|Previous Section||Home Page|
Mr. Tony Blair (Sedgefield): I intend to deal with my response to the Budget in three parts: first, its effect on living standards; secondly, the degree to which it reduces social injustice and cuts unemployment; and, thirdly, its impact on the long-term economic strength of the country.
We have seen the reaction--the cheers--from hon. Members on the Conservative Benches, but I suspect that there will be two distinct views on the Budget. One will be the Conservative politician's view and the other will be the view in the homes, workplaces and streets of this country, because whatever is said by the Chancellor, this Budget will go down in history as the VAT-on-fuel Budget. Let me deal straight away-- [Interruption.] It only shows how out of touch the Conservative party is if Conservative Members do not think that the question that people are asking, and will be asking tonight, is, why did the Chancellor not take the chance to live up to his election promise.
Let me deal straight away with the Chancellor's compensation proposals. Let us just see how generous they really are. As I understand it, there are only two parts. First, there are the social fund cold weather payments, which will apply, of course, only when the temperature is very low and only to certain groups of people. There are many groups to whom that payment will not apply at all. As for the home energy efficiency scheme, let us make it clear exactly how much it amounts to. It amounts to £10 million, to be set against the £2.7 billion that the Chancellor is raising from value added tax. Furthermore, he announced what he described as very generous retirement pension help. I think I am right in saying that that is only the normal indexation to the retail prices index, plus the compensation already announced. Even the extension of help for old-age pensioners which the Chancellor announced earlier amounts, on average, to about 10p a week, or £6 a year. How can that possibly compensate for the enormous rise in VAT?
Next April, everyone's fuel bills will increase by 10 per cent., on top of the price rises and the 8 per cent. VAT already levied. Let us remind Conservative Members--indeed, we will not cease to remind them--that they
Column 1105fought the last general election on a specific pledge that they would never raise VAT. They have broken that pledge, and they will never be trusted on tax again.
Let me tell Conservative Members that the Opposition will provide the House with a chance to speak for the people of this country. When we table an amendment allowing hon. Members to vote on the VAT rise, we will challenge all members of the Conservative party--both Conservative parties--to keep the promise to the electorate on which they were elected. If they break that promise, the country will have been warned that the Conservative party imposed VAT on fuel and power when it promised that it would not, and that it cannot be trusted not to impose VAT on food, children's clothing, books and papers if it is ever elected again.
That, however, is not the end of the tax rises that the Chancellor did not mention in his Budget. Next April, mortgage tax relief will be cut to 15 per cent., which is another breach of a specific manifesto pledge; moreover, the married couple's allowance is to fall. The Chancellor did not mention that either. Car and home insurance taxes are to rise--and all that will come on top of last year's and this year's taxes. In two years, the average British family will have experienced a "sting" amounting to nearly £1,000 a year--7p on the standard rate of income tax. That is the betrayal that the British people will never forget.
In many of the interviews that the Chancellor has given recently, in what used to be described as Budget purdah, he has been honest enough to confess that he has "delivered very little to Mr. and Mrs. Smith up and down the country." I believe that that is a reference to what Conservative central office calls "the elusive feel-good factor", which was mentioned in the now notorious Maples report.
I shall tell Conservative Members why there is no feel-good factor. I shall tell them why Mr. and Mrs. Smith do not feel good. Mr. and Mrs. Smith feel bad about what the Government have done. They feel bad because the mortgage tax relief has been cut by a Government who promised that it would not be cut; they feel bad because it costs more to drive, to insure their car or home and to take a holiday; they feel bad because they must pay the VAT on fuel, and they feel sickened that their elderly relatives must pay it, too.
There is a real world out there, and it is a mile away from what the Chancellor described. It is a world of mass unemployment, temporary contracts and enforced part-time working. That is the world in which people live, and these are the tax rises that will hit them next year. It is a world in which one job is often not enough to make ends meet--a world in which living standards will fall as a result of this Budget, in which crime and the fear of crime have risen, in which the transport system has ceased to serve people and in which the national health service has been sacrificed on the altar of the free market. As living standards have fallen, people have seen the results of social decay and injustice all around them.
