House of Commons Hansard Debates for 16 Mar 1993

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(f) Vehicles excise duty (rates : general) (motion

No. 16) ;

(g) Vehicles excise duty (exceptional loads : 1) (motion No. 17) ; (

(h) Vehicles excise duty (old bicycles) (motion No. 19) ; (

(i) Vehicles excise duty (trade licences) (motion

No. 20).-- [Mr. Lamont.]

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

Mr. Deputy Speaker : I now call on the Chancellor of the Exchequer to move the motion entitled "Amendment of the law". It is on that motion that the Budget debate will take place today and on succeeding days. The remaining motions will not be put until the end of the Budget debate next week, and then they will be decided without debate.

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Budget Resolutions and Economic Situation

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

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

(b) for refunding any amount of tax ;

(d) for relief other than relief applying to goods of whatever description or services of whatever description.-- [Mr. Lamont.] [Relevant documents : European Community Document No. 4683/93, the Commission's Annual Economic Report for 1993, and the draft Decision adopting the Report.]

5.24 pm

Mr. John Smith (Monklands, East) : I am happy to offer the Chancellor the customary congratulations on the style and manner in which he delivered his Budget. As he noted, this will be the last spring Budget and he is the last Chancellor who will deliver the Budget in its traditional form.

I welcome the change to a unified Budget and public expenditure statement, a change which, after all, the Opposition proposed. May I suggest a further reform for the new arrangements later in the autumn? The Chancellor should consider abolishing the increasingly absurd purdah rule. I suggest that he makes an early announcement to that effect, perhaps the earlier the better, so that he and not someone else can take credit for an overdue reform.

Those who have listened to this debate will have been shocked beyond belief at the cynicism of the Conservative party which went into the last general election as the party committed to low taxation. [Hon. Members :-- "We have done that."] Conservative Members say that they have done that. Some innocents on the Conservative Benches describe the Budget as a Budget of low taxation. Let me remind the House of what the Government said during the last election campaign-- [Interruption.] I know that some Conservative Members do not want to hear this, but I think that the public do. Let me start with VAT. On 28 January 1992, the Prime Minister said :

"There will be no VAT increase. Unlike the Labour party, we have published our spending plans and there is no need to raise VAT to meet them."

It is difficult to be more categoric than that. During the election campaign, the Conservative campaign guide stated-- [Interruption.] I know that that is a matter for humour, but we are entitled to treat it seriously. The guide stated :

"Following a series of unfounded and irresponsible scares by the Labour party, the Prime Minister has confirmed that the Government has no intention of raising VAT further."

To get precisely to the point, during the election campaign, at a press conference, Mr. Tony Bevins of The Independent asked the Prime Minister on 27 March 1993 :

"Can you give the same pledge that Mrs. Thatcher gave in 1987 that you will not extend the scope of VAT to children's shoes and clothing, gas, electricity and food?"

The Prime Minister replied :

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"I've made the pledge in the past, I've made it clear. We have no need and no plans to extend the scope of VAT."

I do not know how the right hon. Gentleman can sit there as Prime Minister of a Government who are capable of deceit on such a scale. The Conservative party went into the election and was pressed day after day about increases in VAT and still came back the answer, "Lies and scaremongering from the Labour party. The Conservative party wouldn't do anything like that." Those people make pledges as though they matter not a whit.

It is not just a question of VAT--and I will consider the effect of the VAT increase. The Prime Minister knows perfectly well that commitments were made on national insurance as well. On 28 January 1992, the Prime Minister stated :

"I have no plans to raise the top rate of tax or the level of national insurance contributions."--[ Official Report, 28 January 1992 ; Vol. 202, c. 808.]

