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There follows a glowing account of all the virtues contained in this Budget. Indeed, there never was a Budget of such all-consuming virtue as the one to which Mr. Paul Johnson had his attention drawn yesterday by the spin doctor from the Conservative party. Unfortunately, the spin doctor from the Conservative party failed to call on the City desk, where Mr. Andrew Alexander has as his headline, "Lamont misses his chance". There follows a gloomy account of Britain's parlous economic condition, stressing how serious our condition is and making statements such as this :"It also makes it hard to take seriously the Chancellor's pledge that the Government will successively reduce income tax in the years ahead."
The distinguished writer of the City column continues-- [Interruption.] Conservative Members do not like listening, but I shall tell them any way. He continues :
"Thatcherites, viewing the prospects of six years of budget deficits stretching all the way to 1997 (and suspecting that they are understated anyway) may well feel that the Government is simply squandering its inheritance of fiscal prudence."
That is quite different from the account of the Budget that appears in the political column.
Mr. John Butterfill (Bournemouth, West) rose--
Mr. Smith : No doubt the hon. Gentleman wants to clear this matter up for me, so I shall give way to him in the hope that he will do so.
Mr. Butterfill : Would the right hon. and learned Gentleman compare the PSBR of 4 per cent. that we are running with the 6 per cent. average of the previous Labour Government and the 9 per cent. peak that they reached?
Mr. Smith : During the years to which the hon. Gentleman refers, most deficits were higher in most countries because we were suffering the oil price shock throughout the western world. The proper comparison would be a comparative one, not a historical one, which the Conservative party would not want to make.
However, I cannot confess that I am dismayed at the lack of co-ordination. My only worry about drawing it to the attention of a wider audience is that it might go on the agenda of the A team and the spin doctor from the Conservative party will have to widen his round to the square mile and elsewhere.
On the question of the Conservative party borrowing, which is one of the interesting features of our present political debate, my right hon. Friend the Leader of the Opposition challenged the Prime Minister on just this point last month during Prime Minister's Question Time. He quoted from a Conservative party publication called "Towards 2000", which was issued last year and which says that it was written by the Prime Minister himself. That might be stretching credulity, but that is what it says on the document-- that it was written by the Prime Minister himself, the right hon. Member for Huntingdon (Mr. Major). The document states that
"if borrowing takes the strain, taxes--not just our taxes but the next generation's too--have to go up."
That was the Conservative view just a few months ago.
The Prime Minister, clearly irritated by my right hon. Friend's question and even more irritated by the fact that very recent Conservative party propaganda stated the position so clearly, challenged the Leader of the Opposition to do some more research. On 25 February--last month--he told the House :
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"If he"--my right hon. Friend--
"had done a little more research and had seen the evidence that I gave to the Treasury and Civil Service Select Committee in 1987, he would have seen then--when we had a fiscal surplus of many billions--that I indicated that it would be right, in a downturn, to borrow money in a recession."--[ Official Report, 25 February 1992 ; Vol. 204, c. 808.]
Apparently, that is a complete defence to the charge against them. Of course, taking the Prime Minister at his word, a number of interested parties--including BBC's "On the Record" programme and my hon. Friend the Member for Hackney, South and Shoreditch (Mr. Sedgemore), who is a member of the Treasury and Civil Service Select Committee--decided to do some research. They looked for the evidence of the former Chief Secretary, the right hon. Member for Huntingdon. They searched right through the Select Committee's evidence for 1987, but they searched in vain, because the right hon. Member for Huntingdon did not give evidence to the Select Committee in 1987 at all. Not a word did he utter to the Select Committee.
Undaunted, our intrepid researchers kept working, and discovered some evidence given in 1988 by the then Chief Secretary after that year's autumn statement. Perhaps that had got confused in the right hon. Gentleman's mind. On these matters, given the stresses and strains of the House of Commons, one should take an indulgent attitude but, unfortunately for the Prime Minister-- [Interruption.] I think that I am entitled to be reasonably patronising about this kind of thing. Unfortunately for the Prime Minister, his 1988 evidence is not so helpful after all. He was wrong about the year--
Mr. Butterfill : What would you do?
Mr. Smith : Well, I would not say that I had given evidence to a Select Committee if I had not.
The right hon. Gentleman was wrong about the year, but he was also wrong about the contents of the evidence that he revealed to the Select Committee on 23 November 1988. He did not say anything at all about running deficits in recessions. What he said was far more revealing. As reported on page 18 of the Select Committee's report on the 1988 autumn statement, he said :
"Over a run of years it remains our policy to reduce public expenditure proportionately to national income and we plan to achieve that. If we found that our projections were that growth in the economy would level off quite significantly, clearly we would have to look at the impact on public expenditure and whether we had to take a very clear, fresh and draconian look at the levels of public expenditure that were appropriate."