Let me now deal with the Chancellor's so-called "Budget for jobs" measures. Let us analyse them, and see just how much they amount to when balanced with the problems. The Chancellor talked of a deprived underclass; I believe that many people hold the Government responsible for the 15 years in which that underclass has
Column 1106come into being. He claimed that his measures were very generous. Let me tell him that his national insurance holiday--after two years of unemployment--is what the Opposition asked for, but we asked for it to be granted after one year.
Mr. Blair: Of course we welcome it, but why did the Chancellor not adopt the other alternative that we proposed--a proper tax rebate on national insurance, and one for employers, which would have allowed us to return a substantial number of the long-term unemployed to work?
The Chancellor said that there had been a big expansion of community action. I understand that 57,000 people are involved in the scheme this year and that next year the number will be reduced to 40, 000. The only increase is on last year's plans. Furthermore, I think I am right in saying that the unemployed people who will be assisted will be assisted from a reduced budget. A press release has just been issued by the Department of unemployment--I mean the Department of Employment--[ Laughter.] That was, I think, an entirely justifiable slip. The press release states:
"We will increase the number of unemployed people who get jobs as a result of the programme from a reduced budget".
The Chancellor's generous help does not appear, on analysis, to be quite as generous as he said. On any basis, the problem of the long-term unemployed will remain.
The Chancellor says that he cannot find more money to deal with that problem. Let me tell him one or two things that he could have done. He said today that he could deal with certain loopholes--the loopholes that he used to dismiss so abusively in years gone by. Now, he can suddenly find £1.5 billion over three years--I think that that was the figure.
Let me tell the Chancellor about some of the other loopholes that he could have closed. Why could he not act against the abuse of executive share options? Why could he not withdraw tax relief for private medical insurance, into which £100 million goes each year? Let me tell the Chancellor--this illustrates the choice that must be made between the two parties--that that in itself would have been enough to kick-start a proper programme such as the one that we have described for the long-term unemployed.
Because of offshore trusts and the abuse of inheritance tax, ordinary families are being penalised while those at the top of the income scale are not. The same applies to abuses in the privatised utilities. The national grid was valued at £1.5 billion; it is now worth £4.5 billion. That increase has not been earned. It is a windfall increase, of the same order as the current salary increases at the top of the income scale.
At the bottom of the heap, owing to long-term unemployment, are families with children who are becoming so poor that in certain areas mortality rates are rising. Some of our children are suffering from malnutrition. We believe that, while there exists a single possibility of raising money properly by ending abuses, it is intolerable for the Budget to leave gross abuses of the tax system unchecked, or to refuse to ensure that its burdens and advantages are more fairly distributed when families are living on or near the breadline.
Column 1107The injustice, however, is not just at the expense of the poor. One of the most interesting reports published in the past couple of weeks was produced by the Institute of Fiscal Studies, and it dealt with the impact of tax changes on ordinary families between 1985 and 1995. Using that period is being generous to the Government, because it leaves out the VAT increases that the Government introduced in 1979 in breach of their promise not to do so.
What is shown by the 10 years, 1985 to 1995? That is what we have made all the sacrifices for. It shows that the bottom 40 per cent. of the population have lost as a result of the tax changes and a further 20 per cent. have barely gained. So, a majority have either lost or stayed still and it is only the top 10 per cent. who have gained substantial sums of money. They have gained over five times the amount of the next percentage down. That is what has happened, despite the huge proceeds from the sale of oil and assets which, taken together, amount to £8,000 per family in Britain. That money could have been given to families and could have been put in the building society and they would have done better than they have done out of the Government.
What of the final test--the long-term economic strength of the country? It is true that some of the economic indicators look up. I must tell Conservative Members that I do not believe that anyone in the country gives them much credit for any recovery that there is, but even this Government could not keep the country in recession for ever.
It is true that borrowing is substantially down, but let us not forget who put us in financial chaos in the first place. Now is the time to look at the Government's record in perspective. After all, they have had nearly 16 years--not 16 weeks or 16 months--to get it right.
At the start of the 1980s, the Conservative party's economic promise was based on four elements: first, it would cut unemployment; secondly, it would deliver competent economic management; thirdly, it would improve public services through privatising and
commercialising; and, fourthly, greater wealth at the top would trickle down to the rest and reduce poverty. Some Conservative Members still believe in that, but the country does not believe in it any more.
