Question again proposed,
That it is expedient to amend the law relating to the National Debt, Customs and Inland Revenue (including Excise), and to make further provision in connection with finance."—[Mr. Chamberlain.]
§ 3.55 p.m.
§ Mr. A. V. Alexander
In opening the second day's Debate on the question of the Budget, I should like to make two personal references. The first is that I am sure my hon. Friends would like me to say how much we appreciate the careful presentation of the case for this side of the Committee by my hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence), yesterday. He has always been of great service to us, and we very much appreciate his efforts. The second point is that we should like to congratulate the Financial Secretary to the Treasury upon one aspect of his initiation as Financial Secretary in a Budget Debate. He made a careful attempt to answer all the questions that were put to him, in a very courteous and very pleasant manner. I hope he will not imagine that during the subsequent discussions upon the Budget he will get away as easily all the time, as he did last night, simply by being quiet and having a very pleasant smile. I can assure him that that will not be the case, but from the purely Parliamentary point of view we wish him good luck.
I am sure that hon. Members in most parts of the Committee will agree that, difficult as the task of the Chancellor of the Exchequer was on Tuesday, the Budget which he produced, with one solitary exception, was really a very mundane affair. Apart from the new duty which, strangely enough, bears a title very much like the initials of the Chancellor of the Exchequer—I do not think the Tories will ever let him forget that — National Defence Contribution, there is nothing very substantial in the Budget upon which there can be any very long debate. But when one comes to con- 1942 sider some of the things said in the debate yester1942day, and one remembers the circumstances in which the Chancellor of the Exchequer presented his Budget, which is his sixth successive Budget and is said to be his last, there is a great deal to be said.
The Financial Secretary to the Treasury, again with that disarming smile of his, said that it was difficult for anyone to belittle the financial achievements of his right hon. Friend. [An HON. MEMBER: "Hear, hear!"] I was expecting to hear a cheer from the hon. Member for Huddersfield (Mr. Mabane). I have been reading the speech which he made in the Committee last night. The hon. Member seemed to think that there was nothing but praise to be used about the Budget. He thought that all the credit is due, if there is any credit due, to this Government, to this Chancellor of the Exchequer and to the Government party for all the happenings of the last six years. He then went on to deliver a very virulent and, I suppose in his opinion, a weighty attack upon Labour. He charged Labour with having neglected its duty in 1931, and he also charged it with arrogating to itself a special position in politics as representing the working classes. We can easily answer comments of that kind by actual quotations from friends of the hon. Member for Huddersfield. When he talks about a party arrogating to itself a special position in politics, has he ever studied a book of the kind which I hold in my hand? I have had it for 25 years. It is in paper covers, and I never part with it. Let me take this expression from a former Tory Chancellor of the Exchequer, spoken in the days when he was a Liberal Minister:The proud Tory faction think they are the only persons fit to serve the Crown. They regard government as their perquisite and political authority as a mere adjunct of their wealth and title. They cannot bear to see a Government in power representative of and resting on the working classes; a Government supported by the Nonconformists and the trade unions which cares nothing and less than nothing for the fashionable influences before which they have always bowed.That is the comment of the right hon. Member for Epping (Mr. Churchill) on the Tory tradition in regard to the arrogation of power to itself. When the hon. Member for Huddersfield has been a bit longer in politics he will refrain from the sort of attack he made upon 1943 Labour yesterday. I say this to him as one who perhaps has a little more inside knowledge about 1931 than he can ever have. If the hon. Member really knew the facts about 1931, or if he cared to study them, it would not be Labour that he would attack but the persons responsible for five years of Tory wantonness in finance from 1924 to 1929; he would be attacking the people in the Government to-day who themselves absolutely answer to the charge that the right hon. Member for Epping made years ago, that they were the party of trickery and of treachery.
§ Mr. Mabane
After that attack may I rely on the right hon. Gentleman, when his friends behind him again arrogate to themselves in future a monopoly of interest in the working classes, to turn round and contradict them?
§ Mr. Alexander
We have never attempted to arrogate to ourselves the sole right to anything. I can say this any way: I come from a working-class home. I have been at work since I was 13 years of age. I come from a home which suffered from the cruelties of Toryism all through my boyhood days, and if my hon. Friends on these benches come more from that class than do hon. Members opposite, they have a perfect right to say to the workers, "If you want to be well governed, as workers you should choose people from your own class." Another word about the charges that the hon. Member made in reference to 1931. Let the hon. Member look at the files of the "Daily Mail," not the "Daily Herald," of 1929, and read how they recorded for us how his right hon. Friend in April, 1929, left for us at the Treasury bare cupboards and empty shelves: Let him take the word of his well loved "Daily Mail," a Conservative newspaper. Then he will have a true perspective of the position.
