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Commons Chamber

Volume 929: debated on Tuesday 29 March 1977

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House Of Commons

Tuesday 29th March 1977

The House met at half-past Two o'clock


[Mr. SPEAKER in the Chair]

Private Business

Immediate Transportation (Delivery Warrants) Bill Lords

Read a Second time and committed.

Oral Answers To Questions




asked the Secretary of State for Employment what proposals he has to reduce unemployment among women.

The Government's measures to reduce the level of unemployment are intended to benefit men and women alike.

That is not a very communicative reply. Is my hon. Friend aware that there are about 1 million women unemployed, although only about one-third bother to register as unemployed? Does he accept that many women wish to work and that many have to work to meet the problems of inflation? Is he further aware that in connection with the Job Creation Programme, which is supposed to cater for young people of both sexes, it has been found that so far very few schemes cater for girls. Will he look at the prospects for both girls and women in job creation schemes?

I shall try to be more communicative to my hon. Friend. I accept her analysis about the needs of working women, particularly in terms of keeping pace with inflation. I do not want to minimise the problem, but if we look at the figures it appears that women's employment has suffered less than men's during the present recession, particularly if we take into account the extra number of women coming on to the register and the increased inclination by women to register.

On my hon. Friend's second point, about the Job Creation Programme, it is true that about 75 per cent. of the jobs involved have gone to male workers, but this is a question very much of local initiative, and many of these jobs are for manual workers. Nevertheless, we shall look at the matter. I should add that the work experience programme has placed about four women to every three men.

Will the Minister confirm that recent legislation designed to improve the conditions of work for women has made it much more expensive for employers to employ women, and has thus only created more unemployed women?

No. I certainly will not confirm that, because it does not happen to be the case. Of course there is extra cost for the employers involved but there is no evidence to show that it has resulted in the sort of situation described by the hon. Gentleman.

Does my hon. Friend accept that one way of preventing further unemployment amongst women would be to save the 350 jobs threatened at the Plessey factory in Kirkby, in my constituency? Does he further accept that many of these women, because of high levels of unemployment in the area, are the breadwinners for their families? Will he impress upon his right hon. Friend the urgency of taking all measures possible to save these jobs?

My right hon. Friend will have noted my hon. Friend's remarks, and we shall certainly see that they are noted by other Ministers involved.

Coal, Petroleum And Chemical Industries


asked the Secretary of State for Employment to what extent the labour force in the coal, petroleum and chemical industries has increased or decreased during the last 10 years.

Between June 1966 and June 1976 the numbers of employees in employment in Great Britain in the coal mining and general chemicals industries fell by 214,000 and 19,000, respectively. For the petroleum and natural gas industry the latest figures are for June 1975. Between June 1966 and June 1975 the numbers in this industry increased by 2,000.

Does my hon. Friend agree that despite that quite staggering drop in the number employed in those industries there has been substantial investment and massive improvements in output? Would he deduce from this the fact that it is not by investment in industry that we shall resolve the problem of unemployment? Is he aware that we must turn to the public service sector for this effect?

I have seen the interesting paper about these problems—a paper of which my hon. Friend is co-author—in which he continues to express and expand on these interesting ideas. It may be true that increased investment alone will not result in a significant drop in unemployment; there is also the question of aggregate demand and its expansion. Perhaps we ought to continue to look carefully at the ideas put forward in my hon. Friend's paper.

Job Creation Programme


asked the Secretary of State for Employment what further measures are proposed as a part of the Job Creation Programme.

A further allocation of £25 million has been made to the Job Creation Programme to enable applications to be received up to 31st August 1977. A working party, set up by the Manpower Services Commission to study all the current measures to help unemployed young people, will be reporting to it in April, and the long-term future of job creation will be discussed between the Government and the Commission thereafter.

Has my right hon. Friend considered the proposals of the TUC, contained in the 1977 Economic Review, which talks about the Job Creation Pro- gramme being capable of substantial expansion? Will my right hon. Friend consider particularly the proposal that all young people between the ages of 16 and 18 who are not in employment should have the opportunity of receiving training through taking part in a Job Creation Programme or in work experience activities?

I can assure any hon. Friend that I have given careful consideration to that proposal. I have discussed it with representatives of the Manpower Services Commission and I expect consideration of the issue to be reflected in its report, which I shall receive in April.

Is the Secretary of State aware that I hope that the Job Creation Programme will be expanded? When this happens will the right hon. Gentleman consider simplifying it, because I find that there is some reluctance on the part of companies to take on all the documentation and regulations involved for what may be a short period of employment?

We are considering the possibility of simplifying and even operating a narrower range of measures. The advantages gained through simplicity have to be carefully weighed against the wide range of opportunities that exist now when we are able to tailor specific schemes to specific employers or even to the needs of special areas. It would be unwise to jump to the conclusion that we have to simplify this without having regard to the great advantage of flexibility over the wide range of unemployment problems particularly for young people.

When this review takes place will my right hon. Friend give consideration to an assessment of the value of the scheme, particularly its effects upon long-term prospects for employment and upon the development of industry in areas? Will he consider whether too much influence is exerted by the Civil Service and whether more authority should be vested in the local authority for the use of funds, so that they find the right target?

I am not, as of now, convinced that the Civil Service is having any undue influence on the selection of job creation schemes. The area action committees are examining the schemes and recommending them in the light of their local knowledge. I cannot give a general answer to this. I shall be glad to hear from any hon. Member who has a particular problem in his area or who feels that there is a complaint to be laid against an area action committee for refusing a project. At present I feel that we should maintain this control in the hands of the local area action committees.

Does the right hon. Gentleman recall that when he last made his statement on the Job Creation Programme he informed the House that he was hopeful that it would have a beneficial effect in the West Country? Is he aware that male unemployment in the Exeter and East Devon areas is now 8·5 per cent. and is continuing to increase? We are dissatisfied with what is happening. What new steps does he propose to take?

The seasonally adjusted figures for unemployment in the South-West area show a fall of 600, to a rate of 6·5 per cent. in the last period. That was not as good a drop as was experienced in many other parts of the country at that time. There is therefore a need to examine how effective these measures are in the South-West. I hope that I reflected that feeling to some extent when we debated employment problems in the South-West.

Railways (Closed Shop)

asked the Secretary of State for Employment what discussions he has had with the British Railways Board about the operation of the closed shop.

Is the Minister aware that of 31 employees of the nationalised British Railways Board who have been dismissed for refusing to join a union seven had more than 29 years' service to the board? In view of the events of last Wednesday, does the Minister not understand that even the Liberals believe that there is a crucial issue of individual freedom involved here? Will the hon. Gentleman make a better statement to the House than that which he has just made?

I must tell the hon. Gentleman again, as I have done many times, that the Government's policy on these matters is one of neutrality. We leave these issues for determination by employers and trade unions. I am not sure whether the hon. Gentleman is advocating a return to the conditions that existed under the Industrial Relations Act—conditions that were emphatically rejected by the electorate in 1974 and which had had disastrous results.

Does my hon. Friend agree that there is another way of looking at this matter, namely, that a man who has not paid any trade union contributions for 29 years but has during that period allowed the trade unions to negotiate wages on his behalf and has taken the money, has been freeloading all of his life?

The freeloader is a cause of genuine concern to all trade unionists. I do not want to take sides, because we adopt a position of neutrality. It is worth bearing in mind that if the persons to whom the hon. Gentleman refers have been in employment with British Railways for the period that he suggests they ought to have looked at their contracts of employment, which made provision for trade union membership.

Is the hon. Gentleman aware that while a closed shop can be organised—as some are—to take account of deeply-held personal convictions and the length of service of existing employees, it is deeply offensive and intensely unfair when these considerations are overridden and people with long service are sacked as a result? Is he aware that we cannot accept that in standing by and doing nothing in such circumstances the Government are being fair? They are being intensely partial. They are not being neutral.

The hon. Gentleman persists in his inability to recognise the realities of the situation. The Opposition are under a duty to make their position clear. If they say that there ought to be a statutory right for an individual not to belong to a trade union, clearly they are once again moving along the disastrous road of the Industrial Relations Act, with all its harmful and ineffectual consequences.

On a point of order, Mr. Speaker. In view of the disgraceful nature of the Minister's reply, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.

Disabled Persons


asked the Secretary of State for Employment whether he has proposals to improve the employment prospects of those who are suffering from mental or physical disability.


asked the Secretary of State for Employment what is the current level of unemployment amongst registered disabled workers; and what percentage of such workers this represents.


asked the Secretary of State for Employment what is the latest figure of unemployment of registered disabled people; how this compares as a percentage with the national average; and if he will make a statement about Government policy for the employment of disabled people.

I am informed by the Manpower Services Commission that on 10th February, the latest date on which information is available, 77,951 registered disabled people were unemployed, representing 14·4 per cent. of the disabled persons register. The general unemployment rate was 5·9 per cent. I have nothing to add to the statement about the employment of disabled people which I made in reply to the hon. Member for Gosport (Mr. Viggers) on 7th March.

In view of the large number of mentally and physically disabled people among the long-term unemployed, amounting to one-third of the overall total in my constituency, may I ask the Government to reconsider this matter? In particular, will they ensure that no training facilities for the mentally disabled are lost as a result of the transfer of training facilities from the Social Services Department to the Education Department?

The plight of the disabled who are unemployed for long periods is under active consideration. We hope to be able to do something about them soon. We shall certainly look into the point raised by the hon. Gentleman in the latter part of his supplementary question.

Is my hon. Friend aware that the best way to improve the employment prospects of disabled people is for Government Departments to mend their ways and to employ a reasonable number of disabled people? Is he aware that at present every Government Department, except two has less than 3 per cent. of disabled people on its staff?

I accept that an unsatisfactory situation is revealed by the figures that we published recently. The fact that we published those figures was a major step in the right direction. I have been in touch with my ministerial colleagues about this to ask them to review their procedures. I have also asked them to approach the nationalised industries, where appropriate, and I have written this week to the chairmen of all disablement advisory committees so that they can take local initiatives in the public and private sectors.

Will the hon. Gentleman accept that one of the most important factors in this respect is the ability of disabled people to get to and from their place of work? Is not the Government's decision to take away vehicles from disabled people a retrograde action? Will the Minister press the Secretary of State for Social Services to reconsider this decision?

I am conscious of this problem and have had discussions with my hon. Friend who is responsible for the disabled on the issue of travel to work. The Employment Services Agency's fares-to-work scheme is under active review. We hope to make improvements there. I would not want to mislead the House into thinking that that is a solution. There are other possibilities that we are examining. I shall press the views of the hon. Gentleman further.

Will my hon. Friend bear in mind that where there are severely handicapped people the DRO gets to the home very quickly and gives good advice? Is he aware that the suppliers of equipment supply quickly but that there is a three-months' administrative gap in his Department between examination and distribution? Will he please give his attention to that matter?

I shall certainly look at that. I think that that is probably a little unfair, as in many cases equipment is available but it requires special adaptation to suit special needs. However, in view of my hon. Friend's comments I shall examine the matter and give consideration to any point that he wants to draw to my attention.


asked the Secretary of State for Employment what is the number of men and women unemployed in travel-to-work areas in Calderdale, expressed in numerical and percentage terms and compared with the same period last year.

At 10th March, 2,289 males and 810 females were unemployed in Calderdale and the unemployment rates were 4·7 per cent. for males and 2·4 per cent. for females. These figures are provisional. The corresponding figures for March 1976 were 2,532, 729, 5·2 and 2·1.

Do those figures include the large-scale redundancies of textile workers that have recently occurred in my constituency? Will my hon. Friend give an indication of the present trend of vacancies within the same area?

Obviously the figures include all those who have been declared redundant, have finished work and have registered as unemployed. They cannot reflect any future trends.

Collective Bargaining (Disclosure Of Information)

asked the Secretary of State for Employment when he proposes to implement the provisions of the Employment Protection Act concerning disclosure of information to trade unions during the course of collective bargaining.

My right hon. Friend has approved the draft code of practice sent to him by the Advisory, Conciliation and Arbitration Service and proposes to lay it before both Houses as soon as printed copies are available. I expect this to be within the next four to six weeks.

I welcome that announcement. In the circumstances, will my hon. Friend confirm that as the days of secre- tive and authoritarian industrial rule are clearly numbered, managements that are not making disclosures to trade unions should start doing so?

Yes, I think that is sensible. The code will have to be approved by both Houses. It will be for the House to make a decision. In the recognition that this was one of the less controversial aspects of the Employment Protection Act, it will probably be welcomed by both Houses. It will make sense for all employers to study ways and means of anticipating and fulfilling the provisions of the Code.

Although I accept that this move is probably now inevitable, will the hon. Gentleman take on board the real fears of certain firms that information circulated to trade unions for the purpose to which the Question refers might some-how gain wider circulation, to their commercial disadvantage? Has the hon. Gentleman been able to take on board in any way these genuine fears?

If the hon. Gentleman reads the Employment Protection Act he will see that protection is provided in respect of matters of a confidential nature, of the kind to which he referred. On that ground he will find that his fears are unjustified.

Will the hon. Gentleman confirm that full account has been taken of the representations that have been made and that the many criticisms that the first draft attracted will have been met in the final draft? As I understand it, this is something that is broadly acceptable within industry.

Yes. By the very nature of ACAS it carries with it support from both sides of industry. The hon. Gentleman will find that this is a matter that has the backing of both sides of industry. There has been wide consultation. More than 140 organisations have expressed views to ACAS. In the last resort it will be for the House to make a decision.

Mexborough And Wombwell

asked the Secretary of State for Employment how many men, women, boys and girls, respectively, were registered as unemployed at the Mexborough and Wombwell employment exchanges at the latest available date; what were the corresponding figures for the years 1974, 1975 and 1976; and if he will make a statement on what action he intends to take to find jobs for these unemployed persons.

At 10th March there were provisionally 1,632 males and 780 females. In March 1974 the figures were 1,399 and 218, in March 1975 1,234 and 281, and in March 1976 1,629 and 633. Separate figures are not available for men, women, boys and girls. Mexborough and Wombwell should benefit from the extensions of the Job Creation Programme, Work Experience Programme and Youth Employment Subsidy Scheme, which were announced early this month. We have also provided more support for training and for a further expansion of Community Industry.

Is my hon. Friend aware that the population in Mexborough and district is smaller than it was four decades ago? Is he further aware that that decline is mainly due to young people having to leave the district to find jobs elsewhere? Will he now take another look at this area? If my hon. Friend cannot include the whole of South Yorkshire, will he make this area a special development district? Does my hon. Friend appreciate that although an advance factory was built in the area three years ago not one job has been provided as a result?

Development area status is a matter for my right hon. Friend the Secretary of State for Industry. I appreciate the problems of the area. I shall consider them personally and carefully with my right hon. Friend the Secretary of State and draw the attention of the Secretary of State for Industry to my hon. Friend's concern.



asked the Secretary of State for Employment if he will initiate studies into the human diseconomies of very large factories.

The Work Research Unit of the Department of Employment is concerned with the implications of problems of job satisfaction in factories of all sizes. It is co-ordinating and monitoring a research programme on this subject. The unit is aware of the particular difficulties in large factories and it offers managements and trade unions advice on ways of reducing the problems that arise.

Will the hon. Gentleman take on board the fact that it is becoming more and more evident that bigger is not beautiful, and that we get a stepped function of disincentive for the individual, in terms of lack of job satisfaction and identity, as factories grow beyond a certain size?

There is a good deal of truth in what the hon. Gentleman says. I shall certainly take his remarks on board. It is also true that in many larger industries and plants there is no industrial trouble.

Does the Minister accept that in factories where the number of employees is fewer than about 1,000 industrial relations tend to be more harmonious than in factories with a larger number?

That is rather too much of a sweeping generalisation. Such matters vary considerably between industries, as well as between factories.

Unemployed Persons


asked the Secretary of State for Employment what is the latest total number of unemployed; and how this compares with February and October 1974.

At 10th March the provisional number of registered as unemployed in Great Britain, excluding school leavers, and seasonally adjusted, was 1,268,100, compared with 549,800 in February 1974 and 608,400 in October 1974.

Does the right hon. Gentleman agree that these are disgraceful unemployment figures? Are they what the Government had in mind three years ago when they conned the electors into believing that it would be "back to work with Labour"?

The figures reflect in part the efforts that the Government have successfully made to retain the level of employment in this country to a greater degree than most other countries in Western Europe. In the period to which the Question relates—namely, between March 1974 and March 1976—the fall in the number of people working was only 233,000. The fact that the rise in unemployment was three times that is largely due to the fact that many more people are seeking employment. That will continue to be the case for some time to come. It is against such an objective assessment that the House must judge the measures that the Government bring forward to deal with an appalling problem.

Does my right hon. Friend accept that the working people of Stechford are fully aware that there would be twice as many unemployed if the Tories were in power? Will he take note that the Tories themselves clearly recognise that fact? Does my right hon. Friend discern any trend that shows that in the near future more people are likely to be employed?

If Opposition Members were as assiduous in their study of what is happening in industry as they are in focussing on the particular problems of unemployment they would realise that such a trend exists. The number of people employed in vehicle manufacturing rose by 16,000 between January 1976 and January 1977. The number employed in the textile industry increased by 9,000 in the same period. The number of people employed in chemical manufacturing increased by 7,000. There is every evidence that the support of the industrial strategy for manufacturing industry is resulting in many more jobs.

Is the right hon. Gentleman aware how much avoidable unemployment is caused in many instances by the refusal of the Department of the Environment to give local authorities permission, under Section 42 of the Community Land Act, to sell land to employers who are willing to go to areas as long as they can buy the land, so creating local employment.—[HON. MEMBERS: "Too long."]

Will the right hon. Gentleman take over from the Department of the Environment the question of the release of land under Section 42 of the Community Land Act, so that employment can be provided?

I am not aware that this is by any means a general problem. I know of only one or two very isolated cases of employers seeking to purchase land in which there is difficulty in creating new employment. In the overwhelming number of cases in which employers are prepared to move into areas and to obtain land to create employment they receive nothing but great assistance from Government Departments.

Does my right hon. Friend agree that these unsatisfactory unemployment figures are largely due to inflation of long duration, precipitated by the reckless monetary policies of the last Conservative Government?

I agree with my hon. Friend that our inflation problem is one of the major constraints in dealing with unemployment. These "disastrous" figures which are being referred to arise at the end of two months which have seen successive drops in total unemployment, one of which was a drop of 38,000 in four weeks.

How does the Secretary of State reconcile what he has said about his concern for employment and what one of his colleagues said about the neutrality of his Department on the closed shop issue with the disclosures in the Business News of The Times this morning of the deplorable episode involving Tattersall Advertising Limited, in which an organisation in his Department—ACAS—was used to enforce a closed shop on that company?

The rôle of ACAS is to conciliate and avoid disputes. That includes any disputes arising from breaches of closed shop agreements.

Is not the Secretary of State's statement today and his answers to Questions a shameful indictment of the Government's pathetic employment record? Is he not aware that our figures are now above the average for EEC countries? [HON. MEMBERS: "No."] I have the latest figures here: ours are above the average. Is he not further aware that the Prime Minister said last Wednesday in the House that he thought that the trend in unemployment over the next few months would certainly not be downwards? Would he now tell the House, the country and the electors of Stechford the Government's forecast for unemployment over the next year?

I sometimes wonder what the right hon. Gentleman's programme is before he comes into the House to utter some of these phrases like "shameful indictment". If he would only pause to consider what I have reported, he would see that it includes a drop of 26,000 in the number of unemployed between January and February, a drop of 38,000 between February and March and an increase in the numbers employed in vehicles of 16,000, in textiles of 9,000 and in chemicals of 7,000. I hardly think that figures like that justify such phrases as "shameful indictment" of the Government, especially against a background of a major recession.

Employment Protection Act


asked the Secretary of State for Employment whether the Employment Protection Act is achieving the objectives outlined by the Government.

I am satisfied that the Act is achieving its purpose to the extent that it has been implemented so far.

Is the Minister aware that his Government have suspended free collective bargaining, which ACAS is bound under the Act to develop? Will he resolve that contradiction and tell us what steps his Government have in mind or what consultations are in progress for the reform of collective bargaining?

If the hon. Gentleman thinks that this Government have suspended collective bargaining, he will believe anything.

Does the Minister agree that the Employment Protection Act and the Trade Union and Labour Relations (Amendment) Act do need amendment so as to restore protection against unfair dismissal to those thousands of people who work partly in the United Kingdom and partly overseas, or who have fixed-term contracts with provision to terminate them before their end —all of whom have lost their protection as a result of judicial interpretations?

Yes, there is a problem here, and my hon. Friend has put a Bill before the House in an attempt to remedy it. However, he will recognise that this is not a simple matter, because the words that have given rise to difficulty appear in a number of protective statutes, and it would be necessary to look at them all. However, one of the cases dealt with by the Employment Appeal Tribunal is still to be ruled on by the Court of Appeal, and I think that it would be wise to await the outcome of the Court of Appeal's decision.

With regard to ACAS, what action is the Minister taking to draw attention to the disgraceful happenings in a number of Surrey hospitals, which are causing immense suffering and are absolutely disgraceful? What action is his Department taking to bring this matter to the attention of ACAS and the appropriate union, and to call for an immediate halt to what is going on?