Sixteen years on, let me give the Government some inescapable facts--what might be called killer facts. Unemployment is up, we have had the two worst recessions in living memory, public services are weaker and people are fed up with privatisation. Although there have been massive gains for those at the top, middle income Britain faces a 7p rise in the basic rate of income tax, and poverty and inequality have hugely increased.
The economic strategy for the future is not that which they have pursued in the past. The real test of the Budget is how we rebuild our economy, equip our people and our industry and give them the security and confidence to prosper. The Budget was silent on how to invest in our people at school and at work, to motivate them, extend their potential and treat them fairly as proper partners in the enterprise.
We must expand and modernise our industry, renew our infrastructure, harness and use for all the country the benefits of new technology, regenerate economic activity in areas such as the inner cities, the coal communities and shipbuilding communities, which have been hit by structural change, reduce inequality and provide a more
Column 1108unified and cohesive society. That is the agenda of the 1990s. It is an agenda not of crude market dogma but of partnership for the future. That is what the people of the country want the Budget to do. They want help with the problems that they really face in the real world, not what Conservative politicians say.
We can now see ever more clearly the dividing lines on which the next election will be fought--Labour as the party of people against the Tories as the party of privilege; Labour as the party of investment against the Conservatives as the party of waste and high unemployment; Labour as the party of social justice against the Tories as the party of social decay; and Labour as the party of strong public services against the Conservatives as the party of privatised dogma. Those are the choices that the country faces and, after today's Budget, more than ever before people will turn to Labour.
Sir David Knox (Staffordshire, Moorlands): I congratulate my right hon. and learned Friend the Chancellor on his second Budget speech. I am afraid that I cannot extend my congratulations to the Leader of the Opposition. At his party conference recently, he had a great deal to say about new Labour. This afternoon, we heard nothing more than old Bolsover from him. There is nothing very new about the right hon. Member for Sedgefield (Mr. Blair).
Like last year's speech, my right hon. and learned Friend's Budget speech was commendably brief. No doubt, to some extent his speech will be condemned by the media as rather dull, but I believe that it was right in the circumstances. I must confess that I like some of the measures that he introduced more than others. None the less, his basic Budget judgment has been right and is sound.
My right hon. and learned Friend announced further help with VAT for those on state benefits. That is the additional help that he promised last year. We will, of course, have an opportunity to look at the detail tomorrow, but as my right hon. and learned Friend said, it means that those at work will be paying VAT on fuel and the pensioners will not.
There has been great hypocrisy about this issue. The effect of VAT on domestic fuel has been grossly exaggerated. During the past 12 months, the retail prices index has increased by less than it has for many years and that index includes the effect of the increase of VAT on domestic fuel.
Mr. McCartney: The hon. Gentleman supports the Government's decision to impose VAT on fuel, but he is making no comment about the fact that VAT is imposed not just on the cost of the fuel but on the standing charges as well, which have been increasing dramatically. So, by paying VAT on the standing charge as well as on the cost of the fuel, pensioners are having to pay a double tax.
Column 1109That is leading to some pensioners having to pay more on standing charges and VAT than the cost of the fuel itself. What does the hon. Gentleman intend to do about that?
Sir David Knox: I gave way to the hon. Gentleman for an intervention, not for a speech. He knows as well as anyone else that it was always intended that VAT would be imposed on the whole bill. The hon. Gentleman also knows that, if it did not happen that way, the whole system would be open to abuse. We would probably find that if VAT had not been put on the whole bill, the standing charge would have comprised most of the cost on fuel bills.
Before being interrupted, I said that the effect of VAT on domestic fuel has been grossly exaggerated. I said that the retail prices index has gone up by less in the past year than it has for a long time and includes the effect of VAT on domestic fuel. I understand that the Labour party wants to impose some sort of tax on domestic fuel at some stage. I cannot really see the difference in effect between the Labour party's tax and VAT.
I was pleased to hear my right hon. and learned Friend's proposals to help the unemployed. I have always taken the view that the principal help for the unemployed is through sensible demand management. However, demand management is not enough on its own and other measures are undoubtedly needed, particularly to help the long-term unemployed who have specific problems in returning to work.
I welcome also the fact that my right hon. and learned Friend chose not to increase the duties on beer, wine and spirits. I should have preferred it if he had managed to reduce the duties. Many publicans and others in this country face real problems with people bringing in cheap alcohol from other European Union countries, creating unfair competition for British publicans and others. I hope, therefore, that European Union negotiations to equalise rates throughout the Union will be pursued with great vigour in the months ahead.