The real Debate that ought to take place in this House this week is not upon the ordinary provisions of this Budget, because the Chancellor of the Exchequer, we understand, is shortly to make a trek, a very short one, from No. 11 to No. 10 Downing Street. Our object in this Debate should really be to take stock of the financial position as it is to be left by the right hon. Gentleman when he takes the position of First Lord of the 1944 Treasury. When I begin to study that position I cannot for the life of me understand how it is that hon. Members opposite repeat over and over again, "What wonderful people there are in charge of the national finances." "How wonderful," they say. [HON. MEMBERS: "Hear, hear."] I see that that statement is cheered once more. All right; perhaps we will see whether the cheers are repeated later when I give some of the details.
What was the position in regard to Treasury finance when the Chancellor of the Exchequer took office? He took office a very few weeks after the fall of the Labour Government in 1931. When the Labour Government fell it was on a dispute as to how the Budget should be balanced. Not whether it should be balanced but how it should be balanced. In the bill presented to the Labour Cabinet they were asked to find additional money to balance the Budget. It was a total of about £170,000,000, and the largest part of the bill was for meeting external and internal debt. We were asked to continue the payments annually to the United States of America. We were also asked to provide annually the proper allocation to the Sinking Fund for the redemption of debt. We were willing to do it. The only question was as to how to raise the money. Some people wanted to raise the money from the unemployed and the poor in a way that we did not approve, and as we could not get consent to the Budget being balanced in any other way, the crisis occurred in the political situation. Let us examine the position now at the end of six years, from that point of view. What a story it is. The Financial Secretary to the Treasury last night quoted from "David Copper-field," and I hope he will not mind my repeating the quotation. He said:Mr. Micawber conjured me to observe that if a man had twenty pounds a year for his income and spent nineteen pounds, nineteen shillings and sixpence, he would be happy, but that if he spent twenty pounds one, he would be miserable."—[OFFICIAL REPORT, 21st April, 1937; col. 1872. vol. 322.]The hon. Gentleman was careful to add the rest of the quotation:After which he borrowed a shilling of me for porter, and cheered up.That is exactly what the present Government have done. They presented the bill to the Labour Government. Ever since 1945 then they have been doing exactly the opposite of what they insisted that the Labour Government should do. The right hon. Gentleman the Chancellor of the Exchequer will leave the Treasury for the Prime Minister's residence, having produced six unbalanced Budgets on the basis of the bill that he and his friends insisted should be presented to the Labour Government. I have not forgotten that in the course of those discussions, when consultations were taking place with the other parties, the right hon. Gentleman and Sir Herbert Samuel looked at the first draft of the proposals and they said: "It is a courageous beginning, but it is not enough." Sir Herbert Samuel went on to say, arising out of that joint conference, that it was imperative there should be a further diminution of the payments to the unemployed. That was the situation in 1931. It was supported entirely by the right hon. Gentleman who was acting temporarily for the Prime Minister during his absence on the Continent. That was the position.
Let us look at the facts about the debt. The right hon. Gentleman the Chancellor of the Exchequer is going home to No. 10 after six years of the Chancellorship, after much hard work—I do not deny that—bringing his sheaves with him. But they will be sheaves of debt, debt incurred and piled up in every one of these six Budgets. The total dead weight debt in this country in March, 1931, was £7,413,308,000. According to the White Paper issued this week that debt has increased to £7,797,151,000, an increase of dead-weight debt up to this point, before we begin to talk about the new £400,000,000 of loan, of £383,000,000. Marvellous, orthodox finance! I know the Chancellor will reply, "But you do not take into account the fact that we have floated an Exchange Equalisation Fund." It is true that by borrowing—they borrowed it—they produced an Exchange Equalisation process, and that ever since it was started the House has never been given a balance sheet. We have to rest upon the plain and cold words of the Chancellor that the fund, which has been borrowed, is covered by assets. We do not know what assets; we do not know what block of currency or of bills or from what country they are at any time held. No one knows; we just have to take the word of the Chancellor that that £350,000,000 loan is covered by 1946 assets in a fund called the Exchange Equalisation Fund.