The right hon. Gentleman will know that the Secretary of State for Social Services has made a forthright statement, addressing his remarks to both the union involved and its members. I hope that there is a speedy return to normal working. Undoubtedly, this situation is causing the gravest hardship to a number of people, which should not be allowed. The services of ACAS are ready and available to help in this situation. I hope that if it cannot be speedily resolved by other means, the parties will have quick recourse to ACAS.

The whole House will be grateful for what the Minister has said. Will he see that his Department and ACAS play a full part in bringing this dispute to a speedy end? If there are any further developments, will he report back to the House, perhaps tomorrow?

On the first question, the right hon. Gentleman knows that in connection with industrial disputes we in the Department, having established ACAS as an independent body, want to preserve its independence. Nevertheless, I am sure that his remarks will be brought to the attention of the Chairman of ACAS. The second question would perhaps be more appropriately addressed to my right hon. Friend the Secretary of State for Social Services. I shall certainly draw the right hon. Gentleman's request to his attention.

School Leavers And Graduates


asked the Secretary of State for Employment what assessment he has made of the likely shortfall of jobs for school leavers and graduates at the end of the current academic year.

No forecasts of the incidence of unemployment for particular groups have been made, although it is clear that many leaving school and university this summer to seek employment will have considerable difficulty in finding it.

In order to prevent further anxiety, will the Minister say now what steps he proposes to take to help those people who have been on a job creation project for a year and whose term is now coming to an end? They are likely to be swelling that number, whatever it turns out to be.

It is because the Government have had particular concern for this group that they are waiting for the Manpower Services Commission's report on the future development of services in this field and have decided to continue the youth employment subsidy of £10 a week for 26 weeks for those unemployed for a long time. I appeal to employers to take up that subsidy and give long-term unemployed youngsters a chance.

Would the Minister be prepared to have discussions with the Secretary of State for the Environment about the serious development in West London, particularly in Ealing, of industrialists selling sites for massive profits followed by planning authorities allowing the mushrooming of warehouses on those sites? With this practice, any attempt to get industry to return to London is already jeopardised. This will have a serious effect on young people about to leave school to work in any Job Creation Programme.

I always find discussion with my right hon. Friend the Secretary of State for the Environment stimulating and fruitful. I shall certainly have discussions with him after I have visited Ealing on 13th April to assess the whole problem of unemployment in that area.

Does the Minister agree that those still at school who have jobs to go to should be encouraged to leave early and to continue their education by part-time studies?

I am not absolutely clear what is meant by that question, but Labour Members believe that it is in the interests of young people to continue their education as long as it is practicable to do so.



asked the Secretary of State for Employment what steps he is taking to reduce unemployment in Wales.

In addition to the further allocation of £46 million for training purposes throughout Great Britain announced on 3rd March, the Government are continuing the special measures which they introduced to alleviate the worst effects of unemployment. These measures have so far benefited nearly 29,000 workers in Wales. Other assistance is being given through the Department of Industry.

Does the Minister agree with the Manpower Services Commission's recent prediction that the present record level of youth unemployment, which affects Wales like other parts of the country, is likely to persist for another five years? Does the hon. Gentleman further agree that the best thing that he and his Government can do is to take the pressure off the private sector so that employers are free to employ?

We do believe that there will be a persistent problem of youth unemployment because of the increased number of young people wanting jobs and the disappearance of jobs for young people. That is why we are awaiting the report of the Manpower Services Commission, a report which will lay before us proposals for the long-term solution to this problem.

Does my hon. Friend agree that the Government's approval of the building of the new general hospital in Bangor, of the new roadspan over the Britannia Bridge and the continuation of the hydro-electric scheme in Llanberis will enormously relieve unemployment in the hon. Gentleman's constituency, and my home, and will give new apprenticeship opportunities for young people in the area?

The Government are doing all that they can for that part of North Wales, which deserves attention because of the severe unemployment problem that it faces.

Does the Minister accept that the situation is quite unacceptable in Gwynedd, where unemployment is now between 10 per cent. and 12 per cent? That is something that we cannot tolerate, and it will worsen substantially because of the deliberate decision of the Government to do away with the regional employment premium. Will the Minister now say what alternative new proposals the Government have to replace the regional employment premium in order to encourage the development of manufacturing industry in areas like Gwynedd?

You, Mr. Speaker, would be impatient were I to make the Budget Statement at this point in time, but we agree with Members on the Opposition Benches that the level of unemployment in North Wales is intolerable. That is why we were pleased to see the relief of Shotton, and that is why this morning I have been discussing the possibilities of giving additional community industry places to North Wales, because of the problem that the area faces.



asked the Secretary of State for Employment whether he will take urgent action to offset the decline of jobs in manufacturing industry in the Greater Manchester area by the allocation of a higher proportion of funds for the Job Creation Programme and general Government policy in relation to contracts and industrial development.

The amount of help that Manchester receives from the Job Creation Programme will depend on the number of suitable projects that are devised and put forward by local sponsors.

As far as manufacturing industry is concerned, qualifying firms can benefit from both the regional and national schemes of assistance for intermediate areas administered by my right hon. Friend the Secretary of State for Industry.

In addition, the Government will continue to bear in mind the employment needs of Greater Manchester, along with other areas, in relation to the placing of contracts.

Is my hon. Friend aware of the quite dramatic fall in job opportunities in the inner Manchester area—the area of the Manchester district? Will he accord to that area no less a priority in consultation and in the provision of finance than he already does to development areas, and concentrate funds specifically on inner urban regeneration of industry rather than trying to spread the load thinly?

That question would be more appropriately directed to my right hon. Friend the Secretary of State for Industry. Certainly, in terms of special measures, we in the Department of Employment give a fair share to Manchester.

Prime Minister (Engagements)


asked the Prime Minister if he will list his official engagements for 29th March.


asked the Prime Minister if he will list his official engagements for 29th March.


Roberts asked the Prime Minister if he will list his official engagements for 29th March.


asked the Prime Minister if he will list his official engagements for 29th March.

In addition to my duties in this House, I shall be holding meetings with ministerial colleagues and others.

If my right hon. Friend discusses phase 3 with any of his ministerial colleagues, employers or trade unionists will he emphasise that, although there may be a need for some flexibility, if better-paid workers begin leapfrogging one over the other they may damage the interests of lower-paid workers and possibly destroy the social contract?

I completely agree with my hon. Friend about this. It is part of the Government's economic policy for this year to seek, if at all possible, to get agreement with the trade unions on another phase of wage policy. As my hon. Friend says, that could be destroyed if there were leapfrogging of the sort that he has outlined. With regard to differentials, it has always been the Government's policy to recognise that the rigidities of phases 1 and 2 cannot be extended into phase 3, but that there must be more flexibility, so that differentials can be recognised.

Now that the Prime Minister has abandoned Socialism as his price for a Liberal coalition, will he today explain to his beleagured candidate who is besieged in the Stechford by-election and those of his few Labour supporters who are still there why, if they wish to support Socialism, they should vote for the Labour candidate?

When I read the Question I somehow thought that the hon. Gentleman was not really asking about my engagements for 29th March. The hon. Gentleman has had the opportunity of making his point. I shall not boast about the result of Stechford. I shall leave him to do that and we shall see on Friday morning.

Can the Prime Minister take some time off to study the contradictory statements made by Ministers and Members of the Liberal Party about the recently concluded pact? Will he confirm that he is still leading a Government dedicated to the pursuit of Socialism and that he has not abandoned a single legislative commitment?

I do not think that it is of particular concern to the Conservative Party what arrangements are made between other parties in the House. I would not regard it—[Interruption.] When the hon. Member for Hastings (Mr. Warren) joins the Labour Party, if he ever does, I shall be glad to account for myself to him. Meanwhile, despite this eagerness on the part of the Conservative Party, I do not propose to assume ministerial responsibility for these inter-party arrangements. I am afraid that the curiosity of Conservative Members will have to remain unassuaged. The Government's programme will continue to be carried through as we get a majority in this House for it.

Could the Prime Minister find time in his busy day to sit quietly and contemplate who is responsible for continuing in office a Chancellor of the Exchequer who has seen the retail price index rise, on a three-month basis, from 8·4 per cent. to 21·6 per cent.? Is this inflation not destroying all the plans and hopes of those who have tried to do their best for their retirement?

The degree of inflation in this country has undermined many things. That is why the Government are resolutely determined to reduce it, and are succeeding—without much help from the Opposition. It is our view, which I have expressed in the House many times, that if we resolutely pursue the policies that we have embarked upon inflation will start to turn down in the second half of this year and will go down faster in the first half of the following year.

Is my right hon. Friend aware this morning in Standing Committee A, which was considering the Coal Industry Bill, the hon. Member for Derbyshire, South East (Mr. Rost) advocated a policy that the price of gas should be—[HON. MEMBERS: "Order."]

Order. I think that hon. Members are mixing up a Select Committee and a Standing Committee, but I would also remind the hon. Gentleman that the giving of information is not the purpose of this period—[Laughter.]—except—let me put myself right—by the Front Bench.

I hope that in the course of one of his engagements today my right hon. Friend will send a message to our candidate at Stetchford, informing him that the Tory Party is advocating price increases in excess of the 10 per cent. proposed by the Government and that that has not been repudiated by Tory Front Bench spokesmen.

I am aware that the Conservative Party's policy would be to increase prices substantially, and I hope that that message is well understood in the country. That is why my right hon. Friend the Minister of Agriculture, Fisheries and Food has not accepted the Conservative Party's proposals in Brussels. He has not accepted the view put forward by the Conservative Front Bench on this matter, which would have had the effect of raising food prices. He has steadily resisted both their proposals and those of the other countries.

Is the Prime Minister aware that when it comes to rising prices we could not begin to rival his record and that of the Chancellor of the Exchequer in increasing them? Is he aware that when we left office their maximum was 13·2 per cent. per annum, a record that he has not begun to rival during the whole time that he has been in office?

I know that the right hon. Lady's intentions are of the best, but I was wondering why the Conservative Front Bench spokesmen on food and agriculture should have put forward a proposition that would have the effect of raising food prices in this country by 1¼ per cent., by their proposed devaluation of the green pound, without anything in exchange for it.

How can my right hon. Friend expect any congratulations from the right hon. Lady the Leader of the Opposition on the valiant battle that my right hon. Friend the Minister of Agriculture, Fisheries and Food is putting up in Europe when that is only one more bit of bad news for her in a very bad week?

I hope that my hon. Friend is not intimating that he has had any sight of my right hon. Friend the Chancellor's Budget, because that would be extremely serious. As regards the other news of this week, it is certainly true that what my right hon. Friend the Minister of Agriculture, Fisheries and Food is doing in Brussels is to show that a determined fight on behalf of the British housewife will bring results.



Nevertheless, does the Prime Minister now feel more optimistic about the possibility of New York landing rights being granted? In that context, will he undertake two things? First, will he undertake from now on to press the case as hard as France has pressed it? Secondly, if success is achieved, will he undertake to take the inaugural flight into New York?

It is proposed to submit more evidence on noise levels to the Port of New York Authority. The French authorities and our own are considering when this information should be submitted. There is a lawsuit in the background, about the date of which no final decision has been taken. We are continuing to work in close co-operation with the French on this matter. President Giscard d'Estaing and I had an exchange of views about the matter bilaterally in Rome last Friday.

Will my right hon. Friend make a renewed request to the Americans for a quick decision on the entry of Concorde into New York? The jobs of aircraft workers in my constituency are threatened, and all this is taking place when the new Aerospace Corporation is coming into being. A speedy decision is long overdue.

The American authorities are aware of our anxieties about the matter. If Mr. Cyrus Vance comes to London later this week, as I understand he will, I or my right hon. Friend the Foreign and Commonwealth Secretary will make it our business to acquaint him of our views about the urgency of the matter. We have a battle to fight here in relation to noise and we must proceed by offering more evidence to the Port of New York Authority in the first place.



I refer my hon. Friend to the reply that I gave to my hon. Friend the Member for Hemel Hempstead (Mr. Corbett) on 3rd February.

Does my right hon. Friend agree that the improving economic situation in this country, despite the world recession, has been brought about by the co-operation that this Government have had from the trade union movement? Will he seek to ensure the continuation of that co-operation by meeting the trade union leaders soon after the Budget and considering the positive proposals that they are putting forward in their economic review to deal with the question of unemployment?

Yes, Sir. I certainly undertake to do that, because there is no doubt that the TUC's co-operation in these matters is vital. We also need the co-operation of the CBI on prices and other matters. A Bill concerning this will be brought forward very shortly. I think that it is fair to say that the Government have carried this country through the deepest world recession, from which the world is now beginning to emerge, with less hardship and less poverty than has ever before been known in the history of these islands.

To what extent will the Liberal Party be involved in the Government's talks with the unions over phase 3 of the incomes policy?

If you care to arrange a period of Question Time for the Liberal Party, Mr. Speaker, I am sure that its Leader will be very happy to answer.

Can my right hon. Friend confirm that every Government Department and every Minister has been told to try to take seriously the Liberals, especially the Bunny Girl manager?

Like many of my hon. Friends, I was very happy to have Liberal support in the Lobbies last week. It has preserved the Government in office and will enable us to continue to carry out our policies.

Has the Prime Minister been able to tell the TUC why it is that, to use the right hon. Gentleman's expression, in the Government's carrying Britain through the world recession the standard of living has fallen consistently in Britain whilst it has not so fallen in other Western European developed countries? This is a matter which is of interest to all of us, but especially to the TUC.

As always, the hon. Member has put his finger on a very important point. What is at stake is the level of Britain's industrial performance—whether there is sufficient productivity, whether investment is high enough, whether our managers are sufficiently good and whether our trade union practices are not too restrictive. These are the important issues and upon these—and in a major sense only upon these—our standard of living over the next decade will depend.

When my right hon. Friend next meets the TUC will he discuss with it the latest TUC economic report, which clearly points out that only by direct intervention in our economic affairs in a Socialist fashion can we deal with the intolerable level of unemployment that is facing this country today?

The Government never have any hesitation in intervening, because the free market economy is not capable of providing unaided the total level of life that is satisfactory, or the appropriate level of unemployment that is acceptable. This is being accepted increasingly throughout Europe today, and we shall intervene whenever it is necessary to do so in order to maintain the standard of living of our people.

On a point of order, Mr. Deputy Speaker. Just before you joined the Chair the Prime Minister said that he would hope to assist in making a period of time available for questioning Members of the Liberal Party. Despite the fact that the Liberal Party has just appointed more Shadow Ministers than it has actual hon. Members in this House, it would be for the convenience of the House if we could question them. Would it be possible—I am sure that all parties would be in favour, particularly the Liberals, who would like a Question Time of their own—to make these arrangements after Easter? Could you facilitate this and through your good offices help to set it up?

Regional Affairs


That the matter of the Health Service in the North West be referred to the Standing Committee on Regional Affairs.—[Mr. Foot.]

Statutory Instruments, &C

In order to save the time of the House I propose to put the Questions on the Statutory Instruments together. I understand that the second item on the Order Paper—concerning the International Monetary Fund (Immunities and Privileges) Order—is not to be moved. Therefore I shall put the other three together.


That the draft European Patent Organisation (Immunities and Privileges) Order 1977 be referred to a Standing Committee on Statutory Instruments, &c.
That the Civil Aviation (Navigation Services Charges) (Fifth Amendment) Regulations 1977 (SI, 1977, No. 340) be referred to a Standing Committee on Statutory Instruments, &c.
That the Civil Aviation (Canadian Navigation Services) Regulations 1977 (S.I., 1977, No. 314) be referred to a Standing Committee on Statutory Instruments, &c.—[Mr. Foot.]

Ways And Means

Budget Statement

Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that at the end of the Chancellor's speech, as in past years, copies of the Budget resolutions will not be handed around in the Chamber but will be available to hon. Members in the Vote Office.


3.33 p.m.

In my statement to the House last December I announced economic measures which were part of a medium-term programme for national recovery. I said that those measures, reinforced by the next Budget and further progress on the industrial strategy, would enable us to make the difficult transition to a more firmly based prosperity.

The measures I then announced have succeeded in their main purpose. They have restored our financial stability. This is shown by the rise in the exchange rate, which has been stable at 16 cents above the low point it reached last October, by the increase in the reserves, by the Basle agreement on sterling balances, and by the market loan of $1½ billion which I signed in February. Domestically the success of the measures is shown by the sales of gilts which have kept the monetary aggregates under tight control and by the fall in interest rates—short rates are down by 5 per cent. since their peak in October.

These striking financial successes are a necessary condition for our recovery and must be maintained. But they are not by themselves sufficient to achieve the fastest possible return to a high and sustainable level of output and employment, which remains this Government's overall economic objective. This Budget builds on the success of the December measures and moves us further towards recovery.

The principal measures I shall be announcing will contribute to two key aims—getting our inflation down to the level of our main competitors and improving the performance of our manufacturing industry. The scope for such measures is governed by the need to maintain the financial stability we have now achieved and to get rid of the deficit on our current balance of payments. It is still too soon to take risks in either of these fields, so, if anything, I must err on the side of caution this year, particularly while the precise path of our balance of payments is still uncertain.

The Economic Background

The United Kingdom is a trading nation. This means we cannot sustain our economic recovery without a major improvement in our trade performance so that we win and hold a larger share of both home and export markets. But the speed of our recovery will also depend heavily on conditions in the world economy and the growth of world trade. So I begin my review of the economic background to the Budget with a look at the world economy.

The World Economy

The industrialised countries as a whole achieved a relatively rapid recovery in output and trade at the beginning of 1976, but this fell off through the rest of the year. Over the year as a whole their gross national product rose by nearly 6 per cent., after falling 1½ per cent. in 1975; and world trade in manufactures increased by nearly 10 per cent. following a drop of nearly 4 per cent. in 1975. Nevertheless, there is growing concern that the pause has been unusually prolonged for this stage in the cycle.

More recently, growth in some major countries has shown signs of accelerating again. There now seems to be a reasonable prospect that this year GNP in the major countries will grow at around 5 per cent. World trade in manufactures may rise by about 8 per cent. Present policies in the United States and Japan should help to ensure that their recovery is sustained. But in Europe the prospects are more doubtful. Inflation and difficulties with the balance of payments have led several countries besides ourselves to take restrictive measures. Even countries with a strong balance of payments ments and low inflation rates are being very cautious in their fiscal policies.

The OPEC countries are expected to increase their imports by 15 per cent. in 1977, but as a group they will continue to run a massive surplus. In the non-oil developing countries, however, growth will remain constrained by shortage of foreign exchange. Many of them improved their position last year, as the price of primary commodities rose relative to manufactures, and this may continue to some extent in 1977. Nevertheless, their imports are likely to be held back by financing problems and the need to rebuild their reserves.

The most disturbing feature of the world scene is that over the last two or three years every major industrial country has seen its unemployment level rising well beyond what had been regarded in the post-war world as the limit for a well-managed economy. At the end of 1976 there were estimated to be 15 million unemployed in countries of the OECD, an average unemployment level of over 5 per cent. For the year ahead, Europe at least can expect little, if any, reduction in unemployment, and it will take concerted action to improve the outlook. I will return to this later.

This is the background against which I must review the present position and prospects of the British economy. A fuller and more detailed analysis will, as usual, be found in Part I of the Financial Statement and Budget Report, but I will now describe its principal features.

The Domestic Economy

During the last 12 months production has made a modest recovery from the recession of 1975. But the economy is still working well below its productive capacity, industrial investment is rising but is still too low, and there is still a substantial current account deficit on the balance of payments to be eliminated.

If we were to make no change whatever in present policies, I would see the prospects as follows. Production would grow only slightly in the next 12 months. The main increases in demand are likely to be in net exports and manufacturing investment—the sectors which we want to lead the recovery of the economy. From other sectors, however, little or no stimulus is to be expected. Public expenditure on goods and services will be rather lower than last year. And on present policies, I would expect no increase in private consumption. Indeed, there might be some decline.

Taken together, these trends could be expected to mean that demand and production would continue to grow slowly. But with so modest a recovery in output I would not expect any fall in the level of unemployment. Indeed, I fear that some further rise would be more likely. The rate of increase in unemployment has, however, been falling markedly. In 1975 the increase was 40,000 a month; in 1976 it was 13,000 a month; and this year there has been a welcome fall in the level of unemployment. But two months is too short a period on which to form a judgment. The plain fact is that the present level is unacceptably high; and action is clearly needed to improve the future prospect.

The rate of price increases is also a cause for acute concern. I have said many times that we need to get our inflation rate down to the level of our main competitors'. Last year's experience with the exchange rate shows what is bound to happen until we achieve that. Our inflation rate was falling rapidly in the first half of 1976, thanks to the £6 pay policy, but our rate was still much higher than those of our main competitors. The disparity caught up with us and caused a fall in the exchange rate. There were other factors, such as the drought and the world increase in commodity prices, but the fall in the exchange rate was the main factor which checked the decline in our rate of inflation last summer and prevented us from reaching single figures by the end of 1976.

The response of the trade union movement, first to the £6 pay limit and then to its successor, gives us a very good chance of resuming the fall in inflation in the second half of this year when the effects of last year's depreciation have finished feeding through into prices. Indeed, there is a real prospect of getting inflation into single figures by the second quarter of next year, provided that we can avoid substantial depreciation.

This will be possible only if we maintain confidence at home and abroad in our determination to reduce our inflation rate; and that, in turn, means that we must get a satisfactory agreement on pay to operate when the present pay agreement expires at the end of July.