I am not so sure about the petrol duty increase which was announced by my right hon. and learned Friend the Chancellor. Like many other hon. Members, I represent a rural constituency and people there are heavily dependent on their cars. The constant upping of the petrol duty imposes a heavy burden on many of my constituents.
After the dust of the Budget has settled, it will be judged, not on its detailed proposals but on its effect on the British economy in 12 to 18 months' time. In my view, the eventual judgment on the Budget will be that my right hon. and learned Friend's caution was exactly right in the circumstances.
It is true that my right hon. and learned Friend has been able to present his Budget in more favourable economic circumstances than have obtained for a long time. Usually, a Chancellor faces a situation where either fast economic growth and falling unemployment are accompanied by rising inflation and a deteriorating balance of payments, or low inflation and an improving balance of payments are accompanied by low or negative growth and rising unemployment. Today, possibly uniquely, all the economic indicators point in the right direction. We have fast economic growth, falling unemployment, low inflation and an improving balance of payments. Although the present economic position is
Column 1110extremely good and the outlook is favourable, there is no room for complacency. As we have found out to our cost so often in the past, economic problems are never permanently solved.
It will be extremely difficult to keep economic growth, unemployment, inflation and the balance of payments moving in the right direction, ensuring that expansion neither gets out of hand nor slows down. In performing that balancing act, my right hon. and learned Friend the Chancellor is not helped by the media or by many commentators, particularly those from the monetarist school, whose views are dominated by the short term. I get tired of reading articles written by supposed economic experts who tell us that inflation has been cured and that, consequently, the Chancellor no longer needs to bother about it. We have heard that before. It has always been wrong before and it is wrong again today.
The consequences of any economic decision, be it of a monetary or a fiscal nature, take from 12 to 18 months to become effective. The task that faced my right hon. and learned Friend the Chancellor today was to introduce measures to deal with what he considered would be the position in 12 to 18 months' time. Because inflation is low today does not mean that it will be low early in 1996. A wrong decision in this Budget could well spark off a bout of inflation then. Indeed, it was because my right hon. and learned Friend considered that inflation might be a problem then that he rightly increased interest rates about two months ago.
In his Budget, my right hon. and learned Friend has taken further steps to reduce the public sector borrowing requirement to ensure that economic expansion does not get out of control. I have always believed that the Budget should be used in that way. In times of recession, the Budget deficit should be increased. In times of boom, the deficit should be reduced or even eliminated. That is sensible, counter-cyclical economics.
Of course, my right hon. and learned Friend will not get every economic decision right. No one ever has and no one ever will. After all, economic forecasting is a notoriously inexact science, as he said in the debate yesterday. By looking ahead to try to anticipate the situation, as he has done since he became Chancellor, and as he has done again today in his Budget speech, he has a much better chance of being right than any of his predecessors, whose policies have all too frequently been no more than a response to the current position.
More damage has been done to the British economy by responding to monthly or even quarterly economic statistics, which in any event are invariably wrong, than by anything else. My right hon. and learned Friend has broken clear of that. It is important that he should not revert to such bad habits, however tempting it may be and however strong the media pressure may be for instant action.
One of the great successes of the current economic recovery is that it is largely based on higher exports. At the depth of the recession, there was great concern that the recovery would be accompanied by a deterioration in the already serious balance of payments position. After all, a worsening balance of payments has been a feature of all past recoveries.
This time, as we moved out of recession, exports have risen much faster than imports. As a result, there has been a considerable reduction in the deficit on the current account of the balance of payments. That improvement
Column 1111must continue, as we are still in substantial deficit. It can best be achieved by maintaining a competitive exchange rate without inflation, which means that interest rates must not be increased by too much and that fiscal policy as well as monetary policy should be used in the battle against inflation. Today's lower public sector borrowing requirement forecast is a step in the right direction. I welcome the fact that my right hon. and learned Friend the Chancellor did not reduce taxes in the Budget. It would have been ridiculous to do so when some tax increases in the pipeline have yet to be effective. Moreover, tax cuts would have increased the PSBR and that would almost certainly have upset the financial markets and perhaps necessitated higher interest rates. The Budget will ensure that steady economic growth will continue. It is important that it should do so, for it will be possible to reduce unemployment to an acceptable level only if growth continues.