But if you allow for that you have an actual increase in the dead-weight debt, beyond that, of £33,000,000 since 1931. And in what circumstances? In circumstances which ought to have meant, if the Chancellor had followed the same methods of finance that were thrust by him upon the Labour Government, not an increase in the dead-weight debt but a very substantial reduction. What are the facts? They are, first, that by the conversion of £2,000,000,000 of War Loan to a lower rate of interest—incidentally in the long run another form of capital levy not on all the rentiers but only on those who hold War Loan—you have a reduction of the annual charge in consequence of the service of the debt, by £30,000,000. Every penny ought to have gone, on the principles of sound finance, to the service of debt. The charge upon the Exchequer for war pensions has also decreased by £10,000,000. On top of that the Chancellor, in the first years after the crisis of 1931, extorted ruthless economies from the unemployed by cuts in their rates of allowance, and he continued the operation of the means test, reducing the charge thereby on the Exchequer, and in addition he has now coming in a net increase in receipts from Customs and Excise Duties of £85,000,000 a year.
In face of these facts, if the Chancellor had been a really good and sound and orthodox Chancellor he ought to be sure to-day of a reduction of hundreds of millions in the National Debt. Instead, we find what? We find him with a heavier dead-weight debt; we find him with a seriously increased provision for expenditure. As my hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence) said yesterday, if you take the full charge, including the loan expenditure not put into the Budget, £943,000,000 this year, there is every prospect of a £1,000,000,000 Budget next year. In fact the story of the right hon. Gentleman's stewardship at the Treasury in regard to finance is this: In the years when he was making these reductions in current expenditure, instead of being frugal and really looking after the debt position, he has been using up the ordinary reserves of peace, and now he has nothing to fall back upon in meeting his preparations for war. I want to suggest that that has been the story more or 1947 less of almost every Tory administration for a century. The result was that the opposite party of that time went to the country, often perhaps with their tongues in their cheeks, with the cry of "Peace, retrenchment and reform." Certainly, always after a Tory administration there is always need both of retrenchment and reform.
Here we have all the resources of peacetime dissipated by the Chancellor of the Exchequer, and I want my friends in the country and in the House to note this now—that if we are given, as I hope we shall be given, power at the next election, let them please remember the financial situation, not created by Labour but created by this Government, which will be the legacy that we shall have to take over.
§ Sir John Wardlaw-Milne
Can the right hon. Gentleman give us the increased expenditure on social services and let us know whether he considers it is finance which has been dissipated?
§ Mr. Alexander
The hon. Member has asked a rhetorical question which he can well answer himself from the White Paper; I am dealing with the general finances of the Treasury. There is no dispute on the question of expenditure on social services. Of course there should be expenditure on social services, but I am contending that sound financial methods should be followed to provide the necessary reserves for the stability of the Exchequer and that duty has not been observed by the Chancellor of the Exchequer. It is not as though he was without instruction in the matter. He had available the report of the Colwyn Committee on National Debt and Taxation. He was told by that committee of experts that the Government ought as soon as possible to proceed to raise the contribution to the Sinking Fund to £75,000,000 per annum, and that it was very advisable if it could be done to make it £100,000,000 per annum.
What sort of a contribution has the Chancellor of the Exchequer made in that direction? I think it is fair to compare his record in the last six Budgets with the six Budgets prior to his entry into the Treasury. If you take the six Budgets prior to the right hon. Gentleman's entry into the Treasury you will find that they 1948 provided approximately £330,000,000 for the Sinking Fund for the redemption of debt. In his five Budgets up to the present one—I cannot give the final figures for the present Budget—the right hon. Gentleman, instead of providing about £280,000,000 has provided only £72,000,000, and he has again taken power to borrow to meet the statutory Sinking Fund. How much his policy reminds me of something which I read years ago in "Punch," written by Artemus Ward:Let us all be happy and live within our means, even if we have to borrow the money to do it with.That is exactly what might be said of the right hon. Gentleman. He has certainly not attempted to pay his debts. If you take the figures you will find that the right hon. Gentleman's average during his term of office is £14,000,000 per year to the Sinking Fund as compared with an average for the previous six Budgets of £55,000,000 per annum. I suggest that he will vacate the Treasury leaving behind him six Budgets which have been unbalanced in that respect to the extent of £41,000,000 per annum. In addition to that he has piled up arrears of contributions to the United States debt. I take the figure of last December, to which date the actual arrears which he leaves to some successor to negotiate are £157,000,000. On the basis of the bill which was presented with his approval and with his pressure to the Labour Government in 1931 he has shown a deficit of £41,000,000 per annum plus the accumulated arrears on the United States debt of £157,000,000.
Nor must hon. Members think that the manner in which the Government have treated the American debt is without consequence. I discussed the matter with a number of leading business men in New York last September, and whilst they were perfectly reasonable and did not expect us in the circumstances of the last few years to pay the whole of the commitments, nevertheless, they resented very much the cold and callous way in which the Chancellor of the Exchequer said "I am not paying it." He has not even discussed it and has made no overtures to try and restore good relations with regard to this commitment. Therefore, it is not much use for hon. Members opposite to talk about the great achievements of the Chancellor of the Exchequer 1949 in finance, for not only has he been unsound in producing six unbalanced Budgets but he leaves to his successor at the Treasury, at a time of rising expenditure and in a time when we are preparing for war a larger total dead weight of debt and no special reserves to meet it.