There is no chance of getting a new agreement unless we make sure that the benefits of pay policy and a more stable exchange rate feed through into prices in the shops. So we intend to prevent any unreasonable profit mark-up, by keeping the price control on profit margins, and by taking a new power to freeze a particular price for up to a year when an independent investigation shows this to be justified. At the same time we have to be careful that price controls do not damage the rate of return on investment. This has been driven down by inflation and recession to exceptionally low levels. We must make sure that the return on capital is allowed to recover sufficiently to reinforce the upturn in investment and to ensure that the new jobs we need are created.

The balance of payments prospect is now a good deal better. During the next 12 months we can confidently expect a large increase in the flow of North Sea oil, and an increase in visible and invisible exports, all of which will substantially improve the balance of payments. Our current account deficit, which has been running at an annual rate of a little over £1½ billion in the last six months, should be progressively eliminated and we have good prospects of a healthy surplus in 1978.

The foreign exchange markets have been much more stable everywhere this year. The stability of sterling has been partly due to the December measures and the IMF agreement and also to the reassurance offered by the recent new agreement on the sterling balances, for which we are grateful to our central bank partners. Sterling has also been helped by the repayment of the sterling loans made to finance trade between third countries, which I took measures to stop late last year. I am now proposing to strengthen our exchange control powers over the raising of sterling finance by companies resident in the United Kingdom but controlled by non-residents.

The reserves are now at a much more satisfactory level. Provided that we secure and maintain a balance of payments surplus, we can begin to repay overseas debt. Until this repayment is safely under way, our domestic economic policies will be subject to constraints. I made it clear in the context of the agreement on the sterling balances that I do not intend to rely on sterling inflows on private account as a means of financing the remaining deficits. So I have continued to borrow on a secure medium-term basis, in order to improve the overall pattern and level of reserve assets in relation to the debt structure. But I do not expect this type of borrowing to be necessary much longer. It is a most welcome change to be speaking to the House about the prospect of repaying debt rather than reviewing the prospect for getting more overseas financing.

The outlook for the monetary aggregates has shown a significant improvement. Domestic credit has expanded very little in the last six months, and in the year to mid-April 1977 its expansion is now expected to be only about half that allowed for by the ceiling of £9 billion in the Letter of Intent. In my December statement I said that I expected the associated growth of sterling M3 to be between 9 and 13 per cent. With the much lower expansion of domestic credit, the growth of sterling M3 will now be at or below the bottom end of the range.

Finally, the public sector borrowing requirement has fallen. The total for the financial year now ending is currently estimated at £8·8 billion, but it will be some months before we know it for certain. We know very little yet about public borrowing in the last three months of the year apart from that of central Government itself. The reasons for this downward revision from the forecast in the Letter of Intent to the IMF are discussed in the Financial Statement and Budget Report. Some of the effects carry through to the forecast for 1977–78.

The estimates now suggest that if present policies were continued, the PSBR for the next financial year would be about £7½ billion, about £1¼ billion lower than the figure of £8·7 billion agreed as a ceiling with the IMF. This improvement is mainly due to better prospects for employment, interest rates and the exchange rate since the December measures.

The forecast for 1977–78 takes account of the intention, which I announced in December, to sell an amount of British Petroleum stock which will leave the total of the Government's and the Bank's holdings at 51 per cent.—more than we held before the Bank acquired the ex-Burmah shares. This sale will go ahead in 1977–78, and in framing my Budget proposals I have made full use of the room for manoeuvre which it will give me. Since there is still the impediment of Burmah's claim against the Bank of England, the Government will sell part of its own holding, in the expectation, based on strong legal advice about the merits of the Burmah claim, that we shall in due course be able to consolidate the 51 per cent. holding by securing the transfer to the Treasury of the stock now held by the Bank.

Medium-Term Prospects

I turn now to our prospects in the medium term. The immediate situation provides a solid foundation on which we can build a return to full employment and a steadily improving standard of life. Whether we achieve these objectives, and how fast, will depend partly on improvements in our own economic behaviour, partly on developments in the world economy. None of the improvements we need is impossible, but none is certain either. All depend on acts of will.

Balance Of Payments

First, let me deal with our trading performance. We must not only eliminate our balance of payments deficit but earn substantial surpluses, so that we can start repaying our accumulated international debt while still maintaining adequate reserves. That is the pre-condition for restoring our economic independence and making ourselves less vulnerable to external shocks in future. With the help of North Sea oil, we should earn a surplus next year. But this will be when our economy is still operating well below capacity. Our aim must be to earn a balance of payments surplus in conditions of full employment.

North Sea Oil

The growing output of North Sea oil will not be sufficient to achieve this. The return to full employment must depend primarily on increasing our industrial investment and our net exports of industrial goods, otherwise we can have no assurance that we shall be able to take up the slack in the economy, even when North Sea oil is in full production, without running once more into the familiar difficulties of supply constraints in industry and deficits on the balance of payments.

Moreover, North Sea oil will not last for ever. It is essential to use the advantages which it offers us during the period when it is available to strengthen our industrial base and our trading performance, so that we can maintain full employment and an acceptable standard of living when the flow of North Sea oil diminishes.

In sum, North Sea oil will not itself create a large number of new jobs, nor will it make possible a rapid return to full employment based on a sudden expansion of domestic demand, whether in the public or the private sector. But it does give us the prospect of a period of years in which we can pursue our industrial strategy, and so expand our manufacturing base, without the constant risk that balance of payments constraints will force us to cut back domestic demand just when the process of industrial expansion could otherwise have become self-sustaining.

In other words, it gives us solid grounds for confidence that, if we hold to our present policies, and apply them steadily and consistently, we shall be able to create the conditions for what I described in December as a decisive break away from the restrictive pattern of present circumstances and post-war disappointments.


The necessary improvement in our trading performance depends in turn on a second improvement in our economic behaviour. We must bring down our rate of inflation so that of our principal trading rivals and keep it at that level.

Despite the deterioration in our inflation rate since last summer, we now have a chance of getting near that aim by the end of the next pay round. The recent increase in prices, despite the strict observance of the pay policy, reflects the operation of a vicious circle we have seen more than once in recent years. Even in a period when pay increases are limited, there can be a sharp fall in the exchange rate as a result of excessive pay increases in an earlier period. This fall robs us of the full price benefits which we hoped to gain from pay policy. And if the resulting disappointments makes it difficult to continue pay policy, it threatens us with a further fall in the exchange rate later on. I believe this time we can make a decisive break in the vicious circle and indeed turn it into a virtuous one.

As I shall explain later, the December measures and this Budget together should help to get another round of pay policy. The rise in the exchange rate from the low point it reached last October is worth about 3 per cent. off the retail price index by the end of this year. If, as I hope, my proposals today for income tax relief help to get another round of pay policy accepted, that will help with the future level both of the exchange rate and of prices.

In fact, a satisfactory pay policy can bring prices down in three ways. Provided we have effective price controls, it means lower prices for the goods we produce at home because wage costs are lower. It means lower prices for the goods we import from abroad because the £ sterling is worth more. And these two advantages help to bring down interest rates—which cuts the cost of everything we buy on credit, like housing, and helps employment by stimulating industrial activity and investment. By the same token a free-for-all leading to a wage explosion would send prices rocketing up for three reasons—through higher domestic costs, through a lower exchange rate, and through higher interest rates.

Industrial Performance

It is as necessary, then, to improve our inflation rate as our trading performance, and pay policy is the key. But in the medium term we shall not achieve the necessary improvement in either our trade or our inflation unless we also improve the competitiveness of our manufacturing industries. This is the third improvement we need to make. Price competitiveness is critically important; but we must aim to achieve this not through a lower exchange rate, which carries such a heavy cost in prices and living standards, but through higher productivity—by producing more goods for the same cost.

No less important is to improve what I have called "non-price competitiveness". By this I mean better product design, higher quality and greater reliability, allied to better salesmanship, delivery times and servicing arrangements. In the longer run, it is only by doing better in these aspects of competitiveness that we shall win and maintain an increased share of home and foreign markets. And only through increasing our market share shall we have a secure prospect of a return to sustained full employment and rising living standards.

British industry must respond better to economic opportunity in future than it has in the past. That is why in the industrial strategy we have embarked on a joint effort to improve our industrial performance, involving management, the unions and the Government, and are concentrating in particular on key sectors of manufacturing industry. This will take time, but it is already achieving results and we are determined to carry it through, and so are our partners.

As I have said, each of the three improvements we need in our economic behaviour depends on the other two. For example, if our industrial performance fails to improve, our balance of payments will deteriorate, and then we should be faced with a choice between a deflation which throws men and women out of work, or a depreciation which raises prices.

The World Economy

Other countries have found difficulty, like ourselves, in achieving all their various economic objectives at the same time. At the moment, a significant improvement is also required in the outlook for the world economy if any of us are to achieve our national aims in full.

The world-wide explosion of inflation in recent years has led most Governments to pursue exceptionally cautious demand policies: and in many countries there is no easy way of combining higher levels of activity and employment with a further fall in inflation. So the leading countries must work together in seeking ways of improving the prospects of the world as a whole. The Prime Minister and I will be pressing for this over the next two or three months—in the European Community, in the IMF, and at the Downing Street Summit.

If the stronger economies increase domestic demand and reduce their external surpluses, they would help greatly to sustain activity in the world as a whole. President Carter has recently given his support to the views of the OECD and IMF in this regard. On the other hand, countries with higher inflation rates and weaker balance of payments positions face more painful adjustments. They will need time to adjust their economies to the many shocks they have suffered over the last few years. In particular, they will need access to adequate finance on appropriate terms, so that they are neither forced unnecessarily to deflate their economies nor tempted into trade restrictions—either of these courses would be damaging to the world as a whole. This will be a major topic at the meeting of the Interim Committee of the IMF in Washington next month.

Many countries also need to achieve higher investment. As the Prime Minister made clear in Rome last weekend, we are exploring with our European partners the scope for co-operative efforts to stimulate investment and to maintain or create jobs, particularly in the field of youth employment. I look forward to the opportunity to review with our Community partners our progress in fighting unemployment in a further tripartite conference of Governments, trade unions and employers before the end of June.

The Scope For Fiscal Action

This is the background against which I face my main task in this Budget—to consolidate the gains we have made so far and to create the conditions in which we can get our rate of inflation down and make the necessary improvements in our industrial and trading performance. [ Laughter.] I think that the House will have noted that these are aims that both the British and the external markets greatly appreciated last week when there seemed to be some danger that they would be jeopardised by the possible defeat of the Government.

I have emphasised many times over the past few months that all these objectives will require some reduction in the present burden of income tax. The representations that I have received have been unanimous in advocating this. Both the TUC and the CBI have argued that substantial reductions in income tax are needed both to make it easier to agree on a satisfactory pay policy and to assist our industrial strategy. The sector working parties have reinforced these arguments by pressing for improvements in the structure of income tax to increase incentives at all levels of industry. I am convinced that working people throughout the country take the same view.

My problem in the Budget is to decide how far I can move in this direction this year without weakening the firm control that we have established over fiscal and monetary policy and without putting undue strain on the nation's productive capacity or on the balance of payments.

The economic prospect that I have just described gives some room for moving in this direction. There is all too much spare capacity in the economy, though this varies rather widely within the different sectors of industry. The balance of payments should have moved into surplus by the end of the year. The forecasts for the public sector borrowing requirement and domestic credit expansion give me significant headroom. So there is scope for a carefully controlled fiscal stimulus, to make at least a start in expanding domestic demand by reducing the burden of income tax.

I must also decide how far the prospect for a satisfactory agreement on pay policy justifies me in offering some of the tax reliefs before formal discussions on pay policy have even begun, still less been concluded. What I have heard about the intentions of the trade union movement and the CBI leads me to believe that a satisfactory agreement can be reached, although I would not seek to minimise the difficulties.

I am therefore recommending to the House in the Budget Resolutions which are being tabled today net fiscal action which will cost some £500 million net revenue in a full year. The £500 million package will take effect immediately. When, as I expect, a satisfactory agreement is reached in the coming months on the third round of pay policy, I shall bring before the House further proposals which will cost some £ 1 billion. The combined effect of both parts of the Budget will thus be to reduce the revenue by about £1·5 billion in a full year and to bring the PSBR for 1977–78 to a new forecast level of some £8·5 billion. This is within the ceiling of £8·7 billion agreed with the IMF.

Incidentally, it is not sufficiently recognised that the first year PSBR effect of a net reduction in tax is less than the full year revenue effect, partly because some of the revenue effect falls beyond the first year, and partly because the resulting rise in activity cuts unemployment and raises tax receipts. Thus the measures that I am proposing will affect the PSBR next year by only two-thirds of their full-year revenue effect.

Monetary Policy

A fiscal stimulus of this size will be fully consistent with maintaining the improvement in financial markets. In order to keep firm control of any inflationary pressures, I intend that domestic credit expansion in the coming year should be safely within the limit of £7·7 billion I set in December. The accompanying rate of growth of sterling M3 will depend on a number of factors, particularly the scale of the improvement in the balance of payments, since a surplus has the effect of expanding money supply. Although we expect a much better balance of payments next year, my best estimate is that the growth of sterling M3 will be in the range of 9 per cent. to 13 per cent.—the same as the estimate I gave in December for 1976–77.

In order to maintain this degree of control over the monetary aggregates, I intend that we should again finance a major part of the PSBR outside the banking system. I have already made a start with last week's gilt stock. It will also be prudent to maintain for the time being the present range of credit controls, and to operate them flexibly.

I am satisfied that on present trends these controls will allow sufficient room for industry's essential needs. The Government continue to regard the provision of adequate finance for industry as a key part of the industrial strategy, and I welcome the priority which the Wilson Committee on the Functioning of the Financial Institutions is giving to it.

Public Expenditure

The Government's expenditure plans for the next two years were set out in the first volume of the White Paper issued in January. We shall stick firmly to these plans, making full use of the new techniques of control which have proved their worth dramatically this year. A White Paper setting out cash limits for 1977–78, over a wide range of public expenditure, has been presented to Parliament today by the Chief Secretary.

Employment Measures

The Government believe that it is essential to make room within the totals already published for further measures to relieve unemployment. The measures that we have already adopted have received international recognition and have made a major contribution to the recent improvement in unemployment. But although there has been a welcome fall in unemployment in the last two months, far too many people are still out of work and it is too early to conclude that the trend has changed.

My right hon. Friend the Secretary of State for Employment announced a series of measures on 3rd March, mainly to extend training and job creation, at a gross cost of £83 million. On his advice the Government has decided to supplement these measures substantially. The period in which firms can apply for the temporary employment subsidy was due to end next month. It will now be extended through the whole of 1977–78. The period of payment of the subsidy will also be extended from 12 to 18 months, at a reduced rate of £10 instead of £20 a week, for firms whose initial period of payment comes to an end after today but which reapply and continue to satisfy the other conditions for the subsidy; this extension will run until the end of March 1978. The combined gross cost of these extensions is £214 million spread over the next two years.

In addition, the Government propose four minor but important new schemes. First, there will be a selective job introduction scheme to provide an incentive for employers to engage disabled people by providing £30 a week per persons for a trial period of up to six weeks. The scheme will be administered by the Manpower Services Commission. We believe that this might help about 2,000 disabled people in 1977–78.

Secondly, there will be a special programme to train extra teachers many of whom are now unemployed—in mathematics and science. In these subjects, which are particularly important to our industrial strategy, there has been a shortage for some years which is still with us, despite the overall surplus of teachers in other subjects.

Thirdly, there will be an experimental scheme for six months from 1st July applying only to manufacturing firms in special development areas employing fewer than fifty workers. They will be given a weekly subsidy of £20 for six months for each additional worker taken on.

Fourthly, we are discussing with the Manpower Services Commission the possibility of introducing a selective scheme for an experimental period of six months to help the long term unemployed, who face problems of particular difficulty.

Details of all these new measures are being annonunced by my right hon. Friends the Secretary of State for Employment and the Secretary of State for Education and Science. The cost was in part allowed for in the White Paper programmes; the balance will be met out of the Contingency Reserve. In all these cases the gross cost will be significantly offset by savings on unemployment benefits.

Inner Cities—Construction

Within the general problem of unemployment, the construction industry has suffered particularly hard. Although the prospective upturn in industrial investment and a probable fall in mortgage interest rates will give it some relief, the Government intend to give it additional help by means which will also assist in coping with the growing problems of inner city areas.

For this reason £100 million of additional expenditure will be made available at once from the Contingency Reserve for construction work over the next two years, in certain inner city areas in England, and for similar work in selected areas in Scotland, Wales and Northern Ireland. The Government will consult the local authorities about the allocation and programming of this expenditure.

It is likely that the work in England will include the rehabilitation and improvement of old housing, industrial site preparation, the building of advance factories, school improvements, community buildings, day centres, health facilities and the reclamation of derelict and neglected land. My right hon. Friends the Secretary of State for the Environment and the Secretary of State for Scotland will be making a further statement about inner cities shortly.

The list of employment and construction measures I have just mentioned has a gross cost of about £400 million over the next two years. This includes £165 million from the sum I set aside for this purpose in my Statement last December. The measures should create or maintain between 150,000 and 200,000 jobs or training places by the fourth quarter of this year, depending on the allowance made for the displacement of jobs elsewhere in the economy. I think that the House will agree that this is a real contribution to reducing our unemployment problem.

Indirect Tax Changes

I come now to my proposals in the field of taxation. First, indirect taxation. I have said on several occasions that it is desirable to readjust the balance between direct and indirect taxation. In recent years the share of direct taxes has risen under successive Goverments, mainly because inflation has eroded the real value of income tax thresholds and the value of many of the specific duties. This produces fiscal boost as well as fiscal drag—a point often forgotten by commentators. This, however, is not the year to take a major step to reverse the balance, since the prospect of a steady fall in the rate of increase of the RPI is of critical importance to the negotiation of a satisfactory new pay agreement.

Nevertheless I believe that in two fields some increase in indirect taxation is desirable to support important objectives of national policy, providing it does not have a major impact on prices.

Energy conservation must remain a major objective throughout the industrialised world. This is a message which emerges clearly from the recent OECD report on the "World Energy Outlook". The pressure on the world's resources of fossil fuels, particularly oil, is bound to increase, as that report makes clear. Unless countries respond vigorously, the energy imbalance which struck the industrialised world so severely in 1973 could be upon us again in a much more severe and intractable form. If we allow this to happen, the economic and social consequences will be incalculable.

We must instead open up new sources of supply, and act on demand with conservation measures and through realistic pricing policies. We can claim that the United Kingdom's record in these areas is good. We are well endowed with indigenous energy resources, and we are developing them vigorously. In conservation, we have made a good and effective start, but we must maintain the momentum and develop our polices if we are to stay among the leaders. Fuel saving can bring forward the time when the balance of payments moves into surplus and so remove a major obstacle to high employment. In addition there are reasons of transport policy for increasing taxation on the use of road vehicles.

Petrol/Derv Duty

The taxation of road fuel was not affected by my December measures and the total effect on the private motorist of the changes in my Budget last spring amounted to no more than about 1p a gallon. My measures last year had a greater effect on the business user of road fuel, but for him it was the first increase in the taxation of derv for seven years. In these circumstances I feel justified in proposing an increase in the duty on road fuel of 5p a gallon. If fully passed on, this would raise the price of a gallon of petrol to the private motorist by a little over 5½p, including VAT. This increase does no more than restore the real value of the duty on petrol to its level after my last Budget. [ Interruption.] I thought that the Conservative Party favoured indexation of taxes. Petrol will still be cheaper in Britain than in nearly all other countries of the European Community. My proposals for road fuel duty will produce an overall revenue increase, including VAT, of £300 million in a full year. The rebate of road fuel duty paid to stage bus operators will be increased so

that their costs will not be affected by the rise in the duty.

Heavy Oil Duty

Road fuel is not, of course, the only oil which is subject to duty. The duty on most other oil products, for example heavy fuel oil, reached its present level of 1p a gallon as far back as 1969. Its real value has fallen very substantially since then, and I propose to restore it by raising the duty to 2½p a gallon. The oils affected will be all those which at present bear the 1p rate. I have made one exception only—paraffin commonly used used for domestic heating, particularly by the less well-off and by pensioners. This paraffin will continue to carry only 1p duty as at present. The increase in duty on heavy oils will produce an estimated £150 million in a full year. Both the oil duty changes I have proposed will be brought into effect on oils cleared from 6 p.m. tonight.

Vehicle Excise Duty

Vehicle excise duty on cars has remained unchanged at £40 a year since April 1975 and its value in real terms has fallen appreciably since then. An increase of £15 would be required to restore the real value to the 1975 level. But as I am already going a long way to meet the Government's objectives in transport and energy policy by substantial increases in the duty on petrol and derv, I am proposing a more limited increase in VED of £10 or 25 per cent., taking the duty to £50 a year. The same percentage increase will apply to all other licences except those for goods and haulage vehicles. The increased revenue will amount in a full year to some £150 million.

The tax burden on heavy lorries, in contrast to the position of the private car and the lighter lorries, fails to cover the costs which they impose on the community, such as wear and tear on the roads, even if no account is taken of the damage to amenities in the areas through which they pass. I think I should make a start on closing that gap, although in the case of the heaviest lorries the gap is too large to close in one move. The reasons for moving in this direction were set out in the Transport Consultative Document published last year and the European Community is expected to take a similar view later this year.

