Part of Orders of the Day — Finance Bill – in the House of Commons am 12:00 am ar 17 Gorffennaf 1974.
That is also true. The Chancellor's judgment was probably warped by other than strictly economic matters. The Government were being pressed during the election campaign and shortly after it by the TUC and their Left wing to grab from the company sector some of what was called "the company fat".
There were possibly even worse motives. The long-term strategy of the Government is for far-reaching nationalisation of industry and the extension of Government control through increased dependence on Government finance. For that strategy to be effective companies will have to be far less self-sufficient for investment finance, forcing them—and I think this is what the Government intended—to look to the Government and the banks for their funds. As the company sector moved into deficit and became more dependent on the banking system it would provide a golden opportunity for a major extension of Government control of industry through the nationalisation of the banking system.
This may be taking a rather Machiavellian view of Government policy but there are plenty of Machiavelli's on the Front Bench, not necessarily present now. What is the economic deal now? Even if we allow runaway wage inflation—and we may well allow for that—sustaining consumer spending later in the year, the impact of the Budget measures on the company sector financial position resulting in a £2,000 million to £3,000 million deficit at least was always bound to lead to a collapse in investment spending, widespread bankruptcies and rising un- employment by late autumn or early 1975.
Do the Government accept this? Is that their new judgment, if not their old one? Do they believe that this is the way to deal with inflation in the absence of an incomes policy? The present wage explosion—and we must remember that wage increases are running ahead of price increases and a new norm of 20 to 25 per cent. is being set—is running away with the economy and the Government have no effective policy to combat it. A large part of the burden of later price increases will be shifted through this on to the company sector. That may mean that there is no real need to stimulate consumer spending at present.
The Government may well ask, what about priorities? It is true that this amendment is expensive—it would cost £300 million. This is an alternative to increased unemployment pay. If something is not done for the company sector very quickly there will be 800,000 people out of work by the end of the year or early next year. The increase in unemployment pay will be enormous.
Frankly I would rather put £300 million into companies to maintain employment and produce something than pay people to produce nothing. On that point alone priorities could come down fairly heavily in favour of improving company liquidity. I hope, therefore, that the Minister will be able to say that the Government are sympathetic to the idea, that they recognise the serious problems that now exist in the company sector and perhaps are even prepared to admit that they got their judgment wrong—I hope for good reasons rather than bad reasons—as I said at the time of the Budget debate.