House of Commons Hansard Debates for 11 Mar 1992

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Mr. Douglas : I am asking you, Madam Deputy Speaker, to assist the House in setting the record straight. The Chief Secretary to the Treasury made a statement about the public sector borrowing requirement, and said that it was because the Government had to finance certain expenditure, but the reason for the £28 billion rise in PSBR is--as everyone knows--that the right hon. and learned Gentleman miscalculated the depth of the recession--

Madam Deputy Speaker : Order. That was the most bogus point of order that I have taken in the past 48 hours.

Mr. Mellor : The right hon. and learned Member for Monklands, East knows that the Labour party offers no path back to a balanced Budget. In an extraordinary article in The Mail on Sunday, as well as criticising the Government's level of borrowing, he sought by means of intellectual evasion to claim that additional borrowing would be all right as it was to be used on policies that the Labour party believed to be in the public interest. He cannot even agree with his hon. Friend the Member for Derby, South (Mrs. Beckett), who said on "Newsnight" last night that Labour accepted the level of the PSBR and would not increase it. I wonder whether she realises the implications of what she has said : it means that there is no room for any of Labour's spending plans unless Labour puts up taxes.

We know why the right hon. and learned Gentleman is producing his shadow Budget. He did not want to produce one at all. He is doing it because of protests from Labour Back Benchers about the implications of the limited tax increases that Labour is prepared to consider. We know all about the pressure on the right hon. and learned Gentleman to tone down his tax increases, thereby making it even more difficult for the Labour party to be responsible with the PSBR.

Mr. Peter Shore (Bethnal Green and Stepney) rose

Mr. Mellor : As it happens, the right hon. Gentleman is a constituent of mine, being wise enough to live in my constituency while representing another, so I give way to him.

Mr. Shore : The right hon. and learned Gentleman has been justifying the size of the PSBR at 4.5 per cent. this year and, according to the Red Book, probably more than 5 per cent. next year. I do not quarrel with that, but does he agree with me that we should say "Thank God" that we are not members of economic and monetary union stage three? If we were to sign the Maastricht treaty as it stands, when it came into force we would all be compelled to limit our public sector borrowing requirements to 3 per cent. In the light of the telling experience of a full-scale recession, does the Chief Secretary draw from that the obvious lesson : that we should on no account subject ourselves to such foreign intervention?

Mr. Mellor : The right hon. Gentleman might more pertinently ask Labour Front-Bench spokesmen that question. EMU restrictions do not preclude moving above 3 per cent. in certain instances. The restriction applies across a period of years. How would the Labour party deal with this, given its determination to drive up spending, with the inevitable consequence of having to drive up borrowing above what we have disclosed, or of having to put up taxes to which it is not prepared to admit? As was recognised in the leader in The Independent and in many

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other parts of Fleet street yesterday, we offer the opportunity to go back to a balanced Budget across the cycle and to be well within the 3 per cent. limit.

Mr. Chris Smith (Islington, South and Finsbury) : I am pleased that the Chief Secretary has touched on this matter, because looking at page 17 of the Red Book the question that occurs to me is : what does the right hon. and learned Gentleman mean by "across the cycle"? Five years' worth of PSBR is laid out in the Red Book ; every single one of them shows a substantial deficit.

Mr. Mellor : The hon. Gentleman should have asked me two years ago to help him with the questions that he had left on the photocopier about how Labour would handle these matters. None of them has yet been answered. To answer the question, the problem will be resolved when the economy returns to trend growth. The hon. Gentleman knows that we moved into balance in 1987. Everything turns on how quickly the economy grows ; but there is nothing for the Labour party in this, because it would not be able to stimulate growth over and above what we have achieved. It will not be able to manage the PSBR given its expenditure plans, either.

We have produced a Budget that allows us to restate our commitment in three crucial areas. We believe in low personal taxation--brought down by 3p in our first term, by another 3p in our second term and by 2p by the introduction of the 20p band in our third term. That is a steady record of achievement, of returning spending power to the people. Real take-home pay for the typical family has increased by £78 a week since 1978-79. My right hon. and hon. Friends and I are proud of that. The money has been used to good effect. Millions of people have bought their homes and improved them. Millions more now own shares or have bought equipment that would have been beyond the dreams of families years ago. They have travelled abroad more ; foreign holidays have doubled in number since 1981.