The reduction in joblessness of almost 500,000 in the past two years is welcome, but unemployment at about 2,350,000 is still much too high. I never cease to be amazed at the complacency throughout the country about the much higher level of unemployment that has obtained in the past 20 years. I emphasise the past 20 years because unemployment did not occur only under this Government. Throughout that period, unemployment has been more than 1 million. In the mid-1980s and early 1990s, it was around the 3 million mark. Unemployment at those levels is not inevitable. From 1945 to 1974, we had full employment. The number of people out of work fluctuated, but it rarely exceeded 500,000. In 1955 and again in 1965, it was as low as 1.1 per cent. of the working population, about an eighth of what it is today. That shows how far we have moved from the high level of achievement in the 30 years after the war. We must aim to return to those days as soon as possible, for unemployment is a social scourge and is divisive. It is impossible to have one nation if one in 12 of the working population is out of work.
Unemployment is also economically wasteful. If we are not using all the available labour in the country, we are not maximising national output and that means that the nation is forgoing wealth that it could otherwise enjoy. The task facing my right hon. and learned Friend the Chancellor is, therefore, to ensure that demand is at such a level that the potential supply of labour, capital and enterprise is fully used. That will bring economic success and social harmony to our country and I know that that is my right hon. and learned Friend's aim.
Mr. Malcolm Bruce (Gordon): The hon. Member for Staffordshire, Moorlands (Sir D. Knox) praised the Chancellor, but, in doing so, gave a magnificent indictment of the previous 15 years of Conservative government, although the Government have, apparently, at last got it right.
The Chancellor clearly wished to give the impression of solid caution, prudence and steadiness at the helm and that we are on the road to long- term recovery; the reality is that no one believed him. People know that he is taking more taxes out of our pockets today--seven additional taxes in the current financial year totalling more than £6 billion--and that he intends to hang on to them to cut tax in advance of the next general election. Today's prudence is to pave the way for financial profligacy before the
Column 1112election. The idea that it is laying the foundation for solid and sustained growth does not square with the Government's record of the past 15 years or with the Chancellor's attitude.
The hon. Member for Moorlands referred to inflation. Everyone welcomes the low inflation that we have had for 18 months, but most of the reduction in inflation had little or nothing to do with Government policies but more to do with a highly competitive economy clawing its way out of recession, the effect of world recession and low world commodity prices. Those factors are not under the Government's control and could always change direction. Indeed, as the world economy recovers, they are likely to do so. The Government could then want to introduce tax cuts just at a time when it would destroy sustained economic recovery. We all know what happens in those circumstances: money is clawed back immediately after the general election, once the public have been conned into voting a certain way. The people of Britain will not be taken in so readily again.
We are already hearing reports of capacity constraints in industry. Investment in industry, as a percentage of gross domestic product, is at a historical low. That is not the foundation for sustained, long-term recovery; it is an indication of a manufacturing base too much reduced to provide the platform on which growth must depend. The Chancellor has reaffirmed his commitment to taking the extra tranche of value added tax on fuel, despite the fact that he had enough room to manoeuvre within the Government and gave back sufficient revenue to have wiped out that increase at no net cost to the Exchequer. He did not do so because he was determined not to give people the response that they were seeking--the recognition that it was an unfair tax--but instead to hang on to the money to finance future tax cuts.
Interestingly, however, the Chancellor did not take the same attitude when he suggested the possibility of a new tax--the landfill tax. He told us not to worry because it is an environmental tax that will immediately be ploughed back in tax cuts elsewhere but not, apparently, in respect of the imposition of VAT on fuel. That is testimony to the fact that VAT on fuel was not, is not and never will be an environmental tax; it is merely an unjustifiable raid on our pockets by the Chancellor. To tell those of us who live north of the border that the increase is not a burden when our heating bills are up to two thirds higher than average is to add insult to injury. We need borrowing discipline, but the Chancellor should not expect us to be fooled by the fact that he was able to announce falling borrowing. Anyone who has presided over this particular stage of the economic cycle would expect borrowing to fall; it could only be the result of irresponsibility if it did not.