However, the Government have proposed today a 1p increase in national insurance contributions. No doubt they will go to the country and say, "We haven't increased income tax. We have marginally increased the 20p band." People are not so foolish. They understand clearly that 1p on national insurance is, if anything, worse than 1p on income tax. Apart from anything else, it bites further down the scale. On tax on income and tax on spending, the Conservative party has cynically and ruthlessly betrayed the pledges which it gave to the people of this country. It will not be forgiven for that. The Conservative party used to say that VAT was all right because, after all, people could choose whether they bought the goods on which VAT was levied. Will it tell us now that people can choose whether to have gas or electricity in their houses? The Government must know perfectly well that throughout the land a 17.5 per cent. increase in fuel bills will push many families who are just on the edge, wondering whether they will manage, to despair.

It is no good the Government saying that they will adjust income support levels. Millions of people in Britain are poor but do not qualify for income support and will be hit savagely by the 17.5 per cent. increase in the basic cost of living. The Chancellor says, "It is all right : I have extended the 20p band." But what does the extension of his band amount to? This year it amounts to about 25p a week and at best in future years it will amount to £1. How will that help people to meet the extra bills that they will have to pay as a result of all the other tax increases and reductions in allowances? Indeed, taken together, the tax increases announced in this Budget must be one of the highest hikes ever.

We have also seen the freezing of allowances. That means that more people will be brought into both the standard and higher rates of tax. All this from the party which said that it was the party of low taxation and paraded that all over the country during the general election campaign. There are hundreds of examples of that day after day.

The Government have betrayed their pledges and caused unnecessary increases in the cost of living. They should have been busy in this Budget looking for loopholes in taxation. The Chancellor may have discovered a few here and there, but there are massive loopholes in taxation by which people do not pay the proper amount of tax. Here we have the Government putting an even heavier burden on the ordinary people of

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Britain. The Government must bear in mind that the public's conclusion about the Budget will be simple and clear : the Conservative party is a party without honour and without feeling. The other question that people will ask about the Budget is whether it will bring down unemployment. [ Hon. Members :-- "It will."] There can surely be no doubt that unemployment is Britain's No. 1 problem. We shall see in the November Budget whether this Budget has brought down unemployment. If Conservative Members want that to be a test, we shall make it a test for the Government. The Government cannot simply wish away unemployment. The Chancellor announced inadequate measures on that front. The Government do not seem to understand how depressing and debilitating it is for our people to suffer unemployment of more than 3 million. It is economic madness as well as a social tragedy.

Ministers should bear it in mind that there is hardly a street in Britain in towns or villages, in the country or elsewhere, which the tentacles of corroding unemployment have not reached. It is also depressing to consider that, each time we plunge into another Tory slump, it gets longer than the one before. The last one lasted five quarters. We have already gone 10 quarters in the slump that we are suffering now--the longest since the 1930s.

What measures does the Budget contain to deal with the problem of unemployment? The Chancellor said that the Secretary of State for Employment would announce a few measures which would potentially affect 100,000 people. But 300,000 people have lost their job since the election alone. So even at his most optimistic, the best that he can touch is one third of the people who have become unemployed since the Conservative party was elected on a pledge to reduce unemployment. The measures are wholly inadequate to deal with the scale of Britain's jobs crisis.

There is some merit in the Chancellor's proposals. For example, he has removed the restriction on people on benefit taking up educational courses. Why do we have to wait so long for a simple and obvious change such as that to be introduced? Why does misery have to become desperately acute before the Government will take even minor measures to deal with it?

As we know, the Government's spending on training--one real way in which we could tackle unemployment--has fallen between 1991 and now by 14 per cent. in real terms. That is a reduction of £300 million. So the amount of training falls by 14 per cent. at the same time as unemployment increases by 87 per cent. That gives a clear idea of the Government's approach to the problem.

The Chancellor's proposals in the Budget hardly fill the hole that has been created by the Government's previous actions. Therefore, the Government cannot claim any credit for action on unemployment. That is hardly surprising because the Chancellor gives such a low priority to the unemployed. Who has been more callous and complacent than him? Both he and the Prime Minister want us to forget that it was the Chancellor who told us in the House that unemployment was a "price well worth paying." He said it ; he meant it. He has never apologised for it. If nothing else, he might have done that today.