This is a Budget for people which allows us to reaffirm our determination that the living standards of the British people should rise. It is also a Budget for proper public provision. That provision has been a hallmark of this Government, which shows that, with growth in a successfully managed economy, it is perfectly possible substantially to increase public expenditure in priority areas while reducing taxation.

Miss Joan Lestor (Eccles) : If the right hon. and learned Gentleman is so concerned about public provision and helping families, why was there nothing in the Budget to help women back to work by helping with child care? Single families and people living in poverty will receive nothing. Child benefit, which would have helped people in need, was not increased either.

Mr. Mellor : Most of those assisted by this measure are working women, because they predominantly constitute the category of people most helped by the 20p band. What the hon. Lady has said in her well-intentioned way is exactly the sort of stuff that we will be hearing from the Labour party. The shadow Chief Secretary does not propose any increase in the PSBR ; on the other hand, when the hon. Member for Eccles (Miss Lestor) gets on the hustings, she will offer all sorts of inducements to working women, outlining what Labour will do even though what she says is not part of Labour's spending programme.

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Will Labour put up taxes or will it put up borrowing? Or will it repudiate the priorities that the hon. Member for Eccles and so many other Opposition Members are peddling?

Mr. Campbell-Savours : Will the Minister give way?

Mr. Mellor : No. The hon. Gentleman seems even more than usually disturbed.

Mr. Campbell-Savours : I am trying to be helpful--

Madam Deputy Speaker : Order. I cannot help that, but it would be helpful to the Chair if the hon. Gentleman would resume his seat, as the Minister is not giving way.

Mr. Mellor : I can outline some matters to the hon. Gentleman later in private ; he might like to follow them up.

The conditions for the recovery of the British economy exist : low inflation, competitive interest rates, improving productivity, the best industrial relations since records began a century ago, a good export record and money in the pockets of consumers.

Mr. Campbell-Savours rose --

Mr. Mellor : The hon. Gentleman is just trying to be disruptive. Although he takes advantage of the rights of Parliament, he does not like others to do so.

The response of the business community to the Budget showed that its members feel the wind in their sails. What is needed now is a return to confidence. And what is the single greatest obstacle to confidence? The prospect of the election of a Labour Government. Today, we embark on the great and necessary task of removing that obstacle.

Yesterday, the Leader of the Opposition said :

"They are hollow men--and the Tory Government ends not with a recovery bang but with a bribery whimper."--[ Official Report, 10 March 1992 ; Vol. 205, c. 768.]

I beg to remind Opposition Members of how the last Labour Government ended. The following are some headlines from the last six months of that Labour Government :

"999 cover only by ambulances

1,100 hospitals under siege

Ambulance strikers ignore emergencies"--

Mr. Campbell-Savours rose --

Madam Deputy Speaker : Order. The hon. Gentleman must resume his seat. The Minister has made it clear to me and to the House that he is not giving way.

Mr. Mellor : The Opposition do not want to know, Madam Deputy Speaker. Other headlines read :

"Cancer ward sent home

Rees ready to use troops to move medical supplies

Callaghan says : I see no chaos".

Many people in this country remember what the last Labour Government were like. Those who fail to learn the lessons of history are doomed to repeat them. Judging by their performance this afternoon, the right hon. and learned Member for Monklands, East and his colleagues have learnt nothing except--and this only with partial success--the art of evasion.

Some say that everything has changed about the Labour party. Its members have certainly been willing to change inconvenient attitudes. The right hon. and learned Gentleman says, "These are my principles ; if you don't like them, I have others." In that sense everything has changed,

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but nothing has really changed. The Labour party is as incompetent as ever, as unready to listen to reason as ever, and that is why it must be defeated.

