part in closing the trade deficit with which we are currently wrestling.

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Mr. Maude : My hon. Friend is entirely right to draw attention to the large amounts of investment coming into this country. Despite Opposition Members' efforts to talk it down, this country is now a rather good place in which to manufacture goods, as people outside the Labour party increasingly recognise.

I shall deal briefly with the speech of the hon. Member for Berwick-upon- Tweed (Mr. Beith). The main burden of his song seemed to be that we should hand over control of monetary policy to an independent central bank. That demonstrates in an aspirant Chancellor of the Exchequer a certain lack of confidence in his ability to control monetary policy. If there were ever the prospect of his being Chancellor of the Exchequer, the attractions of having an independent central bank might become rather more apparent.

Mr. Beith : It was the view of the previous Chancellor, the right hon. Member for Blaby (Mr. Lawson). Was he dissatisfied with his capacity to run monetary policy?

Mr. Maude : The hon. Gentleman wants to hand over control first to the Bank of England and then to a European central bank. I am bound to say that that view does not command much support on this side of the House.

The hon. Member for Norwich, South (Mr. Garrett) referred, as did my right hon. Friend the Chancellor, to the erratic nature of some forecasts. The hon. Gentleman expressed a strong preference for private sector rather than public sector forecasts. That represents a damascene conversion to the merits of the private sector which is wholeheartedly to be welcomed.

My hon. Friend the Member for Twickenham (Mr. Jessel), who also spoke in complimentary terms about my right hon. Friend's Budget, rightly emphasised the importance of getting inflation down. That is the major theme of the Budget and of the debate. Unless we get inflation down we cannot build for growth and prosperity in the future.

Several hon. Members talked about local government, and properly so because it featured in my right hon. Friend's Budget statement. I must ask them to contain their impatience until tomorrow, in particular the hon. Member for Londonderry, East (Mr. Ross), who asked several specific points. Those points will be dealt with in due course, but I must ask the hon. Gentleman to contain his proper inquisitiveness until then.

In the Budget there are several tax reform issues which take forward the Government's firm commitment steadily to reform the tax system where necessary. There is a consultation document on foreign exchange gains and losses--not, I accept, a glamorous subject, but it is important--in which we present proposals that we believe will bring rationality to a difficult aspect of the tax code. We have also presented a consultative document on resident trusts. That is the outcome of a review that was announced by my right hon. Friend when he was Financial Secretary to the Treasury. Again, that document would rationalise the law in a way that will simplify it and make it more comprehensive and helpful. We proposed to bring forward a consultative paper on taxation of the self-employed. The present arrangements for taxing companies and the self-employed are complicated and inefficient.

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We are already introducing a new system, "Pay and File", which will simplify the way in which companies pay tax. It is now time to streamline the arrangements for the self-employed. We propose changing one of the oddest features of the present system which is that in any year the self-employed are taxed on their profits in the preceding year. Under the new proposals, the self-employed would, like employed people or companies, pay tax for one year on the profits earned in that year. We believe that that would help to make the rules much simpler. We also have proposals to cut the regulation of the self-employed by the Inland Revenue, by giving the self-employed greater responsibility for settling their own tax, as happens in other countries. It will not be possible to implement the reforms for some years, but, if we are to take full advantage of the opportunity for radical and imaginative reform, we need to start planning for it now.

The Budget contained a number of proposals about deregulation of the tax system. Taxes inevitably place a compliance burden on taxpayers and it may frequently be necessary for businesses to play a role in administering the system to ensure that it is as cost-effective as possible. Periodically, we must look at ways of easing that burden where possible, and must always take into account the compliance costs when considering options for change. Of course, the best deregulatory measures are those that take people out of the tax system altogether. That is why my right hon. Friend the Chancellor announced a 40 per cent. increase in the value added tax threshold. It will mean that up to 150,000 firms will no longer have to register for VAT.

We have also reduced the burden of the tax system on small firms through our proposal to allow up to 700,000 small employers to pay their PAYE and NIC payments quarterly instead of monthly. That will help them by improving their cash flow--although I accept that it will do so only slightly--and by reducing their administrative costs. Next year we shall increase the number of taxpayers who may submit simplified three-line accounts to the Revenue from 1 million to 1.5 million. Again, that means a substantial reduction in compliance costs for those in business.

My hon. Friend the Member for Bedfordshire, South-West (Mr. Madel) asked yesterday about the proposed tax relief on vocational training and whether it would extend beyond examination fees, and tuition and course fees. The relief is intended to be given at source. Repayment systems always cause delay and confusion, so we propose that tax offices will be involved only in reimbursing organisations that provide qualifying relief and individual taxpayers who are entitled to relief at the higher rate. Because it is relief at source, it is not possible to extend it to travel, subsistence or accommodation costs or to the cost of books or equipment--

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