An apology is also due from the Chancellor for the failure of his last Budget--a failure which makes us, and indeed the whole country, cautious about believing anything that he says to us today. After all, his record undermines his credibility. Let me remind the House what he predicted a year ago. He said that the economy would

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be growing by 3 per cent. and manufacturing output would be growing by 4 per cent. by this time. Let me remind the House of the sad reality--the outturn.

The economy shrank during the whole of 1992 and, even on the latest figures and giving the Government the benefit of the doubt, an increase of barely 1 per cent. per annum is likely. Manufacturing output, instead of growing at 4 per cent. as predicted last year, is not growing at all according to figures published yesterday. A year ago in the Budget the Chancellor predicted that the PSBR would be moving virtuously back towards balance. We know how absurd that was. We know how the Chancellor's management of the economy has thrown Britain deeper into debt, with a projected PSBR of £50 billion. If the public had known what would be the outcome of the right hon. Gentleman's Budget last year in terms of constantly rising unemployment, deepening recession, rising bankruptcies and home repossessions, let alone the betrayal of election pledges, how many of them would have given the Tory party the benefit of the doubt on the night of 9 April last year? Precious few. We now know that their trust has been spectacularly betrayed.

The other vital question to which the country wants to know the answer is when action will be taken, in a Budget or otherwise, to halt the long, sad economic decline of Britain. Where are the measures of investment and training that will revive the British economy and, in particular, its vital manufacturing sector? The Government will not publish the report from the Department of Trade and Industry that tells us about our problems of weak investment and our skills problems and shows with chilling reality what is happening to British manufacturing industry.

The most important and worrying factor is that investment in manufacturing industry is 6 per cent. lower than it was in 1979 when the Conservative party took office. It appears that civil servants in the Department of Trade and Industry are guilty of the dreadful crime of talking Britain down. Any criticism of this incompetent and dishonest Government is regarded as talking the country down. People are more worried about who is pulling the country down--the Government. They are unable to face up to the scale of the challenge that Britain faces. We shall run into serious balance of payments deficits. We had another foretaste of that in the Chancellor's predictions today.

From the industrial revolution until 1983 we had a surplus in manufacturing trade. Under this incompetent Government we went into deficit for the first time in 1983 and we have remained there ever since. If we examine Conservative economic policy, we find that it will be extremely difficult for us ever to return to a surplus. We shall be able to set a course of sustainable economic recovery only when we begin to invest in industry, in the skills of our people and in the public infrastructure so crucial to our economic development. On the infrastructure front, we got one reannounced real project and another one postponed. People are doubtful about this channel tunnel business. It appeared to me that the right hon. Gentleman was postponing it yet again. We may find that we have no proper connections on this side of the English channel, while the other side has excellent connections. As for the railways, the most intelligent step that the Government could take would be

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to remove the threat of privatisation ; that would be sensible, and would do a great deal of good to the morale of a beleaguered industry.

Let me briefly remind the House of the Conservative party's promises. It promised economic recovery following its election. Hon. Members may remember the slogan : "Vote Conservative on Thursday, and recovery will continue on Friday". That was 300,000 unemployed people ago. According to the Conservatives, the public expenditure programme set out for the future would be rigorously maintained. There would be no cuts in public expenditure ; that was another scaremongering Labour story. What is happening now? The Chief Secretary to the Treasury is undertaking what may be the biggest review in this country's history to cut public expenditure.

Mr. Michael Fabricant (Mid-Staffordshire) : Very good.

Mr. Smith : The hon. Gentleman may say "Very good", but his party did not say that at the time of the general election. I am sure that, when voters asked the hon. Gentleman, "What about spending on schools, hospitals and training?", he replied, "Do not worry ; all the programmes that the Conservative party has put in place are costed, and they will be fully maintained if you elect a Conservative Government." Did the hon. Gentleman tell those voters, "The Chief Secretary will slip in a few months later and undo all those promises"? That is yet another example of a blatantly broken promise. Worst of all, the Government promised that there would be no increase in taxes, direct or indirect.

