My Budget speech
Nicholas Davenport
It gives me enormous pleasure to prepare a budget speech which I know can never be delivered in the House of Commons. It is never allowed, of course, to speak the economic truth from the Front Bench. But if it were, and if I were Denis Healey, this is what I would Say
"My left-wing friends will not like what I have to say on the occasion of my third budget. The first was intended to be broadly neutral; this is intended to be broadly rude. I was once a Communist myself but I have long since realised that communism is unworkable in this country. We British are pretty nearly ungovernable in any case and if I were to saY that we are proceeding towards the socialisation of all the means of Production , distribution and exchange, as laid down in Clause 4 of our Constitution, I would have a general strike on my hands in no tinle. For it would be understood that the first task of an authoritarLan Communist government would be to abolish the trade unions. "I don't really see how we can ever get rid of inflation — the wage-cost-push sort of inflation — until we abolish the annual ritual of the unions' cost-inflationary wage claims. But as I cannot do this Without a confrontation, which would ruin me as quickly as it did Ted Heath, I propose to say nothing and wait for the so-called social compact to bust itself or work itself O1 t, There is bound to be an unholy tow between the trade unions — the Weak ones resenting being made fools of by the strong ones — and out of the suffering this will cause I an'i hopeful that a little more ennirnonsense will emerge and pore voluntary restraint will folWYou cannot really run an nuisitive society if every one oecome too acquisitive. So this budget is not going to teflate consumption. To restrain '7/11sumption and imports I propose o abolish the threshold agreeInents, which have become divisive
d inflationary (per cost of living „Vex) So to maintain the standard
living if food prices rise you will "aye to work a bit harder, which Will not be a bad thing. But as old ,,a!e Pensioners cannot do this I 2013ose to remove taxation from "I!ir Pensions, anThat is all the reflation I can OW on the consumption side. On 11e production side I propose to 1710w companies to make a profit easing the price controls. I know
this will upset the Marxists who want to see the private enterprise system collapse but I would like to remind the House that the Labour Party is committed to a mixed economy through its new 'State ment of Aims' of 1960. You will recall that when Hugh Gaitskell failed to get Clause 4 removed from our Party Constitution this new Statement of Aims recognised that 'both public and private enterprise have a place in the economy.' In fact without private enterprise we could never carry on an export trade and without an increasing export trade we could never balance our payments overseas. "Here 1 must pause to remind you that as a trading nation we are temporarily bust. Fortunately this unpleasant fact is hidden from the public gaze by the misleading official reserves figures which we publish every month. For example, we have just proclaimed that our reserves rose in October by $377 million to $7,547 million (£3,230 million) simply because I made a first drawing of $500 million on our $2,500 million Euro-dollar loan. Over two-thirds of our reserves are foreign money which we have borrowed and have to pay back over ten years.
"In the first nine months of the year we were running a deficit on our overseas trade at an annual rate of £3,860 million, of which about two-thirds is accounted for by the deficit on oil at the outrageous (quadrupled) price charged by the Arabs. The remainder of the deficit is fortunately covered by the net income from our invisibles' coming from our investments and commissions abroad. Thank God, I say, for the City.
'What worries me about this overseas trade is that the export prices of our goods have risen by a third in the past year. The volume has risen only slightly — and we are approaching a world trade recession. So I conceive it my first duty to come to the aid of our manufacturers, whatever you Marxists say. My statisticians tell me that they have been trading at a substantial loss in 1974 and that their net liquidity is now about minus £5,000 million.
"My first job then is to undo my first mistakes. I will abolish this advance payment of corporation tax and the increase, bringing it down to 50 per cent. I will not levy tax on the unreal profit created by the inflationary rise in stock values. And I will come to the rescue of companies suffering from shortage of cash — some of them have had to refuse export orders for lack of finance — by giving government guarantees to £1,000 million of medium term loans which my friend Mr Lever is hoping to remove from the money market on the 'street' and re-cycle into industry through the FFI and the banks. This incidentally will enable the banks to buy short-term gilt-edged stocks and start a recovery in the gilt-edged market where I expect to sell stock to the nonbanking public to finance the rise in the borrowing requirement without inflating the money supply. And if this does not bring down gilt-edged yields I will introduce the two-tier system of interest rates which that pertinacious commentator in The Spectator has been advocating for years. In other words, I will have a lower rate of interest for home borrowers and a higher one for foreigners.
"As the city has been a god-send to our invisible income from overseas I will do what the chairman of the Stock Exchange asked me to do at the Mansion House feast — abolish the stamp duty on stock transfers and remove the 25 per cent surrender rule of the investment currency premium from `switching'. The turnover of shares in foreign securities which London has lost to New York, Paris, Zurich and Johannesburg should come back home. It will enlarge my tax revenue from the extra commissions they earn.
"As for gold I don't mind a little hoarding of gold coins. Those who buy gold lose revenue and have less to spend on consumption, which is good in these inflationary times. I make a nice profit on minting Elizabethan gold coins, which sell at a large premium over the gold content because of the attraction of our graceful Queen's head. I am thinking of issuing new coins with the heads of the popular Prince Charles and Princess Anne which should command even bigger premiums, especially if Princess Anne is shown on a horse. But as we import more coins than we export I propose to limit the importing and purchase of Krugerrands or melt down Krugerrands for reminting as Elizabethans to sell at a profit.
"I hope my measures will do something to restore the profitability of our private enterprise sector, but in case you realise how broke that sector is and take to drink, I am doubling the duty on spirits in a vain hope that you will not drink youselves to death."
The Chancellor always looks like a weatherbeaten sea captain and in this Budget he has really acted like one — shrewd, canny and cautious. He knows that he is in command of a waterlogged, if not sinking, ship, and he has thrown out a selective lifeline to those already swept overboard (I refer to the tax and price control concessions which will help the bankrupt private enterprise by about £1,600 million) and he has told the rest of the crew to work much harder manning the pumps. A ship full of water is like an economy full of inflation: it must be pumped out by increased productivity and exports. Criticism in detail is reserved, but I salute a canny old skipper at the helm.
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