NATIONALFINANCE
Inflation
1. Mr. Norman Lamont
asked the Chancellor of the Exchequer whether he is satisfied with the progress of his counter-inflation policies.
4. Mr. Rost
asked the Chancellor of the Exchequer whether he proposes any further measures in order to achieve his target of an inflation rate of 10 per cent. by the end of 1975.
6. Mr. Skinner
asked the Chancellor of the Exchequer whether he is satisfied with the progress of his policies for the control of inflation; and if he will make a statement.
ThePaymaster-General(Mr. Edmund Dell)
My right hon.Friend will take what ever steps he considers necessary, but it is imperative that the terms of the social contract on pay be adhered to.
Mr. Lamont
Is the Paymaster-General aware that many people who are deeply anxious about inflation find it very difficult to believe that the Government are taking the question seriously? Does the Paymaster-General agree with the forecast of the National Institute that inflation will be 25 per cent. next year? If he do es not agree with that forecast, will [column 740]he say—as this is a matter on which there ought to be the maximum open public discussion—precisly why he does not agree?
Mr. Dell
I am aware that many people in the country are deeply anxious about the problem, and the Government certainly take the problem seriously. No Government have made forecasts of the rate of inflation. Therefore, I shall not comment on the National Institute forecast, except to say th at there are many forecasts, which cover a range, and that so far most of the people in respect of whom settlements have been made have benefited from settlements within the social contract. But, of course, there are very important further settlements yet to be made.
Mr. Skinner
Does my right hon. Friend accept that it is not just a question of wages alone, if at all? There is the very important consideration of a £2,000 million trading deficit with our Common Market partners—so-called. Is not that the problem that is creating the hemming-in a nd is preventing our doing the things which we really want to do? Is it not imperative that we concern ourselves with introducing severe import controls? If our Common Market partners do not like it should we not tell them to lump it?
Mr. Dell
Unfortunately, our trading deficit has increased not merely with the EEC but with other parts of western Europe. The main danger in respect of inflation in this country at present—although, of course, there are other factors—lies in wage settlements. My hon. Friend should no t ignore that.
Sir John Hall
Does not the Paymaster-General agree that the movement of world prices and the general trend of likely industrial and economic activity in 1975 give considerable support to the estimate that inflation will rise at a rate of 25 per cent. or even more next year? Does h e not agree that this would be an intolerable development? Does he not further agree that, so far, the Chancellor has done nothing which is likely to change that situation in 1975? Cannot the Chancellor be prevailed upon to do something much more effective than what has been done so far?
[column 741]Mr. Dell
My right hon. Friend cannot, unfortunately, affect the level of commodity prices next year—that is one important factor in the situation—but I emphasise that as things are now the most important factor is the level of wage settlements. That is why I emphasise th e importance of adherence to the social contract.
11. Mr. Stanley
asked the Chancellor of the Exchequer what has been the rate of inflation over the last three months expressed on an annual basis.
10. Mr. Pardoe
asked the Chancellor of the Exchequer what has been the increase in retail prices over the last three months for which figures are available expressed at an annual rate.
The Chief Secretary to the Treasury (Mr. Joel Barnett)
The increase in the rate of inflation over the three months to October expressed at an annual rate is 13.4 per cent.
Mr. Stanley
Does the Minister not agree that when the Chancellor of the Exchequer made his prediction on 24th September that inflation next year would be down almost to 10 per cent. he was basing it on the successful working of the social contract? Will the Minister now acknowledge, after nearly nine months' working of the social contract that it has conspicuously failed to bring down inflation to an aceptable rate, there and that if it continues at its present rate will be mounting unemployment, a flight from sterling and a decline in real living standards next year?
Mr. Barnett
I do not agree with the hon. Gentleman's gloomy prognostications. The majority of settlements in the past nine months have been inside the social contract.
Mr. William Hamilton
Will my hon. Friend keep on repeating that if we do not get on top of inflation there must be substantially increased unemployment? As we are committed to maintaining at all costs an acceptable rate of employment, will my hon. Friend keep on explaining the pro blem to those who do not seem to understand it?