This is a shameful Budget, presented by a cynical party, and I hope that the Conservatives live to regret it.

5.41 pm

Mr. John Biffen (Shropshire, North) : I note the content of the Budget, and will refer to it in due course. First, however, let me congratulate my right hon. Friend the Chancellor of the Exchequer on the sheer stamina with which he made his powerful case. His was a valedictory speech--a valedictory Budget speech, that is, in the light of the reforms that will be implemented in the autumn, when the Chancellor must deliver a speech covering not only budgetary arrangements but public expenditure.

It occurs to me that the House must seriously consider the form that our proceedings will take. The Chancellor's audience is not confined to the House of Commons ; he has an audience outside. He will face the difficult task of making a speech of reasonable duration without reverting to Gladstone's five hours of 1853--I have done a little homework to acquaint myself with the potential limits of such speeches. Determining the appropriate form of our debates once the Budget and public expenditure speeches have been combined will present the House with a serious problem.

I wish to make a few general observations about the speech of the right hon. and learned Member for Monklands, East (Mr. Smith). First, let me say how much I enjoyed it. The right hon. and learned Gentleman spoke from the heart about revenue and public spending issues ; he did not touch excessively on the subject of borrowing, but it was there, just beneath the surface. He was speaking of the very matters that brought the House into being, and on which it has asserted its authority for generations. He

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spoke as though he thought that that arrangement was permanent, but he knows very well that he must fight to ensure that the House remains master of these great areas of economic policy. He must partner his convincing rhetoric with the logic of his hon. Friend the Member for Dagenham (Mr. Gould) : I offer him that dream-ticket prospect.

Of course we welcome the approaching debate between the two sides of the House, which will concern the social and economic priorities that we consider appropriate in regard to revenue and public spending and wise in regard to borrowing. That is what this place is all about. At least the words of the right hon. and learned Member for Monklands, East supported that proposition ; I hope that his judgment does the same.

Before commenting more directly on the Budget, let me declare my interest. I am a non-executive director of Glynwed International plc and J. Bibby and Sons plc--both manufacturing companies--and I am therefore interested in the Budget's contribution to our manufacturing base. My right hon. Friend the Chancellor has made some valuable proposals for industry, and his advance corporation tax measures--he confessed that they were somewhat technical, which, in my view, showed a moderation of judgment--will be widely welcomed. Equally welcome will be the priority that my right hon. Friend has given, in a difficult time politically, to the industrial sector ; that is matched by the proposals in respect of unemployment. I shall confine my remarks to the central issue of the deficit. In a Times article on 3 March, just a few days before his death, Lord Ridley said :

"What has happened for years now is that fiscal policy has been too lax and monetary policy too tight."

I am very happy to preface my comments with that quotation. I believe that, given his views and the manner in which he conducted his campaigns, Lord Ridley will long be remembered in the House as an example of the grit that provides the pearl in the parliamentary oyster. I have a deep personal affection for his memory, and I welcome this opportunity to place on record my esteem for such a personality.

I fear that the deficit is uncomfortably large. That is an anxiety that I share with my right hon. Friend the Chancellor--and, indeed, with almost every other Member of Parliament ; certainly with every Conservative Member. Given that the deficit is perceived to be running at about £50 billion, what measures should be taken? I may be a little more anxious than some of my colleagues, because I do not accept the proposition that it will wind down easily with the recovery in the economy. There is now a discontinuity between output and employment ; I think that output can recover, while unemployment will continue to lag behind that recovery. In that event, all the recessional costs of the deficit are likely to remain higher than those resulting from past practice.