Note the words
"clear, fresh and draconian".
We know--it cannot be a matter of doubt--that unfortunately growth has not only levelled off but disappeared. According to the Prime Minister's own rules, he should be taking a
"clear, fresh and draconian look"
at public spending, but of course he is not, because he has just called an election.
If he were to win the election, we could expect "clear, fresh and draconian" action. That would come in one of two ways : either through increases in taxation in the favourite Conservative manner--by raising the level of VAT or extending its range of application, or both--or by cutting public expenditure sharply. The Conservative party is engaged--
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Mr. Norman Lamont rose --Mr. Smith : Will the right hon. Gentleman allow me to finish the sentence ? It is not bad my giving way twice to him when he did not have the courtesy even to turn up for the debate, but I shall do so. The Conservative party is engaged on a three-card trick. It is promising to maintain levels of public expenditure, to cut the basic rate of income tax to 20 per cent. and to balance the budget. In our economic situation, they cannot do all three things at once.
Mr. Lamont : I am afraid that what the right hon. and learned Gentleman says about borrowing is totally unconvincing. He should remember the lectures that the Leader of the Opposition used to give my right hon. Friend the Member for Finchley (Mrs. Thatcher) when she was Prime Minister, urging her to borrow ever more money. A few years ago, the Leader of the Opposition said :
"The vitality of the US economy has been initiated by Government borrowing. To renovate our economy we have to generate expansion in much the same way."
The question that the right hon. and learned Gentleman must answer is--
Mr. Speaker : Order. The right hon. and learned Member for Monklands, East (Mr. Smith) has given way.
Mr. Lamont : The right hon. and learned Gentleman must answer this question : is the present level of borrowing too high, or is it about right ? If it is too high, will he tell us which taxes he will put up, or which spending programmes he will drop from his manifesto ?
Mr. Smith : The right hon. Gentleman took some time to put his question--some people will think that he wants to have another run at presenting his unsuccessful Budget to the House. It is a bit rich to be asked questions about borrowing by the right hon. Gentleman, but I shall answer his question directly, and I shall be obliged if he will do me the courtesy of answering me, and explaining the quotation from him that I cited.
I shall fulfil the first part of that bargain by saying that I shall accept the public sector borrowing requirement which exists after we win the election. I shall have no choice, because it will be there, and we shall operate on that basis. Having given that answer, I shall give way to the Chancellor if he will explain to us what he meant by saying :
"We shall pay for borrowing by borrowing--that is the normal way in which one pays for it."
I shall give way to the right hon. Gentleman now if he wants to explain that.
Mr. Lamont : The right hon. and learned Gentleman has not answered the question that I put to him--[ Hon. Members :-- "Answer."] The right hon. and learned Gentleman says that he accepts the borrowing requirement, yet he also makes promises that would cost some £37 billion. Which promises is he prepared to drop?
Mr. Smith : The right hon. Gentleman did not behave terribly honourably there. I gave way to him on the basis that he would answer a specific question. However, he will now have to live with the fact that the quotation will go into the record uncontradicted. He said :
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"We shall pay for borrowing by borrowing-- that is the normal way in which one pays for it."--[ Official Report, 28 November 1991 ; Vol. 199, c. 1062.]That is not the normal way at all ; it is the Conservative way. The Government cannot do all three things at once. Most people will therefore conclude that in this context reductions in income tax are a cynical pre- election device, which, as the history of the Conservative party shows, could be equally cynically overturned if the Government were to achieve their purpose at the polls. The Conservative party's professed concern for lower-paid people is equally cynical. The proposed income tax cut is designed to reduce everyone's tax bill by just under £2 a week--I do not think that the Government could deny that. The reduction is not £2.64 per week--the figure which appeared in newspapers and, I believe, in Government statements--because 72p of that sum results from the annual indexation of allowances in line with inflation, and should not be regarded as a genuine reduction. Of course, the gain is less for the 250,000 people in taxpaying families on family credit. They will lose 70p in benefit for every pound that they gain in tax cuts.
It was revealing that, in his Budget broadcast last night, the Chancellor, on his own initiative, took as the example of a lower-paid person a taxpayer earning £70 per week. He asked whether we could charge so much tax to a person earning £70 a week.
Mr. Tim Smith (Beaconsfield) : Will the right hon. and learned Gentleman give way?
Mr. Smith : I will not give way to the hon. Gentleman. I have given way frequently in the debate--more than most people would have done. I have given way, although it has been to little purpose.
Mr. Neil Hamilton (Tatton) : You have not given any answers.
Hon. Members : You are a Whip. Be quiet.