Mr. Barnett
I agree with my hon. Friend. The Government are well aware of the problem. We are seeking to get [column 742]on top of it and to ensure that there is not unemployment at the levels that some hon. Members seem to relish.
Mr. Robert Carr
Will the Minister explain why the rate of inflation has risen from the 8.4 per cent. of which the Chancellor boasted in the election to the current 13.4 per cent., and say whether the Government do or do not maintain the Chancellor's public forecasts that i t will be down to 10 per cent. by the end of next year? If not, why not? Does the hon. Gentleman realise that if the Government would do as his hon. Friend the Member for Fife, Central (Mr. Hamilton) has just asked, and treat the matter more seriously, putting their weight behind the social contract, all of us in the H ouse would give the Government their support?
Mr. Barnett
I find that hard to take from the right hon. Gentleman, who has not exactly been behind the social contract. He has done nothing but denigrate it from the beginning. The 8.4 per cent. has never been denied. The Price Commission gave figures that were very similar.
£ Sterling (Value)
3. Mr. McCrindle
asked the Chancellor of the Exchequer what is the value of the pound at the latest date for which figures are available assuming it to be 100p on 18th June 1970 and 28th February 1974, respectively.
The Minister of State Treasury (Mr. Robert Sheldon)
Sixty- four and a half pence and 90p respectively. These estimates are based on movements in the General Index of Retail Prices between June 1970 and October 1974 and between February 1974 and October 1974.
Mr. McCrindle
Does the Minister recall the days of 1972 and 1973 when his hon. Friends were berating the then Conservative Government over the fall in the value of the pound and promising better things to come? In the light of the figures that the Minister has just supplied, may I ask whet her there has been a change of heart or a change of policy on the part of the Government? If not, when we can expect the things that we were promised in 1972 and 1973?
[column 743]Mr. Sheldon
Unfortunately, the decline in the value of the pound is not something which has happened just over the last few months; it has been a continuing factor which has bedevilled British economic policy for many years. The Government are determined to take action at least to reverse that particular situation.
Mr. McCrindle
What action?
Mr. Ridley
Does not the Minister agree that the level of the borrowing requirement has a direct correlation with the subsequent rate of inflation? In that case, is not the Government's policy in planning for a borrowing requirement of £6,300 million to say the least negligent, and, t o say the worst, trying to destroy the British economy?
Mr. Sheldon
The hon. Gentleman is quite right when he says that the borrowing requirement is high, and this is accepted by the Government. But the important thing in this connection is the way in which it is being financed. The way in which it has been financed will at any rate, I should h ave thought, give some consolation to the hon. Gentleman that it is not causing the large increase in the money supply which we saw on previous occasions.
Travelling Expenses
5. Mr. Gwilym Roberts
asked the Chancellor of the Exchequer if he will take steps to make travelling expenses to and from work by office and industrial workers allowable expenses for taxation purposes.
8. Sir A. Meyer
asked the Chancellor of the Exchequer whether he will now permit travel to work expenses to be set against an individual's liabilities to income tax.
Mr. Joel Barnett
I do not think it would be right to single out this particular form of personal expenditure for tax relief.
Mr. Roberts
Does my hon. Friend accept that the increasing costs of travel are putting the ordinary shop floor worker at a growing disadvantage as compared to the director, the executive or people in this place who often find their costs covered by the company or the organisation concerned? Does he recognise that in[column 744]areas like Cannock Chase, which border major conurbations, this increasing cost of travel is now acting as a positive disincentive to people to make the journey, and that this cost factor will be a weapon of unemployment if nothing is done?
Mr.Barnett
I am aware of the increasing problem of higher costs. Directors and Members of Parliament are taxed on the private benefit of car expenses, and that would include travel from home to work.
Sir A. Meyer
Is the hon. Gentleman aware that this problem is particularly acute in areas of low economic activity, particularly in rural areas? Does he realise that if there are further increases in the cost of fuel, as seems all too probable, the point will shortly be reached at which the average wage in such areas simply will not cover the cost of travel to work, and then the effect of unemployment will be very severe?
Mr. Barnett
I am aware of the problem, but it does not apply only to rural areas and I do not think that it would be fair for the general body of taxpayers to give a subsidy in this respect.
