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Mr. Deputy Speaker: Order. The hon. Lady may be ingenious, and perhaps the relevance of her comments to the Budget will come out. I hope that it will.
Ms Eagle: My comments are relevant, and I shall explain my train of thought. We have signed up, as a Government and a country, to the commitments that emerged from the women's conference. The platform for action contains a specific section on lone parents, which states that Governments must
- "provide adequate safety nets and strengthen State-based and community-based support systems . . . to enable women living in poverty"
- "preserve their livelihood, assets and revenues in times of crisis."
In the 1985 Green Paper on social security reform, the Government admitted that there were additional costs for lone parents bringing up children. The Green Paper described the need for the creation of the lone parents premium in income support
When the Select Committee on Employment, of which I am a member, looked at the issue, it discovered that lone parents who are women are the only group of women who, over the past 10 years, have found it harder to get out to work. Fewer of them, as a percentage of the total number, work now than they did 10 years ago, simply because of the difficulties of looking after children, going to work and the costs involved. Yet the Government, in the Budget, have deliberately made matters worse for them, just to save very little money.
Mr. Nicholas Budgen (Wolverhampton, South-West):
I understand the rebuke directed towards me by the hon. Member for Sunderland, South (Mr. Mullin). I am sorry that I was held up on the motorway and I plead guilty, albeit with some mitigation, to some of his charges. You, Mr. Deputy Speaker, have rectified matters by properly calling two speakers in succession from the Opposition Benches.
Although I crave the indulgence of the hon. Member for Sunderland, South, I hope that the House will give proper attention to his significant speech. The shadow Chancellor has suggested a 10p rate of income tax and I have no doubt that it is a splendid thing. Many ordinary working people must feel tremendous pride at being led by a public school activist on the make who is anxious to gain the middle-class votes of people from Hampstead and to preserve the high earnings of those at the Bar and engaged in, similar activities. It is refreshing and interesting to hear the voice of old-fashioned, honourable socialism saying that socialism is not about creating inflation by vast deficits, but is properly financed by higher taxation and redistribution. The hon. Member for Sunderland, South spoke in unfashionable but honourable terms. I hope that the myriad spin doctors now employed by the Labour party will give proper prominence to his interesting and honourable speech.
As the hon. Gentleman chided me, he said that I had gone off to get the Red Book, which I did. I hope that he will note that it is a well thumbed Red Book and I have given a little thought to the balance of the Budget these last few days. I shall do something unusual: I shall commend the Chancellor's judgment over the Budget. I have known the Chancellor, man and boy, for more than 30 years. He and I were at Cambridge together; we were at the Birmingham Bar together; we ran the Birmingham Bow Group together and we have been in the House of Commons for a long time. On almost everything that is important in politics, he and I have disagreed. I read that many of my hon. Friends were almost insulted when the Chancellor said that the financial deficit was now expected to be close to the Maastricht reference level of 3 per cent., but in light of the Chancellor's views I thought that he was being remarkably reticent in containing his European federalism to but one sentence.
Those are all unnecessary and adolescent jibes at my right hon. and learned Friend and his views over the past 30 years. Contrary to the views of some of my hon. Friends, particularly my hon. Friend the Member for Bridlington (Mr. Townend), I think that the central question that the Chancellor had to decide was properly decided. Contrary to what commentators on both sides of the House say, we know that the balance between one action and another is well constrained and the arguments are finely balanced. My right hon. and learned Friend had to decide whether to take more off the standard rate and please my hon. Friend the Member for Bridlington or be cautious and hope to have a helpful effect on interest rates.
My hon. Friend the Member for Bridlington draws on many of the arguments that have been used in the Republican party in America. Roughly speaking, the Republicans said that if taxation was cut hard enough it would create a big deficit and rising interest rates, which would force the Government to cut public expenditure. I do not know whether that happens in America, but that was the argument advanced.
The Americans' different political system and different federal structure may allow that policy to work there, but it would not work here. If we had a bigger deficit, it would merely create trouble in the money markets. Everyone knows that, although every Chancellor gives the impression of being in complete control of interest rates-- as though he decides unilaterally on their level--he is merely the biggest player in the market. Of course he has a substantial influence on interest rates, but he does not control them.
If the Chancellor had followed the advice of my hon. Friend the Member for Bridlington, we would have had a funding crisis, higher interest rates and possibly a cut in public expenditure--although that would have happened much later. The dislocation and sense of crisis created would have been far more damaging. Those effects would have had to be balanced against the stimulus that would not occur until next year in lower rates of taxation.
I believe that we should be more helpful towards interest rates. As we debate the Budget in the autumn, we forget that its effects will not come until next April and are not immediate, whereas the effects of interest rates can be immediate and variable. Let us consider the effects on interest rates. We know that there has been a dispute between the Chancellor and the Governor of the Bank of England. At this stage, no one can say who is right. The Chancellor has been applauded and it has been said that the Governor of the Bank of England has lost authority as a result of being overruled by the Chancellor.
But the Governor may yet prove to be right. The Governor is simply saying that he, as the custodian of sound money, is told that it is the Government's objective to achieve an inflation rate no higher than 2.5 per cent. per annum and he replies, "Okay--if those are my riding instructions, we should not have lower interest rates." The Chancellor says no and that, perhaps for other reasons, we must have slightly lower interest rates. This year's cautious Budget may not result in lower interest rates immediately, but it will be a factor for lower interest rates and it will certainly prevent them from rising.
Lower interest rates are felt by all the most fragile elements in the economy. Mention has been made of the construction industry. I have in my constituency one of the largest construction companies, Tarmac, which has faced considerable troubles. It was not the company's fault, but it bought an awful lot of well priced land in the south-east hoping to build houses very profitably. The company's housing sector has had great difficulties, as has every house builder in recent years.
I am told that there are only six or seven big contractors who undertake major road building contracts, and it is said that two or three of them are in an extremely dodgy state and may either go into liquidation or be taken over. The construction industry itself is in a very dodgy state at present, and for that industry interest rates are the most crucial element in the economy.
Interest rates are also important to those entering self-employment or starting up small businesses. Companies and individuals who are not making profits, but are borrowing a bit of money because they are starting out, are not terribly interested in getting 1p, 2p or 3p off the standard rate of income tax. If they are not paying any profits or making any money, all that they want is the lowest possible interest rates to keep them going for the initial and most difficult period. So lower interest rates
are good for unemployment in the sense of reducing unemployment and making it easier for people to move into self-employment.
Lower interest rates are crucial to the housing market. Of course we have had much discussion about whether something selective could be done for the housing market. I agree with my right hon. and learned Friend the Chancellor that nothing affordable would do anything selectively for the housing market, but the housing market is also important for employment.
"as a contribution to the additional costs faced by lone parents bringing children up alone."
Why have the Government, in the Budget, decided to freeze that premium and announce its future abolition? They are punishing lone parents.
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