The Chancellor also suggested that he had made enormous savings, but he was able to do so only because he got the forecast wrong last year and the outturn has been better than anticipated. In those circumstances, the forecasts that he has made for the next three years are not to be relied on because, if anything goes wrong with the forecast of GDP, growth or inflation, he will be knocked off course and will not have the necessary money to play with. One or two of the Chancellor's proposals need clarification. There is no commitment to long-term investment, which the country needs to sustain the Government's commitments. Cuts have been made in the
Column 1113roads programme with no corresponding investment in, for example, public transport, as the Liberal Democrats would have wished. Cuts have also been made in the housing programme, despite the increasing problems of homelessness in many parts of the country, and in local government expenditure, and despite the fact that, at least in Scotland, local government is facing the cost of a reorganisation that nobody wanted. The Government are effectively passing the buck to local authorities, on whom they load more responsibility but from whom they expect more restraint.
The forecasts have been wrong in the past and they might be wrong in the future, so we need to investigate the claims that the Chancellor made in the Budget. He said that he hoped to secure £5 billion of extra investment under the private finance initiative, but he did not tell us how much of that £5 billion will come from the private sector. I think that we should be told. On the strength of the record to date, I suspect that it will not be very much, and it will not be very much unless the Government are prepared to offer a more attractive deal. It is a sensible way to unlock private funds, but not as practised by the Government to date.
Housing benefit reform is long overdue. The Government in effect provided private landlords with a charter to rip off the homeless and people who did not have access to the housing market or to local authority housing because it had been sold. Those landlords were paid out of taxpayers' money. Interestingly, the Government are now reintroducing rent control by the back door, and not before time. Perhaps the biggest insult of all is to be found in that part of the speech where the Chancellor poured forth a profusion of words, which is always a sign of little substance. I refer to the part of his speech that contained a plethora of gimmicks and gizmos to deal with the problem of unemployment. In the end, it amounted to very little. The number of long-term unemployed might be reduced by 5,000, according to the Government's own forecast.
I cannot think of anything more insulting to someone who has been unemployed for two years than to be told that the Government have a plan for him that involves a national insurance holiday for his potential employer, which he will be able to claim in 18 months. The Government's commitment in this respect falls not within the framework of the present Budget but the one after. It is no solution at all. The Chancellor says that he has been able to tackle such problems, but he has not told us how.
In summary, the Budget contains nothing new. It is a standstill Budget from a Chancellor who is anxious to hang on to all the extra taxation that he can and who does not understand the meaning of the phrase "long-term investment". It must be recognised that stop-go cannot be sustained in the future any more than it has been in the past.
If we are to prevent inflation from taking off, and if we are to get people back to work and keep them there, we need to invest in industry now, but there is nothing in the Budget to promote investment now, when it is needed. If we fail to invest, and as the recovery continues and our competitors become sharper as their recovery begins to
Column 1114gather momentum, we shall find that the old problems of capacity constraints, skills shortages and rising inflation will take hold again.
We need to improve the skills of our people so that we can innovate and compete and ensure that we have the products and services that will enable this trading nation to pay people at a higher rate and sustain long-term tax cuts rather than short-term tax cuts intended to get one party through a general election. The Government got away with it once; they will not do so again. The Budget will fool no one. It does not provide the necessary investment now or the justification for tax cuts at any time before the next election.
Sir Anthony Grant (Cambridgeshire, South-West): I am always glad to follow the hon. Member for Gordon (Mr. Bruce). I shall miss his presence on the Select Committee on Trade and Industry, of which he was an amiable and agreeable member. His speech, however, was strong on rhetoric, but a little thin and vague on detail. I am no wiser now about precisely what the Liberal Democrats would do than I was before. We shall, no doubt, hear more detail from Labour Front-Bench speakers.
The hon. Member for Gordon is a little cheeky to say that we have improved the competitiveness of industry, that the recession is over, that things are looking up and that we are coming out of the recession, but that it has nothing to do with the Government and is all to do with world events. Whenever we pointed out that the recession was a world recession, he would, say that it was not and that it was all the fault of this wretched Government. He cannot have it both ways.
I believe that it is sensible to join the Budget with the public expenditure round rather than to have them at different times, although that poses certain problems, which were well highlighted in an article in The House Magazine by my right hon. Friend the Member for Worthing (Sir T. Higgins). He pointed out the difficulties of getting representations properly made and considered before the Budget. What seems to happen nowadays is that we have a long recess, we then roar into the Queen's Speech and before we know where we are, we are engaged in the unified Budget. That probably provides insufficient time for people to make representations to us and for us to discuss fully with the Chancellor and his team what our views are.