The lighter lorries already cover their costs to the community. So for vehicles up to 4 tons unladen weight I intend to raise the duty by about the same percentage as for the motor car. But for lorries above 4 tons and up to 6 tons I propose increases of around 30 per cent., and for those above 6 tons increases of around 35 per cent. For individual weight categories within these bands there will be some variation from these figures, This is necessary to ensure a smooth progression in the tax rates. For virtually all these vehicles the increases fall short of restoring the effective burden of the duty to its level two years ago. The total increase in revenue from these changes in VED on lorries will be about £60 million in a full year.

Tobacco Duty

There are compelling health arguments for increasing the duty on tobacco in real terms. Besides consolidating the increases on tobacco and tobacco products announced last December, I therefore propose to raise the duty on a packet of 20 cigarettes by 4p, with a corresponding increase on hand-rolling tobacco. A further increase on other tobacco products would not be justified at present; in particular pipe tobacco plays an important part in the life of many retired people. The increase, which will take effect from Monday 4th April, will produce an extra £150 million in a full year, including VAT.

The increase of 4p per 20 cigarettes which I have just announced will be added to the tobacco products duty as a flat rate per cigarrette. This is in itself a move towards the new structure of taxation on tobacco required by the EEC. The Financial Statement and Budget Report refers to the remaining stage of the transition, which will be reached on 1st January 1978. My hon. Friend will explain the details later in the debate. I propose no other changes in the excise duties.

Value Added Tax

I come now to my proposal for value added tax. It is—in spite of the recommendations of a Task Force which I read about yesterday—to make no change.

Effects Of Indirect Tax Increases

Thus, the only increases which I propose in indirect taxes are those justified by considerations of health, of energy or transport policy. These increases will produce extra revenue, including VAT, of about £810 million in a full year. The effect on the RPI by the fourth quarter of this year will be an increase of just under 1 per cent.

National Insurance Surcharge

I turn now to a matter which has attracted a good deal of interest on both sides of the House. This concerns the new National Insurance surcharge which, as I announced last July, will take effect from 6th April as a two percentage points addition to the rate of employers' National Insurance contributions.

I have received many representations from charities, including the Churches, and my right hon. Friend the Prime Minister has received a deputation from some very senior representatives of charitable interests. I have considered the representations very carefully, and I have concluded that there is a strong case for relief in view of the special position of these organisations. Many charities perform valuable work in the community, and the Government would not wish to see them hampered as a result of the operation of the surcharge.

All organisations accepted as charities for income tax purposes will therefore be eligible for relief from the surcharge. The concession will be available from the first payment in respect of the 1977–78 tax year, so that no charity will be required to pay the surcharge. Details of the arrangements are set out in a Press release to be issued this evening.

Direct Tax Changes

I turn now to direct tax changes. I am proposing no change in the rates of corporation tax. Stability in company taxation is an important part of the industrial strategy, as I pointed out last year, and should not be disturbed without compelling reason. I shall continue to direct the relief I give to companies through the provisions for capital allowances and stock relief which already exist.

However, I believe that small companies deserve special consideration. So for the second year running I propose to increase the profit level by which small companies are defined for the purpose of the preferential rate of corporation tax. This will go up from £30,000 to £40,000. The limit for marginal relief will be increased from £50,000 to £65,000. The cost of these changes, which will benefit the small company sector in real terms, will be about £20 million in a full year.

Stock Relief

In my Budget Statement last year I said that the interim scheme of stock relief would continue for two more years. I then thought that this would give sufficient time to devise a permanent scheme which could take account of the views of the accounting profession and of industry. However, although the Government and others have welcomed the principle of current cost accounting, the Morpeth Committee's detailed proposals are still at exposure draft stage and are not yet firm. We need more time for discussion and consultation on a permanent scheme; the implications are very important for industry, and we must get it right. I propose therefore to continue the scheme in its present form, not only for 1977–78 but also for 1978–79.

As I have said many times before, in moving to a permanent scheme there will be no question of any general withdrawal of the relief given under the current scheme. I cannot, obviously, foretell at this stage what sort of transitional arrangements may be appropriate, since this will depend upon the form of the permanent scheme, but again I repeat that, if necessary, special provisions will be included to ensure that the change of system does not lead to cash flow difficulties for individual companies.

On the question of deferred tax, a good deal has been said also, notably by several sector working parties in their end-year reports, about the troubles that some companies meet when they seek to raise finance because of the existence in their balance sheets of large deferred tax provisions. But for the normal continuing business there is little or no risk that any substantial part of the deferred liability will in fact arise. This should now be better understood in the financial world.

Capital Gains

I come now to proposals for improving the taxation of capital gains. These take account of recommendations made by a joint working party of the Inland Revenue and representative bodies, for whose help and advice we are grateful.

First, I propose an improved roll-over relief for what is often called "domestication", that is, the transfer of an overseas branch to a separate non-resident company.

Second, I intend to modify in certain respects the rules applying to company take-overs, amalgamations and reconstructions.


I intend to take further action to deal with tax avoidance. It is intolerable that when the overwhelming majority of men and women pay their taxes honestly, a small number of wealthy corporations or individuals should escape their responsibilities to society by tax dodging on a massive scale.

First, there is increasing evidence of some particularly objectionable avoidance schemes designed to manufacture wholly artificial capital losses by shifting value from one asset to another. I am sure that there will be general agreement that they should be stopped.

Second, I propose to deal with certain highly artificial schemes under which taxpayers undertake to pay annuities for a consideration which is not taxable, or not wholly taxable, in their hands. The Inland Revenue is challenging these schemes under the present law, but I propose to introduce provisions designed to annul them. These provisions will apply to payments made after today.


I have also asked my officials to begin urgent consultations with the companies concerned about the possibility of legislating in the Finance Bill to restrict unilateral relief for certain taxes paid by oil companies to Governments of oil producing countries.

Foreign Currency Borrowings

In my Budget speech last year, I referred to the question of tax relief for the extra cost to companies of repaying foreign currency loans where sterling has fallen in value. I have now considered this question fully in the light of the report I have received of the extensive discussions the Inland Revenue subsequently had with those affected.

As I made clear last year, the arguments for general relief for exchange losses are finely balanced. There are major areas where the balance of argument would be against relief, and in these areas there are real problems in distinguishing between different cases and in drawing lines between them. Moreover, although the recovery of sterling has reduced potential losses, the sums of tax at stake are considerable. I have had to conclude that, since this year there is an urgent need to concentrate on income tax reliefs, I cannot at the same time propose relief for exchange losses.

Foreign Earnings

I said last December that I believed it important to find ways of improving the tax treatment of employees living in this country and working abroad, particularly those at the sharp end of exporting. The Inland Revenue issued a consultative document with proposals for changes. In the light of many representations and discussions, I am putting forward some changes in the original proposals designed mainly to benefit those who work abroad for relatively short periods at a time.

I now propose that any employee who works abroad for a total of 30 days or more in a tax year should qualify for the tax relief, whether or not the 30 days are continuous. This means that he will pay no tax on 25 per cent. of his earnings from work overseas. And those who have separate employments with overseas companies requiring them to carry out all their duties abroad will also qualify for the reduction, regardless of the length of their absence abroad. Details of my proposals are set out in the Press release which the Inland Revenue will be issuing today.

Retirement Annuities—Ceiling For Relief

Finally, I propose to increase again this year the limits on the annual amounts within which self-employed people may claim tax relief on premiums paid for an annuity on retirement. Although these limits were raised last year, I have de-decided, after reviewing the position again, that it would be right to provide a further increase. Accordingly the limit of £2,250 will be raised to £3,000 and there will be proportionate increases in the limits for people born before 1916 and for the special types of contract first introduced in 1971.

Revenue Effects

Details of the effects of these changes of the yield of the revenue, and of certain other minor tax changes, are given in Table 16 of the Financial Statement and Budget Report.

The combined effect of all the indirect and direct changes I have announced so far this afternoon will be a net increase in revenue of £740 million in a full year.

Pay And Tax

I now come to the heart of my Budget—the reductions in income tax and their relevance for pay policy. Given the size of the fiscal stimulus I consider justified and the net revenue resulting from the tax changes I have just described, I shall be able to make reductions in income tax amounting to some £2¼ billion in a full year—assuming we reach a pay agreement for the year from August 1977 which is consistent with our inflation objectives. To the extent we fall short of such an agreement the scope for overall tax relief would be that much smaller.

I need not go into all the reasons why substantial income tax relief is desirable. We shall discuss that fully in the Budget and Finance Bill debates. In a nutshell, the effect of inflation has been to put too high a proportion of the tax burden on to the income tax; to impose tax on too low a level of income; and to bring too many people into the higher rates of tax at each successive level, starting at a level not very far above average earnings. The effect has been to weaken the incentive to work throughout the economy. In correcting this, I have to distribute tax relief so as to give priority to the areas where the problem creates the greatest hardship or is most damaging to our economic performance.

The greatest hardship falls on the poorer members of our society. I could help them through three possible changes in the income tax—by increasing personal allowances, by introducing a reduced rate band, and in the case of retired people with only modest savings by raising the threshold for the surcharge on investment income. I shall take these in turn.

Personal Allowances

The various personal allowances reduce the burden of income tax at all levels but give special help to the very poor by relieving them altogether of all liability to pay income tax. I therefore propose to increase the single person's allowance and the wife's earned income allowance by £70 to £805 and to raise the married allowance by £140 to £1,225.

I am proposing a substantially larger increase in the married allowance so as to provide the family man with special help during the transition to the child benefit scheme. It would not be appropriate to adjust child tax allowances again as I did last year. Hon. Members have already been given details of reductions being made in child tax allowances this year as the first stage in their replacement by child benefit. The effect on family income of the reduction in the allowances will in general be more than offset by the child benefits which mothers will get. But I am conscious of the need to ease the effect of this change on the father's pay packet. That is why I am proposing a substantially larger increase in the married allowance.

I propose also to raise the additional personal allowance by £70 to £420. This will ensure that, as in previous years, the allowance for one-parent families is kept in line with that for two-parent families. I propose to increase the age allowances for those over 65, so that they become £1,080 for the single and £1,695 for the married.

These increases in personal allowances will give relief at all income levels. For those over 65 the resulting threshold will remain above the level of their retirement pensions and they will continue to be able to earn some supplement to their pensions without paying additional tax. As a result of these increases in personal allowances, 845,000 people who would otherwise have been paying income tax next year will not now do so.

Proposals For A Reduced Rate Band

I turn now to the question of a reduced rate of tax for the initial band of taxable income. I have been urged from several quarters to move in this direction. There is much to be said for this in principle. But to insert a band of reasonable length would be very expensive and rule out action in areas which I believe are more important at this time.

For example, if the reduced rate were 25 per cent.—and anything higher would hardly be worth while—and the length of the band were the first £1,000 of taxable income, the special benefit of a lower marginal rate of tax would fall only on those coming between one-fifth and about three-fifths of average earnings. It would cost some £2,200 million—leaving nothing over for raising tax thresholds or meeting the special problems of those on average earnings and above.

So far as those on low incomes are concerned, the highest priority for the future must be to raise the tax threshold so as to maintain the real value of personal allowances as far as possible and, if circumstances permit, to increase their level to the point where they stand clear about the levels of the main social security benefits. Once this has been achieved I believe that the next priority should be the reintroduction of a reduced rate band. I have asked the Inland Revenue to examine the administrative problems which a reduced rate would pose for them, so that effect can be given to it as soon as circumstances permit.

Investment Income Surcharge

I am, however, particularly concerned about elderly people who now find themselves liable to the surcharge on their income from savings which are quite modest in modern terms. I propose therefore, for the first time since 1974, to make some increase this year in the thresholds for investment income surcharge. For those over 65 I propose that the threshold for the 10 per cent. rate should be raised by £500 to £2,000 and for the 15 per cent. rate by the same amount to £2,500. For those under 65 I propose that the starting point for the 10 per cent. rate should similarly be raised by £500 to £1,500, while the starting point for the 15 per cent. rate will remain at its present level of £2,000.

Extending The Basic Rate Band

Before turning to higher rates of income tax, I must deal with the problem which arises at the upper end of the basic rate band. If I took no action this year, people earning less than one and a half times average earnings would find themselves moving out of the basic rate band into liability to the higher rates of tax. In two years inflation has already almost doubled the number of people paying tax at the higher rates, from 750,000 in 1974–75 to 1·4 million in the current year; and, if I took no action, the number would rise this year to 1·8 million.

I propose, therefore, to extend the basic rate band by £1,000, making the entry point to higher-rate liability £6,000. As a result, 800,000 people who would otherwise be paying tax at the higher rate will now not do so.

I now come to the rates of income tax above 35 per cent. These apply to successive bands of taxable income which will now start at £6,000. I want to produce a more rational sequence of bands above this level. The first higher rate band—charged at 40 per cent. tax—is only £500 long and I propose to extend it to £1,000. The next three bands will remain £1,000 long but the following band—charged at 60 per cent.—which I had to shorten last year from £2,000 to £1,500, I propose to restore to £2,000. I propose to make the following two bands £2,000 long and the 75 per cent. band £5,000 long, as it is now. Thus the maximum rate will be reached at £21,000—£1,000 higher than this year.

The effect of these changes will be to raise the thresholds for the higher rate bands by between £1,000 and £2,000. This will benefit all higher-rate taxpayers, but those in the area of middle management will gain proportionately more than those at the very top.

I should have liked to have been able to do more for senior managers, as I should have liked to do more for those at the bottom of the earnings scale. But I have felt it necessary this year to concentrate relief where it is most needed. I believe that the improvements I have announced strike a reasonable balance between the needs of the various groups which most require relief immediately.

The total cost of this whole group of measures in the field of personal taxation is £1,290 million in a full year. I propose that all these income tax reliefs should take effect immediately. The benefit will generally be felt in pay packets in May.

Further Possible Reductions

To make this sum up to the £2¼ billion of reductions in income tax which I said we could afford if we can be assured of a continuing fall in our inflation rate, I would propose to reduce the basic rate of income tax from 35 per cent. to 33 per cent. at a cost of £960 million in a full year. Though of course all taxpayers will benefit, this will be of special advantage to people on up to nearly twice average earnings, with the biggest proportionate benefit going to the highlyskilled worker.

I have explained why it would not be prudent to commit myself absolutely to this decision until a satisfactory agreement on a new pay policy has been reached, as I expect to happen well before the Finance Bill leaves the House. To do otherwise would be to take risks with the growing confidence which is being shown in our economy both at home and abroad—risks which could be avoided by deferment for a short period. I shall not, therefore, include this proposal in the resolutions to be tabled or in the Finance Bill to be introduced after the recess. I shall move an amendment proposing a reduction in the basic rate at the appropriate time and in the light of the pay agreement.

Particulars of the effects on different families and individuals of the total income tax reliefs which I have described will be available in the usual way, but it may be helpful if I give one or two examples now. Average earnings for men are now nearly £80 a week, and the earnings of four-fifths of employed men are within £30 either side of that. A married man on £80 a week would be just over £2 a week better off when all my income tax proposals were implemented. A married man on £50 a week would gain nearly £1·50, and a married man on £110 a week over £2·65. So, besides giving substantial help to the lower paid, these reliefs would increase cash differentials and broadly maintain percentage differentials for people in the basic rate band.

Perhaps I should remind the House that all mothers will receive child benefit from next Monday 4th April, and all but the richest families will be better off as a result. The tax reliefs which I have now proposed will more than compensate fathers for the associated loss of child tax allowances.

I believe that the advantage which working people will get from the tax reliefs I have proposed should make it easier to reach agreement on a pay policy which will reduce inflation substantially in the coming year. A tax benefit of rather over £2 a week to the married man earning £80 a week is worth as much as a pay increase of £3·50 from which tax and national insurance contributions take their bite. So my proposals give him as much as a pay rise of almost 41½ per cent.; and this sum would be paid not from the date of his next pay increase towards the end of this year or in the first half of 1978 but with effect from 6th April—next week. Moreover, this sort of increase in take-home pay would not add to wage costs and so to prices. So he would get further benefit from a lower rate of inflation. And this in turn will keep interest rates lower and the value of sterling higher than they would otherwise have been.

Therefore, as I have explained, there would be a triple benefit for prices, worth 2½ per cent. off the retail price index by the end of 1978. That would be equivalent to a further gross pay rise of over 4 per cent.—making nearly 9 per cent. in all. And the resulting addition to demand would help to produce more jobs.

In fact, it is difficult to exaggerate the advantages of a satisfactory pay agreement which makes it possible for me to proceed with the full income tax package of £2¼billion.

No one should underrate the difficulties of reaching such a pay agreement for the third year running. I know that it will demand a high degree of discipline from working people and their trade union representatives. I appreciate, too, the heavy burden of responsibility it places on the TUC and would like to acknowledge again the way in which it has shouldered that responsibility in its own and the nation's interest over the past two years. But the prize is even greater than the burden. We cannot afford at this of all moments, when the rewards of our sacrifices are within our grasp, to throw away what we have gained in those two years.

The TUC has written in its "Economic Review":

"All that can be said at the present stage is that the intention is to be in a single figure inflation position rather than allow the situation to deteriorate as it did two years ago. A 'single figure' pay-prices equation is not only the same in the short term for living standards as a 'double figure' one but is incomparably better designed to protect living standards over a two to three year period because of its impact on the exchange rate and on the possibility of economic growth".

I fully endorse that statement, and I hope that there is not a single Member of this House who would quarrel with it. The TUC should have the support of the whole nation in seeking to achieve the objective it has set itself. All of us will benefit from its success.

These, then, are my proposals. They constitute a significant first step in reducing the burden of direct personal taxation. At this time, I believe that this is the most effective way the Budget can contribute to the attack on inflation and the improvement of our industrial performance, on both of which our economic recovery depends.

The full tax changes I have proposed will shift the balance between direct and indirect taxation. Direct taxation is provided over half of total revenue—about 51½ per cent.—in the current year. It will provide under half—about 48 per cent.—next year.

If I am able to implement my proposals in full, the effect of my Budget will be to increase output by a little over ½ per cent. by this time next year and approaching ¾ per cent. by the end of 1978.

On this basis, I see the economy developing as follows between now and the first half of 1978. On the central forecast, I expect output to grow by about 1½ per cent. and manufacturing output by about 2½ per cent. Manufacturing investment should be recovering rather strongly, with an increase of some 15 to 20 per cent. between now and the first half of next year. The balance of payments should also be improving strongly this year and be in substantial surplus next year.

The rate of inflation should start falling again after about the middle of this year as the effects of last year's depreciation work themselves out of the system and we enjoy the benefits of this year's lower interest rates and more stable exchange markets. The measures which I have announced today will raise prices by about 1 per cent. by the end of this year. Thus, I now expect the year-on-year rate to be about 13 per cent. in the last quarter of 1977–2 per cent. lower than the forecast of 15 per cent. which I published in December. With a satisfactory pay agreement, the prospect is that the rate of inflation will fall to single figures by the second quarter of 1978. In consequence living standards, which have fallen sharply over the past six months, following the depreciation of the pound, should at least stabilise at something close to their present level. We are now through the worst.

As I said last December, no one can predict the path of unemployment with any hope of accuracy in current circumstances. Those who have done so have had ample cause to eat their words in recent months. But it is possible to estimate the effect on employment of all the measures which I have described this afternoon compared with what it would otherwise have been. The specific employment measures I have described will, as I have said, by the end of this year create or maintain between 150,000 and 200,000 jobs or training places. The effect of my proposed tax changes will build up more slowly, but if they are implemented in full they will increase employment by about 100,000 by the end of 1978.

But the House must recognise that the key to a sustained improvement in our unemployment prospects must lie in the success of our manufacturing industry in increasing the volume of our exports and countering the penetration of our domestic market by foreign imports. I believe that this Budget will make a significant contribution to that objective. For that reason I commend it to the House.

I remind the House of the procedures to be followed. Under Paragraph 1 of Standing Order No. 94, the first motion, entitled "Provisional Collection of Taxes", must be decided without debate. When that matter has been disposed of, I shall call the Chancellor to move the motion entitled "Amendment of the Law". It is on that motion that the Budget debate will take place today and on the succeeding days. The remaining motions will not be put until the end of the debate on Monday 4th April and they will then be decided without debate.

Provisional Collection Of Taxes

Motion made, and Question,

That pursuant to section 5 of the Provisional Collection of Taxes Act 1968 provisional statutory effect shall be given to the following Motions—
  • (a) Spirits (motion No. 2).
  • (b) Beer (motion No. 3).
  • (c) Wine (motion No. 4).
  • (d) Made-wine (motion No. 5).
  • (e) Cider (motion No. 6).
  • (f) Tobacco (motion No. 7).
  • (g) Termination of surcharge (motion No. 8).
  • (h) Tobacco products (motion No. 9).
  • (i) Hydrocarbon oil etc. (motion No. 11).
  • (j) Vehicles excise duty (motion No. 15.—[Mr. Healey.]
  • put forthwith, pursuant to Standing Order No. 94 ( Ways and Means Motions), and agreed to.