Let us look at his record on taxation. We have just raised the Income Tax to 5s. in the £, a very high charge for peace time. I do not suppose that the Chancellor of the Exchequer is proud of it; probably he thinks it a very disagreeable necessity in relation to the armament programme to which he is committed. But, nevertheless, it is a heavy direct tax in time of peace and there is no suggestion of it being static or likely to decrease. On the other hand, there is every reason to suppose, unless there is a much higher yield from other forms of taxation, which I cannot see at the moment, that he will have to increase Income Tax again before the armament programme is completed. But that is not all. What about the transfer of much of the burden from the direct taxpayer to the indirect taxpayer. The figures I have given are really startling. In the year ended 31st March, 1931, we raised from Customs and Excise Duties £245,000,000, and we are estimating a yield in the year 1937–38 of £333,000,000, an increase of £88,000,000.
I want to point out that this additional £88,000,000, raised from indirect taxation, is the alternative of the Chancellor of the Exchequer to raising the money where it should be raised, that is from those who are best able to bear it. If this was a charge on the Income Tax payer it would mean an increase of is. 6d. in the £ on the Income Tax. Really a burden of is. 6d. in the £ on the Income Tax has been transferred from the rich and Income Tax paying classes to the consumers. There used to be an old fable among hon. Members who supported Protection and tariffs and duties on commodities, that really the consumer does not pay the tax. I am interested to find that the Chancellor of the Exchequer in his speech completely gave the show away. He made this statement when he was considering alternative forms of increasing his revenue:I might, of course, increase indirect taxation, but the prices in the shops, which particularly affect wage-earners, the lower grades of clerical workers, and the smaller rentiers whose incomes are largely derived from fixed 1950 interest-bearing securities—those prices already show a tendency to rise, and I did not want to do anything to push them any higrier."—[OFFICIAL REPORT, 20th April, 1937; col. 2615, Vol. 322.]That, of course, is a complete admission that the taxes which the Chancellor of the Exchequer has been raising by Customs and Excise are paid by the poor. It is true that they are paid by all consumers, but he knows that four-fifths of them are paid by the workers. There is not much room for pride or for special credit in the Chancellor's record in that regard. The right hon. Member for Epping in his more regenerate days, speaking on the Peoples' Budget told us that it was his aim and his profound belief that the tendency of the nineteenth century was steadily to decrease the ratio of percentage of indirect taxation and gradually to arrive at a position raising all the revenue required from direct taxation was the goal to which the right hon. Gentleman was committed. Now, we are going absolutely in the other direction. In this year's estimates 38.6 per cent. of the whole revenue of the Budget and 40 per cent. of the total tax revenue will be paid by the poor. The question, therefore, whether the Chancellor of the Exchequer has been a sound Chancellor in relation to taxation can be answered in this way, that he has, as I have often said before in this House, performed the usual function of a Tory Minister, to look after his friends while in office, and in times of stress, when money is more difficult to raise than at other times, to relieve his friends as much as possible and place the largest possible share he can on the working classes.
Now I come to another point of criticism and that is the result of the Chancellor of the Exchequer's financial policy in relation to prices. The Financial Secretary said something about it last night and made some comparisons between the prices of to-day and those of seven and eight years ago. I want to say to him that it really will not do for the Government to answer charges about high prices to-day by a formula of that kind. If he is going to take that line perhaps he will also look up the record of the reductions in the wages of the workers, in so far as they are available from the Ministry of Labour's figures in the years 1931, 1932, and 1933. I have been looking them up this morning. It must be remembered that there are many 1951 workers who do not come within the records of the Ministry but who also suffered by way of reduced wages. But if you take those classes of workers of whom there is a record you will find that they lost £895,000 per week, which must be set off against the fall in prices. In those three years, they probably lost from £50,000,000 to £60,000,000 per annum in wages.