I am still old-fashioned enough to believe in a period of purdah, which served this country well. The Chancellor and Treasury Ministers simply listened silently to what people said and then made up their minds, rather than initiating matters by flying kites all over the place, causing some uncertainty in the financial world. Having said all that, however, I think that we must stick with a unified Budget. The Budget will be widely welcomed by those involved in the serious business and industry of this country. The one message that I got, more than anything else, was that, for heaven's sake, what we want is some degree of stability. We want to know where we stand on taxation. We hope that we have a stable currency. We want to know where we are on all the provisions made by the Government for business and industry, and we want reasonably stable interest rates. The Budget can be commended on those grounds.
Column 1115Throughout my parliamentary life and before, I have taken an interest in Budgets on two particular grounds. First, I have been a long-term advocate of wider share ownership throughout our community. We have seen ups and downs. The reason why I have argued strongly for wider share ownership is that I believe that it is in the interests of freedom and democracy that people should own a stake in the country, whether in property or in shares in industry and business. I judge a Budget on those grounds as well and I commend the Chancellor for improving the PEP--personal equity plan--provisions. This has been a useful and helpful way in which to encourage savings.
Secondly, we should recognise that there are 1 million more small businesses than there were in 1979. They have probably suffered more than any other sector in the recession, but they are sufficiently resilient and they will recover most speedily. I welcome the measures taken to encourage small businesses through schemes such as the venture capital scheme. I also welcome the raising of the ridiculously low VAT threshold, which will now start at £46,000. I have always argued in favour of a higher level because small businesses do not have the time to fiddle around with endless bureaucracy and taxation. The Government are to be commended not only for that change, but for the Deregulation and Contracting Out Act 1994, which will be a very great help. Likewise, small businesses need stability and they need to be able to get on with their business.
There is some very good news all around. We have low inflation, low interest rates and rising exports. I point out to the hon. Member for Gordon that one of his distinguished colleagues, Lord Jenkins, introduced a Budget after another devaluation. One thing that he advocated more than anything else was that recovery should be export led. That is exactly what is happening now and it is extremely good news.
Today some of us on the Select Committee on Trade and Industry met construction industry exporters. The construction industry is having a difficult time at home, but exporters are doing extremely well and they are anxious to do better on Britain's behalf. They were critical of the Export Credits Guarantee Department provisions, especially in respect of new markets in third-world countries. They said that the present provisions were too tight and too bureaucratic, and compared unfavourably with the provisions in France, in Germany and elsewhere. I am glad that that has been recognised by my right hon. and learned Friend the Chancellor and I welcome and praise his provisions concerning the ECGD, which will make it more amenable to exporters. I hope that there will be good results from that.
Exports are up by 10 per cent., productivity is up by 5.5 per cent. and investment is up by 6 per cent. Altogether, it is good news, but why is that fact not percolating through to the ordinary man in the street? Why do our constituents not seem to see things in the same way as business and industry? Here, I give a note of caution to my right hon. and learned Friend.
I do not believe that the message will get through until there has been some recovery in the housing market. Negative equity and the absurd boom and bust we have suffered recently have left the worst possible taste in the mouths, minds and hearts of many people. The reason why they do not have the confidence to invest in property
Column 1116or to acquire property is the fear of unemployment and the fear of redundancy, which strike hard. On that score, I believe that we are moving in the right direction.
Unemployment went down by 400,000 last year. The concentration on small firms is immensely important because we shall not get new employment out of the great firms of this country; it is only through the growth of small firms that unemployment will be reduced. That growth will take quite a time and, meanwhile, we must make it clear that the housing market is stable and we must encourage the construction industry to develop.
Nobody wants to go back to the absurd situation of house prices going through the roof. People started up small businesses in the vague hope that the houses in which they lived would provide future capital. That is madness and we do not wish it to happen again; it should never happen again. We want, however, to get the housing market on the move again. I tell my right hon. and learned Friend the Chancellor that that depends on interest rates being reasonably stable and I hope that he will always have that in mind.