    Budget Resolutions And Economic Situation

    Amendment Of The Law

    Motion made, and Question proposed,

    That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but
  • (a) this Resolution does not extend to the making of amendments with respect to the surcharge imposed by the National Insurance Surcharge Act 1976 other than amendments for affording relief to charities; and
  • (b) without prejudice to any authorisation by virtue of any Resolution relating to value added tax, this Resolution does not extend to the making of amendments with respect to that tax so as to provide—
  • (i) for zero-rating or exempting any supply;
  • (ii) for refunding any amount of tax;
  • (iii) for reducing the rate at which tax is for the time being chargeable on any supply or importation otherwise than by reducing that rate in relation to all supplies and importations on which tax is for the time being chargeable at that rate; or
  • (iv) for any relief other than relief applicable to goods of whatever description or services of whatever description.—[Mr. Healey.]
  • [Relevant Commission Documents: Nos.R/566/77, R/567/77, R/2361/76 and R/2520/76.]

    4.56 p.m.

    It is the custom for the Leader of the Opposition to congratulate the Chancellor of the Exchequer on the manner in which he presented his Budget. I congratulate him most warmly this time. We have never had such a short Budget Statement—it lasted 1 hour 23 minutes—and that was much appreciated. I notice that the right hon. Gentleman took the usual refreshment. I am not sure whether it was brandy or whisky, but I am sure that he needed it, as we did as we listened to him.

    By custom, the Chancellor of the Exchequer starts by giving the House some background to his Budget. There are three aspects of that background on which I should like to comment, but before I do that I must tell the right hon. Gentleman that what he said struck many of us as though, in this Budget he were really apologising for much of the damage that he had done in his other nine Budgets. We are glad that he is repenting the high level of direct taxation that he has imposed on people and, to some extent, the other levels of taxation that arise from the high level of public expenditure that it has been this Government's choice to impose on the economy and on the people.

    Looking at the Budget as a whole one finds that it is still a take-away Budget rather than a give-away Budget. He has taken his fiscal stand on £1½ billion. That is not quite enough to restore us to last year's level and it is nothing like enough to restore us to the level of the 1973 Budget.

    The Chancellor of the Exchequer said that much would depend on a satisfactory pay policy, but he made no attempt to say what that would constitute. He has given us no hint at all. I thought that the Government were still in charge. Perhaps they are not responsible. They do not like taking responsibility. The Chancellor of the Exchequer has staked everything on a satisfactory pay policy next time, yet he has left himself absolutely free to bring in the reliefs, regardless of what that pay policy is.

    Last year the right hon. Gentleman said that there would be certain tax reliefs if the pay policy was set at 3 per cent., and he brought those reliefs in on the basis of 5 per cent. We have no means of judging what is in his mind.

    There is another gap. It is customary for the Chancellor of the Exchequer to say something about the annual review of social security benefits. He has said nothing about that. Usually there is a reference to the annual review either by the Chancellor today or during the course of the Budget debate. I am not quite sure whether it will be coming or not.

    Perhaps I may turn to three of the background factors. There seems this time to have been a singular unanimity in the forecasts of what will happen in the year ahead in Britain. They have not varied very much on a number of things. First, on the real gross domestic product that we may expect this coming year, what many of us are very worried about is that we are practically near the peak of the very temporary recovery and that we are in danger of going into a minor recession. Therefore, the whole Budget is against the background, once again, of stagnant or very slightly rising output; some forecasters say it is falling very slightly. But it is against a background of more or less stagnant output. That is one of the most serious aspects. Again, all commentators are agreed upon that.

    The next thing that they are agreed upon is that consumer prices will rise by about 15 per cent. That, too, is pretty devastating in terms of the cost of living for those who have absolutely no margin left in their incomes, and it is much too high. I shall say something about that again shortly.

    The third thing that they are agreed upon is that unemployment is likely to rise, particularly towards the end of the year, due no doubt to the stagnant output that is expected and to the increasing productivity that is expected.

    That is the background. I have not for a long time remembered such unanimity among the several forecasters in what they are expecting in the coming year.

    The second background factor is how we adjudge what the Chancellor says about his own forecasts. I heard his broadcast last year. It was extremely interesting. I remember watching it and admiring it for the Chancellor's very polished performance. He started off by saying that we were expecting or hoping for "an economic miracle". I am not quite sure what happened to that, but it did not come about. He said in the House:
    "All that is required to achieve the formidable objectives which I have set is a marginal improvement in our industrial performance at every level. This will suffice to produce the economic miracle we need."—[Official Report, 6th April 1976; Vol. 909, c. 282.]
    The economic miracle never happened.

    Perhaps I may look at some of his other forecasts and analyse what he said would happen. First, he said that
    "World trade has already picked up and for once we are getting our proper share of it."
    World trade had picked up, but our share of it was in fact falling during the first three quarters of last year. Indeed, it fell from 9·2 per cent. to 8·6 per cent. according to Trade and Industry figures. So the Chancellor was not right about that one.

    The Chancellor went on to say
    "British industry is already on the move … and our output will be growing fast."
    First, our historic increase in output ever since 1948 has been on average over 3 per cent. per annum, but last year it was only 2¼ per cent.—the annual rate since the Budget. If one contrasts that with what many of our EEC colleagues were doing, one finds that, unlike us, they had got right back not merely to 1974 production but to their 1973 peak production, and over it. We are nothing like back there, in spite of the temporary increase during last year. Therefore, it could hardly be said that our output was growing fast.

    The Chancellor then went on to say,
    "In the next 12 months unemployment will be on the way down."
    In fact, in March 1976 it was 1,235,000; in March 1977 it was 1,328,000.

    Finally—and I could go on and on—there is just one other factor that I shall take. The Chancellor went on to say
    "Then our inflation will at last be down to the same level as it is in other countries."
    But, of course, it is not. On the figures that the Government have placed before us, ours is 15·1 per cent., at an annual rate, and the average in the OECD is 8·4 per cent., so we are way, way ahead on inflation—"behind" would perhaps be the more appropriate word. We are behind the OECD countries on taking advantage of increased output.

    Somewhere during his speech today the Chancellor referred to the fact that other countries in Europe were having difficulty in getting their economies right. Of course, we all are, but I do not think that anyone except us has got pretty nearly all the indicators wrong together. Certainly Europe has difficulty with unemployment, although I believe that we are now slightly above the European average, but European countries have not got simultaneously difficulty with unemployment and inflation and the volume of increased production. Everything is going wrong with us simultaneously. Therefore, if we are to judge the Chancellor by his forecasts, we must look at them very circumspectly indeed.

    The third background factor is the increase in inflation, which has not come about in any way through wage inflation but, indirectly, through the level of the public sector borrowing requirement and public spending. It seemed to me that the Chancellor ducked this in what he said, but he knows that if he looks at the quarterly figures and not at the annual figures that he has always been very careful to quote, he will find that they dodge about like a yo-yo. This is because his money supply and domestic credit expansion have been so very much related to his borrowing needs that he has had great difficulty with sterling. It went out in the summer, and because of that he has very much higher import prices. That was due to the level of public expenditure and to the level of the deficit, which is still, even on IMF figures, proportionately high as compared with that of other countries. Eltis and Bacon brought this out in an article in The Sunday Times last Sunday, and in The Times previously.

    The CBI attributes to that mismanagement of borrowing, and sterling, and an increase of 6 per cent. in the level of inflation. That is a very great imposition on the British people—that large public sector borrowing requirement and that mismanagement of sterling, which the people now have to endure.

    Perhaps I may say just one more thing about this factor. I know, or I deduce, that it is the Chancellor's policy to keep the £ sterling low to try to make export prices competitive. I believe that he bases this on the old German strategy that when they kept their exchange rate low they built up a big export trade, which has stood them in good stead ever since. But they were in circumstances that were very different from our present circumstances.

    It seems to me that the policy of Switzerland has been very much better, namely, to follow what I would call conservative—with a small "c"—policies, which is to have a more balanced Budget—I know that it is not possible at present—which has led to them having only a 1 per cent. rate of inflation and a high exchange rate. Certainly a high exchange rate makes it difficult to export—although not with the quality of their goods. But it does two other things. It means low import prices and, therefore, low costs feeding into one cost element of their exports; and it means a low demand for increased pay because their inflation is low.

    That seems to me a much better policy than the one that the Chancellor seems to be pursuing on the exchange rate. I hope that there will be no attempt now to hold the exchange rate down artificially, because that will land us in difficulties with the retail price index and inflation.

    I come now to some of the proposals that the Chancellor has put before us. I think that we were all shaken, perhaps, by the extent to which he has loaded extra taxes on the motorist, which will undoubtedly react very heavily on a number of people in the rural areas who have to use their cars.

    Concerning corporation tax, again we were very concerned this morning, as we have been for the past few days, to read that companies appear to be very short of cash. This is not when their stocks are high. This is when they have already liquidated their stocks, and, in fact, when they have had a year of low investment. The fact that they are short of cash is very worrying if one is wanting increased output next year.

    I am particularly pleased that the Chancellor has raised the ceiling on premiums for retirement annuities for the self-employed. As for his income tax reductions, in the case of most of them he does not, in fact, even take us back to where we were last year. That is why it is, net, a take-away Budget and not a give-away Budget.

    I notice that the Chancellor has spread his reliefs. I think that he has spread them wisely, because the people at the lowest end of the taxpaying scale are to have considerable relief. After all, it was the Chancellor who brought them into paying income tax. We pay the highest rate of income tax at the lowest level of income of any country in the EEC. That is the measure of Socialism—the effect on the poorer people of this country. He had to do something about that. I noticed that he said that he would take 845,000 people out of paying income tax. With due respect, since he has been Chancellor of the Exchequer he has brought more than 1·1 million people into paying income tax. He still has a long way to go to undo the damage that he has done.

    The Chancellor was wise to give relief to those in the middle management band. There has been no more demoralised group in society than middle management. People in middle management have often seen their pay squeezed and have suffered heavy taxation on that pay. Many in middle management have had their standard of living drop not by 3 per cent. or 4 per cent.—which is the average—but by 20 per cent. or 25 per cent. They, at least, have managed to get some encouragement from the Chancellor's Statement.

    One wishes that the Chancellor could have been able to do more for the real wealth creators. I accept that middle management does a great deal, but those at the top could have been helped more. On them depends the creation of extra jobs. That is the single most important thing. It is not that we should just add to jobs by artificial means; we should add to the numbers of jobs available by creating real jobs, whether in the manufacturing sector or in the services sector. Both are equally important.

    The Chancellor certainly could not do without the very big bonus that he gets from the invisibles every time we have the balance of payments figure.

    These are some of our initial comments. We are delighted that some of the direct tax is down. We know that the Chancellor is under the constraint of the IMF. There really is no Budget judgment this year, because it is an IMF Budget. In that sense the only judgment that the Chancellor of the Exchequer was able to make was whether he should be slightly tougher or take it at IMF terms. I notice that he has preferred to leave it roughly at the IMF level.

    Finally, this is not a revival Budget for Britain. That is what we were hoping for. Instead, it appears to be a survival Budget for the Labour Government.

    5.12 p.m.

    In the course of my right hon. Friend's Budget speech he indicated that all the representations that he had received in recent weeks had suggested to him that there ought to be a cut in income tax. When he talked about all the representations I do not know whether he was thinking about representations from the Labour Party. I certainly have made representations to him not to cut tax in the way that he has.

    My right hon. Friend has given away the equivalent of £2,250 million in reduced taxation. The effect upon the average wage earner will be as little as £2 a week on a £80 a week income. The effect of that totally massive give-away on the living standards of the average worker will be minuscule. That undermines the whole of the approach both in the Chancellor's speech and in the speech of the Leader of the Opposition.

    The fact is that we have made a disastrous shift from the policy which has been pursued by both Governments over the last 10 to 15 years. The policy has always been to provide for the standard of living out of public expenditure, leaving the ordinary wage earner to provide, out of his wage packet, only for the less essential Darts of his standard of living. The shift has been most marked in the last 12 months by successive attacks upon public expenditure and the reduction that has taken place, for the prospective year, of about £3,500 million worth of public expenditure and the shift back to personal income that has taken place in this Budget.

    It is against that policy that I wish to argue in my immediate reaction to my right hon. Friend's speech. That policy is totally misplaced. The reason why it has become misplaced is that the concentration has been upon the effects of the borrowing requirement and the effect that a high borrowing requirement has had upon the whole economy. It is not necessary to have a high borrowing requirement if we have high public expenditure.

    There is a sense in which we can take the Gladstonian rigid financial attitude towards high public expenditure by indicating that it will be paid for out of taxes, either direct or indirect. We could have a low borrowing requirement, if it were thought desirable, by ensuring that public expenditure was paid for out of income tax. That approach would have no more inflationary effect than the approach now being espoused both by the Opposition and by the Government.

    It would not mean that we were creating a demand for the printing of money or borrowing in gilts; it would simply mean that there was a shift between what a man received in his standard of living out of the tax he paid, through the State and what he provided himself out of his wage packet. That balance must always be judged according to what a man gets. Too much of the judgment involved in the suggestion that we are paying too high personal taxation comes from people who are looking back to time when the standard of living was almost entirely provided out of the private wage packet.

    The position just after the war, before the Welfare State was inaugurated, was that only the basic structure of government was provided through the State, with defence as the major item and education as perhaps the most important item after that. We now provide the whole of the education budget, certainly for the average worker, and most of the social security budget, including pensions. Any average worker would now be foolish to take out superannuation for himself when the present State superannuation, especially for someone under 45, will provide him with a better deal than he could get out of any insurance company.

    We now provide a considerable share of housing expenditure and, although on a declining basis, some of the average worker's food. The essential part of his standard of living, which comes out of his pay packet, is the basic part of his food bill, some part of his housing bill, and his furniture and clothing bills. The rest, which he pays for himself, is either luxury or quasi-luxury. It is not part of the essential items in his standard of living.

    In order to get money to provide a man with an extra £2 a week—which will rightly be seen as minuscule by comparison with his expenditure—we have to garner about £2,000 million from public expenditure. It is monstrous, when that money could have provided better education for his children, better social services for him and his family, and a better Health Service. I forgot to mention that the whole of the National Health Service comes out of public expenditure. It is that kind of false judgment that has plagued our thinking too much in the last 12 months, and it is now crowned by this Budget.

    That is my immediate reaction to the tone and the overall effect of the Budget. But I have some misgivings, too, about the level at which the Chancellor has decided to aim at the motorist. It is true that there is a need to try to shift the balance of traffic from private transport to public transport—to the railways and the buses. I welcome that. But whether it is the right moment, when we are concerned about the effect upon the retail price index, to put such a heavy burden upon petrol, with the effect that it will have on industry and on the cost of living as a whole, seems questionable at the very least.

    I return to my major point, that the style of the Government has become quite misplaced in relation to the proportion of the standard of living that comes out of public expenditure and that which ought to come out of private expenditure. It is also misplaced in terms of the barrage of criticism that comes from the Opposition, who take a different dogmatic view about the reality of the earning man's standard of living.

    I am absolutely convinced that even if the Budget proves popular in the short term the overall cuts in public expenditure that will take place in the coming years will have a disastrous effect upon the average worker's standard of living. Ultimately, we, as a Labour Party, sworn to uphold that proportion of the average man's standard of living that comes out of public expenditure, will be the sufferers.

    5.20 p.m.

    I welcome the opportunity, so soon after the Chancellor's Statement, to enter the debate. I follow what the hon. Member for York (Mr. Lyon) has said about the effect on transport costs, which I regard as one of the most serious aspects of the Chanlor's Statement. While I welcome the general shift from direct to indirect taxation I must say that the way it has been done—and the little that has been done—means that the Chancellor is simply restoring what he took away in previous Budget judgments and replacing what has been eroded as a result of inflation following the failure of the Government's economic policies. While I welcome the shift in taxation, we must see it against that perspective.

    One of the main things that concerns me in relation to this shift of direction is the area in which indirect taxation has fallen. For example, if the decision had been to make a marginal increase in VAT, that would have been relatively fairly shared among all those who have to spend. I am concerned about the way the increase in indirect taxation has been largely centred on road fuel duty and the increase in car licences.

    Although the Chancellor may be right in saying that he wishes to see a shift from road transport—and I know the effect that heavy lorries have in my own constituency—what he must realise is that when he increases the cost of road transport and of travel for the private motorist he hits hardest those who live in the remoter areas of the country, far from centres of population. Further, it is not just the cost of living of the individual that is affected. It is the costs to industry, too. The Chancellor's actions will hurt those who live in these remote areas and for whom essentials have to be brought in by road. Transport costs cut far more into the cost of living for people in those areas than for people living elsewhere. The same is true of industry. We all want to see more industry and the employment base extended in these remoter areas. However, much of the raw materials has to be brought in by road and the finished product must leave in the same way.

    It is all very well for the Chancellor to say that he would like to see a shift away from road transport. For the people and the industries I have in mind there is often no alternative form of transport. Areas in the North-East of Scotland, as well as being dependent upon road transport to bring in goods and food, also depend upon the transport industry for employment. The employment area of the city of Aberdeen contains a higher proportion of people employed in the road transport industry than any other area in the United Kingdom.

    I ask the Chancellor to remember that the car is essential for the person living in the remote areas. Bus services are practically non-existent in some areas, while they are rapidly deteriorating in others. I was in Angus in my constituency at the weekend. There, people who require out-patient treatment at hospital must leave by bus at 9 o'clock in the morning to undertake a 40-mile journey if they are to be sure of keeping an appointment three or four hours later. Because of this, such people are desperately dependent upon the car.

    Many of these people, particularly the older people, do not use their cars very often. They use the car on a limited scale socially, and perhaps once a week to go to the village or the town for shopping. They do not do a great mileage. This is when the cost of the licence will bear particularly heavily on them. I condemn this aspect of the Budget.

    Although I welcome the shift from direct to indirect taxation I feel it could have been done in a fairer and less discriminatory way. The way chosen by the Chancellor adds to the cost of living and to the costs of industry in the areas I represent.

    I come now to employment. We all wish to encourage employment and investment and to broaden the base of industry. I say this with a special feeling for my own part of Scotland. At one end of my constituency there is the Aberdeen area which has a low level of unemployment because of the industry inspired by North Sea oil development and so on. At the south end of my area in Tayside, there is a different situation. Unemployment is running at a relatively high level.

    I took a deputation to meet the Minister of State responsible for industry at the Scottish Office last Friday. Fortunately, a threatened factory closure has been partly averted, but there will still be a great reduction in employment in the town of Brechin. The unemployment rate in this relatively small town will jump from about 7 per cent. to nearly 12 per cent. when this closure takes place. If the rate jumps to that level it will be very hard for the community. However, it will be rising only to the level that some other towns in the Tayside Region are suffering. I support anything that can be done to encourage employment and investment in such areas.

    Although Tayside has not benefited from oil development to the same extent as other areas we must recognise the benefits that have been gained from North Seal oil. We are now towards the end of the exploratory stage, which will be seen to have created the greatest stimulant in the North-East of Scotland. We are moving into the production phase, in which there will not be so many jobs. As we enter this phase we must recognise that there will not be the same boost to employment from North Sea oil. We must broaden the base of employment, even in the Aberdeen area, and begin preparing for the day when we cannot have the same reliance on North Sea oil and the encouragement that the boost has given to the economy of that part of Scotland.

    Notwithstanding the areas of oil development, there are small pockets of unemployment where new investment is needed. I appreciate the benefit of oil, as it has brought 50,000 or 60,000 jobs to Scotland. Equally I appreciate the benefits of the regional development policy as we have seen it developed over the years under successive Governments. A recent study by Dundee University has shown that, as a result of regional development policy, we invested about £220 million in Scotland from 1960 to 1970, leading to about 50,000 new jobs in private industry. That is something we must all welcome. The increase in new jobs as a result of the regional development policy is very nearly equivalent to the benefit that we have had from North Sea oil.

    If the Scottish economy and Scottish industry had expanded at the same rate as that of the rest of the United Kingdom we would have required about another 90,000 jobs to keep pace. I am in no sense denigrating the benefits brought to us by the regional development policy. The benefits have been immense, but there has still been a shortfall in Scotland. That is the basis of much of the economic malaise in Scotland, compared with the rest of the United Kingdom. If we had not had the benefits of North Sea oil the shortfall in jobs in Scotland compared with the rest of the United Kingdom would have been even worse.

    I support the regional development policy, but with the removal of the regional employment premium we must look for a new strategy to encourage the creation of new jobs and industries in areas such as Scotland. The Chancellor rightly mentioned a number of the short-term schemes that he is continuing and new schemes that he is proposing, that are designed to alleviate unemployment. I welcome them, as I am sure that they will be of help. However, although they are good in the short term we must recognise that, when they come to an end, we are left with basic weaknesses in our economy that must be put right. I hope that we shall use the breathing space provided by the temporary schemes to work out a better long-term strategy for regional aids to industry.

    Various Committees of the House have drawn attention to present weaknesses in the economy and the schemes that we have introduced. I question whether we are getting the best advantage from investment of public money in terms of employment. In my area of the North-East of Scotland there are schemes being financed from public funds, and they would have gone ahead in any event because of North Sea oil and natural economic reasons; they would have gone ahead regardless of extra aid from public funds. I say that although I represent an area where the investment of public funds has taken place. I do not believe that investment to be sensible, even though my area has benefited. It is not the best use of public funds to continue to put them into investments that would have taken place in any event. The money might have been better spent in other directions.

    We must take a fresh look at the amount of money that we put into industries that are highly capital intensive. The oil industry is an example. It is sometimes to be questioned whether the return in the number of jobs created has been commensurate with the amount invested from public funds. The money might have been spent in better ways and a Committee of the House has drawn attention to that argument.