5.9 pm

Mr. Merlyn Rees (Morley and Leeds, South) : This will be my last speech in the House of Commons. If it were not, I would have been tempted to take up the point made by the Chief Secretary to the Treasury when he chided the Welsh rugby team for being so bad at Twickenham. That I agree with, but I found his nasty anti-Welshism nauseating. When I speak in Cardiff next week in a marginal Tory seat, the constituents will not be highly amused at the sage of Putney who hates the Leader of the Opposition largely because he is Welsh and from the mining valleys. I am prepared to give way to the right hon. and learned Gentleman but he does not seem to wish to intervene. He would be anti-Welsh to the nth degree, and he always is when it comes to the Leader of the Opposition.

Mr. Mellor : I am sure that the right hon. Gentleman is capable of recognising the difference between being anti the Leader of the Opposition and being anti-Welsh. He has made a thoroughly unworthy point.

Mr. Rees : I would repeat it because I feel it, even if it were the last thing that I said in the House. I would join the right hon. and learned Gentleman in having a go at the Welsh rugby team, but not in having a go in the way that he does in the snobby phoney accent of outer London against a decent man whose only crime is that he has a Welsh valley accent.

In most of my parliamentary career, I have not spoken on economic affairs, even though it was my academic interest for a number of years. Therefore, I finish in a way that I should have started 30 years ago, when my first speech was on education and its implications for technology. Today I want to talk about the Budget. I shall be brief, but it will be sufficient to bring out the issue that dominated my formative years. I was born in a village with 80 per cent. unemployment. My father walked to London during the depression. Therefore, I cannot shake off an abiding hatred of unemployment in any form.

In the south Leeds part of my constituency and in the area represented by my hon. Friend the Member for Leeds, Central (Mr. Fatchett), unemployment is still more than 20 per cent. I cannot glory in that. People say that we must grin and bear it, but many of those 20 per cent. have been unemployed for years. Nothing in the Budget will help them. In The Independent today, a research fellow from the London School of Economics makes it clear that the majority of non-taxpayers will not be helped by yesterday's Budget. That is the group I am talking about.

In his Budget speech yesterday, the Chancellor said :

"Even with a resumption of growth, unemployment is likely to go on rising for some time. But while the increase will moderate over the months ahead, a sustained reduction in unemployment over the longer term will depend crucially on our success in keeping inflation down".--[ Official Report 10 March 1992 ; Vol. 205, c. 747.] In the 1930s, inflation was low because of high employment. The moment one moves to full employment, one has inflation. Unemployment is one of the reasons--not the only reason--why the Government have been able to bring down inflation.

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The Financial Secretary to the Treasury (Mr. Francis Maude) : If unemployment is so easy to solve, why have every Labour Government left office with unemployment higher than when they started?

Mr. Rees : If the Minister looks at the figures for 1951 and 1979 he will see that the relative increase is right, but the figures overall were falling. I shall come to that point in a moment. In no way will unemployment in my constituency be reduced by the upturn. That is not how the upturn works. It works in that way in the city, the suburbs and in the affluent middle of Leeds where there is a boom at the moment, but it has no effect on the sort of people whom I and my hon. Friends from Leeds represent. That is one of the gaps in the Government's thinking.

Mr. Rogers : Earlier in the debate, despite having mentioned me, the Chief Secretary to the Treasury would not give way. I said that Japanese investment was coming to Britain because of our cheap labour. The Chief Secretary, in his usual reptilian way, is still not listening. As well as the levels of unemployment that exist in many of our communities that the Chief Secretary is not prepared to accept, he is also not prepared to accept the low wage levels of the economy surrounding those levels of high unemployment. One reason why the Japanese are investing in Britain is that our wage levels are so much lower than those of France, Germany, Holland and Belgium. Until the Government recognise that, our communities will continue to suffer.

Mr. Rees : My hon. Friend knows that in south Wales, which I left many years ago, the work of the Japanese firms is to the credit of the area. They have brought in better management and they make a product. They are in manufacturing. I approve of that.

