Below is the text of Mr Major's comments during the Budget Debate, made on 14th March 1989.
Mr. Kinnock I begin with customary felicitations and, on this occasion, thank the Chancellor of the Exchequer for his reply to my private notice question. I shall try to ensure that my supplementary is not as long as the answer he gave me.
I also take this opportunity to welcome the change that the right hon. Gentleman has announced in the excise duties, a change that will promote the use of lead-
This is not simply an annual Budget; the occasion is becoming marked by what can only be described as the custom of holding the annual nationalist games. I hope that that custom will not last very long because it is of no use to anybody, least of all the people of Scotland and Wales. In any case, we did not have to rely on the nationalists for entertainment when we had a professional juggler right in front of us.
After nearly six years as Chancellor of the Exchequer, the right hon. Gentleman was able to stand up this afternoon and say that inflation in the second half of this year will reach 8 per cent. and that then it is expected to dip. He is so afraid of what will actually happen that he dare not raise any excise duties. He announced that growth in the course of this year will be halved and that the balance of payments deficit will stay the same this year as it was last year -
Yet again, in the next 12 months, we shall see just how much strength the right hon. Gentleman will produce in the economy. A year certainly does make a difference. Last year we had the boom budget that made the credits spree and the trade deficit and inflationary pressures worse than they otherwise would have been. This year we have had the bust Budget -
Last year, in his Budget forecasts, the Chancellor told us that, in 1988, inflation would be 4 per cent., but he said that that was still too high. It was 6.8 per cent. in 1988 and it is now 7.5 per cent. and he has just told us that it will rise further. Of course, it might dip a little towards the back end of the year, perhaps even as early as July, because of the arithmetic of the year-
Last year, the Chancellor, as usual, missed his monetary targets -
There will, as usual, be much comment on the Budget, but I warrant this: this year no one, neither the Chancellor's friends nor the Prime Minister -
The Chancellor of the Exchequer has received advice from his right hon. Friends the Members for Henley (Mr. Heseltine), for Shropshire, North (Mr. Biffen), and for Chesham and Amersham (Sir I. Gilmour) and had the benefit of advice from his right hon. Friend the Member for Woking (Mr. Higgins) -
There was advice for the Chancellor from this side of the House too. Sadly, he neglected that. He told my hon. Friend the Member for Dunfermline, East (Mr. Brown), who presented a series of proposals for improving the situation, that there would be no change of policy. That was the Chancellor's absolutely unflinching announcement. He must have forgotten nine movements in the interest rate over a very short period, a kind of economic yo-
Let us hope there will be different responses in the forthcoming months; otherwise there may be substance in the rumours percolating that the Prime Minister might be looking for a replacement for this Chancellor of the Exchequer. We understand that her gaze has fallen favourably upon the Secretary of State for the Environment. It is only a week since she was telling us that the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley) is absolutely first-
In this Budget the Chancellor did not offer anything to repair the damage done to ordinary families both as a result of last year's giddy, give-
So it comes as no surprise to the people of Britain that they have a Government who take with one hand and then take more with the other. They are a Government who give income tax cuts and then wipe out any gains with mortgage and interest rate rises and rises in other taxes, who have imposed the highest tax burden in peacetime history on the people of this country.
This Budget will not lessen the burden either on the family or on the national income. I see the Chancellor disagreeing. The fact is that, even to get back to the burden as a proportion of national income and a weight on the average family that was reached under the last Labour Government, the Chancellor would today have had to cut the standard rate of income tax by another 6p. That demonstrates how much of an increase there has been in the tax burden under this Chancellor of the Exchequer.