    Although a great deal has been done to bring new industry into Scotland, industry which has helped to broaden the Scottish economy—there have been American money and industry as well as money and industry from Common Market countries—it seems that when we come on had times the firms from outside the United Kingdom are often the first to end their operations. For example, we all welcomed the investment that was made by the National Cash Register Company in Dundee a number of years ago. The transformation from dependence on the old jute-based industry was remarkable, but in the longer term it is something that must be questioned. It was a good kickoff, but, on its own, was it in the best long-term interests of Dundee? When the company hit difficult times the whole of the town was faced with difficulties once again.

    Another weakness we have seen in our policy to encourage regional development is that we have paid insufficient attention to encouraging local, indigenous industry based on Scottish enterprise. It is important that we encourage such industry to set up firms that have roots within Scotland and that will continue regardless of the economic climate. Such firms will be prepared to weather the storms so long as they do not continue too long. Indigenous Scottish industries might well provide a stronger economy for Scotland.

    As I have said, the temporary schemes have given us time to think out a new strategy for industrial policy within Scotland. We should put more emphasis on selective assistance instead of a blanket system for which people qualify regardless of whether there is justification in terms of development in a particular area, development which might have taken place anyway, or development which will be far too expensive in terms of the investment of public funds in relation to the number of jobs provided. We should put increasing emphasis on selective assistance, using Government agencies, such as the Scottish Development Agency, to provide help for the areas that need it most. That assistance should be directed to areas that will offer the best return on public funds and the best long-term structural economy and employment prospects.

    I have discussed greater selectivity with the Minister of State. I am glad to see the hon. Gentleman on the Government Front Bench. I thank him for his courtesy in meeting the deputation that took to him last Friday. I thank him for the considerate way in which he listened to the matters that were put to him, and for his response. I believe that he takes the same view as myself in these matters. I hope that, through the SDA, and the selective assistance for which I am arguing this afternoon, we shall give more encouragement to local enterprise within communities in Scotland. I believe that that, more than anything else, will help to secure a much stronger long-term economy in Scotland.

    I deprecate certain parts of the Budget, especially those that affect the rural areas. I hope that the result of a rethink and a new industrial policy will be that some of my ideas may be carried through in Scotland.

    5.40 p.m.

    In general, I support the Budget proposals. I disagree with my hon. Friend the Member for York (Mr. Lyon) about income tax. In the last six months or so, more of my correspondence has been about reducing income tax than about anything else—both from those with low incomes and from skilled workers who feel that they are not getting an adequate return for their skills. I therefore strongly support that main part of the Budget and I hope that it will assist the Government in reaching a further agreement on incomes with the unions.

    My constituency is in outer London, and includes the main factory of the Ford Motor Company. I hope that we shall not have a policy that in the long run will damage the motor car industry, both on the home market and in exports. We should therefore think carefully about any increase in taxation on that industry. However, I support the higher taxation of the large lorry and look forward to the time when it pays its full complement for road maintenance and repair of the damage to amenities that it causes.

    I would make a plea on behalf of those who spend a large amount of their income and their time travelling to and from work—whether by car or by public transport. This applies, for instance, to those travelling from outer London to the centre. Travelling expenses, especially on public transport, should be allowed against tax.

    Many of the sons and daughters of those who work in Fords and neighbouring factories travel into central London to work. Travel costs are a serious impediment to their taking up the careers that they wish to follow.

    This problem arises in every large conurbation and for those who travel from villages to work in cities. In Oxfordshire, for example, an enormous proportion of the village population work in Cowley and Oxford. Many villages are kept going by inhabitants who work some way away from home. We want them to continue as living communities. These costs should be considered in taxation policy. This disability will increase and inhibit future population movement.

    The argument against my proposal is that a tax rebate will lead to more people moving still further from city centres. But the inconvenience of long travel to work is very serious and people are not anxious to suffer it. For instance, Leatherhead is 10 miles nearer London than is Dorking and the same kind of house is £1,000 dearer in Leatherhead than in Dorking, because of the shorter time spent travelling from Leatherhead into London. Since this disability will always exist, it will always counter the argument that many people are likely to move further out. This should be considered seriously in the long term as well as the short term.

    I am a heretic, in that I believe strongly in concentrating on improving our manufacturing industry. More capital, whether Government or private, must go into developing our resources and thus our industrial base. But that will not, in my view, greatly affect unemployment in the long run. The more capital-intensive an industry becomes, the fewer people it will employ. We shall need new skills—I support the Government's training schemes—but as trade revives the expansion in employment will be in the service industries.

    Over the last 15 years there has been a 5 per cent. drop in employment in manufacturing industry. That proportion may stabilise for a while and new industries may be developed, but I do not see a large increase in employment resulting from improving manufacturing industry, necessary as it is.

    We must consider how to deal with the problem by longer holidays and earlier retirement when we are more prosperous. Retirement cannot be made compulsory, but in the long term we are mistaken if we believe that improving our industrial base will enormously increase employment. However, there will be more employment in the service industries. I hope that all parties will think about this long-term problem.

    5.48 p.m.

    I join my right hon. Friend the Leader of the Opposition in commending the Chancellor on his brevity. I am sure that this was the shortest Budget speech since my arrival here in 1970. I hope that it sets a precedent. Chancellors who compile their speeches have always seemed to feel that they should be filled out and that we should all be kept sitting here bored for hours. It may seem churlish to say so, but the right hon. Gentleman could have dropped most of the first half hour of his speech, without great loss and to the great benefit of the House. However, it was a great improvement and I hope that we shall not revert to long Budget speeches.

    I share the reservations of my hon. Friend the Member for North Angus and Mearns (Mr. Buchanan-Smith) about the Chancellor's proposals for the motorist. The increases in both road fuel duty and vehicle excise duty will eventually affect the retail price index. They will also place further burdens on people who live in rural constituencies like mine, where the car is not a luxury but an absolute necessity. I regret this additional burden and it seems from what has been said so far that others share that view.

    My second detailed point concerns VAT. I was sorry that the Chancellor decided to take no action about VAT, because it strikes me that he missed a great opportunity to revert to a single rate. It was a great mistake to move away from this in his first Budget in 1974. Inevitably, two rates create much more work for small retailers, small business men and, indeed, larger business men. I believe that there would be substantial savings in administrative costs if the Chancellor decided to go back to one rate once again.

    My third point concerns the direct tax changes. One must obviously welcome these changes. As the Chancellor rightly pointed out, they will encourage initiative and hard work. Even more important, they will help remove the very strong feelings of injustice and grievance among people at all income levels. I cannot recollect a time when people have felt more bitter about the level of direct taxation. Although the Chancellor's steps are modest by any standard they are nevertheless, steps in the right direction.

    As my right hon. Friend the Leader of the Opposition rightly pointed out, the changes which the Chancellor has made go only a short way towards remedying the adverse effects that inflation has had over the past year, far less over the past three years. Nevertheless, one must welcome the changes as at least being a step in the right direction.

    I also welcome the conditional tax changes. This was a continuation of the idea in last year's Budget. I welcomed the concept then. It seems to be that the level of incomes and settlements is inevitably bound up with the kind of concessions that the Chancellor can make. In introducing any Budget it is only fair that the Chancellor should allow himself some leeway to adjust tax rates on the basis of the eventually determined income settlements for the year ahead.

    I now turn to certain more general matters. The Chancellor has now completed three years in office. I do not think that even his best friend would claim that his tenure has been anything other than disastrous. The past three years have been punctuated by a series of crises of confidence of great gravity demanding enormous borrowings abroad which, eventually, we shall have to repay. Moreover, during this period the balance of payments has been in substantial deficit. Inflation has been higher for longer than ever before and at one time achieved a rate of 25 per cent.

    Unemployment has reached an unprecedented high level in the post-war era, reminiscent of the level during the 1930s. Moreover, as we heard yesterday, living standards during the past three years have fallen. That is during the period when the right hon. Member for Leeds, East (Mr. Healey) has been Chancellor. All in all, the last three years have been bad years economically for Britain.

    It would, of course, be quite unfair to pretend that all this is entirely due to the Chancellor or his policies. It is certainly the case that he inherited problems in March 1974. Not all the consequences of the commodity price explosion in the previous two years had worked their way through the economy when the Chancellor took office. The effects of the quadrupling of oil prices in the previous few months still had to work their way through as well. No one would hold the right hon. Gentleman or his party responsible for those matters. But the right hon. Gentleman also inherited the consequences of the utterly irresponsible attitude of his party and himself to every wage and salary claim during the 1970–74 period and, above all, to the final miners' dispute.

    It was that attitude which probably made inevitable the wage and salary explosion of 1974–75, to which the severity of our present situation can be directly attributed—particularly in relation to the balance of payments, inflation and unemployment. No one but the Chancellor and his friends can be held responsible for that.

    It is important that the seriousness of the present level of unemployment should not be underestimated. I have no doubt that it is the most serious social problem in Britain today and that it has serious long-term social consequences. It is not just that unemployment is far too high today. Even more, it is that it has risen far too steeply during the last three years. The sharp rise in unemployment undoubtedly causes deep concern not only to those directly affected by it but to those at work who are worried that they might be next to lose their jobs.

    According to the figures provided to me yesterday by the Department of Employment, unemployment in the Leek parliamentary constituency has more than doubled since February 1974—that is, since this Government came into office. In the town of Leek itself unemployment has more than trebled during the same period. The sharp rise has undoubtedly caused deep concern to my constituents. Many of those at present in employment are worried that they may be next to lose their jobs. That is in an area where, thank God, unemployment is still less than the national average. How much worse is it in other areas of the country where unemployment is higher than the national average?

    We in this House must never forget that unemployment is a severe affront to human dignity. The feeling of not being wanted is an insult to the great majority of those who are without work today and whose only wish is the opportunity to earn their living and look after their families. Whether one likes it or not there is, unfortunately, still a stigma attached to being unemployed. This should not be the case, because the level of employment and unemployment is dependent on the demand for labour. It has very little to do with the qualities of those affected.

    Unemployment hits the good worker just as it hits the bad worker. It hits the hard worker and the lazy worker alike. It hits the skilled worker and the unskilled worker alike; unemployment does not discriminate. The great majority of unemployed lose their jobs through no fault of their own.

    The effects of unemployment on our society are very serious. It undoubtedly embitters those affected against society. It undermines their belief in our democratic system. It sours their attitude to their fellow men. It adversely affects the quality of their whole life, and not just during the period when they are out of work.

    More than anything else I believe that it has encouraged work-spreading restrictive practices, which so plague our industry and result in so much of the overmanning that we now have in British industry. If people see their jobs being threatened, it is only natural that they should spread their work. If they see a lot of unemployment about, even if the threat to their job has disappeared, they are unlikely to drop these restrictive practices which they adopted in more difficult times. If we are treally serious about getting rid of overmanning in this country we must get rid of the main cause of it which is high unemployment.

    The oil crisis in late 1973 and early 1974 made a temporary rise in unemployment inevitable. But had the present Government pursued sensible policies during their first year in office—had they pursued policies of restraint in public spending and wage and salary increases—I believe that that rise in unemployment would have been temporary and that things would by now have been back to normal. The fact that things are not back to normal, that unemployment is more than twice what it was in February 1974, is one of the measures of the Chancellor's failure in the past three years.

    I turn to the question of inflation and incomes policy. I mentioned earlier that the seeds of the present Government's disastrous economic record were sown during their first year in office, and in particular during the period when the wages and salaries explosion took place in 1974 and 1975. During the period up to the summer of 1975, increases in wages and salaries of 30 per cent. and 40 per cent. were commonplace. Inevitably, these produced hyper-inflation, with a record rate of 25 per cent.

    Then the Government introduced their incomes policy—a policy that they should never have abandoned in the first place. First we had the £6 limit and then, more recently, the 4·per cent. limit. There can be no doubt that both those policies have worked. Of course, they have not stopped inflation, but if one generates a 25 per cent. rate of inflation one cannot eliminate it in two years. It has already fallen considerably and it should fall further in the future.

    In my view, phases 1 and 2 of this Government's incomes policy have played an important part in the improvement that has already taken place. I believe that wage and salary increases are less than they would have been had this policy not been introduced. If that is not the case, why has almost everyone received the full amount? If, as some people claim, the market should have been allowed to deal with the situation, surely, with the present high level of unemployment, most if not all the wage settlements should have been for less than the full amount.

    The fact is that, as we have found again and again, the market cannot deal with the situation adequately. It does not do so, because the monopoly powers of trade unions and professional bodies and other imperfections in the labour market mean that the labour market works very crudely and that income-cost inflation will be contained only at an excessively high level of unemployment. The fact is that however much some people may dislike it, we need a third phase of the incomes policy to moderate income increases after the present limits end.

    We have been hearing a great deal recently about a return to free collective bargaining. I should not mind if it were free collective bargaining. It may well be collective, but there is nothing free about it, and it is certainly not real bargaining, because of the imperfections of the labour market and the monopolies in it. In fact, the term "free collective bargaining" is a euphemism for the exploitation of the public by trade unions and professional bodies through the monopoly power they have in the labour market.

    Free collective bargaining is freedom for the strong to exploit the weak. It is the very process that enabled the crippling income-cost inflation of recent years. We are always hearing about the defects and weaknesses of incomes policy. It is time to remind ourselves that in recent years the defects of so-called free collective bargaining have been far greater than those of an incomes policy.

    Of course, phases 1 and 2 have not been perfect. They have had weaknesses. They have undoubtedly been somewhat rigid and inflexible. Therefore, it is essential that the next phase should be less rigid and more flexible than the previous two phases. It must allow for some restoration of differentials, but it cannot allow a total restoration, because the damage done in terms of extra wage-and-salary cost inflation would far exceed any benefits that might accrue.

    In framing phase 3 of their policy, the Government might well closely examine phase 3 of the last Conservative Government's income policy, because there has never been a more flexible phase of any incomes policy introduced by any Government in this country. If inflation is to be reduced, first to single figures and then to less than 5 per cent., the next phase of incomes policy must be less generous than the two previous phases. But, whatever the next phase may be, I hope that those of us on the Conservative Benches will adopt the same responsible attitude to it as we did to the two earlier phases. Our attitude compared very favourably with that of the Labour Opposition to the Conservative Government's incomes policy between 1970 and 1974.

    It may well be that the present Government do not deserve the Opposition's support for phase 3 of their incomes policy. But the country deserves it, the country expects it, and the Government will, I am sure, get the support of the Opposition for it.

    6.6 p.m.

    It is not easy, a few minutes after a one-and-a-half-hour Budget speech, to make any useful comments. I shall certainly not range across the whole economic panorama. I wish merely to make one point briefly.

    I should have liked to comment on the speeches of the hon. Members for York (Mr. Lyon) and Dagenham (Mr. Parker), but both have left the Chamber. I thought that the remark of the hon. Member for Dagenham, who said "I am a heretic; I support manufacturing industry", was worthy of inclusion in "Sayings of the Week". If the hon. Gentleman is a heretic, does that imply that he is the only one on the Labour Benches who supports manufacturing industry? If so, I feel even more frightened than I was before I heard him.

    The hon. Member for York made a predictable speech, saying that he wanted more money spent in the public sector. I do not agree with him, but I do not think it worth following the matter up, because the disagreement is so fundamental. I still like Gladstone's remark that money fructifies best in the pockets of the people. I wish that all Governments would remember that phrase, because it is worth remembering.

    I want to comment upon a matter that most closely affects my constituency. I am becoming desperately concerned about those whom I shall call the "responsibles"—mostly men of 60, 70 and even 80, who retired 10 or 20 years ago, having served their country faithfully for 40 years. They include retired civil servants, retired officers, and people retired from business. Such people are to be found all over my constituency, as they are to be found in most of South-West England. Being responsible people, they made their calculations and settled in a two-room or three-room bungalow. They had a small car. They thought that they would live upon their pensions and savings. Most of them had some savings, although those savings were not substantial.

    Those to whom I am referring represent an enormous body of people throughout the country, but perhaps particularly in Dorset. Inflation has struck them like a bomb. I shall not say that their savings are valueless, but the income derived from them after dividends have been restricted is now trifling. When these people took their houses 10 or 20 years ago, rates might have been £30 a year. They are now probably £150.

    Because of their age, these people can barely leave their houses. They thought that their greatest and most lasting asset was their little motor car, with which they could visit their children and grandchildren and see their lives out in that sort of style. Now the motor car is also being put beyond their reach.

    I am glad that every hon. Member who has spoken so far has dwelt on the question of the motor car. The hon. Member for Dagenham was of course concerned because of the Budget's effect on the industry manufacturing motor cars. It is perhaps the more surprising that this anti-motor trend seems to exist in Government circles when North Sea oil is just beginning to come in and the dollar content of the cost of petrol is likely to be less than ever before. This is the moment when the Government choose to make motoring more difficult still.

    I wish that I could bring home to Members of the Government the effect that this has in rural areas. I try to sound impartial when I say that I dread the trend that has been emerging over recent years—that economic policy always seems to benefit those who live in the cities. I hesitate to say that this is because they vote Labour, because that is not fair, but the point is that economic policy is generally unfair to those who live in the countryside. We do not wish to make that political distinction, but recent economic and financial measures are making the distinction apparent.

    To illustrate the hardship that is being felt in the countryside I quote the example of the lovely town of Swanage, in my constituency, where two things have happened. Swanage is a little town at the end of a single road. In summer time that road is often impassable because of the number of tourists. The two things that have happened are that the maternity nursing home is to be closed and the town's ambulance is to be withdrawn. There have been protests, but if the ambulance stays it will have only one driver. Hon. Members should remember that this is a town of 8,000 to 10,000 people, yet it is being practically cut off from essential services. What about expectant mothers? There will be no services for them in the future. Here we have a community that is utterly dependent on the motor car.

    If one wanders around South Dorset, Devon or Cornwall one can find countless other examples. There are numerous villages which have had their bus services withdrawn. The very last thing that I would want the Chancellor to do is to make transport more difficult in these areas. I am thinking not in economic terms but in human terms, because we are getting near the point at which the hardship could be described as cruelty. This hardship falls on people who have served their country well, and they are now suffering greatly. The Chancellor should use his influence to see that things change, and I hope that the Treasury Bench will take note of what I have said.

    6.13 p.m.

    The hon. Member for Dorset, South (Mr. King), spoke of his constituency, which seems to be heavily populated by retired civil servants and officers—those he calls "the responsibles". I claim to represent equally responsible people, but they are essentially producers. They make the basic steel for our community and many manufactured products as well. In fairness, I should say that I do not entirely disagree with the hon. Member's remarks, as I shall make clear in a moment.

    I endorse what the Leader of the Opposition said in her earlier remarks and what other hon. Members have said in congratulating the Chancellor on a very short Budget. Over the years we have grown accustomed to hearing much longer Budgets, with extended economic analyses. At least this one was relatively short.

    One's comments on the Budget at this stage can express only one's immediate reactions and not one's considered judgment. I welcome the proposals that the Chancellor made in a further attempt to combat unemployment, which, of course, along with inflation is one of the twin pillars of evil at present. Certainly the assistance that he announced to the construction industry is most welcome. A week ago I received a deputation from building trades employers in my constituency and I am sure that they will welcome the Chancellor's proposals. One of the beneficial aspects of helping the construction industry is that it relies on very few imported materials and therefore is essentially a home producer industry.

    One of our famous writers once said:
    "Hope springs eternal in the human breast."
    I confess to being a little disappointed by the Budget this afternoon. Certainly my hopes for it have not been entirely realised. Perhaps I was over-optimistic, but from the Labour Party point of view I do not think that there is very much to cheer about.

    I am not at all happy about the proposals on transport. I have already said that inflation is one of the twin pillars of evil at present, and of course these additional charges on essential transport will certainly not help the inflationary situation.

    The Chancellor has imposed additional taxes on heavy vehicles. I appreciate the difficulties that these vehicles cause to the environment, and I know that we get many protests about them from our constituents. Nevertheless, these vehicles carry essential goods and the additional costs will inevitably be passed on to the consumer.

    Then there is the question of individual motorists. Today, many work people use their cars to follow their employment, so the £10 additional tax on motor cars will be much resented. The extra 5½p on a single gallon of petrol will be even more resented. My own feeling is that there will be a pretty bitter reaction to these two proposals.

    Speaking as a non-smoker, I would have thought that for health reasons alone tobacco could have been much more heavily taxed. This would have eased the tax on transport, which the Chancellor seems intent on levying.

    On the Question of the future of the incomes policy, one of the Chancellor's main inducements to comply with this is a reduction in the basic rate of income tax from 35 per cent. to 33 per cent. In their economic strategy the Government attach great importance to the third stage of the incomes policy. However, I do not think that they have given anything like sufficient assistance to trade union leaders, who have the most difficult task of persuading their members that there are benefits in a further stage of restraint.

    Undoubtedly there will be a major call for a return to free collective bargaining. There has been a disastrous toolroom strike at Leyland which has had catastrophic effects on our export performance, but in view of the inadequate proposals in the Budget I believe that in the weeks and months ahead the Government will face a great deal of trouble on the wages front.

    We all know that on the narrow political front there is a by-election on Thursday. According to an opinion poll published today, the Conservatives now have a very slender lead. The Chancellor's proposals this afternoon might possibly have provided an inducement to win over, or indeed to win back, voters in what in the past has been a Labour constituency. We must appreciate that the constituency contains a large number of motor car workers. I do not believe that my right hon. Friend's proposals will be well received in the Midlands.