The unemployment that I am concerned about is the unemployment in my constituency and that of my hon. Friend the Member for Leeds, Central. The reason for it is the decline of manufacturing industry. My constituency--I have always said that I do not like that phrase--the constituency that I represent was a manufacturing area with engineering and clothing industries. Those industries have gone. Manufacturing there has been decimated. It is no longer a proud manufacturing area. Sometimes I think that one of the things that is wrong with the Government is that they have never understood the value of manufacturing, because their Members come from areas where manufacturing is not the norm. It was the norm in my area. I am the last person to want a return to the smokestack industries and the old collieries with the 1ft 6in and 2ft 6in seams--which, thank heavens, were shut down in the 1960s ; no one wants to go back to those--but we need a Government who are concerned with a return to manufacturing, with training and education. As my hon. Friends know, we talk in the House about the great changes in education, but we see nothing of those in my constituency. The number of people who stay on at school after 16 is remarkably small. I often used to meet my young constituents in Northern Ireland. They were in the infantry battalions, in the KOYLIs and the Duke of Wellingtons and so on. There is much talk about picking out one or two to go to independent and direct grant schools. That might be a good idea in some respects, but it has no effect on my area in the sense in which I am

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talking. The Budget played little part in what I want to see in my area in training, educational changes and investment.

I have a memory of the day when people began to be concerned about full employment. They were not so concerned in the inter-war years, when the heavy unemployment was largely due to the decline in manufacturing and there were the hunger marches and so on. Seeing the films of that time, one would have thought that the majority of people in Britain cared. They did not. Otherwise, the election results would have been different, but, as a result of the war, people began to be concerned.

I was doing other things at the time, but some years later the speech of Ernest Bevin introducing command paper 6527 on employment was brought to my notice. Before I came here today, I had it looked up in the Library. He introduced it in June 1944, just after D-day. That saw a resumption of the years when we tried to do something about unemployment with employment exchanges ; when we tried to get labour mobility with schemes for bringing people from the depressed areas. He said :

"It is now and universally accepted the primary responsibility of Government to maintain a high and stable level of employment. We are turning our back on class doctrine."

I was gald to be able to find one section that was at the back of my mind. Mr. Bevin said :

"The Government"--

the coalition Government, that is--

"welcome the fact that Parliament is--I hope irrespective of party, and with widespread agreement--at last facing this problem as a fundamental issue. We are grappling with the problem which is uppermost in the minds of those who are defending the country to-day, at home, overseas".

Mr. Bevin described a visit, with the Prime Minister, to the 50th Division, who were in boats off Portsmouth. They leaned over the side of the boats and asked :

" Ernie, when we have done this job for you, are we going back to the dole?' "

A clever dick who was in the House when I was in the House many years later --Mr. Pickthorn, representing Cambridge University--sneered, and said, "For you?" Mr. Bevin replied :

"Yes they knew me personally. They were members of my own union."--[ Official Report, 21 June 1944 ; Vol. 401, c. 212-3.] He was referring to the 50th Northumbrian.

In those days, people were concerned about unemployment. In one way, I regret leaving the south Leeds part of my constituency. I know that things have been done over the years. The back-to-backs have been cleared ; only one section is left in the area represented by my hon. Friend the Member for Leeds, Central. But there are people there who will never find jobs, and nothing is done about it.

The situation is viewed through the eyes of writers on The Times, The Guardian and The Independent --people who are mobile. Those people in Leeds, however, are not mobile, and they will not find jobs. They are brought up to go into unemployment, and nothing is done about it. The training programme in Leeds has been cut in half : that was announced only the other day.

For a while, following Beveridge and the work of the coalition and then the Labour Governments, full employment mattered. It is not enough to get out of a slump--call it what you will. In the 1930s, when I was first active in politics, we heard all the arguments that were advanced in the old days of Keynesian economics--was it deflation? Was it reflation? My hon. Friend the Member

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for Sheffield, Attercliffe (Sir P. Duffy) and I attended the London School of Economics together as ex-service men. Such questions did not matter very much ; it just meant that a lot of people were out of work.

Even reflating the economy is not enough : it will not have any effect. People in areas such as "up the tops", in the constituency of my hon. Friend the Member for Rhondda (Mr. Rogers) and in my village, represented by my hon. Friend the Member for Pontypridd (Dr. Howells), will be affected. They will not vote for any party other than Labour. No one cares. We see the odd programme on television about how dreadful the situation is, but nothing is really done. If it happened in the south of England, something would be done, but it is happening in the wrong place.