Mr. Grocott
The housing problems of the conurbations will be solved only if people are prepared to move out to new housing areas outside the conurbations. Is my hon. Friend aware that one positive disincentive to their doing that is increasing travel costs and the increasing costs of priva te motoring? Does he agree that a proper tax incentive system covering people's journeys to work would encourage public transport, and not private transport, and could be a very worthwhile social objective?
Mr. Barnett
My hon. Friend has raised a very good point, but I do not believe that tax relief of this kind is the best way to help. If it were done in this way it would be necessary to look at the tax assessments of about 20 million taxpayers, which would involve an enormous administrative problem.
Mr. Spicer
If the Minister does not believe that tax relief is the right way to help people, particularly in rural areas, how does he suggest this should be done?
Mr. Barnett
There are many other ways in which one can help. One is to [column 745]see that we have a decent public transport system, and that is our objective.
Mr.Robert Carr
Byputting up the price of petrol via the VAT mechanism are not the government putting the whole burden of the higher price on the private motorist and no burden on the business motorist?
Mr. Barnett
I am interested to hear the right hon. Gentleman's question. I assume, therefore, that he would rather increase the burden of industrial costs and affect exports. I would have thought that he would welcome the way that we made this increase through the VAT system.
Balance of Payments (EEC Countries)
7. Mr. Hurd
asked the Chancellor of the Exchequer what assumptions are made of likely trends in the United Kingdom's balance of payments with other members of the EEC in the general balance of payments forecasts published in his latest Red Book.
Mr. Joel Barnett
The forecasts attempt to allow for developments in the balance of trade in goods and services with all other countries. But it is not the practice to publish further details beyond those provided in Table 1 of the Financial Statement and Budget Report.
Mr. Hurd
Since there appears to be some confusion on this issue below the Gangway will the Chief Secretary confirm that if importers switch to buying such things as cereal products from European suppliers because they are no cheaper the result will probably be an increase in our deficit wi th the EEC, but that that will be of benefit to the balance of payments as a whole?
Mr. Barnett
What the hon. Gentleman said simply emphasises the difficulties of trying to make assumptions on a particular figure or figures.
Mr. Ronald Atkins
Will my hon. Friend put pressure on the Secretary of State for Defence to arrange an offset agreement with Germany to reduce the £200 million-£300 million deficit which we have in the balance of payments with that country because of running the Britis h Army of the Rhine?
[column 746]Mr. Barnett
There is, of course, already an offset agreement, but I shall naturally bear in mind what my hon. Friend said and bring it to the attention of my right hon. Friend the Chancellor.
Mr. Marten
Is the Chief Secretary aware that the latest figure shows that 96 per cent. of our non-oil trade deficit is with the EEC? What are the Government going to do about that?
Mr. Barnett
As I pointed out, there is great difficulty in extracting figures in that way. Our balance of trade with the EEC has been deteriorating substantially since well before our entry-as, regrettably, it has been doing with many other areas of the world. I must therefore ask the hon. Gentleman not to make this kind of assumption.
Value Added Tax
9. Mr. Brittan
asked the Chancellor of the Exchequer whether he will take steps to relieve those living in rural areas from the effects of the increase in VAT on petrol.
Mr. Robert Sheldon
It would not be practicable to provide the type of relief which the hon. Member has in mind.
Mr. Brittan
Does the Minister of State accept that for those living in country areas ownership of a car is not just a luxury but is often the only way of getting to work, seeing friends or engaging in the slightest social or communal activity? Will he not at least consider providing petrol vouchers for those living in the most isolated areas which would enable them to buy petrol at slightly less than the present prohibitive cost?
Mr. Sheldon
I understand fully the hon. Member's point, but there are serious practical difficulties in moving in the direction that he has in mind. There are problems of definition and discrimination of one kind or another which make it almost impossible for this to be considered as a sol ution.
Mr. Gould
Does the Minister of State accept that while the reasons for the increase in VAT on petrol are widely understood and accepted, there are some people who have been particularly hard hit by that increase, namely, disabled people who have to drive themselves to work and for whom the cost of petrol [column 747]forms a high proportion of the small sums they are able to earn? Will he consider some form of relief for that group?
