Mrs. Margaret Thatcher (Finchley)
It is the custom of the Leader of the Opposition always to congratulate Denis Healeythe Chancellor of the Exchequer on the manner in which he has presented his Budget speech, although, as he will know, one reserves one's comments on the contents for a little later. I warmly congratulate the Chancellor on his different presentation. His speech was much shorter, which, I believe, is a great advantage. We had been told that it would be freer of jargon and a good deal simpler. However, I am bound to say that I did not notice it. This is, of course, the Chancellor's thirteenth Budget. The style has changed a great deal, and I think that the House has benefited from the change in style and from its being shorter.
With regard to my comment on the Budget, perhaps it is known in this House but not outside that this has to be wholly off the cuff—[Interruption]. The House knows that I have no advance knowledge whatsoever of what the Budget contains. Therefore, I know no more than the public knew in listening to this broadcast. I hope that they will not——
Mr. Andrew Faulds (Warley, East)
These are proceedings of the House. It is not a broadcast.
Mr. Deputy Speaker
Order. The hon. Member for Warley, East (Mr. Faulds) must restrain himself.
Mrs. Thatcher
It is also the custom that the Opposition's reply is made tomorrow by Sir Geoffrey Howethe Shadow Chancellor. It will, of course, be made. Finally, the Leader of the Opposition makes some preliminary comments, or attempts to [column 1210]comment, on the Budget that we have just heard.
I noted that the Chancellor did not go into his own immediate history of his last 13 Budgets or of his last four years. Indeed, the way in which he started the Budget meant that we scarcely recognised the picture which he drew. As he knows, under his stewardship output in this country has not increased for four years. The right hon. Gentleman has presided over the biggest increase in unemployment in the post-war period. In terms of inflation he has presided over both the biggest increase and the peak in the post-war period.
Although the Chancellor now says that the year-on-year rate of inflation is down to 9.5 per cent.—he and we hope that it will soon be down to 7 per cent.—he omits to say that from the housewife's point of view this is 9.5 per cent. on top of 16.2 per cent. on top of 22.9 per cent. on top of 19.9 per cent. Therefore, it is not surprising that the housewife does not entirely see it in exactly the same way as the Chancellor.
The right hon. Gentleman also omitted to say that inflation is still three times as high as it is in Germany in the same world circumstances, twice as high as in Japan and higher than in any other major competitor country except Italy. He also omitted to say that under his stewardship the fall in the standard of living has been greater than any other we have experienced in the post-war period. Indeed, the average wage earner is £6 a week less well off than he was when the Labour Government came to power. He also omits to say that he has presided over the biggest increase in personal taxation.
All that the Chancellor is doing today is taking off just a little of the tax that he has put on. He also omits to say that the Budget is delivered against a background of 4¾ million people dependent on supplementary benefits and against a background in which industry is not in a competitive position because it has far lower profits than it should have in real terms and is still suffering from the old problem of far too many restrictive practices to be competitive.
I must say, therefore, that as I listened to the Chancellor I thought that the trailer to his Budget had been a good deal more exciting than the show itself. [column 1211]
The fact is that the whole of his strategy during the last four years has failed and that instead of tinkering with the system we ought to go in a totally different direction. I believe that the whole of the right hon. Gentleman's strategy has been to take more of the nation's income to be spent by the Government and to leave less of it to be spent by the people from their own pockets. Indeed, if one studies what has happened in the past four years, every description shows it. The Government side of the House believes in the Government spending the people's income. The people believe in having a higher proportion to spend themselves.
The right hon. Gentleman did this—it was his strategy, I believe—to try to get higher growth, which he did not get, and to try to get better social services, which he has not got either. So the entire strategy has failed. He set out to create a Socialist paradise, and all that we have is Socialism. Therefore, the right hon. Gentleman starts off as the prisoner of his previous 12 Budgets and as the prisoner of his party's philosophy.
As we know, every Budget has two effects, and perhaps the right hon. Gentleman knows this better than most. It has the immediate effect of tax cuts which one can see. It has the longer-term economic effect, which comes with the money supply and the amount which he borrows, and sometimes the longer-term effect, which is not immediately seen, can be very damaging. But that effect ought to be foreseen.