The spontaneous outbursts which are occurring among sections of the workers in various parts of the country at the present time, in many instances not organised or engineered by their unions, indicate how severely they are feeling the effects of the cost of living to-day. The "Ministry of Labour Gazette" was quoted yesterday by my hon. Friend the Member for East Edinburgh and I have no doubt that he would be much calmer and more conservative in his criticisms on this point than I am. I am sure, however, he will not mind it if I say that useful as are the figures of the Ministry of Labour cost of living index, they are not adequate for the purpose of giving a true picture of the price situation at any time. They have in their limited survey found a rise of 10 points in food alone as between May last year and March this year, but the Committee will forgive me if I make a further reference to certain other figures which we now have and which I mentioned last week. Those are figures given by Mr. Ronald George in a paper read to the Royal Statistical Society in which he pointed out that in 1933 the cost of food for an adult, for a week, on the minimum scale laid down by the British Medical Association was 5s. 11d. and that that had increased, on the cost-of-living index figure for July, 1936, to 6s. 9d. I pointed out last week that, since July, 1936, the cost of living has so increased in the food items, that the same diet would last week have cost 7s. 3d.—an increase of 1s. 4d. on 1933.
In other words, those who, because of their poverty, have to live upon the kind of food scale laid down by the British Medical Association are having to pay £1 where they had only to pay 15s. 6d. in 1933. That is the real measure of the rise in prices to-day. There is no doubt in the minds of those who are concerned, day by day, with the wholesale business of buying food commodities that the 1952 figures given by the Ministry are from six to eight weeks behind. The present tendency in the wholesale food market shows that, within a few weeks, retail prices are bound to rise substantially in comparison with the corresponding period of last year. I compare wholesale prices of April, 1937, with those of January, 1936. Take middle quality wheat, Manitoba No. 2. In January, 1936, it was 36s. 6d. a quarter and in April, 1937, it was 69s. 6d. Barley increased in the same period from 8s. 4d. to 10s.; oats from 5s. 10d. to 8s. 4d.; maize from 18s. 3d. to 29s. 6d.; flour from 27s. 9d. to 43s. 9d.; beef, per stone, from 3s. 6d. to 4s. 4d. and up to 5s.; mutton from 5s.-5s. 8d. to 6s. 4d. and 8s.; bacon from 85s. to 92s. and 96s.; butter from 97s. to 105s.; cheese from 625. to 68s.; cocoa from 38s. to 80s.; potatoes from 75. 6d. to 10s., and sugar from 18s. 9d. to 20S. 1½d.. When these wholesale prices come to be related in the course of the next few weeks to retail prices, you are bound to see a further substantial increase in the cost of living.
I agree at once that the Government and the Chancellor cannot be held responsible for the rise in world prices so far as that is affected by external factors. But I do say that prices are also considerably affected by the financial policy of the Government. My hon. Friend the Member for East Edinburgh warned them that to issue a loan, to seek to deal by any policy of inflation with the necessary expenditure-as they regard it-on armaments, would be bound to have a serious effect on the price level and injure the general position and the standard of life of the community. That cannot be confined to the price level of food commodities. I take actual figures from the Board of Trade Journal of 8th April, which show that the average wholesale commodity index price for March, 1937, stood at 107.3 compared with 91.7 in March, 1936, or an increase in 12 months of 15.6 points. May I give one or two special examples? Coal increased 12.1 per cent.; iron and steel 10.7; nonferrous metals—required for armaments —55 per cent.; cotton 27.2 per cent.; wool 25.9 per cent.; other textiles 6.2 per cent.; chemicals and oils 8.3 per cent., and miscellaneous 22.6 per cent. Of course, with rising commodity figures we are faced, not only with a threat to the workers' standard of life but with even 1953 greater charges to be met next year in the Government's general expenditure and in the case of the armaments programme. I can see no great check upon that as a result of the financial measures proposed by the Chancellor of the Exchequer.
May I refer to the effect of the Chancellor's policy upon another factor which was used against the Labour Government in 1931? It was said then that we had no policy for dealing with the growing danger of the adverse balance of trade. Let us see how the Chancellor's policy has affected that. If we take the figures for 1936 we find, first, an enormous increase on the year, in the adverse balance of trade—the total being something between £350,000,000 and £360,000,000. What is more serious is that when account is taken of all the credit to be got from invisible exports by insurance, shipping receipts and investments there is actually a deficit, on the balance of payments, on our external trade last year, of £19,000,000. Is that position improving with the Chancellor's policy? I think I can show that it is deteriorating. The figures of imports and exports for the first three months of this year, compared with corresponding periods of the last two years, show that in 1935, for the first three months, imports were £59,000,000 in excess of exports. In 1936 the corresponding figure was £78,000,000 and in 1937 it was 190,000,000, so that the adverse balance of trade, in this three months period, has enlarged since 1935, by £30,000,000. If we continue on that basis during the whole of the year, which I hope may not happen, we shall see an increase in the visible adverse balance of something like £120,000,000 and in all probability we shall have a deficit in the balance of payments, not of £19,000,000 hut of something nearer £100,000,000. It will be interesting to see the effect upon foreign opinion in financial circles and upon the foreign exchanges.