My right hon. Friend says that he will try to deal with the deficit by means of substantial measures to increase revenue. I am happy to stand here, shamelessly, as a taxing Tory. I cannot believe that, in the present circumstances, the deficit can be seriously reduced other than by an increase in revenue, which means identifying taxes that can be raised to that end. I am not outraged in the least by the increases in national insurance, or by the increases in VAT in respect of fuel and power. We have a narrow tax base

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in comparison with our major partners and competitors, and the proposed reforms are welcome. I will leave it at that.

I am not quite so happy about the timing. I understand the deep anxiety that is felt : the recovery from recession is tentative, and must not be subject to undue heavy-footedness on the part of the Government. However, I feel slightly uneasy about leaving the increases in taxation until so far in the future. Therefore, I would welcome it if the matter could be reconsidered in the November Budget.

In politics, there is a most powerful instinct--the Augustinian tendency-- to say,

"Lord, make me perfect--but not yet awhile."

I feel that the Budget contains all the right instincts, but the timing is a little cautious and too far into the future. I hope that my modicum of unease will not be validated. I should be delighted to discover that my right hon. Friend has made good judgments on both the measures and their timing. Above all, as my right hon. Friend needs luck, that is exactly what I shall wish him.

5.50 pm

Mr. Malcolm Bruce (Gordon) : I recall being asked yesterday what I thought that the Chancellor might achieve in the Budget. I said that, if he were sensible, he would recognise that, after the disasters that he had inflicted on us, he could do very little good, but should be careful not to do harm.

Clearly, the Chancellor was not listening to me or anyone else. The Budget will be greeted with disappointment and despair in many quarters of the country. It gives a sharp rap over the knuckles to those who suggested that we were at the bottom of the recession and could expect things to get better. It is clear that the Government expect things to become worse, and we are all going to be dragged down with them next year and the year after.

As to the general background, I find it extraordinary that the Chancellor of the Exchequer can stand at the Dispatch Box and calmly state that the public sector borrowing requirement will be £50 billion next year. He did so having totally lambasted those people who suggested that, if he had taken a little more advice earlier and invested earlier, he might have avoided the situation in which he now finds himself. The Chancellor fails to understand the meaning of investment and the Government's role in ensuring that investment takes place. He is now borrowing to pay for failure, rather than investing to secure success.

The Chancellor's comments on the events of black Wednesday and our leaving the exchange rate mechanism were extraordinary. If one were to believe the right hon. Gentleman, that would have been the first national debacle to be masterminded in advance. He gave himself credit for the achievement, and failed to recognise that he has not left British industry and the British economy in a position to deal with the single market. For a Government who claim to believe in the single market, it is the height of embarrassment to enter that market on 1 January, having just left the mechanism that was designed to make it work with some stability and confidence.

As the right hon. and learned Member for Monklands, East (Mr. Smith), the Leader of the Opposition, powerfully and eloquently made clear, the reality is that the Government have been found to be political cheats who reached a position of power by sheer dishonesty and

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defrauding the electorate. The Budget is a tax-raising Budget designed to tax, tax and tax again--it will tax this year, tax next year and tax even more the year after.

What a cheek for the Government to pretend that theirs is the tax-cutting party. They have consistently increased taxes year after year, but so far the public have believed them. One can only hope that today's Budget will finally make the public realise that the Tories can never be trusted to tell the truth, even about history, never mind about promises for the future.

The Budget contains taxes--not just income tax. As the right hon. and learned Member for Monklands, East said, the extension of the 20 per cent. band amounts to a difference of 50p a week. For most people on middle incomes, that money will be clawed back by the Budget's failure to index the general allowance. Therefore, most people will be £1.50 a month worse off as a result of those two measures. The Budget increases excise duties by double the rate of inflation. The increases in tobacco prices are mischievous and malicious. I believe that increases in tobacco tax are desirable for the health of the nation, but why target people on lowest incomes, who buy the cheapest cigarettes? That seemed to be a vindictive little measure. The increase in car tax will be particularly condemned in rural regions, where there are no other means of getting about and the Government have not introduced measures to try to improve the existing means.