The Chancellor seems to be querying that statement. Why is nothing done? If this were happening even in the northern part of Leeds, something would be done. The position is accepted, and the community as a whole does not really care. That is what it boils down to ; it is not just about political parties.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich) : Has it occurred to my right hon. Friend during his long and distinguished service in the House why we have benefited from men of his calibre? His Welsh heritage has made it very clear to him that we must never again treat people with the disrespect with which his parents and mine were treated.

Mr. Rees : I am grateful for that comment. Although he belonged to a slightly older generation than mine, my hon. Friend's father was of the same generation as my father, and came from the village round the corner. I have been away from that area for a long time, and I am proud to be a northern Member of Parliament, but I have never forgotten living in a home where we had very little. As I leave this place, I want others not to forget that : indeed, it was part of what brought me here. I am aware that nothing is being done about it. There is a cycle of boom and slump. We shall return to the previous position at some time or other, but it is not enough to provide extra demand. Perhaps my hon. Friend the Member for Attercliffe remembers the arguments advanced by President Hoover. The change to Roosevelt was an attempt to do something more fundamental. It will all come back. We always get out of a slump ; we always experience the drop--the quick drop that we experienced between 1929 and 1931--and then the slow movement along the bottom, followed by the pick-up. In this country, that will happen the year after next. It is all annotated : the eight-year cycle can be traced all the way back to 1793. It is as clear as a bell.

Sir Patrick Duffy : I am grateful to my right hon. Friend. He has been gracious enough to refer to me on two occasions, and he is right--we have shared much together. We are almost lifelong friends, having shared wartime service and post-war studies at the London School of Economics.

More important, our formative years were shaped by the great slump of the 1930s. Does not my right hon. Friend agree that the present developing recession--perhaps almost a slump, in terms of its configuration, certainly in terms of its length and perhaps soon in terms of its depth--will come as near to the great slump of the 1930s as anything that we have known since?

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Mr. Rees : The Chancellor mentioned in his speech yesterday the fact that some people hold that view. I felt a strong pang when he said it. Nowadays, people say that the failure of the Austrian banks in 1929-31 need not have happened if only the world banks had acted together, and I imagine that that is true. There is a danger that a similar position could arise now. The Secretary of State for Education and Science is a political ruffian--I say that with a smile on my face--but he speaks up occasionally. He has said that the country's problems are to do with the present Government--and of course they are--but there is also a world recession. Of course that is true. There is a danger that the situation will not pick up as much as before. My point is that we have learnt that investment is required.

I am speaking off the top of my head--perhaps the Chancellor will check the figures--but I believe that we moved slowly out of the big slump of 1931, and that by 1937 the economy was not as high as it had been in 1929. Then it began to drop again. At the beginning of rearmament, the activities of the shadow factories masked the position to an extent, but we did not return to full employment until 1942. By then, millions of people were in the armed services, and Barnbow in Leeds was making guns and tanks. It takes a long time to get out of such situations, and the economy does not necessarily rise to its former level. Therefore, investment is required : members of all political parties in the House should consider that.

Schools in my constituency were badly built in the 1960s--it does not matter whether they were built under a Labour or a Conservative Government. Corporation houses were badly built as well. They need to be knocked down or repaired. Old people's homes are to close because it costs too much to rebuild them ; the same applies in the constituency of my hon. Friend the Member for Leeds, Central. Building work could be done on schools and houses. We are short of houses. I shall continue to interview my constituents until polling day. Currently, families of owner-occupiers are telling me that their houses have been repossessed and that they are being put into hostels because there are no houses for them to go to.

Now is the time to go in for capital investment and to build houses. Let me tell the Financial Secretary to the Treasury, in regard to taxes for current spending, that it is wrong to have a deficit on current spending. It is wrong to use receipts from privatisation for current matters. Borrowing must be for investment. Unless this country goes in for investment in the same way as the Japanese and the Germans, we shall have a problem. We may not enter a world slump, but we may always remain a third- class nation, never able to pull out of the recession.