However, not content with maintaining that record tax burden, the Chancellor of the Exchequer has ensured that the greatest burden falls on the average family. Since the right hon. Gentleman, the great tax reformer, entered 11 Downing street, the bottom 50 per cent. of British taxpayers, over 10 million people, have received £10 billion in income tax cuts; the top 1 per cent., just 200,000 people, have been given £16 billion in tax cuts. That cannot be just, efficient or right, and it will certainly not be right when that burden is increased by the Government-
Not content with being a high-
After all, in the past six years this miracle worker has raised the mortgage rate to a level more than 35 per cent. above that which he inherited. Today, just before he sat down, the Chancellor claimed that the changes in national insurance contributions make this a budget for the low-
The right hon. Gentleman told us that he was going to claim credit for removing the steps in national insurance contributions. That is very interesting. We of course welcome it. We have made several demands over several Budgets for radical reform in national insurance contributions to alleviate the burden on the lowest paid workers. What has to be remembered, however, is that this man now removing the steps in national insurance contributions is the Chancellor who installed the steps in national insurance contributions and who increased the rate from 6.5 per cent. to 9 per cent. -
I wish this were a Budget for the low-
True to form, again in this Budget, while the right hon. Gentleman was failing the majority he was favouring the minority. Even this modest Budget today brought in a few more of what are becoming known as Lawson's loopholes. We have had them before. We had the BES and enterprise zones. Those are just two examples; there are plenty more of them. We have had various kinds of tax relief, based on the hope that if the tax obligations of those on higher incomes were reduced they would be more willing to commit their resources to investment. That has never worked, and it will not work now.
The Chancellor has announced with a little twist today that, through this Budget, he will allow previously purchased privatisation share issues to be placed in personal equity plans. It will be plain to everyone that he is doing that to give free and speculative gains on privatisation issues. That is the water privatisation bribe, and the Government will need all the bribes that they can get if they are going to make that flotation work.
Of course, trying to relieve of tax the people on top incomes to induce them to invest has not worked. After 10 years of giving away £26 billion to the richest I per cent. in our country, the proportion of total investment in GDP is lower than during any year under the last Labour Government. The savings ratio is also at rock bottom. It is historically at its lowest ever figure.
I used to think that it was the national debt which did not matter. It now appears to be the savings ratio which does not matter. That is extraordinary. If the savings ratio does not matter, why did the Chancellor put all that effort into trying to subsidise savings if it was not to try to pull up savings from the historically low level which he has managed to reach as further evidence of his brilliance?
The Chancellor's steps today. like so many of his other steps, show his incompetence and perversity. If the fact that we have 13 per cent. interest rates does not attract savers, why should subsidies attract them? In a country in which the Government refuse subsidies to meet the environmental costs of a rail link and in which they regard subsidies for training or research as the work of the devil, people rightly ask why subsidies are right for those with the money to save and wrong for those who use railways, carry out research or need training.
The Budget contains the most indefensible of all the Government's tax subsidies -
When I raised this matter with her, the Prime Minister said that she was surprised I was prepared to purchase a private house but not prepared to purchase private health care. [Official Report, 2 February 1989; Vol. 146, c. 424.] That is what she said to me just a couple of weeks ago. The Prime Minister is so distant from reality that she equates housing with health. If she can do that, perhaps she can tell us what are the health equivalents to rent, mortgage arrears, housing, rises in mortgage rates, overcrowding and homelessness. If the Prime Minister believes that there is an equation between buying a house and buying private health insurance, she can tell us all about it. I might even get her to rise at the Dispatch Box to answer this, who knows?
The needs of the elderly, whether they are in the private sector or on the NHS, will not be met by subsidies of this kind. When we know that the Government, according to the Chancellor, are prepared to give over £40 million -
We all know why that provision is in the Budget. It is not because the Chancellor is enthusiastic about it. It is not even, to do him credit, because the Secretary of State for Health is enthusiastic about it. That provision is in the Budget because it is one of the Prime Minister's pet obsessions. She deludes herself, or she wants to delude others, that private health subsidies for the over-
Apart from any other considerations, private health insurers do no cover pre-
In the Finance Bill which will follow this Budget and in many other ways, it is important that people's attention is drawn to the basic ideology behind that proposition so that people can judge the Budget and the Government's White Paper on "Working for Accountants". The idea that the private medical sector can help with health needs is not the Prime Minister's only delusion. She believes, or says that she believes, that the trade deficit is being financed by people who are prepared to invest in Britain and who have full confidence in the country's economy." -
At the same time that the Chancellor is making families and businesses bear the crushing interest rate burden, he is presiding over a huge and continuing net outflow of long-
However, against that background the Chancellor expects us to stand back and admire him for accumulating a Budget surplus. Against a background of huge household debt, a rock-
Before anyone becomes too impressed with the Chancellor, a few factors should be taken into account. It is very difficult for the Chancellor to claim "prudence" for accumulating the surplus when he did not plan for it and when it is five times bigger than he expected. He was the most shocked man in the House of Commons. He must be the only person who still believes in Father Christmas.