My right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) asked me what we could welcome in the Budget, as we should try to be even-handed as we are Liberal Democrats. I find precious little to welcome. I welcome one aspect : the Chancellor has listened to the arguments and recognised the importance of the Scotch whisky industry. As three distilleries in my constituency have recently had to reduce their labour, I hope that that proposal will at least prevent further job losses in that important industry.

There are some welcome measures for the small business sector, such as those relating to the loan guarantee scheme and to value added tax on cash accounting, although the increase could have been much more. I have no doubt that the voters of Newbury will be expected to welcome the changes in the bloodstock regime, but I doubt that they will be very much impressed by them when they look at the consequences for their electricity bills.

By freezing the increase in business rates, the Government have acknowledged the burden that the rates create. However, they have also acknowledged their total failure to create a viable system of business rates that does not require an annual fix.

The Budget will be desperately disappointing for the unemployed. The Chancellor referred to worries about the rise in unemployment and the difficulties that the unemployed face, but he showed little willingness to grasp the nettle. With respect to the community action programme, I suppose that it is refreshing to bring back something which worked, but which was abolished by the Government. However, that measure will help only a relatively small number of people. The requirement for special measures for the long-term unemployed are welcome in principle. However, by limiting the measures to people who have been unemployed for two years, the Government have drawn

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them far too tightly. I only hope that the pilot schemes will prove successful and the measure will be extended to people who have not been unemployed for that long.

When we look at the list of bad news we see a 1 per cent. increase in national insurance--a tax increase by any other name. We see the restriction on mortgage tax relief, which constitutes a real cost increase for domestic home owners. We see the freezing of tax thresholds and the appalling prospect of the introduction of full VAT on fuel in two years. That is the one measure for which the Chancellor will be universally condemned. It is breathtaking that the Chancellor can introduce such a measure in such a way without acknowledging the poverty and hardship that it will cause millions of people who are on low incomes but do not quality for benefit. Few people in the country will not find the 17.5 per cent. increase in fuel bills in two years anything other than a substantial burden. The Budget is, effectively, a Budget of despair and a Budget of desperation which contains little for the unemployed and nothing for those struggling to cope with the recession. In it, the Chancellor merely exhorts those looking for hope and encouragement to hang on now. By God they will have to pay later.

5.57 pm

Mr. David Howell (Guildford) : As my right hon. Friend said in his marathon Budget speech, of course recovery is coming. We know that from seeing what is happening in the United States, where the growth figures and indicators are rapidly improving. I see no reason why the progress should be aborted unless, having been started by George Bush--who received precious little thanks for it--President Clinton becomes too enthusiastic in his protectionist tendencies. If President Clinton does so, recovery will be damaged and improvements here will be correspondingly damaged. However, I do not believe that will necessarily happen. As long as we keep a maximum pressure on the Americans and everyone else to avoid protectionist measures, the recovery will come. My right hon. Friend was right to set the measures that he has announced in the context of that coming recovery, to ensure that it goes ahead and is not aborted and undermined by over-hasty measures or allowing the economy to overheat too soon. Budget occasions--of which this will, mercifully, be the last-- generate expectations that are far too high. Everyone looks to my right hon. Friend, or the Chancellor of the day, to achieve miracles when they cannot be achieved at any time, certainly not today. One forgets the European context in which my right hon. Friend is operating. Anyone who thinks that we have problems should look at the rest of Europe. Italy is going down into a black hole ; France is about to experience a political earthquake, rather belatedly having the vestiges of socialism--all but President Mitterrand himself--swept away and finding itself in a completely new phase ; the Swedish economy is drowning altogether ; and the German economy is shrinking.

In those circumstances, it is indeed miraculous that my right hon. Friend has been able to produce a Budget of balance and prudence and to develop so many interesting, if not necessarily very dramatic, proposals to carry us forward into the recovery process--a process that the

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United Kingdom will be the first European Community country to enjoy. We shall certainly have a higher rate of growth than Germany and many other continental European countries.