The Committee will now permit me to say a few words next with regard to the main new proposal in the Budget. I must not be unfair to the right hon. Gentleman and there are some proposals in the Budget which we welcome. There are one or two proposals for the purpose of checking evasion and the right hon. Gentleman can rest assured that, however much we may oppose him on other 1954 matters, we shall support him always in his efforts to deal with persons who seek to evade their proper responsibilities to the State. But I want to deal with the National Defence Contribution. The position is that the right hon. Gentleman, after a great deal of pressure from this side, with regard to the steeply rising prices of materials required for armaments and the accumulated evidence of increasing profits, has ushered in this new proposal in an attempt to deal with that situation. I heard one or two comments from the other side on Budget Day which seemed to indicate that hon. Members thought that my hon. Friends on this side would strongly welcome this proposal. Many of my hon. Friends would welcome effective steps by the Chancellor to stop profiteering in armaments but until we get a great deal more information about these proposals, we can have no confidence that they are going to check profiteering in armaments.
I should say from experience of other Measures—not of exactly the same kind, but based on the same principle like the Excess Profits Duty—that a check on profiteering is just the opposite to what will be secured by this new tax. I agree with the criticism made by my hon. Friend the Member for East Edinburgh and by the right hon. Gentleman the Member for Hillhead (Sir R. Home). I think it is a false conception of the way to deal with profiteering, to allow the profiteer to charge the prices and make the profit first, and then to put a tax upon some of the profits. That is not the way to deal with it. If we are to judge by some of our experiences during the War and in the immediate post-war period, it would be fair to say that a method devised on those lines, so far from placing any incubus on the profiteer as such, will merely result in a new kind of impost on the general consumer. The profiteer will first charge the prices and the consumer will pay them. Then when the gross profit has been ascertained by the profiteer, he will look around in every nook and corner for some method of expenditure by which he can escape, before the net assessment is made, from his liability to the new duty.
I have a case in mind of a factory built by a great firm who were contractors during the War for food supplied to the troops in France. That factory cost about 1955 £200,000 to build and equip and it was built in order that the firm might escape from Excess Profits Duty. The building stood idle for 12 years after the War—an idle factory and idle plant, with idle men all round the country. There was a complete waste of all that capital and labour for all that time, and, finally, that factory was bought for less than one-quarter of its cost. That is the kind of thing which this method of dealing with the problem is likely to induce. The Financial Secretary last night said that this would be different, because Excess Profits Duty had gone up to as much as 80 per cent—and certainly in later times it did reach that figure—and we are not now making any such impost as that. But I am not sure that that is a virtue of the scheme. If you are first going to allow the profiteer to make excess profits and then, instead of collecting 80 per cent., you are only going to collect one-fifth or one-fourth or in any case not more than one-third, the profiteer gets away with at least two-thirds of the swag. In regard to large businesses with large turnovers, even in respect of the one-third, there will be a great temptation to evasion and a great part of the return which ought to accrue to the Treasury may be dissipated in actual operations and spendings which can he charged against the gross profit before it comes to assessment of duty.
I hope that before the right hon. Gentleman puts this into the Finance Bill and makes it a permanent part of the financial policy for the year, he will reconsider the question from that angle. I hope that he will also give us to-night in more detail some of the information which was asked for in the course of yesterday's Debate. Certainly we had a little information on the matter from the Financial Secretary last night. It was interesting to know the general basis—although we have not yet had the details —upon which capital is to be computed. It was interesting to know that the duty is to be charged first, before assessment for Income Tax and that the amount paid in duty will be regarded as an expense and therefore deducted from the sum assessible for Income Tax. But I hope we shall hear, for example, what it is proposed to do in the case of mutual concerns and Industrial and Provident societies in regard to the computation of their capital. I can follow what the Financial 1956 Secretary said about the proposed method of dealing with company securities, with preference and ordinary shares, and debentures, but what about institutions in which there is a capital which fluctuates every day, a capital which is obtained and used on the basis of continuous lending? I think it would be helpful if the right hon. Gentleman could give us some information on those points to-night.
I apologise to the Committee for having detained them so long and I only say this in conclusion. Perhaps I may be found numbered with the old statesman who said that he never really brought himself to forgive his political enemies but he did his best to see that they were put in a position in which, at least, he could sympathise with them. I think that on the whole, after six years of budgeting at the Treasury, the right hon. Gentleman's record of unsound finance and unbalanced budgets, of "scooping the pool" and leaving nothing for his successor, is one of which he can hardly be proud and that the best thing that we can do is to sympathise with him.
§ 4.50 p.m.