Despite all the talk that we heard again this afternoon about "prudence and caution" in paying off the national debt to "lift the burdens of the future", the Chancellor knows that he is not using the Budget surplus because he wants to. He is using it to repay the national debt because he thinks that he dare not do anything else with it.
The Chancellor has his bonanza budget surplus -
We must remember that the surplus is not the Chancellor's. The headlines might read "Mr. Lawson's surplus", "The Government's surplus", "The Chancellor's surplus", "Mr. Fixit's surplus", "Wonderman's surplus" or even "The Brilliant Chancellor's Surplus". However, as the Chancellor and the Prime Minister repeatedly and rightly remind everyone, Governments do not have their own money. Governments only have the people's money. Governments only have the taxpayers' money. So Governments do not have their own surpluses: they have only the people's surpluses.
What are the people in Britain saying should be done with their surplus? In every measure of opinion, such as that in The Daily Telegraph 10 days ago and confirmed by every other source, people are not saying that the surplus should be used to repay the national debt or to spend on big tax handouts. In huge majorities, in all measures of opinion, the people who own that surplus are saying that their surplus should be used on health, education, transport, to protect the environment and to make the streets and railways safer and cleaner. The people are saying that their surplus should be used to prepare for their future and for their children's future. That comes through strongly from every measure of opinion, and this is a day on which the Chancellor should have trusted the people.
Some of the people want their surplus used in this way because of their instinct for social justice; others because of an innate understanding that this country's economic and social fabric has been run down and must be built up if we are to face the future. But most people, I suspect, will say that their surplus should be used for constructive reasons of the most enlightened and common-
This is the time that the Chancellor really should have trusted the people of this country, because the National Health Service lacks the resources to spend properly on its development needs. In this country, rivers, beaches and water supplies need cleansing. In this country, under this Government, local council house building has dropped by two thirds, private house building has fallen by one third and we have increased overcrowding, bad housing and homelessness. Under this Government it is a country that spends a fraction of what our competitors spend on skill training and in which investment in commercially viable research is still, despite all the oil, the tax burden and the Budget surplus, still spending 10 per cent. less on research than in 1979.
In this country, with all those needs, the Government would have to spend £14 billion in order to raise the proportion of GDP spent on public sector capital investment back to the level it was at under the right hon. Member for Old Bexley and Sidcup (Mr. Heath), or under my right hon. Friends Lords Wilson and Callaghan.
The Chief Secretary to the Treasury (Mr. John Major) He does not understand.
Mr. Kinnock Oh, I understand only too well. One only has to walk out of this place and see the filth on the streets and the railways, the schools understaffed, the shortages of teachers and the under-
In this country, with all these needs for repair and renovation and to face the future, a Government that use their Budget surplus to pay the national debt are like a householder who insists on paying back the mortgage despite the fact that the roof is leaking, the damp is rising, the electric wiring is perilous and the windows are falling out. This decision is justified by the Chancellor and the Prime Minister by saying that we should be paying off the mortgage, paying off the national debt, because if the people do not use their resources for that they will leave a debt round their children's necks.
It is strange that the Prime Minister and the Government as a whole always say that they do not want to leave debts to our children. Yet they are always prepared to cut the taxes of the rich and to restrain public capital spending. They do not want to leave debts to our children, but they are always willing to preside over stagnation in manufacturing investment, always ready to leave a legacy of decay and danger because they will not undertake proper investment in the present or the future.