Like the very best Budgets, this one will mature. It will not result in immediate flag-waving and cheering, but neither does it justify rather splendid ranting such as we heard from the right hon. and learned Gentleman the Leader of the Opposition, who seems to have a basically erroneous concept of what my right hon. Friend is doing. My right hon. Friend says that he has gone this year for a Budget that is broadly neutral. That is a sensible but difficult stance. My right hon. Friend is building in, for coming years, a wedge of changes in the fiscal and monetary balance which will make sense against the background of rising economic activity. I recognise the skill of that approach, which I think is right.

I greatly enjoyed the speech of my right hon. Friend the Member for Shropshire, North (Mr. Biffen). Indeed, I always enjoy his speeches. I am a little less worried than he is about the timing of the Chancellor's proposals. Incidentally, I should like to associate myself most closely with my right hon. Friend's remarks about the late Lord Ridley--a marvellously non-conformist character who sometimes drove his friends, and certainly his opponents, to distraction, but who contributed mightily to the thinking part of our affairs. He will be sadly missed. My right hon. Friend the Member for Shropshire, North has said that Lord Ridley was the grit that generated the pearls in the parliamentary oyster. Indeed, my right hon. Friend himself is not a bad piece of grit. In any case, we shall certainly miss Nicholas Ridley very much indeed.

It is too soon to go into the minutiae of this very complex and interesting Budget, so I shall refer to three major issues. The first is the purdah that is associated with Budgets. I agree with the right hon. and learned Gentleman the Member for Monklands, East (Mr. Smith) that it is a very good thing that we may now be moving--I hope that we shall indeed move--away from this ridiculous convention, which guarantees that tax reforms are ill considered, ill prepared and dumped on an unsuspecting world in ways that have to be heavily revised, at great cost, afterwards.

I shall be very glad indeed if my right hon. Friend's bold reform--bringing the revenue and expenditure sides of the Budget together, starting this November--results in opening up the discussion of tax reforms, which we could have done with years ago. It is absolutely ridiculous that, at present, the Treasury policy-makers have to go into purdah, whereas many of their advisers, including the seven wise men, have no purdah at all. Indeed, they fill every column with contradictory views, and these are added to by a variety of people--assorted ex-Chancellors and other commentators of every kind. In the case of this Budget, when there has been a vast surplus of advice, all we have lacked is additional comment from the Archbishop of Canterbury or the Chief Rabbi. We have had a swirl of outside advice, but the Treasury has been held in purdah, unable to participate in policy-making.

The House of Commons ought to be able to take a little more initiative, perhaps by organising hearings before the Select Committee on Treasury and Civil Service in advance of the Budget. There is nothing to prevent us from doing so. We might have difficulty in getting Treasury Ministers to answer, but we could certainly set the debate

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going far more vigorously than happens at present. In this regard, the House has a role to play, in addition to my right hon. Friend's initiative of changing the whole timing of the Budget cycle--a move that my right hon. Friend will be remembered for being bold enough to make. Others will have to sit back and say that the officials never told them they could do that--as was said in the 1930s, when the Conservatives decided to go off the gold standard.

The second point on which I want to comment relates to capital and infrastructure. This is one area in which constant weakness has raised costs and accelerated the rate at which, in each cycle, the economy becomes overheated, increasing the volatility and management difficulty of the British economy. I want to see a very much greater impact from investment in the infrastructure of this nation, to cut costs and make us more competitive and to help to accelerate employment, as undoubtedly will happen.

I welcomed in the autumn statement, and I welcome now, the final sweeping away of the old Ryrie rules, which prevented adequate harnessing of private capital to the public sector. It is very exciting that new projects are coming forward and that we shall be able to do what the great cities of Asia have long since been doing : mobilise massive flows of private capital to bring infrastructure, particularly transport, into the 21st century--in our case, even into the 20th century. In expressing that welcome, I gladly declare my own interest as a non-executive director of Trafalgar House, which has a major interest and has had some success in developing privately financed public-sector projects.