May I deal first with what is seen with some of the tax cuts that he has mentioned? First, I take small businesses. Will the right hon. Gentleman please remember that it was his Government who successively damaged small businesses with capital transfer tax and then with one tax after another—[Hon. Members: “VAT.” ]—with the Employment Protection Act and with one Act after another. I notice that people with small businesses, like other people, will have to take the increase in interest rates which he has announced, and they will be very harmful to them. We note that at last the right hon. Gentleman recognises that they are the prime source of innovation and that he has given them some reliefs. We welcome the reliefs which he has given to small businesses—especially those [column 1212]on capital gains tax, which will help a great deal—and especially the arrangements which he has announced about losses being allowed against previous income. We also welcome the changes on value added tax, although we wish that he had accepted our amendment last year and raised the threshold to £10,000. We are also very pleased about the relief for bad debts.
As for other tax changes, most of us welcome the intention to make stock relief permanent, although a number of us would have preferred it this year. This is causing great problems in the balance sheets of many companies particularly small businesses but almost all companies, and the sooner that deferred tax liability goes the better it will be.
I think that the right hon. Gentleman's main tax changes will very soon disappear without being noticed. He has announced changes on personal income tax to the tune of about £2,150 million. Last year, he announced changes on personal income tax to the tune of about £2,250 million, and they very soon disappeared without trace, in that they were absorbed—[Interruption.] I am reading from the right hon. Gentleman's broadcast last year, in which he said that it would cost a lot of money to do all that he proposed. He said that it would cost £2,250 million—[Hon. Members: “Off the cuff.” ] Of course, I armed myself—[Hon. Members: “Some cuff.” ] It is a very good cuff. Hon. Members should try having one themselves.
The Chancellor announced fairly moderate reductions in personal income tax, and I believe that most of us were expecting more, provided that he could make room for them in the public expenditure side of his Budget. I notice that he has brought back again the reduced rate band, one of his predecessors having abolished it. The reason why it was abolished, of course, was that it was very complicated administratively. One of the effects of bringing it back is that we could never, in fact, have a tax credit system—[Interruption]——
Mr. Deputy Speaker
Order. The House must listen to the right hon. Lady.
Mrs. Thatcher
It is a great disappointment to many of us that the right hon. [column 1213]Gentleman has not reduced the standard rate of income tax. We left it at 30p. It is now still 34p. It still presses very hard on middle management—the very group of people whom we need to encourage if we are to get industry back into the position where it must be if it is to be competitive. The changes which the Chancellor has made on investment income are very small and could have been bigger.
On the whole, the right hon. Gentleman has done some double counting in the figures which he announced at the end of his speech. He omitted to point out that the increases in national insurance contributions which come into effect this same April will be offset against some of the tax reductions, and some people will notice very little difference in their net take-home pay.
I come to what I call the longer-term effect of the Budget, of which the two most important features are the public sector borrowing requirement and the money supply. I must warn the right hon. Gentleman that when he said that the public sector borrowing requirement would go back to £8.5 billion, many of us thought that it was very high if he was to keep down the level of inflation in future years. That in fact is reversing his previous policy. His previous policy had been to reduce public sector borrowing as a proportion of the gross domestic product. He has reversed that policy, and now he is increasing borrowing as a proportion of the gross domestic product. That gives rise to the very great dangers of laying the foundations of a future round of inflation in the years to come.
The Opposition are very glad that the right hon. Gentleman has reduced the money supply targets from a band of 9 per cent. to 13 per cent. to one of 8 per cent. to 12 per cent. He said that he thought the money supply would be just above this year's target, about 14 per cent. That is very much on the high side, bearing in mind the broad width of the target which he set himself originally. It is undoubtedly because he has overshot that target that the market has been signalling interest rate increases and, because he has overshot that target, the interest rate has to go up. [column 1214]
We utter a warning here that the tax cuts which he has made are welcome, provided that he is prepared to make sufficient reductions in his Government expenditure not to have inflation in future years. On that we shall reserve our judgment. The right hon. Gentleman knows full well the dangers. He announced them in his speech. We are not certain that on the programme which he has announced he will avoid inflation in future years. Many of us think that he has laid the very foundations for it.
I notice one or two features with regard to public expenditure. I notice, first, that we had to join Europe before the Labour Party could get school milk back for the 7 to 11 age group. I notice, secondly, that he announced with a very great flourish an increase in expenditure on school building of £40 million. That would be the equivalent of about £20 million in my time. It is about the smallest increase that I have ever heard of in relation to school building. It was almost not worth announcing—[Hon. Members: “Oh.” ] I did not say that it was not worth giving. I said that it was not worth announcing in the Budget.