§ Mr. Clement Davies
Everybody has been congratulating the Chancellor of the Exchequer upon the lucidity and clarity of his Budget statement. I join in congratulating him in that respect, but I should like first to congratulate the country upon its wonderful resilience, the wonderful way in which it has shown its power of recovery and of extracting itself from any Slough of Despond, however deep. I would like to congratulate the country also upon the power it has shown of recovering its trade activity, whatever fetters may be placed upon it. One can congratulate the Chancellor of the Exchequer upon the expansion of the revenue, but I cannot congratulate the right hon. Gentleman upon the last part of his Budget statement or upon the methods there proposed. Ever since 1909, when the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George) introduced into his Budget matters which were really extraneous to the actual finance of the year, that precedent has been followed, and in my opinion it has been followed with disastrous results. One knows the reasons which induced the right hon. Gentleman the Member for Carnarvon Boroughs, at that time, to attach to his Budget matters 1957 by which he hoped to get social legislation, which was being denied to him by another place up to that time. But why has the Chancellor of the Exchequer attached to this Budget something which is entirely unnecessary for the purposes of the present financial year?
Can anyone deny that the right hon. Gentleman had, before he came to that later part of his statement, already balanced his Budget? He had to meet an expenditure of £862,000,000, and he estimated a revenue of £847,000,000. The estimated deficit was £14,800,000, which was nearly met by the extra threepence on the Income Tax calculated to raise £13,000,000 in the present year. That left a deficit of £1,700,000, a sum which he rightly described as trifling. I suggest that he had in fact at that point balanced his Budget because it is impossible to estimate within £1,500,000 or £1,750,000, over or under, when you have to provide a total of £868,000,000. I wish Chancellors of the Exchequer of to-day and of the future would read the Budget statements of the greatest Chancellor of all time, namely Gladstone. If they would follow that purist, they would not fall into the traps into which so many Chancellors have fallen since.
The Chancellor on Tuesday rightly said that everybody would admit that the Government had played a part in restoring prosperity to the country, but if Governments are entitled to take credit for that, they must also take the blame for bringing about conditions which make trade conditions bad or perhaps almost impossible. It is, as I say, amazing how this old country will recover in spite of difficulties which are very often imposed on it by Governments, but the Governments must take the responsibility. The right hon. Gentleman the Member for Hillsborough (Mr. Alexander) was right in what he said about the slump in 1931. To a very large extent it was due to the inaccuracies in high finance of the right hon. Gentleman the Member for Epping (Mr. Churchill) when he was Chancellor between 1926 and 1929. It is not necessary for Chancellors of the Exchequer to go in for new methods of taxation. I agreed with the Chancellor of the Exchequer when he said that he rejected an increase in indirect taxation. I do not believe in indirect taxation. I suppose I am too much of a purist or a revolutionary ever to hope that such a 1958 method as the single tax will come about, but the single tax is the fair tax. The only fair tax levied to-day is the Income Tax, where every man is called upon to bear his fair share according to his ability. He can, and, of course, he should, cut down his expenditure to meet his income, after making his fair contribution towards the country.
Now I want to come to my real objection to the Chancellor of the Exchequer's new suggested tax. My first and fundamental objection to it is that it offends against the principles of taxation. It is a double tax; secondly, it is a double tax upon certain selected trades, companies and industries. Thirdly, it is not entirely upon all those selected trades, but only upon such of them as failed to make profits during the periods 1933–34–35. Those who were fortunate during the slump to make large profits will escape this extra tax. The Chancellor will say to those who were doing well during that time: "Continue to do well and I will not tax you a single penny more than the ordinary taxation, so long as you do not increase the profits which you have been making in the past." To the other people he is going to say: "You have gone without profits from 1931 until now; I will see to it that if you make any profits from now on there will be an extra tax upon your backs over and above the ordinary taxation which I put upon the backs of others. Dare to do better at your peril." That is the full nature of this new form of taxation.
I have said that it is a double tax. In 1931 Lord Snowden introduced, in his Budget, a complete travesty of the Land Valuation Sections of the Budget of the right hon. Gentleman the Member for Carnarvon Boroughs. Lord Snowden did not propose to value all land; he did not propose to value agricultural land and put an increment value duty on it. He proposed to value developed land and put an extra tax upon it over and above the Schedule "A" tax which that land was already paying. The Chancellor of the Exchequer at that time joined with the others in compelling Lord Snowden to withdraw that tax and Lord Snowden had to content himself wilth a bare formula, which may have satisfied his soul but brought not a penny piece into the nation's purse. That was double taxation; and if it was 1959 wrong then, according to the Chancellor of the Exchequer, it must be wrong now. What justification can there be for upsetting trade? [Interruption.] I would tell hon. Members who interrupt me that when I have conscientiously made up my mind in regard to a matter I do not hesitate to say it in this House. I have never hesitated to go into the Lobby to support the opinions which I have expressed on the Floor of the House.