Mr. Smith : Yes. It is a sad state of affairs that the hon. Member for Tatton (Mr. Hamilton) is a Whip. I did not know that the Conservative party had descended to a condition in which the hon. Gentleman had been made a Whip. I see that it has now happened. Perhaps the hon. Gentleman will become the Government Chief Whip as well. He certainly looks as if he aspires to that office. I return to the subject of the taxpayer on £70 a week, whom the Chancellor told us he had in mind when he made his tax change. The tax reduction offered to that taxpayer is just under 19p per week. That is the price of a box of matches, which may be why the Chancellor referred to the tax on matches.
If the Conservative party truly cared for the interests of the lower-paid, the Government would increase retirement pensions for all pensioners--by £5 for a single person and £8 for a married couple--instead of £2 and £3 only for pensioners on income support, and they would uprate child benefit to £9.95 for every child in the family. That would have been its level if the Conservatives had updated it in line with inflation, as is customarily done with tax allowances. That neglect may not be surprising in a Cabinet that does not have a single woman member.
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The money that the Conservatives have borrowed for tax cuts should be used for investment in our public services and in the improvement of our economy. That is the preferred choice, and the better choice which will be made by families throughout the country who depend on our national health service for all their health care needs and who look to our education system to provide the opportunity for their children.Over the past 13 years, Britain has been subjected to the rollercoaster economics of boom and bust--of stop, go and stop again. We have had to suffer two recessions. The one at the beginning of the decade was the deepest since the war, and the one that we now endure is the longest since the war. Separating those two recessions were the years of an inflationary boom. During the Conservatives' period of office, economic growth has averaged 1.7 per cent., which is the worst record for economic growth of any Government of any political colour since the end of the second world war.
Despite all the benefits of North sea oil, with those revenues alone worth more than £100 billion, and despite selling off the family silver, our public finances are now in debt and in disorder. Fortunately for our country, time has run out for a party living on borrowed money and on borrowed time. The time for choice is now ; it is time for Labour. [Interruption.]
Mr. Speaker : Order. I hope that we shall now proceed in good order. Will hon. Members please leave quietly if they are not remaining in the Chamber?
4.18 pm
The Chief Secretary to the Treasury (Mr. David Mellor) : I am glad that Labour Members enjoyed the speech by the next Leader of the Opposition. To those of us who attend these events more regularly than some of those who were cheering, it was yet another of the "green" speeches of the right hon. and learned Member for Monklands, East (Mr. Smith)-- endlessly recycled. He chanced his arm in a number of respects--for instance, the mention of Japan, and the "Boy, they've got good" remark. I wonder whether the right hon. and learned Gentleman has studied the figures that I gave in a parliamentary answer to his hon. Friend the Member for Leeds, West (Mr. Battle). They actually tell us something about the Japanese attitude to Britain.
In 1978, the last full year of a Labour Government, when the right hon. and learned Gentleman held quite high office, Japanease investment in this country was minus £10 million. In other words, there was disinvestment. The Opposition were not saying, "Boy, they've got good." In 1989, there was Japanese investment in this country of £1.12 billion. Whether or not the Opposition were saying, "Boy, they've got good," that is what the investment is actually telling us they felt. They are doing that in the teeth of nonsensical opposition to overseas investment by the Labour party, including the Trades Union Congress speech from the rostrum denouncing it as alien--something never repudiated by the Opposition Front Bench. The right hon. and learned Gentleman trailed his coat by making reference to the Frost programme last Sunday. I am astonished that the Opposition wish to be reminded of the performance of the hon. Member for Livingston (Mr. Cook), unless the byzantine complexity of the politics of the Labour party at the moment mean that the right
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hon. and :learned Member for Monklands, East was quite happy that his colleague should remember what a fool the hon. Gentleman made of himself.Mr. David Howell (Guildford) : Is my right hon. and learned Friend aware that, last weekend, Japan's second biggest investor in the United Kingdom, the president of the Toyota motor company, was here and that he made it crystal clear that he regards Britain as one of the most successful countries in the entire European Community?
Mr. Allan Rogers (Rhondda) : Cheap labour.
Mr. Howell : He intends to build on his investment here, and he has undiminished faith in the economic success and dynamism of this country. Does my right hon. and learned Friend agree that the right hon. and learned Member for Monklands, East (Mr. Smith), by bad-mouthing Britain in the eyes of the Japanese and undermining our reputation and success, is doing no good whatsoever to this nation?
Mr. Mellor : It is interesting that, even this early in the debate, we have revealed the two faces of the Labour party--on the one hand the attempts at moderation and understanding of a market economy by Front-Bench Members, and on the other hand the real voice of the guts of the Labour party. The hon. Member for Rhondda (Mr. Rogers) shouted out "Cheap labour" when my right hon. Friend the Member for Guildford (Mr. Howell) referred to Japanese investment. Even more extraordinary is that he from south Wales should shout "Cheap labour" when the economy of south Wales has been transformed by inward investment from countries such as Japan. [Interruption.] If the hon. Gentleman wishes to withdraw "Cheap labour", I shall give way to him. After all, in four weeks he could be a Defence Minister, so we should hear a bit more. He is laughing. He does not think that that is very likely.