The poverty that exists in some cities of the western world shows that the position is not peculiar to this country, but I want to stress the problem of unemployment in my area. I would be exaggerating if I referred to sub- standard living, but the point is that people are not going to move out of their present circumstances. Their houses often contain a photograph of the grandfather of the family in uniform, taken during the war, and perhaps one of a grandmother who may have been in the WAAF. Those people are citizens of this country, yet we do very little for them. I do not think that the Budget meets the needs of the moment.

Mr. Martin Flannery (Sheffield, Hillsborough) : I lived through the same period as my right hon. Friend. The

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Conservatives are now taking refuge in what they describe as a world recession. The fact is that it is a slump here and a recession there. Figures can be obtained from the Library to show that, last year, new unemployment throughout Europe amounted to 972,000. Of those people, 777,000 were British--80 per cent. That is four times as large as the figure for all the rest of Europe put together.

Mr. Rees : It is my last go at this, and I am not just being wet, silly and soggy. Unless the whole House puts its mind to these problems, we will not get out of them. The Budget was a little like the Budgets of the 1930s. The first Budget that put its mind to accounting in the sense of savings and investment was that of 1941. I believe that there will be another Budget in a few weeks' time, whoever wins the election--I have my views about who will win. Unless we become involved in investment and think about the structure of the country and the problems in certain areas such as those that I have tried to represent over the years, I believe that we will fail. The Chancellor referred to the danger of a world recession. With a bit of luck, we will not get into that. The Budget is too near the election to have any real sense of the country's needs.

I often wonder--it happened this afternoon--what in heaven's name I do in this place. One can think of the problems of the world and then the office- boy humour that comes from both sides of the House. Never again will I-- well, I will for a while--have the antidote of travelling on the sleeper and arriving in an area that makes one feel that it is worth it because at least one might be able to do something. The House will do itself a disservice if it ignores the real problems facing the country. I went to the funerals of two Popes during the time I was a Minister. I remember going into a room at the Vatican and looking at who mattered. I realised that I did not. We have been bit players since Ernie Bevin's speech. Since that time, the Americans and the Russians have mattered, and look what has happened to them. If we are to count in the world and in foreign affairs, and if the words that we speak are to matter, we have to produce ; we have to produce modern manufactured goods. Only in that way will we provide the schools and education that we need. My grandchildren will receive such an education, have no fear about that. What about the others? What about the kids in my village, represented by my hon. Friend the Member for Pontypridd?

I have said it, and I have done it. Parliament is a good place. One can speak one's mind. There are people on both sides who have done that and that is what makes it worth while. That is why it is here. 5.32 pm

Mr. Terence Higgins (Worthing) : There is a tradition in the House that, after a maiden speech, the next speaker makes complimentary remarks about the person who has just spoken. I do not know if there is a tradition that one should act similarly after a valedictory speech, but if there is not, I shall try to start one. I should like to pay tribute to the right hon. Member for Morley and Leeds, South (Mr. Rees). I do not believe that I have ever followed him in a debate speech before. In my experience in the House

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over many years, he has been a fine parliamentarian and he was a brave Secretary of State. The House will be a poorer place for his departure.

I share the view expressed by the right hon. Gentleman about unemployment. For whomever it affects, unemployment is a great personal tragedy. The Budget presented by my right hon. Friend the Chancellor will help to reduce the level of unemployment. It has been recognised as a balanced Budget that is imaginative in many ways. It will create a situation with which the Conservative Government will be able to live on their return. So, in that sense, it is not an electioneering Budget.

I pay tribute to my right hon. Friend the Chancellor for effectively announcing the demise of Budget day as we know it. His proposals for transferring the arrangements to December, when one takes into account both public expenditure and taxation, are a long overdue reform. It will enable the actions that the Chancellor takes to regulate the economy--an immensely difficult task for whoever is in office--to operate in a more effective way.