The question is how we are to judge what the Chancellor has said. We have to make a judgment not only of what he says that he has done but of whether it will be done. I have been through the right hon. Gentleman's previous Budgets, as I usually do, and noted the previous way in which he has set them out to the people. It has been one tale of euphoria after another. The Opposition are very conscious of the Budget which he introduced before the last election What he did then is very similar to what he appears to be doing now, in that apparently he is cutting tax in advance of a General Election.
At that time, he announced that his actions were taking
“the top off the peak which inflation would otherwise have reached”
and that this would give
“a solid prospect of a steady improvement in 1975” .
In fact, in the following year inflation went up to 27 per cent., so his forecast was totally wrong.
At the time of his next Budget, the Chancellor said that his main job was making sure that people had jobs that [column 1215]winter. What happened? The unemployment rate went up steadily. In the next Budget he said that he had
“laid the foundations … for a tremendous leap forward next year.”
Somehow he stumbled, and he did not look before he leapt. In his next Budget we were promised “an economic miracle,” and somehow that foundered too.
The Chancellor could have made all the general comments that he made today—and he has made them—on almost every Budget that he has presented to date. But not one single Budget that he has presented has brought an improvement in prosperity to this country. Indeed, they have brought a flat output and a reduction in living standards.
We judge the Chancellor not by his words, because we have heard so many words before. We judge him not by world summitry, to which he gave a great deal of attention. It is not the first time that world problems have gone to world summits. We have had one every year, and every time the message has been of confidence, but we have not in fact seen any recovery as a result of that world summitry.
The truth is that the Chancellor is a very late convert to tax cuts. He said that he would make people howl with anguish over increased tax. He made everyone who worked for a living howl with anguish over the increases in taxes that he made. His policy and that of his Government is to take an increasing proportion of the national income for the Government to spend, so that the increased social wage is determined by the Government and there is a lower real wage in the wage packet. I see that hon. Members below the Gangway are nodding.
The Labour Government have told the people that they will take their money and look after it for them. Now, the people are saying that they want more of their own money to look after themselves in their own money to look after themselves in their own way. The Chancellor's conversion to tax cuts is only election-deep, and we shall deal with it accordingly.
Mr. Faulds
On a point of order, Mr. Deputy Speaker. I wonder whether you would give some guidance to the House in the new circumstances of the broadcasting of our proceedings. The Leader [column 1216]of the Opposition, in her introductory comments, referred to the outside audience listening by mechanical means to our proceedings today. I have always understood that it is one of the conventions of the House that reference was not even made to those in the Strangers' Gallery. Therefore, how is it possibly right to make reference to an outside audience of a much larger number?
Secondly, it is surely improper that the Leader of the Opposition should refer to the proceedings of this House as “a broadcast” . That is not what we are doing in this place. We are discussing specific matters on specific occasions. In this context the Leader of the Opposition made it quite clear by her statement that she was using this House not to argue the merits or demerits of the Budget but to make an overt party political broadcast, supposedly off the cuff.
Perhaps, Mr. Deputy Speaker, you could give us some guidance—or perhaps Mr. Speaker could do so on another occasion—on the conduct of Members in these new circumstances. Surely the guidance should be that Members should not make reference to the broadcasting of the House while we are conducting the proceedings, and that there should be direct comments—[Hon. Members: “Reading.” ] No. I am not reading, I am referring to some notes that I have made. This is more off the cuff than the comments of the Leader of the Opposition.
Surely there should be direct comments in the House only to those who are actually here and not to the listening audience outside. In this the Leader of the Opposition patently failed.
Mr. Robin Maxwell-Hyslop (Tiverton)
Further to that point of order, Mr. Deputy Speaker. The hon. Member for Warley, East (Mr. Faulds), in addressing you, presumably forgot that while he was here in the Chamber, Mr. Speaker has asked whether the outside broadcast channels were switched on at the moment. Since Mr. Speaker was referring to the hon. Member for Warley, East in that case, the hon. Member must be alleging that Mr. Speaker was himself out of order, which is a somewhat improbable hypothesis.
Mr. Faulds
rose——
[column 1217]Mr. Deputy Speaker
Order. The hon. Member for Warley, East (Mr. Faulds) must resume his seat. Broadcasting is now a fact of life in this place. On the question of the conventions, there are no conventions existing in that connection.