Easing the advance corporation tax rules and improving the Export Credits Guarantee Department cover will also help very much in that direction. But that is not enough, so I must ask my right hon. Friend and his advisers in the Treasury to consider going further and starting to develop in this country what has been developed in many other countries--a separate capital budget for that part of the total budget which relates to public sector asset creation. The figures appear in the expenditure papers and, no doubt, in the Budget papers that are now being circulated, which I have not yet had time to examine.

We are told that, of the total Budget spend, about £30 billion is designated for public-sector asset creation. Our friends in Japan say that a Government deficit should be financed by operating on the basis of market psychology and bringing home the fact that much of the deficit arises precisely from capital spending. The Japanese therefore have infrastructure bonds and normal deficit bonds, which they put before the market.

That would not get round the problem of the market's attitude that this is all Government expenditure and should all be treated with the same scepticism when it comes to financing. However, we could make a major start in changing the psychology of the funding problem if it were possible to designate much more carefully and clearly the part of total Budget expenditure and the part of the total deficit to be funded that represented capital expenditure and public sector asset creation.

I ask my right hon. Friends in the Treasury to consider that idea much more carefully in the future. I believe that it would help us to get out of the bind that we have been in. Throughout the 1980s, we enjoyed great success in achieving rapid growth in the economy, but we did not see adequate growth in support and infrastructure--the true supply side of the economy-- that many of us, from the

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early 1980s, urged was necessary. We said that, if that course were not pursued, there would be serious bottlenecks, considerable cost increases and a slow-down in the general performance of the economy. That is a very important area, and I was very glad to hear what my right hon. Friend the Chancellor had to say about it. However, more thinking, better presentation and a little more radicalism in respect of funding the capital side of the Budget are required.

I am glad that we are now thinking radically about proposals to give people the opportunity and the dignity of working part-time or doing voluntary work, or of going into full-time education or training without forfeiting the state payments--perhaps "benefit" is the wrong word.

I understand the joy for the Opposition of taking the figure of 3 million, or wherever we have got to, and using it as a rolling pin with which to hit the Government on the head. There are experienced Members on the Opposition Benches who have made proposals over the years for changing the nature of unemployment. They know that 3 million is a good figure with which to bash the Government but that it is not a real representation of the problem.

We have to unravel the larger figure, and understand that within it there is a vast variety of different conditions which require sensitive and varied remedies in order to remove the whole concept of the scrap heap of unemployment. We must create in every individual who wants work, and in some who may have given up hope of getting work, the feeling that they have a function and a dignity in society.

It is right to start with small schemes, and my right hon. Friend announced a few small schemes ; indeed, some are not so small. They are interesting, and I hope that they will grow and develop, and that it will be possible, even in the adversarial politics which we operate in the House, to begin to do away for all time with the idea of the "scrap heap" of unemployment and the self-inflicted misery and undermining of confidence that that language creates. It should be made clear that everyone has a function, and the dignity which goes with that function.

On the monetary side, what my right hon. Friend is trying to do--again this is not the stuff of headlines--is achieve some rebalancing between the monetary and fiscal stances in the economy. We have had the welcome descent in interest rates which has been amazingly rapid, and monetary conditions are reasonably easy. If the Bundesbank cut interest rates again, it might be possible for us to go a point or two lower, although it would be unwise for my right hon. Friend to change the relative short-term interest rate posture of the British economy vis-a-vis the German economy.

Whenever we talk about monetary policy in the House, and whenever I hear my right hon. Friend talk about his plans for short-term interest rates, I feel that he is taking too much on his shoulders. The responsibility for short-term interest rate policy should be spread more widely and should be given more publicly to a central monetary authority, a reformed Bank of England, rather than left solely to the action and discretion of the Treasury, the Chancellor of the Exchequer and other Ministers.

People will say that monetary policy should not become unaccountable in the hands of bankers, but one does not need to go all that way. A sensible compromise would

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