    I sum up my few remarks by saying that I am a little disappointed in the Budget proposals, and I can only conclude that the Government's agreement with the Liberal Party will continue for a long time yet.

    6.22 p.m.

    I congratulate the Chancellor of the Exchequer on the fluency with which he produced his Budget speech. I also wish to commend him on the brevity of his remarks, which was appreciated in all parts of the House. I also wish to echo what was said by the hon. Member for Newport (Mr. Hughes), that certainly the Chancellor cannot be said to have tried to bribe the electors of Stechford in the forthcoming by-election.

    I find the Budget on the whole disappointing. The income tax changes, which were so heralded at first glance, only take inflation into account and do not represent any real reductions in tax paid. There is too little incentive to work hard, as people can and do on the Continent. No doubt this is why so many of our best and brightest young people are going abroad. This represents a serious loss to the country and will become more serious as time elapses unless steps are taken to deal with the situation.

    Unfortunately, the Chancellor of the Exchequer still bears down heavily on small businesses and on the self-employed. I represent a constituency that is almost wholly composed of producers—those in the wealth-creating sector of society from whose wealth everything else ultimately stems. That sector of the community believes—and I share that belief—that there have still not been enough cuts in public expenditure to allow for sufficient cuts in taxation. As a nation we still depend too heavily on foreign borrowing.

    I wish to support the remarks of my hon. Friend the Member for Dorset, South (Mr. King), who mentioned the number of responsible retired people who have given of their best in lives dedicated to the service of the nation, who have saved money and who expected to live in modest comfort on the dividends and interest flowing from that money. In the whole of the Budget speech, there was no mention of any lifting of dividend restraint which bears so hard on those people. Even the changes in investment surcharge were not enough to take account of inflation.

    I wish to deal mainly with the effect of the Budget on manufacturing industry, which is the great interest of the vast majority of my constituents in the West Midlands. Manufacturing industry is still clobbered by heavy taxation, and every kind of hindrance is put in the way of employers who wish to take on more people. I hope that the Chancellor will ensure that the Secretary of State for Prices and Consumer Protection does not ruin the profitability of industry by imposing too harsh a policy on controls and prices, and I hope that those controls will not last for too long.

    The prime shortcoming of this country lies in our failure to produce. Because of that important factor, unemployment is unlikely to fall. I very much agree with the hon. Member for Dagenham (Mr. Parker) that in present-day industry we require not so much unskilled workers in the mass but scientists, technologists, engineers and skilled craftsmen. With the continuing improvement of automation and machine tools and every kind of production facility, machines will more and more replace men. Therefore, we must look to those engaged in export finance and other services to employ more people than they have done up to the present time.

    A great deal is heard about the failure of industry to invest, but the first task of industry is to produce from the existing rate of investment. We all know that there is serious under-capacity. We require production and productivity before investment, which will come only at a later stage. There is not enough incentive to invest, because there is not sufficient reward either in terms of investment or on the part of the individual in terms of risk and effort.

    So far, every contributor to this debate has mentioned the effect of the Budget on the motor car industry. I cannot see how the new taxes on the motorist will help British Leyland or, indeed, the British motor industry as a whole. If we are not careful, it will soon be regarded as a sin and anti-social to own and drive a motor car. We know from hon. Members who represent rural constituencies that the use of a motor car is essential following railway closures and the scarcity of buses.

    The Chancellor spoke at some length about job creation, but I regard that instrument largely as artificial and bogus. What the country wants is real jobs in real firms—firms that have confidence that they can make what customers want. Those firms also want a fair return in profit terms, and they want to be satisfied that those profits will not be unduly taxed.

    As the Budget debate unfolds, we shall hear a great deal about the importance of preserving or enhancing differentials. How can we expect men to become foremen, foremen to become managers, or managers to take on the responsibility and strain of directorships of enterprises if there is virtually no additional gross pay and certainly hardly any additional net pay? That is one of the great differences between this country and the Continent and is why so many of our executives are now looking across the Channel for higher gross salaries and higher net rewards. I do not believe that anyone—from the workers at the bench to the directors in the boardroom—really wants an egalitarian society.

    High taxation, apart from being evil and inflationary, has many other disadvantages. It is one of the causes of the dishonesty of which we have heard today. It is because of the high level of taxes, and their often evident unfairness, that people feel that this is really too much. What was an honest nation could easily become a dishonest one unless taxes are substantially and regularly reduced.

    People are becoming more fed up with the tax changes proposed by the Chancellor coming into force by courtesy of the trades unions, and that is once again a feature of the Budget. As a result, the tax paid by the people in this country—most of whom are not in unions—depends on the view that the trade unions take of the Government.

    Would not the hon. Member also consider the fact that the CBI and eminent economists concerned with commerce and industry have asked trade unions to do precisely what the Government are asking them to do? Has not the British trade union movement responded admirably over the past few years to requests that have been made by the Government, the CBI and British commerce? Surely that is a good thing.

    I shall first finish what I was saying, as I gave way immediately to the hon. Gentleman, and I shall then return to his point. The majority of the people have to depend for their tax changes on the views of a minority of trade unionists and not on the view of Parliament, which represents everybody. That is wholly dangerous and wrong.

    I had not proposed, in the short time remaining, to talk about incomes policy, but shall make just a few comments and I am sure that they will represent the views of a great many people not only in my constituency but throughout the country. I am wholly opposed to an incomes policy. Such affairs should be settled by firms themselves dealing directly with their own trade unions and elected representatives, either nationally or, better still, at plant level. The longer that these so-called incomes policies continue, the greater the distortion and unfairness that will be created. The trouble with the tool room workers at British Leyland was entirely due to that. Sooner or later such a straitjacket must give way. The country's economy may be worse at the end than at the beginning of such a policy.

    I know that at a time of unemployment some attempt to hold down wages may reduce the speed at which unemployment arises, but in the end the damage that such a policy does to the whole economy, to incentives and to our efficiency as a great producing and manufacturing nation is far greater. Therefore, I am not an incomes policy man. I have the greatest faith in management and workpeople and in the good sense of most trade union representatives.

    This is one of many Budgets that we have heard from the present Chancellor. I said earlier that I am disappointed in it. I certainly welcome his change of heart and humility now, but on the evidence of the past why should we believe his promises today? If the Chancellor has been wrong so many times before, why should he be right today? The Chancellor is no doubt an incurable optimist, but I am not at all sure that we do not need a pessimist at the Treasury.

    The Budget exemplifies the failure of Socialism. Socialism cannot create wealth. It can only spend and distribute wealth that has been produced by others. I am old-fashioned enough to believe that we shall never get the economy right until we cut spending more substantially than we have done, balance the budget and in that way—it is the only way—halt inflation. Inflation is a kind of revolution by stealth that robs people of their savings almost without their knowing it. Next to civil strife, it is about the worst thing that could happen to any country, as we know from the example of Germany and other countries. There must be a tremendous change of attitude here. We must roll back the extent to which the State increasingly, and certainly at ever greater expense, intrudes and intervenes in every facet of our lives. That not only deprives us of our basic freedom but it is enormously expensive. In the end, the salvation of the country will come from individuals and not the State, and certainly not from a Socialist State.

    6.37 p.m.

    It is obvious that no one could make a detailed assessment of the Budget so soon after hearing it delivered, but I should like to add my congratulations to those already given to the Chancellor for speaking this year for a shorter time than he has done previously.

    There are two or three immediate points that I should like to make, albeit briefly. Today's Budget is not really aimed at attacking the twin evils of which hon. Members have spoken today—inflation and unemployment. This Budget will not attack them swiftly. We all know the harm that inflation does to everyone, whatever his wages, and how inflation is dangerously eating into people's jobs. With that is associated the whole problem of unemployment and what it does to people and to their morale.

    The one area that could help unemployment and inflation is industry. I should have preferred the Chancellor to give more encouragement to industry, and to let industry raise its dividends and thus increase its investment and its earnings in order to create more jobs by taking on more people. I should have liked the Chancellor to take another look at the level of corporation tax, because it is only through the productive sector of private industry and small businesses that we can cure unemployment.

    Naturally, we all welcome the Chancellor's cuts in direct taxation, but we must also realise that we have not gone back to where we were a few years ago because inflation has already eroded such tax cuts as we have received today. I certainly agree with the Chancellor's move to tax spending rather than earning by putting anything additional on indirect taxes—with one exception, on which I add my voice to the others who have spoken this afternoon, and that is the tax on petrol and the licensing of vehicles. That will bear hardly on all rural constituencies such as mine of Aberdeenshire, West. An hon. Member who spoke earlier made the point—although I do not want to become too political on this—that it is obvious that this type of taxation hits the rural areas harder than the cities, where there is often subsidised public transport. In rural areas today, with less public transport, a car is not a luxury but a necessity for various needs such as taking old people to hospital and transporting children and so on. Therefore, it is a retrograde step to increase the cost of transport in rural areas.

    It is a great pity that the Chancellor did not take this opportunity to put right what he did wrong a few years ago when he introduced more than one level of VAT. Value added tax replaced purchase tax, and the thinking behind purchase tax is basically Socialist. It provides a series of rates of tax, and the Government—or, in reality, the man in Whitehall—decide what is a luxury and what is a necessity rather than leave it to the individual to make up his mind about what is a luxury and what is a necessity.

    I hope that the day is not far distant when we shall return to one low rate of VAT on everything. If the Chancellor had returned VAT to 10 per cent., which is a far easier rate to operate anyway, the cost would not have been large and it would have been a first sensible step in the right direction.

    Compared to our competitors in Western Europe, taxation in this country is still too high. This is because Government spending is too high. If we are to get a big reduction in taxation, we must have a cut in Government expenditure. This would allow money to be ploughed back into productive industry, and that would cure unemployment and inflation.

    6.41 p.m.

    I have undertaken to speak for no more than five minutes. I regard this as a neutral Budget, and the one thing for which I must give the Chancellor credit is that it is not an electioneering Budget. It will not fire the imagination of the electorates at the forthcoming by-elections.

    It is an unimaginative Budget and it does not tackle the main problems facing this country—unemployment and inflation. Right through the Budget, the reliefs and gifts do not match the inflation through which this country has passed. No incentives are provided for investment, which is so essential in the creation of jobs, for differentials or for people to earn more and to do better in society.

    I welcome the move from direct to indirect taxation because I am a protagonist of that form of taxation. I believe that people should be allowed to have the maximum net amout of take-home pay and be allowed to decide on what they wish to spend it—and pay taxes accordingly.

    It is unfortunate that most of the burden of the increases in indirect taxation has fallen on the motorist. Those in rural areas will be particularly hard hit. Hon. Members with large constituencies like my own will know that public transport is becoming increasingly costly and that people are being obliged to use their cars for themselves and for such things as visiting or taking people to hospital.

    This Budget is almost the same as the sort of Budget that we had when the Government first came to office. It is an admission by them that inflation and other factors have overtaken us to such an extent that their forecasts have never materialised and we are back again or the same old treadmill of go-slow policies, with the Chancellor hoping that North Sea oil will help us to pay our debts and to live better lives. It is important for us to realise that we still have massive borrowings and that it may be a considerable time before we are able to pay them all off from the money that we get from North Sea oil.

    We must encourage industry and investors and make our industrial concerns far more viable. I cannot go along with the Government's ideas of high taxation and high rates of public expenditure.

    I do not want to pour cold water on the agreement with the trade unions, but the Government have not spelt out what bargain they will require or how far the unions will be expected to respond. It seems that the Chancellor has offered an open-ended commitment. He also suggested that he would want to introduce yet another Budget.

    We must tackle inflation. It is eating into our way of life and into people's purses and savings and destroying the whole structure of life as we know it. Inflation and unemployment, which is equally destructive, must be tackled, and we shall do this only by making our country a place in which it is worth working, by giving more incentive and by creating an atmosphere in which people can work and earn more and increase the benefits for the country.

    I have no hesitation in repudiating the Budget. It does not take sufficient cognisance of the high rate of inflation, and I do not believe that it is right to have a neutral Budget at this time.

    When the Government came to power they said that our prosperity would increase. There is no indication of that prosperity in the Budget. I do not wish to be too political about these matters, but the Budget is an admission of three year of failure during which there has been no advance in the standard if living in this country.

    6.46 p.m.

    The hon. Member for Windsor and Maidenhead (Dr. Glyn) was correct when he said that this is not an election Budget. It is to the Chancellor's credit that he has put the nation before any by-election or electoral gain.

    I am reminded of the great consternation and no little anger caused by the late Sir Stafford Cripps when he introduced his famous Budget for the remarkable Labour Government of 1945–50 which did so much to put working people on the agenda for consideration. Sir Stafford Cripps' Budget was the day before the London County Council elections, but he did not hesitate to put enormous taxes on tobacco, drink and all sorts of fancy things.

    The electorate were angry and annoyed, and the Labour majority in County Hall was greatly threatened. However, that did not deter that Labour Chancellor from putting Britain first without thought of electoral gain, and my right hon. Friend the present Chancellor has not been deterred from putting Britain first.

    The Budget can be described as a strategic Budget and a Budget of recognition. It is strategic in that it maintains what has been achieved in the past 12 to 18 months in trying to get Britain out of the morass of inflation and the evils of unemployment that follow it.

    It is about time that the House acknowledged that the inflationary blizzard through which we have been living is not the fault of Great Britain, the United States, Germany or even the EEC. If any people are chuckling with glee at the state of Western society and the massive unemployment in the United States, Great Britain, France and Germany, it will be those who despise and deplore the sort of system that allows us to come here and debate such issues. That ought to be recognised, and it is about time that the Leader of the Opposition recognised it. It is time she stopped talking about foreign countries and running her own country down. She should realise how dangerous that is. Slowly and surely, the right hon. Lady is becoming one of the finest recruiting sergeants for the Communist Party, and I should have expected that to be the last thing she wanted to do.

    As I say, the Budget is a recognition Budget too. It recognises where people's standards have been pinched. Well-off people have felt the pinch. They have had to do away with the Rolls and put up with the Jaguar. Only the elder boy can go to a private school, and the other will have to go to a State school for a little time.

    But then there are all the ordinary people, right down to old-age pensioners, who have been paying their income tax and making their contribution, helping to solve our problems and put the nation back on its feet. Our Chancellor of the Exchequer has done the right thing in recognising that these people have made the greatest contribution. He is not the first to do so. He is not the first to acknowledge that the comparatively poor have made the biggest contribution. I shall not remind the House in detail of the parable of the widow's mite, but the principle is the same and the Chancellor has recognised it. It is only right and proper that people at the lower end of the scale who are paying income tax should have recognition.

    Income tax hurts and annoys, but people at the lower end of the scale have paid it. There have been no mass riots or terrible demonstrations. People have gritted their teeth in an ordinary British way and have paid up, although it has hurt. I am glad that their contribution is now acknowledged. They are to have some relief, having made their mite of contribution, and the rest of us will still be called upon to pay up, which is only right.

    I turn now to another aspect of the same matter, and I put an appeal to the Opposition. Negotiations and agreements in industry today can no longer be left to a couple of heads of departments, and neither can we have the Government laying down the law. That is wrong. The skilled artisan today demands that his voice be heard, and he demands that his skills be properly recognised. I should have thought that Conservatives would realise that.

    On the issue of differentials, I admit at once that Conservative Members are right when they say that there has been annoyance and irritation felt by those who no longer earn what they ought to earn according to the principle of differentials. But they should admit, for their part, that there is another side to the coin. There has been moaning and groaning, but people have carried on. Those of us who have experience in the Services know of the complaining and moaning that goes on among the other ranks. But they are always there when they are needed. That is why we are here in this place tonight—because they were always there.

    Although there has been moaning and complaining, except in just one instance there has not been any real confrontation on the differentials issue. Everyone should give credit for that to men who have had an excuse almost handed to them on a plate by some individuals and Conservative politicians who now claim to support the toolroom workers. In normal circumstances, the last people in the world to wish to sustain or help the toolroom workers of British Leyland would be Conservative politicians. I hear no interruption in response to that.

    Right hon. and hon. Members opposite know that what I am saying is true, and it is pointless to challenge the truth.

    I believe that the time is very near when those differentials must be restored, but let the House of Commons tell the workers that it acknowledges their frustration and their anger, and that it recognises also that they did not hold the nation to ransom at a difficult time. They gritted their teeth and took what was coming. Let us give a little credit for that.

    Many single people and married couples with families have been exasperated to see the enormous amount of tax which they have to pay out of their weekly or monthly earnings. They resent it, and they resent the size of it. They resent it all the more when, having to make their contribution out of £40 or £50 a week, they know that if only they had been taught to play the guitar and learned to make appalling noises into a microphone they could have earned £1 million a year and shoved off to a foreign country, thereby avoiding tax.

    I am glad that the Chancellor has recognised the contribution which ordinary people make. The strategy of the Budget maintains the strategy which is getting us out of a difficult situation, and, above all, it recognises the position of those who have made the biggest contribution. For its overall philosophy, the Budget deserves to be highly successful, not just for the Chancellor's sake or for the Government's sake but for the sake of Britain.

    Debate adjourned.—[ Mr. Coleman.]

    Debate to be resumed tomorrow.

    Orders Of The Day

    Agricultural Holdings (Notices To Quit) Bill Lords

    Read a Second time.

    Bill committed to a Committee of the whole House.—[ Mr. Coleman.]

    Bill immediately considered in Committee.

    [Sir MYER GALPERN in the Chair]

    6.56 p.m.

    With the agreement of the Committee, I shall, as is customary with consolidation Bills, put en bloc the Question on the clauses and the schedules.

    Clauses 1 to 15 ordered to stand part of the Bill.

    Schedules 1 and 2 agreed to.

    Bill reported, without amendment.

    Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 ( Third Reading), and agreed to.

    Bill accordingly read the Third time and passed, without amendment.

    British Airways Board Bill Lords

    Read a Second time.

    Bill committed to a Committee of the whole House.—[ Mr. Coleman.]

    Bill immediately considered in Committee.

    [Sir MYER GALPERN in the Chair]

    6.58 p.m.

    With the agreement of the Committee, I shall, as is customary with consolidation Bills, put en bloc the Question on the clauses and the schedules.

    Clauses 1 to 25 ordered to stand part of the Bill.

    Schedules 1 and 2 agreed to.

    Bill reported, without amendment.

    Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 ( Third Reading) , and agreed to.

    Bill accordingly read the Third time and passed, without amendment.

    Select Committee On Overseas Development


    That the Standing Order of 22nd November 1974 relating to the nomination of the Select Committee on Overseas Development be amended, by leaving out Mr. Lewis Carter-Jones and inserting Mr. Nigel Spearing.—[Mr. Walter Harrison.]

    St Paul's Playing Field (Trust) Bill (By Order)

    Order for Second Reading read.

    7.0 p.m.

    I beg to move, That the Bill be now read a Second time.

    Before proceeding with my central argument, I should like to give the House some of the background to the Bill. Its object, as stated in the Long Title, is
    "to provide for the retention of St. Paul's Playing Field in the London Borough of Hammersmith as public open space for the use of the public and for educational purposes, to provide for its clearance of any obstacles to the full use of the Field for such purposes, to enable the Greater London Council and the Inner London Education Authority to spend money on capital account for the provision of alternative accommodation for the Hammersmith and West London College".
    Pages 1 and 2 of the Bill describe the background to the local problems, and I have no doubt that this aspect of the Bill will attract a degree of comment from hon. Members in many parts of the House.

    Clauses 1 to 4 deal with the title of the Bill, the retention of land for open space, the cessation of building and removal of objects, and the usage of alternative accommodation in Blythe Road for the accommodation of the Hammersmith and West London College of Further Education. Clause 5 deals at length with the formation of the charitable trust to be known as the St. Paul's Field Trust, with the appointment of trustees and with the creation of a trust fund and a management fund.

    I hope and believe that this is not essentially a party or partisan issue. Nor do I and hon. Members in any part of the House who seek to give the Bill a Second Reading totally commit ourselves to support it prior to Third Reading. Our purpose is to obtain objective scrutiny, by a Committee of the House, of a case which has enough disquieting features to suggest at first glance that justice may not have been done.

    That is not to say that any blame attaches to any political party, councillor, local authority or council officer. What has happened is that there has been a sequence of decisions, some no doubt bureaucratic, over a number of years, which have left many thousands of Hammersmith residents frustrated and disillusioned with the processes of democracy.

    I can only quote a remark made last year by Baroness Young in a debate in the other place on the Greater London Council (Money) Bill. I think that her remark sums up the feeling of most hon. Members on the Conservative side of the House, and I have no doubt that it will appeal to others such as the right hon. Member for Fulham (Mr. Stewart). Baroness Young said
    "looking at the history of the St. Paul's School site, as I have done, it is difficult to escape the conclusion that the responsibility for the present situation rests on both political parties."—[Official Report, House of Lords, 12th July 1976; Vol. 373, c. 91.]
    The promoters of the Bill have shown themselves dedicated, persistent and courageous. They have been dedicated because they have conducted the battle entirely from their own resources of time and money without any outside backing. They have been consistent because they have not allowed disappointment to reconcile them to defeat but have taken what the Chairman of Ways and Means has termed an unusual use of the right to petition Parliament. They have been courageous because they have presented themselves, as individuals, to the risk of severe financial penalties should the House in due course so determine.

