Speeches, etc.

Margaret Thatcher

House of Commons PQs

Document type: Speeches, interviews, etc.
Venue: House of Commons
Source: Hansard HC [951/360-66]
Editorial comments: 1515-1530.
Importance ranking: Major
Word count: 2394
Themes: Parliament, Monetary policy, Public spending & borrowing, Taxation
[column 360]

CORNWALL

Q1. Mr. Pardoe

asked the Prime Minister, if he will pay an official visit to Cornwall.

The Prime Minister (Mr. James Callaghan)

I have at present no plans to visit Cornwall.

Mr. Pardoe

I am sorry to hear that. If, at some time during the months remaining between now and the General Election, the Prime Minister is able to visit Cornwall, he will find that Cornwall's economy and the public services generally are suffering greatly—[Hon. Members: “Question.” ]—from lack of public expenditure. Will he, therefore, listen to the cries of Conservative politicians in Cornwall for more money for roads, for water and sewerage services, for private industry and for hospitals? Will he explain to the Cornish people how this fits in with the cries from the Leader of the Conservative Party for cuts in public expenditure?

The Prime Minister

Yes, Sir. I think that I could find it a very interesting hour to go through all the proposals for increased public expenditure from the Conservative Party—which, by coincidence, I have in front of me. [Hon. Members: “Surprise.” ] It is a surprise. I did not know that the hon. Member was going to say that. But it is quite clear that the Conservative Party cannot at one and the same time call for reduction in taxation against the increases in public expenditure that they are proposing.

PRIME MINISTER

(MANCHESTER SPEECH)

Q2. Mr. Geoffrey Johnson Smith

asked the Prime Minister if he will place in the Library a copy of his public speech in Manchester on 11th May 1978 concerning the Budget.

The Prime Minister

I did so on 19th May.

Mr. Johnson Smith

Does the Prime Minister recall that in that speech he said that the Government had an inescapable responsibility for the nation's finances? In view of the fact that the measures [column 361]announced by the Government today are an attempt to restore some confidence in the Government's management of the nation's finances—measures which, I calculate, involve the equivalent of an increase in the basic rate of taxation of 4p—does he not agree that the truth of the situation is that the Government have got their Budget strategy wrong again for the fourteenth time?

The Prime Minister

No, Sir; the very reverse is the case. I would have preferred a situation in which the Opposition had not pressed their amendments in order to reduce taxation. Then we would not have to introduce the proposed clause that we shall table in due course to recover it by means of the national insurance surcharge. In other words, the Budget was balanced but the Opposition unbalanced it, and now we are putting it back again.

Mr. Norman Atkinson

Does my right hon. Friend agree, however, that those people who believe that the City of London has now taken over the government of this country—[Hon. Members: “Oh.” ] There is now widespread belief that many money brokers, who are enjoying the greatest bonanza in their history, are demanding from the Government that the minimum lending rate be at least 10 per cent.—[Hon. Members: “It is.” ]—and that they believe that the Treasury will concede their demands for 10 per cent. Has not the time now come for the Government to stand up to these people and for us to pursue the policies in which we believed during the 1974 General Election campaign, which were based upon a cheap money policy and the reflation of our economy?

The Prime Minister

My hon. Friend should place the responsibility where it belongs, as I did in my speech on 11th May, to which this Question refers. I said then

“I call on the electors”

—of Hamilton—

“to show that they disown both the Tory Party and their allies in the Scottish National Party who yesterday combined together in cupidity and irresponsibility.”

I also said that

“whatever happens in the Division Lobby of the House of Commons, the Government has an inescapable responsibility for the national finances, and if it proves necessary to take [column 362]action to offset whatever has been done we shall not hesitate to act” .

That is what we have done today. The manifesto on which my hon. Friend and I fought the election said that the conquering of inflation was the first and major task that we had. It is in pursuance of the success that we have had so far on that matter that I intend that measures shall continue to be taken in order to ensure that our success is maintained.

Mrs. Thatcher

The James CallaghanPrime Minister may convince himself by his own complacency, but he will convince no one else. May I put a few points to him? First, this is the fourteenth Budget during a Labour Administration, but the first one to be announced outside the House of Commons. Can he name any other occasion on which a proposed increase of taxation of £1,500 million—the equivalent of 4p on the standard rate of tax—has been announced to the Press but not to the House of Commons? Second, is he not aware that this latest economic crisis—[Hon. Members: “Which one?” ] The one which has given rise to these measures—began when his Government announced an increase in public expenditure this year of £4,000 million over last year, as a result of which he had to announce an increase in the standard bank rate on Budget day? That was followed by a further increase in bank rate of 1¼ per cent., heralded by a total loss of control of the money supply—all before the reduction in the standard rate of tax of 1p. When will the Prime Minister take responsibility for his actions?

The Prime Minister

The new clause which will be tabled on Report in due course will be debated on the Floor of the House, and the House will then be able to come to a conclusion on it—as, indeed, was forecast by my right hon. Friend when he advised the Opposition—they rejected his advice—not to press their amendment on income tax some weeks ago. We then informed the House that we would table any necessary clauses to recover the situation. That is what we are doing. As for the amount involved, it is about £500 million this year, which is a measure of the degree of irresponsibility of the Opposition, reflected in the votes which they forced on that day. The right hon. Lady is quite correct that if it were carried [column 363]through to next year the amount involved would be £1,500 million, but I must remind her that we are discussing this year and not next year.

Mrs. Thatcher

Will there be another Budget in July?

The Prime Minister

There will be another Budget next April, I can promise the right hon. Lady.