On this occasion, however, one should look at both sides of the equation. The Budget deals only with raising money, not spending money. We know that decisions on spending are taken in the autumn. Therefore, on this occasion, we need to look at expenditure and taxation. The argument is sometimes used that the money used for cuts in income tax, such as those announced by my right hon. Friend yesterday, could be spent on the national health service. We must consider the enormous increase that was announced in the autumn statement in the amount expended and planned to be expended on the NHS. One could say that tax cuts and increases in spending on the NHS are election bribes. That enormous increase in spending on the NHS went on last year, the year before and the year before that. If it is an election bribe, it has been going on for a long time. The same is true of income tax cuts.

The Budget contains a number of aspects that I welcome, not least for Worthing, which I represent. I welcome the help for pensioners on income support, the proposals for the uniform business rate which will certainly help small businesses at a difficult time, and the provisions for charities. I should have thought that those measures would have support on both sides of the House.

I had grave doubts about the proposal for reducing the standard rate of income tax, despite the fact that the Conservative party is committed to reducing the standard rate to 20p. My right hon. Friend's proposal is a much better way of working towards that objective than simply leaving the standard rate at 25p and reducing it salami-like until we reach 20p. It is much better to have a reduced rate of 20p and gradually to raise the level at which that becomes applicable until, perhaps over the life of a Parliament, we eliminate the 25p rate. I welcome that. It is of considerable help to those on low incomes, not least working women, many of whom fall into that category. The basic approach is imaginative and correct. I shall deal now with the public sector borrowing requirement and the question whether tax cuts are being paid for by borrowing. I find the arguments of the Opposition Front Bench spokesmen extraordinary. There have been very few years in the past century when the situation has been such that the Government have not borrowed in one way or another. It is almost true to say that whenever taxes have been cut the Government, certainly in recent times, have done that against a

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background of borrowing. There is nothing unusual about that. I cannot recall any year when a Labour Government cut taxes without borrowing, so it is a strange argument for Opposition Front Bench spokesmen to use. Perhaps there will be some comment about that in the reply to the debate.

Mr. Campbell-Savours : Will the right hon. Gentleman give way?

Mr. Higgins : No. I should like to deploy some rather complex arguments.

Another question is whether the PSBR is excessive as a percentage of gross national product. One should compare the present level--4.5 per cent. of GDP--with the percentage when the right hon. Member for Leeds, East (Mr. Healey) was Chancellor of the Exchequer. I believe that the figure was double the current rate. That puts the matter into perspective. At all events, the level of borrowing in the Budget is entirely appropriate against a recessionary background, about which the right hon. Member for Morley and Leeds, South rightly expressed concern. I believe that that borrowing will help to get the economy out of recession. A large percentage of it has been caused by the recession--by the reduction in Government revenue from taxation and the increase in public expenditure on unemployment benefit. The Treasury and Civil Service Select Committee made it clear that the use of automatic stabilisers is entirely appropriate in a recession.

Mr. Campbell-Savours : The right hon. Gentleman is a distinguished Member and Chairman of the Treasury and Civil Service Select Committee. The Red Book refers to borrowing of £110,000 million--£110 billion-- over the next five years. Does he find that excessive? Is he saying that even when we borrow £6 billion in year five or £19 billion in year four we shall still be borrowing to get out of this recession? How long will it take?

Mr. Higgins : I make two points. First, the economic effect of borrowing depends on the extent to which it is funded. That is what affects the money supply. Secondly, on every occasion since the war the Treasury has underestimated turning points--both going down and coming up. I therefore treat with much scepticism the figures to which the hon. Member for Workington (Mr. Campbell-Savours) refers. As the recovery continues, borrowing will reduce substantially below the estimated figure. If someone says, "That is the official forecast", I shall be happy to express my views on forecasts in greater detail, as I have in the past.

Against that background, it is appropriate not only to use automatic stabilisers, but to do more. My right hon. Friend the Chancellor has been modest, and the foreign exchange markets have recognised that. That is an important point, because we are constrained by those markets. None the less, the further stimulus that he has given the economy is appropriate.

It has been said that this is a massive reversal of policy, that suddenly the Government are borrowing when they said that they would not do so. There has indeed been a change in policy : we have joined the exchange rate mechanism of the European monetary system, which has resulted in a rapid reduction in inflation. It has been possible to combine that with a welcome reduction in interest rates. As the Treasury and Civil Service Select

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