Mr. Sheldon
My hon. Friend has made an important and valid point. This is something which I shall draw to the attention of my right hon. Friend the Secretary of State for Energy.
Mr. Gwynfor Evans
Is the Minister of State aware that in Welsh rural constituencies as many as 40 per cent. of the working population have to travel considerable distances to work by car because of the almost total absence of public transport? Is he aware that these people have th e lowest level of income in the United Kingdom? This oppressive cost of petrol is bound to aggravate the problem of rural depopulation.
Mr. Sheldon
I fully understand the hon. Gentleman's important point, but I must return to the very real difficulties of definition of rural areas, of the marginal situation between rural and suburban areas, and the question of subsidies for essential and non- essential users. Many people in rural areas do not use petrol always for essential purposes. This is something the House must understand.
Mr. Raphael Tuck
My hon. Friend has referred the question of the disabled driver to my right hon. Friend the Secretary of State for Energy, but is he aware that we have been to see the Secretary of State for Energy and that he has been able to offer us no relief? To stop this cont inual buck-passing, will the Minister of State offer some solution?
Mr. Sheldon
This is obviously a matter for both the Department of Energy and my right hon. Friend the Secretary of State for Social Services. The only thing that can usefully be said is that in this context there is possible scope for amelioration, and I shall take the matter up in consult ations with both my right hon. Friends.
12. Mr. Dodsworth
asked the Chancellor of the Exchequer what is the outcome of his consideration of proposals for zero rating VAT on bloodstock; and if he will make a statement.
Mr. Robert Sheldon
These proposals are still under consideration.
[column 748]Mr. Dodsworth
I thank the Minister for the continued consideration of the proposals, but is he aware that the matter is causing acute concern to those in the bloodstock industry? There is excessive competition in France and Ireland because of the advantageous VAT arrangements in those countries, and we shall see the destruction of the bloodstock lines in this country if we do not make rapid changes in the legislation.
Mr. Sheldon
The Government understand the problems of the bloodstock industry. That is why the negotiations are taking place.
Mr. Hugh Fraser
I thank the Minister for his apparently sympathetic reply, but I reinforce what my hon. Friend the Member for Hertfordshire, South-West (Mr. Dodsworth) said. Will the Minister will look at the correspondence I have sent to the Chancello r of the Duchy of Lancaster about the devastating effect the tax could have on the standard of British racing unless something is done?
Mr. Sheldon
The Government are waiting for the original bloodstock VAT committee to be reformed. Our waiting for its reformation, so that it can make representations covering the whole industry, is contributing largely to the delay.
19. Mr. Spriggs
asked the Chancellor of the Exchequer how many written representations have been made to him by retail and dispensing chemists, and the pharmaceutical industry in particular, about his plans for additional rates of VAT on the retail pharmacists; and whether he has cons idered their problems where calculation of VAT liability at more than two rates becomes impossible.
Mr. Joel Barnett
I have received over 430 written representations from or about retail pharmacists concerning the possible introduction of additional rates of VAT. Customs and Excise are studying, in consultation with the representative trade bodies, the problems that would arise, but I should stress that no decisions in this matter have yet been taken.
Mr. Spriggs
I thank my hon. Friend for that reply. Will he look at this question from a reasonable point of view and ensure that before final decisions are taken no action will be taken by his [column 749]Department that will bring VAT into disrepute?
Mr. Barnett
I always like to be reasonable, particularly to my hon. Friend. I assure him, as I said in my original answer, that no decisions on this matter have yet been taken.
Mr. Fairgrieve
Does the hon. Gentleman appreciate that one of the main reasons for the change to VAT was that it would be a tax which could be at one rate, and that we are in serious danger of getting back to the stupidities of the previous purchase tax?
Mr. Barnett
I know that the Opposition when in Government announced that it was to be a broad-based, comprehensive and simple tax, but I am not sure whether anybody really believed them.
Mr. Robert Carr
The tax may not be wholly simple, but does not the hon. Gentleman admit that it would be two or three times more complicated if the Government were foolish enough to introduce a multi-rate system? Will he take note that the Opposition would oppose such a change wit h all the power at our command?