As for the borrowing requirement, it is true that both last year and this year it was estimated at £8.5 billion. Last year, it turned out to be about £5 billion, or perhaps a little lower. Because of the difficulties of estimating these borrowing requirements, no one can say to what extent it will be accurate this year, but £8.5 billion is a reasonable figure to take and to work on. No one can say at this stage that it is likely to be over the top—certainly not by comparison with the past two years.

As for what the right hon. Lady calls the bank rate, the minimum lending rate is, of course 10 per cent. now. I would only like to remind her that when she left office it was running at somewhere between 12 per cent. and 13 per cent.

Mr. Jay

Is it not now perfectly clear that the Opposition amendments to the Finance Bill were wildly irresponsible and highly damaging to the country?

The Prime Minister

Yes, Sir. My right hon. Friend has put it succinctly. We said this to the House at the time. We regret very much the necessity now to introduce the national insurance surcharge on employers. It would not have been necessary if the Opposition had not voted to reduce taxation in the way they did.

Mr. Emery

Does the right hon. Gentleman realise that with the 1 per cent. increase in minimum lending rate announced today, we have now seen 11 alterations of MLR in under six months? This makes our long-term financial security massively unstable. Will he therefore try to take some action to rectify that situation and perhaps to allow the Chancellor of the Exchequer, because of his actions, to be put out to grass?

The Prime Minister

With respect to the hon. Member, who I think is trying to put a helpful question, this is the way in which the market works. It is the market which has been fixing these rates [column 364]during the last two or three years. These short-term rates do not necessarily, of themselves, affect the level of investment or the degree to which people go for investment. I agree with the hon. Gentleman in theory—I should like to see more stability in rates—but as long as the market has been operating them we must rely on the market so to do. Last year, there were 19 such changes. I do not welcome that, but that is the inevitable consequence of the policy which the Opposition support.

PRIME MINISTER

(ENGAGEMENTS)

Q3. Mr. Neubert

asked the Prime Minister whether he will list his official engagements for 8th June.

The Prime Minister

This morning I presided at a meeting of the Cabinet. I also bade farewell to the Prime Minister of India on his departure for Washington. In addition to my duties in this House, I shall be holding further meetings with ministerial colleagues and others.

Mr. Neubert

Has the Prime Minister seen the Chancellor's Written Answer to me in today's Hansard, which shows that, within nine months of the statement that inflation was at 8.4 per cent., it was six times higher than that, that in only nine months of this Government has inflation been, on that basis, less than 8.4 per cent., and that it is now already in double figures, at 11.2 per cent? Will the right hon. Gentleman now retract the statement that he made last Tuesday and admit that much the same would be likely under another Labour Government?

The Prime Minister

On the last point, I should not like to retract what I said last Tuesday; I should prefer to emphasise it, and to say that it is necessary to maintain the conditions under which a single-figure inflation rate can be maintained. However, I outlined the necessity for doing this because of our competitive position and I outlined the factors which would be necessary. I said that some were fiscal, some were monetary—we have taken action today on monetary levels to keep those figures down—and that the third group of factors related to wage settlements.

I must make it clear that our people have had great benefits this year from [column 365]the moderation in wage settlements over last year. They are higher than I wanted. We wanted no more than 10 per cent., and it looks as though the rate will be above that. Next year, if we get a lower figure than we have had this year—I hope that it will be a substantially lower figure—the people of this country will get a greater benefit than they would from double-figure wage settlements. That is what I am going for.

Mr. Stoddart

If he has time today, will my right hon. Friend make it clear to the British public that if the mortgage lending rate goes up tomorrow it will be as a direct consequence of the attitude and actions of the Opposition in upsetting the Chancellor's balanced Budget? Will he also make it clear that if the mortgage rate rises by 1 per cent., people will have lost more as a result of the Opposition's tactics than they will have gained from the 1p reduction in the standard rate of income tax?

The Prime Minister

Mortgage interest rates must, I think, reflect the capacity of the building societies to attract savings. If their rates are out of line, in accordance with the policy which this Government intend to follow we do not intend to massage them to get a result which would be misleading and deceptive. I said at the beginning—I have gone on on this basis—that we would act to preserve the best interests of our people. As for the Opposition, it is true that the right hon. and learned Member for Surrey, East (Sir G. Howe) has suggested that there should be an increase. I do not criticise him unduly for that, but if we get these rates in agreement again we shall, I believe, see a period of declining rates, providing that we can keep inflation down. That seems to me the right approach.

Sir G. Howe

If today's crisis measures are said to be a consequence of the tax cuts imposed by the House of Commons on this Government, why is it that minimum lending rate had to be increased after the date of the Budget and before the tax cuts were introduced, by 2¼ per cent.? Was that not a consequence of the Government's deliberate and reckless decision to increase public spending by £4,000 million earlier in the year? Will the Prime Minister tell the House by how much today's crisis measures will [column 366]increase unemployment and by how much they will increase the cost of living? Will he not acknowlege that today's fourteenth—unannounced—Budget from this Government is the final proof of the incompetence of the Chancellor of the Exchequer?

The Prime Minister

I think that what the Opposition are irritated about is the fact that we have not got a crisis on our hands. The Opposition may have a crisis, but the country has not. The Government are acting in all of these ways to ensure that there is a steady economic policy, by putting right what the Opposition did in their sheer, reckless irresponsibility. As for unemployment, we should give the Opposition credit, to this extent: because of the reduction in taxation, their measures would have had the effect of reducing unemployment below what it would otherwise have been, because of the increased consumption. What the national insurance surcharge will probably do, as far as we can estimate, is to put unemployment back to where it was, in other words, to offset that. It cannot be calculated, but the net effect is probably very little, with one offset against the other.