Mr. Stuart Bell (Middlesbrough) rose--
Mr. John Home Robertson (East Lothian) rose--
Mr. Mellor : I shall push on for a bit now. [Interruption.] I shall give way to the devolutionist tendency a bit later. This is a Budget for recovery, and I warmly congratulate my right hon. Friend the Chancellor on it. But, as it happens, I do not need to add a single word of commendation of my own ; I can let the business men and industrialists of Britain do that for me. Contrary to the picture that has been portrayed by the Opposition, what has been said by business and industry is a tremendous vote of confidence in this Budget, my right hon. Friend the Chancellor and the Government. The Confederation of British Industry said :
"This is a prudent and positive Budget--reflecting the prime importance of keeping inflation under control. Business welcomes, particularly, bringing forward the benefits of the Uniform Business Rate reforms, and the measures to help small firms and the car industry."
The Institute of Directors said that the Budget was
"prudent, sound and correct and producing a realistic base for business recovery."
[Interruption.] Opposition Members do not like it, but they will have to deal with the business community in Britain. They do not understand for a moment-- [Interruption.] During the election they will have to deal with what the business community of Britain thinks of them. It is better that they prepare now by knowing what the business community has said about the Budget.
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Mr. John Garrett (Norwich, South) : Will the Minister give way?
Mr. Mellor : I shall come to the hon. Member for Norwich, South (Mr. Garrett) in a moment, if he will contain himself. I wish to remind him of a comment of his.
Mr. Home Robertson : Will the Minister give way?
Sir Patrick Duffy (Sheffield, Attercliffe) : Will the Minister give way?
Mr. Speaker : Order. We must get on.
Mr. Mellor : The president of the Association of British Chambers of Commerce, Mr. Miles Middleton, said :
"The combined effect of these measures will provide considerable assistance for businesses fighting their way out of the recession. UK business believe that the Chancellor is wholly justified in his continuing priority of defeating inflation. The Chancellor has the full support of British firms, who had not asked for nor expected cuts in corporation tax."
He went on to commend the uniform business rate.
Mr. Home Robertson : He would, wouldn't he?
Mr. Mellor : I hear the hon. Gentleman say, "He would, wouldn't he?" One scratches the surface of the Labour party and that is its attitude to business men in Britain.
Sir Patrick Duffy : Will the Minister give way?
Mr. Mellor : No. I am not giving way for the moment. The hon. Gentleman is an experienced parliamentarian. I shall give way to him when I have finished telling him what the business community says about the Budget.
The Society of Motor Manufacturers and Traders said :
"The Motor Industry is pleased with this year's budget. We are delighted Car Tax has been reduced to 5 per cent. We believe that about 70,000 extra sales should result, with all the implications this has for employment."
The Federation of Small Businesses has sent a letter to my right hon. Friend the Chancellor this morning from its chairman of financial affairs. It says :
"Dear Mr. Lamont,
I am writing to congratulate you on your budget statement, which contained many proposals which will be of benefit to many small businesses It has been most refreshing to see that you have listened to the recommendations put to you and have been able to act upon a number of them."
The Road Haulage Association said :
"It was a very clever Budget."
The secretary of the National Farmers Union's taxation committee said :
"This is a substantial help for the farming industry and something we will welcome."
[Interruption.] The childish attitude of Opposition Members shows that they are not remotely interested in dealing with the central issue. If they wish to take issue with the suggestion that the Budget is a Budget for recovery, they ought to weigh in the balance what all the business men and industrialists of Britain are saying about it. Their unwillingness to do so reflects no credit on them. Perhaps they might listen to this--
Mr. John Battle (Leeds, West) : Will the Minister give way? Sir Patrick Duffy rose--
Mr. Home Robertson rose--
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Mr. Speaker : Order. Let us settle down. Several of the hon. Members who are rising to put questions seek to participate in the debate. It will make it difficult if they take time now.Mr. Mellor : Peugeot Talbot, which manufactures at Ryton in Coventry, said :
"Reports coming in from dealers are of increased retail sales and fleet enquiries. I would estimate that we have taken over £3 million worth of additional sales in the first morning of post-Budget trading."
Sir Patrick Duffy : The Minister challenged my hon. Friends to listen to what the business community was saying. May I remind him of the views published only last week of the regional secretary of the Yorkshire and Humberside Association of Chambers of Commerce? He called on the Government to rescue the sinking economy in Yorkshire and Humberside and went on to say that sitting there and doing nothing was no longer an option.
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