Mr. Barnett
I am not too surprised about what the right hon. Gentleman cares to oppose.
Capital Gains Tax
13. Mr. Lane
asked the Chancellor of the Exchequer whether he is satisfied with the operation of the capital gains tax as it affects householders; and if he will make a statement.
Mr. Joel Barnett
I assume that the hon. Member is concerned about the liability to capital gains tax that may be incurred by a householder who lets part of his home. Complete exemption from capital gains tax for the residential owner occupier extends only to a house which is wholl y owner-occupied. It was never the intention that it should extend to parts of the house not used by the owner as his home.
Mr. Lane
Will the Minister take a fresh look at the serious situation in Cambridge and other university towns where householders are increasingly hesitant about letting the odd room or two for lodgings because of the capital [column 750]gains tax problem, coupled with uncertainty resultin g from the Rent Act 1974? Should not it be within the wit of the Treasury to find a commonsense solution that will increase the supply of badly-needed lodgings without breaching the principle of the capital gains tax?
Mr. Barnett
I am aware of the problems of students in Cambridge and elsewhere, but I should be surprised if capital gains tax were the major problem for landlords and landladies.
Mr. Evelyn King
Asi de from the problems of householders, is it not a fact that in the existing disastrous economic climate there are likely to be more capital losses than capital gains? Is not this the right moment to abolish the tax?
Mr. Barnett
No, Sir.
Investment Finance
14. Mr. Leslie Huckfield
asked the Chancellor of the Exchequer whether he will now make a further statement about his plans for expanding medium-term investment finance.
Mr. Dell
Finance for Industry is expected to engage in its expanded activities very quickly. I understand that the company is already dealing with inquiries from potential customers.
Mr. Huckfield
Is my right hon. Friend aware that the result of the last relaxation of credit facilities in 1971 is that the Bank of England is now spending over £1,300 million propping up property companies and fringe banks? How will my right hon. Friend make sure that the Finance fo r Industry medium-term capital which will now be available on easier terms will go towards the kind of investment and structural reform that the economy demands?
Mr. Dell
Finance for Industry will have discretion as to where it lends its money, and it will consider projects put up to it by companies in industry.
Mr. Hordern
Is the Minister aware that any funds provided for Finance for Industry must necessarily come from existing institutions, from funds that they would otherwise have invested in Government securities? Therefore, is he aware that any funds so provided for Finance for Industry will be at a cost [column 751]to the Government's own borrowing requirement? Where will the Government get their money?
Mr. Dell
That is not necessarily the case. The Government are doing a great deal of borrowing abroad. There is no evidence, as far as I know, that satisfying the Government's borrowing requirement and helping investment through Finance for Industry will be in conflict.
2½p Coin
15. Mr. Lipton
asked the Chancellor of the Exchequer what plans he has to withdraw the 2½p coin from circulation.
Mr. Robert Sheldon
The position is being kept under review. No decision is likely in the immediate future.
Mr. Lipton
It has been under review for a long time. When will the Government make up their mind to phase out this obsolete relic of the predecimal coin-age? Is my hon. Friend aware that if the coins are withdrawn from circulation the Government will make a vast profit, because most of the m will not be surrendered but will be used for making trinkets, bracelets, and that sort of thing?
Mr. Sheldon
I am interested in my hon. Friend's suggestions for the Government to make large profits. The coin has a useful, though limited, rôle still to play. Obviously, the matter will be reconsidered, but in various surveys people have made known their preference for the continua tion of the coin. As long as that remains the case the Government intend to keep the coin in existence.
Mr. Tebbit
How long will it be, at the present rate of inflation, before the hon. Gentleman has to withdraw the 5p coin, as being of no use in our commercial transactions?
Mr. Sheldon
The hon. Gentleman is mistaken. It is a useful coin. It is used considerably, as is all the other coinage, and will continue to be in use.
Education (Parental Contribution)
16. Mr. Fletcher- Cooke
asked the Chancellor of the Exchequer why parents who are obliged to contribute to the further education of their married daughter cannot write off this expense for income tax purposes.