    My hon. Friends and I would not be taking up the time of the House if we felt that no more was at stake than a routine local planning dispute, whose dying embers are being fanned by a small but vociferous group of disgruntled Fulham and Hammersmith residents. The fate of a 14¾acre parcel of publicly owned open space in the heart of our inner city is of concern to all Londoners. In so far as our capital might claim to set an example of the best modern planning practices, the outcome of this case is important to everyone in the country and everyone in the city who is interested in the environment.

    Until 1968, the site which forms the subject of the Bill contained the playing fields, and only the playing fields, of St. Paul's Senior School. On the school's move to new premises at Barnes, the Greater London Council completed the purchase of the playing field for a total of £1·2 million, together with the site of the junior school—Colet Court, on the other side of the road—occupying 3¼acres on the north of Hammersmith Road, for which it paid £900,000. We are concerned solely with the senior school site, bounded by Talgarth Road, Colet Gardens, Hammersmith Road and Gliddon Road. Those negotiations and the progress payments had begun as long ago as 1964. During that year, the then London County Council had announced its intention to designate 10 of the site's 14 acres as public open space. It was on that basis that the purchase had been authorised.

    Before embarking on the subsequent history of St. Paul's field, we should note that under the 1971 survey the London borough of Hammersmith has 74 acres of public open space less than the minimum envisaged in the Greater London Development Plan. It could well be an area of great deprivation in terms of public open space.

    We now know that it is incumbent on local authorities, and it is suggested in that plan, that residents should live within a quarter of a mile of 5 acres of open space and within three-quarters of a mile of 50 acres of open space. Most of such open space as exists is situated at the northern and southern extremities of this long, thin borough, which stretches from Wormwood Scrubs to the Thames. In the centre, where the St. Paul's field is located, there is almost no other public space. Therefore, this is an area of open space deprivation.

    Incidentally, as will appear relevant later, the field was used—no doubt without formal planning permission—for physical education and recreation by most of the local schools, including ILEA schools, between 1969 and 1976. It is interesting to note that Holland Park School was one which used it. These 9,500 schoolchildren now have to be driven to distant sports grounds, half an hour each way, and one school is involved in expenditure of £130 per week. That is the Mary Boon Girls' School, where pupils have to travel to Warren Farm in Southall. It may be true in a narrow technical sense that the field has never been public open space. In practice, however, it has provided public recreation space for thousands of children and adults for the best part of a decade.

    If, as I hope, the House grants the Bill a Second Reading, it will be for the Committee to determine the rights and wrongs of the administrative, political and quasi-judicial statements and decisions which followed. Meanwhile, we should bear in mind two points. The first is that open space in the heart of London, once lost, is unlikely ever to be re-created. The bulldozers can destroy in a day the devoted husbandry of a century or more. Secondly, it is a fact that no alternative site for the Hammersmith and West London College, work on which has now begun on the field, was ever seriously considered.

    For example, the College of St. Mark and St. John has stood empty on the King's Road since 1973, when plans for the West Cross route were abandoned. In a personal letter to Martin Stevens, Conservative parliamentary candidate for Fulham, the then Secretary of State for Education and Science, the right hon. Member for Sheffield, Park (Mr. Mulley), stated that this site would have been suitable, with some modifications.

    I return to the field and its history. During 1968 the GLC and the Hammersmith Borough Council were considering the use to which it could be put. The Inner London Education Authority was offered 6 acres, and 8 acres were offered to Hammersmith borough at £1 million. The GLC's case all along has been that it has neither the power nor the responsibility to provide parks for deprived boroughs. Let me say right away that this claim, which was later reiterated by the then Secretary of State for the Environment, is totally untrue. Section 58 of the London Government Act 1963—to say nothing of the current GLC literature—contradicts that argument. At all events, the GLC puts the burden on the borough, and the borough said that it could not afford the £1 million. Both authorities at that time were Conservative-controlled, and the Fulham and Hammersmith Labour Parties had pledged themselves in their 1968 election manifestos to keep the field as a public open space.

    During 1969 the GLC studied the possibilities for developing the land and in 1971 awarded itself outline planning permission for a scheme by which 4 acres formerly covered by the school buildings to the north of the site would be used for housing and the 6½ acres to the south would provide a new home for the West London College of Further Education. The borough council felt that it could not stop the scheme other than by buying the whole site, for which the GLC was then asking £6 million. The then Secretary of State for the Environment, my right hon. Friend the Member for Worcester (Mr. Walker), waived his right to intervene.

    Since that date much use has been made of the suggestion, repeated by the right hon. Member for Fulham in the House, that the residents, who shortly formed themselves into the West Kensington Environment Campaign, were seeking to prevent the intrusion of council housing into their area. That is not true. At no time did they do that. The sole objection has been to the building of the college.

    On 20th August 1970, at the height of the holiday season a single public notice appeared in the West London Obeserver under the Town and Country Planning Act 1962. It referred to the proposed development of the site jointly by the GLC and the Inner London Education Authority for housing and education purposes,
    "with provision for public use of the open space on the site".
    Naturally, the local people thought that this meant the existing 10 acres of open space. Even so, and in spite of the holiday season, 51 written objections were received from individual residents within the statutory 21 days.

    During 1974 and 1975 the West Kensington Environment Campaign, one of the promoters of the Bill, began to be active. By this time government at all three levels had changed hands, but with no perceptible change of attitude to the project. The campaign was not invited to appear before the planning committee until 10th June 1975, only a matter of days before the time limit for requesting the Minister to order a public inquiry. The campaign asked the council to press for a public inquiry on a number of grounds. It said that there was a manifest need for the field to become a permanent public open space in view of the serious shortage of green parkland in that part of the borough.

    The campaign went on to ask for the inquiry because of the loss of amenity through schoolchildren having to be bussed to Barnes for physical recreation and because of the unsuitability of the site, being bounded by two exceptionally busy roads, for the introduction daily of some 12,500 students at the college and others—students for whom no living accommodation was proposed. Subsequently it has been shown that there is inadequate parking for vehicles in this development. The campaign also pointed out the availability of other sites, already built on, for educational purposes which could be used for the purpose at much less expense. Another factor was the immense costs involved. They are reckoned by some to be of the order of £25 million.

    To the campaign's consternation, the majority party on the committee unanimously rejected its appeal. The excuse was given that a request for a public inquiry could result in the council having to find £6 million to buy the land. This was untrue, and from being a peaceable group of conservationists the campaign now became militant. Within 10 days it had secured no fewer than 11,300 signatures from local residents to a petition calling for a public inquiry. On the strength of this it asked the right hon. Member for Fulham and the hon. Member for Hammersmith, North (Mr. Tomney) to receive a deputation here at the House. Both, surprisingly, refused. The right hon. Member may have had a point when he indicated that this was very much a matter for the Greater London Council or the local authority.

    There are several matters in the hon. Member's speech to which I shall want to refer if I catch your eye, Mr. Deputy Speaker. This point, however, I must correct at once. I received members of the campaign in the House and I arranged for one of them to have a meeting with Lord Ponsonby of Shulbrede at the GLC to see whether a compromise solution could be reached. The statement which is repeatedly made by the campaign that I refused to see its members is untrue, and I hope that the hon. Member for Sutton and Cheam (Mr. Macfarlane) will withdraw it.

    I cannot withdraw it, much as I should like to do so because of my respect for the right hon. Gentleman. On this occasion, however, I wonder whether he recollects the situation with complete accuracy. A deputation arrived led by a number of prominent public figures in Fulham—the prospective Conservative parliamentary candidate, the GLC prospective candidate, an ex-mayor and the Labour Mayor of Hammersmith and Fulham. The deputation arrived outside the House of Commons. One or two broke away to come inside and saw the policeman at the desk in the Central Lobby. I understand that after that the right hon. Gentleman received one Socialist member and that subsequently three were received at the right hon. Gentleman's advice bureau.

    I have no doubt that if I have maligned the right hon. Gentleman in any way he will have the opportunity of setting the record straight, but that is the situation which has been related to me by those concerned with the campaign.

    I have no knowledge of having been contacted to receive a deputation, but I did receive two individuals connected with the campaign privately in my office at Hammersmith. I believe that one was a Mr. Fry. I have no knowledge of having been asked to receive a deputation. I submit that my reputation in this House stands at least as high as that of the hon. Member for Sutton and Cheam (Mr. Macfarlane), so will he now withdraw what he has said?

    I am grateful to the hon. Member for his observations, but the impression created among the campaign organisers is that they were refused a visitation into the House of Commons by the two Members of Parliament. That is the situation which has been presented to me. If the right hon. Member and the hon. Member wish to make any observations, of course I shall gladly withdraw, but I must point out that that is the situation which has been presented to me.

    In this Chamber hon. Members must make statements of fact, not statements of innuendo or permissive inference. There was no contact with me about a deputation. The only contact I had was in my office at Hammersmith with the leader of the campaign and one other person. Will the hon. Member now withdraw?

    The hon. Gentleman says that there was no contact. That is precisely what I have been told by the campaign organisers. However, if necessary, we shall no doubt set the record straight during the debate.

    The Conservative prospective parliamentary candidate for Fulham, Mr. Martin Stevens, made a detailed case to the then Secretary of State asking him to receive a deputation and/or order a public inquiry. With the then Liberal candidate, Mr. Frank Brown, he organised a march on Westminster, where the campaigners were received by my hon. Friend the Member for Aylesbury (Mr. Raison) and the hon. Member for Isle of Wight (Mr. Ross), whom I cannot call an hon. Friend since he is a part of the Lib-Lab coalition.

    The hon. Member must withdraw the word "coalition". I confirm that I met the deputation and the march when it came to Westminster, and I was very pleased to see them.

    It should go on record that the campaign organisers were much impressed by the general level of welcome that they received from the hon. Member for Isle of Wight. I repeat, in case the House should miss the point, that the only request of the marchers was for a public inquiry.

    Although, by September 1975 the borough council had modified its position and drawn the GLC's attention to the unduly high density of the plan, the Minister refused an inquiry. Some slight modification, however, was made, involving a 1½-acre area of public open space, plus some temporary public use of another part of the field.

    The campaign kept up its all-party pressure on the GLC. Then, on 12th July 1976, an objection was put down in another place to the Third Reading of the Greater London Council (Money) Bill. A Select Committee was set up there to examine the case of St. Paul's field and sat from 20th to 26th July. No doubt correctly, from a technical point of view, the promoters of the present Bill were not granted locus standi, and so were not allowed to present their case, although some were invited to answer questions. No councillors were called, though Councillor John Putnam, Conservative, and former mayor Councillor George Simpson, Labour, both offered to attend.

    As a result, the Select Committee was concerned more with legal niceties than with the facts of the case, although it reported its:
    "regret that the provision of public open space on the St. Paul's site should have been so sharply reduced."
    The Greater London Council (Money) Bill received its Third Reading. The rest is history.

    I now come to the present phase of the campaign's initiatives—the Private Bill which the Hammersmith Society and four public-spirited individuals have succeeded in bringing before the House today. Once again they have had the support of Martin Stevens and Councillor John Putnam, who have provided parliamentary briefings.

    Without burdening hon. Members with an exhaustive analysis of the Bill, I shall summarise the argument. There is a prima facie case for retaining St. Paul's field as public open space. The Government-owned National Savings Bank building in Blythe Road, W.14, which is less than 400 yards from the St. Paul's site, will be vacant by July 1977. No other use for it is planned. Reliable professional opinions state that it is in excellent condition, that it would accommodate West London College comfortably and that it would cost about £1 million to buy and about £2 million to convert. The Inner London Education Authority could have it in use far sooner than the building now being started on the St. Paul's site.

    According to current estimates, the St. Paul's site college building will cost £24 million. The National Savings Bank building could be acquired and converted, the field cleared, compensation paid and the rescued public open space set out at less cost to taxpayers and ratepayers than the present plan envisages.

    The Bill recommends the establishment of a trust and management fund to ensure the preservation of the field for posterity and for the benefit of Londoners and visitors in perpetuity. A Select Committee is the proper forum in which to canvass the detailed merits of the Bill. But its outline is clear, and, at first glance, it appears to make sense.

    Many of our citizens, representing all walks of life and political views, have been seeking a fair hearing for every side of the case for a number of years. They have been denied a hearing by their council, by their local Members of Parliament, by the GLC, by the Secretary of State for the Environment and by the other place. Their faith in our institutions as vehicles for the redress of grievances has become thin. At last they have brought their case before us—the elected House of Commons—as the last available democratic tribunal. They ask us not to judge their case tonight but only to agree to listen to it. I hope that the House will give the Bill a Second Reading.

    7.23 p.m.

    The hon. Member for Sutton and Cheam (Mr. Macfarlane) has tried to turn the case into a cause célèbre. He referred to the people involved as being dedicated, persistent and courageous. I agree with that. However, it has been false courage. It is one matter to tilt at windmills but another to be taken off by them. That is what has happened with the Bill.

    The Bill is weak. I hope that the House will not give it a Second Reading but reject it. The Bill has been backwards and forwards. The debate has gone backwards and forwards in Hammersmith for two and a half years or more. It has been bandied backwards and forwards, and it has even reached the High Court which ruled against it. The Bill has produced the most unusual circumstances. The Chairman of Ways and Means draws attention to the Bill. In the last paragraph of his Report, he says:
    "This is so unusual a use of the right to petition Parliament for a Private Bill that I have thought it right to exercise my power under S.O.875 to draw the Bill and the circumstances of its promotion to the special attention of the House."
    The GLC and the Hammersmith council have been correct in all their proceedings. They have been correct in their legality, in their approach and with their advice. Whilst one may respect people who promote environmental causes in general, there are times when one must promote such causes knowing that there are differences of ideals and do so in good time before any commitment is made that involves public money. In this case a contract has been entered into, and to abandon the project now would cost the taxpayers of London £3½ million.

    The substance of the argument is contained in a document that was sent to me today. It is of such consequence that even if public works had not already been undertaken the argument against the GLC developing the site would not be justified.

    Hammersmith is short of public open space—probably more than any other borough in London. That is not the fault of today's planners or environmentalists. The site was once a public school, which I was sorry to see demolished, because of its architectural value. It was never an open public playing field. It was vested in the school and remained vested in the school.

    Development is well under way. It is being physically and lawfully carried out in accordance with valid planning laws. It would cost millions of pounds to abandon the plan. The GLC has been prudent, correct and patient in its dealings. Even a Select Committee, after a five-day hearing, decided that the Bill and its Money Resolution should be allowed to proceed without amendment.

    In paragraph 9 of its Report the Select Committee says:
    "Administratively, matters have now gone so far that an attempt to prevent or substantially to modify the proposed development of the site might well do more harm than good; contracts have been entered into and cancellation would be costly.".
    In the next paragraph, the Report continues:
    "The Committee attach importance to the fact that their intervention came only at a very late stage. If Parliament is to express an opinion on, or to intervene in, a major project contemplated by the Greater London Council, it is preferable that it should do so at the outset. Intervention after plans have been completed and funds committed can be disruptive and costly.".
    Once a project has begun and an objection has not been raised at an early stage, it should be allowed to continue. The Hammersmith council and the GLC were committed to a project that was necessary for the amenity of West London.

    The premises for education in Hammersmith are scattered over 11 sites, Concentration on this site will benefit instruction, scholars and staff. With that in mind, the GLC decided to proceed.

    Any cancellation at this stage would cost £3½ million in lawyers', contractors' and surveyors' fees. The trust would have to try to raise that money. In God's name, how would it do that? It would have compulsorily to acquire land vested in the GLC and the Hammersmith council. If a member of the trust died during the proceedings, the trust would be invalidated. The promoters of the Bill have got themselves into a mixed-up conglomeration of legal nothingness.

    Genuine people are involved. I know Councillor Simpson well. He is a first-class councillor. The building and the field are situated in his area, and I understand his concern. However, at this stage there is no project that should be allowed to go forward with greater freedom than this.

    Will the hon. Gentleman address his mind, before he concludes his speech, to the deprivation of open space in that location? So far he has not applied his mind to that aspect of that neighbourhood.

    The hon. Gentleman could not have been listening. I said that Hammersmith has less open space than any other borough in London. That is not the fault of this generation or recent generations; it is probably the fault of the previous century. But that is the way in which the borough is constructed. It cannot be helped. However, there is also now a greater need, or as great a need, for housing the population of Hammersmith—there are 7,000 people on the waiting list—and for an extension of education facilities. This is applicable to the population not only of Hammersmith but of the whole of West London.

    Is not the Bill an opportunity to put this matter right? If there has been deprivation of open space for so long, surely we now have the ideal opportunity to put that right. We should not miss the opportunity to put that right now.

    As I have said, if the intervention had been made at the right time, with parliamentary counsel, the case would have been much better than it is now. The contracts have been entered into. The trust could not possibly find this money, even if it won the day on the vote. I am hoping that the House will have the sense not to force a vote on an issue such as this. The project has been supported in the past by councillors of various political colours. One cannot accept in reality that projects such as this should be abandoned. There would be an outcry from ratepayers and taxpayers.

    Who would move the existing buildings from the site? Who would give the trust, so established, further planning permission to develop the site? The trust would have to go to the same bodies as are now being contested—the GLC and the council. Such permission would not be forthcoming.

    Despite the efforts of the people concerned—who are, in the main, genuine people—this project has advanced so far that it should be allowed to continue. This House, in its wisdom, and recognising the dedication of the people concerned—I do not deny them that—should tonight decide not to vote on the issue. It has been through the High Court for a considered judgment. It has been through the House of Lords and through the Select Committee. It has been the subject of advice of counsel of this House and of the Chairman of Ways and Means. Regrettably, from the point of view of those concerned, it is time for them to admit that although they have put up a very good fight it really is time to call it a day on the issue.

    7.33 p.m.

    It is with considerable hesitation that I intervene in the debate, because I must declare an interest straight away. I live in the neighbourhood concerned. It is a neighbourhood that I know and appreciate. It has been my home for a great part of my life. I lived there during the First World War, and when I married in 1949 I went back to live in the same neighbourhood, and I am still living there.

    It is a mixed part of London, with many characteristics that make it very typical of London. One of those has been the development of the original development around the area of the St. Paul's School playing field. Many of the houses around it and the artists' studios to the south grew up as part of a development of which late Victorian and Edwardian London might well have been proud and which has subsisted to this very day, all around the most important lung—I use that expression of the St. Paul's School playing field—in that part of London.

    It is a tragedy for London and for Hammersmith, and not only for those who, like me, live relatively near that field, that that lung should now be destroyed when it has been there as a ready-made open space for the people of that part of London.

    This evening I shall not indulge in recriminations. I dare say it is true that over the last six or seven years there have been mistakes and misunderstandings. However, they are mistakes and misunderstandings that could again and again have been righted. It was as long ago as 29th October 1974 that I wrote to the right hon. Member for Fulham (Mr. Stewart) and begged him to see that this vandalism—because such it is—was not perpetrated and that this open space was not destroyed. In 1975, in my personal capacity—because I am not a London Member; I represent a Midlands constituency and I am proud of it—repeatedly I wrote to the then Secretary of State, the late Anthony Crosland. The representations that were made to him resulted in some modification of the density of the housing that it was proposed to put on the site of the school.

    Nevertheless, despite all those representations and the campaign that was launched by the people of West Kensington, that part of Hammersmith and Fulham, the Greater London Council persisted in going forward with the destruction of 14 acres of open space in an area which, as my hon. Friend the Member for Sutton and Cheam (Mr. Macfarlane) says, is lacking, to the extent of some 76 acres, in the most elementary necessities that are now deemed appropriate for any part of the metropolis.

    The hon. Member for Hammersmith, North (Mr. Tomney) says that it is now too late and that we should withdraw and let the GLC get on with the building over the field—a field that has been the delight of residents of that part of London for many years. It is nothing of the kind. The cost is to be measured not only in money but in the effect upon the lives of the people who live in Hammersmith and the amenities of the area. The greater part of the cost of this building, the technical college, still remains to be incurred. It is not too late to give over to open space what no doubt in Hammersmith has been open space since the beginning of time, because there never was a building upon that land.

    Many grave errors of judgment have been made in London in the last quarter of a century. Many grievous errors of planning have been made. We now rue the day when we allowed, for instance, high-rise flats to dominate the landscape of a large part of the metropolis. We shall rue the day—and those who come after us will not lightly forgive us—if this House does not, even at this eleventh hour, step in and stop this act of vandalism—this destruction of the most important open space that still exists in that part of London.

    Thank you, Mr. Deputy Speaker.

    7.39 p.m.

    I am bound to say that the hon. Member for Sutton and Cheam (Mr. Macfarlane) has been misinformed on a good many points. I corrected him on one point, on which he ought to have withdrawn. It is untrue to say that I refused to receive the leading figures of the deputation. I spent a considerable time arguing with them. I made it clear that I could not agree with their general proposition. When, at one stage, it looked as if a compromise solution might be arrived at, I arranged to meet the leading figure on the GLC for that purpose. Therefore, the suggestions that the hon. Gentleman made will not stand up. He ought to withdraw what he said about me and my hon. Friend the Member for Hammersmith, North (Mr. Tomney). However, I mention that only in passing.

    It was in 1968 that the GLC, with a Conservative majority, decided to use this site of 14½ or 14¾ acres partly for education, partly for housing and partly for open space. This decision was reached in full accord with planning law. The