Inflation is, of course, a menace that must be watched all the time. As commodity prices have increased by about 25 per cent., I anticipate that further rises in interest rates may be necessary at some time in the future. Having said that, they must be carefully applied. I urge my right hon. and learned Friend the Chancellor always to recognise two factors: first, the need to contain inflation and, secondly, the need to restore confidence at all levels, from the lowest upwards. I am sure that my right hon. and learned Friend appreciates that because it is the most crucial matter for us to consider now and in the future.
I sum up by congratulating my right hon. and learned Friend on helping savings and on maintaining stability for industry. Industry wants stability and a period of calm. The Government have not gone berserk over taxation, and nobody wants that. I have not had a single letter asking for a reduction in taxation. The odd eccentric has asked for taxation to be put up--usually rather well-heeled eccentrics, and there are not many of them. By and large, business, industry and the public want stability so that they can plan for the future. On that ground, I believe that the Budget passes the test of the time and I very much commend it to the House.
Dr. John Marek (Wrexham): The hon. Member for Cambridgeshire, South- West (Sir A. Grant) has been a Member of the House for many years. I distinctly remember him taking his part in cheering Mrs. Thatcher, as she then was when she was Prime Minister, during the period when easy money was flowing out of everybody's ears and bumping up the price of houses. Of course, the hon. Gentleman is reaping a bitter harvest as people are now acutely aware of what happens when, due to mismanagement of the economy by the Conservative party, interest rates shoot up to 14 or 15 per cent., as they did, plunging countless householders into negative equity. Indeed, many people are still in that situation.
Sir Anthony Grant rose --
Dr. Marek: I will give way to the hon. Gentleman as I mentioned him by name. It is true, however, that there was no dissent among Members on the Government Benches in 1985, 1986 and 1987 under Lord Lawson and
Column 1117Mrs. Thatcher, the then Prime Minister. The Conservative party now has to live with the fact that the electorate has rumbled it and will not vote for it again.
Sir Anthony Grant: I accept my responsibility for having supported Budgets and, indeed, encouraged the reduction in interest rates at the wrong time. But so did the Opposition, more so than I ever did. As I subsequently pointed out, the panic throughout the world after black Wednesday or Thursday or whenever it was in 1987, when everybody was in a panic and Finance Ministers all over the globe suddenly reduced their interest rates, was a very great mistake.
Dr. Marek: I accept the hon. Gentleman's generous comment as he takes his share of the blame in supporting Budgets in the 1980s, but he cannot say that Opposition Members did. I remember that we were incensed by some of the Budgets when free handouts were given to the very wealthy through executive option schemes and through a lower top rate of income tax --some of which was deserved although, of course, it has gone too far.
The problem with this Budget was not what the Chancellor said, but what he did not have to talk about at all--the decisions which were taken before and which will come into effect next year. Principally, of course, I am referring to VAT on fuel, which is going up by 9.5 per cent., as has already been mentioned. I do not apologise in any way for repeating the proposition that the public have rumbled the present Government. They will not vote for the Government again because they realise that the Government cannot be trusted. It was made very clear before 9 April 1992, by Government Members, the Prime Minister and everybody else, that they did not intend to impose value added tax on any of the tax-free sectors of goods. As soon as they won the election, of course, VAT on fuel was proposed.
The Budget was forecast to be dull and dreary, and to a large extent it was. Perhaps for that very reason, however, I found today's Budget less repulsive or repugnant than previous Budgets. Measures for job seekers are all right as far as they go, but they will not necessarily create the jobs needed. Industry has to create jobs. It is a subsidiary matter to ensure that the jobless are encouraged to apply for jobs and to train and retrain, and what the Chancellor announced in that area had my support. However, that will not create jobs in the first place.
I was disappointed about proposed measures for job creation as there is to be no change in corporation tax and no incentive to invest. I firmly believe--there is a clear difference between me and the Government here-- that it is through investment that we shall create jobs. The Chancellor could have gone for taxing dividends, which would have been an incentive for companies to put more of their profit into investment rather than shelling it out as dividends. Unfortunately, there is nothing like that in the Budget and no changes in advanced corporation tax.
Business rates are to go up. The Chancellor made great play of that. They are to increase by up to 7.5 or 10 per cent. Business rates, which companies have to pay, are among the biggest banes of society. They are huge and they set our country apart from what goes on elsewhere in the European Union. The greater scope that the Export Credits Guarantee Department will have to cover,