[column 752]Mr. Robert Sheldon
So long as a daughter over 16 is receiving full-time education at a university, college, school, or other educational establishment, the parent is entitled to claim the income tax child allowance of £305, whether she is married or not. This al lowance is intended broadly to take account of a child's financial dependence or her parents so long as she is undergoing full-time education.
Mr. Fletcher-Cooke
Is the Minister aware that that by no means compensates the father of a married daughter in those circumstances for the amount of grant that he is forced to pay on the purely artificial assumption that the daughter is still dependent uponhim?
Mr.Sheldon
The hon. Gentleman is under a misapprehension. No parent is forced to pay in that way. There is no obligation upon a parent by law to contribute. Deductions are made from grants to allow forparentalcontributions.
Mr.Woodall
Doeswhat my hon. Friend said about daughters over the age of 16 apply to unmarried daughters over the age of 21?
Mr.Sheldon
Yes, Sir. A recent decision by the Court of Appeal showed that that was so.
Mrs. Thatcher
I wish to ask only one thing. Will the hon. Gentleman make clear that there is a moral obligation on the parent to find that contribution towards a university grant because he is means- tested on that basis? I would not like any impression to be left that the hon. Gentleman felt that there was no obligation to do so and that therefore the tax consequences followed.
Mr. Sheldon
I would not suggest that a moral obligation and an obligation for financial purposes are the same thing.
Development Land Tax
18. Mr. Michael Latham
asked the Chancellor of the Exchequer whether he will make a detailed statement on the proposed development land tax.
Mr. Robert Sheldon
I would refer the hon. Gentleman to the reply given on13th November by my right hon. Friend the Paymaster-General to a Question by [column 753]my hon. Friend the Member for Rother Valley (Mr. Hardy).—[Vol.881, c.149.]
Mr.Latham
Has the hon. Gentleman any conception of the total paralysis that the lack of such a statement is causing in the housing market?
Mr. Sheldon
Without conceding the point made by the hon. Gentleman, I am aware that the sooner this position is clarified the better, and a statement will be made as soon as possible.
Mr. Grylls
Will the Government tell the House whether this new tax will result in more or fewer new houses being built?
Mr. Sheldon
The whole question of development land tax will come before the House and the hon. Gentleman will find that our proposals will improve the supply of land for houses, with the benefit to be obtained by the community in general. He must, regretfully, take on a little more patience and wait until the statemen t is made, as it will be shortly.
Overseas Borrowing
20. Mr. Ridley
asked the Chancellor of the Exchequer what guarantees he has given of repayment terms of overseas borrowings; and for what amounts.
Mr. Dell
The total of overseas borrowings under Treasury guarantee since March 1947 is £680 million, at the rates of exchange at the dates of the borrowings. With permission, I shall circulate details of the amounts raised by individual borrowers in the Official Report.
Mr. Ridley
Does not the recent Aramco affair show that people will increasingly demand repayment in dollars of our overseas borrowings? Are the Government aware that this will place a shackle on our future, which we may never be able to discard in view of the impending weight of debt which the Government must incur? W ill the right hon. Gentleman therefore take steps to reduce our dependence on overseas borrowing and give an assurance that he will seek to do all possible to borrow free from guarantee of any dollar repayment terms?
Mr. Dell
We shall do what we can to reduce the amount which this country has to borrow. To try to cover the balance of payments deficit in the short term would have serious results. The [column 754]foreign exchange markets reacted in too alarmist a way to reports about the currency in which payment for oil is to be m ade to Saudi Arabia. It is not the currency of payment so much as the investment policies of the Government concerned that we must consider. It would be quite wrong to conclude from reports of changes in arrangements with the oil companies operating in Saudi Arabia that the producing Governments have changed their investment intentions.
Mr. Skinner
Does my right hon. Friend accept that one of the reasons why there is a great deal of despair in the international trading market at present, especially with regard to the £ sterling, is that it can be seen not only that we are to some extent mortgaging our North Sea oil, but also that, according to the latest communiqué from Brussels, even that amount of our oil which is not already mortgaged will go into the hands of the Common Market partners?
Mr. Dell
There is no question of mortgaging our North Sea oil. It will remain under the entire control of the British Government.
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