What possible justification can there be for upsetting trade just when it is improving? Why should not the Chancellor of the Exchequer have stuck to the true principles of finance and taxation? If it was necessary to raise more money and necessary, as I believe it is, for us to insure ourselves against aggression, he should have put the matter upon a fair basis, so that everyone could bear his fair share. He should have put it upon the Income Tax. In that way it would be spread evenly on the shoulders that can and should bear it. This tax, I agree, is upsetting everyone with the exception of, as the right hon. Gentleman the Member for Caithness and Sutherland (Sir A. Sinclair) rightly suggested, the lawyers and accountants. My own profession has been doing not too well for the past six years, but it seems that the Chancellor of the Exchequer is providing it with a harvest that sorely tempts me to go back to it. But why does the Chancellor select particular persons for taxation and leave out the others? Why is it that the lawyers, accountants, stockbrokers, the rentier class, and the wage-earners are not brought under this tax? Why differentiate between any classes? The only reason I can suggest is that these people I have mentioned are the voters, and the Chancellor's sympathy is going out to them. It is apparently thought better to tax the trades upon which the professions, the wage-earners and the rentier class depend for a living. The voters will not notice that they are being taxed, so all will be well, and another election will be won.
The small trader making up to £2,000 profit is exempted completely and even the one making up to £10,000 gets a certain amount of exemption. Why should the small trader be specially selected? Is it because, although his profits may be small, his voice is large and his votes 1960 numerous? Is it because it is so difficult to trace where the incidence of this tax may be falling? The Chancellor does not merely discriminate between one section and another section. between the trader and the professional man; he discriminates between trade and trade. Those trades that have done well in the past will scarcely suffer. Those that have done badly will be punished.
Let me give some figures taken from those published by public companies. What the Committee will find is that those companies which have been selling commodities direct to the public have maintained their profits and possibly even increased them throughout the period of the slump, but those which have been producing, especially raw materials and primary products, are the very ones that have suffered. Take Woolworth's: In 1931 they had a dividend of 40 per cent.; in 1932 70 per cent.; in 1933 and 1934, 80 per cent.; in 1935, 80 per cent, plus a bonus of 20 per cent. and a capitalised bonus of 100 per cent. The Chancellor is going to take the three years from 1933 to 1935. I do not suppose that Woolworth's can make a dividend above the average for those years plus a capitalised bonus of 100 per cent. in the future.
Take the well-known caterers, Lyons: They had a steady 22½ per cent. from 1931 to 1935. Imperial Tobacco had in 1931 a dividend of 15 per cent., plus a bonus of 7½ per cent.; in 1932 and 1933, 15 per cent., plus a bonus of 5 per cent; in 1934, 15 per cent., plus 7½ per cent.; and in 1935, 15 per cent., plus 9 per cent. The International Tea Company had a steady dividend of 30 per cent. throughout the five years. British Insulated Cables had 15 per cent. from 1931 to 1934 and 20 per cent. in 1935. It is necessary to mention my own company, because it is supplying a commodity which the public needs. It returns a steady 15 per cent. without variation from 1932 to 1935. Much increase in the dividends of these people cannot be hoped for. The Chancellor cannot hope to get anything out of them except the ordinary taxation.
Let me turn to some other businesses. The Bradford Dyers from 1931 to 1935 returned a dividend of nil, not a penny piece. Coming to the steel manufacturers, Richard Thomas & Co. had nil in 1929 and nil from 1931 to 1933. In 1934 they 1961 had a dividend of 6 per cent., and in 1935 it was 12½ per cent. Baldwins had nil from 1929 to 1933; they had 2½ per cent. in 1934 and 7½ per cent in 1935. Take Furness, Withy & Co. They reduced their capital. Companies which have tried to put themselves in order will be penalised because they have done so. The mere fact that they reduced their capital will be utilised against them. Furness, Withy & Co. had a dividend in 1931 of 6 per cent., and in 1932 3 per cent. From 1933 to 1935 they had a dividend of nil, and theirs is a general company, shipbuilding, shipping and everything else. John Brown & Co. had nil from 1929 to 1934, and a sudden jump to 16┓ per cent. in 1935, on a reduced capital. Take a producing company with which I am connected, which trades in West Africa, buying cocoa and the necessary fats and oils which come to this country. From 1931 to 1933 they had no dividend, but in 1934, owing not to increased armaments but to changed world conditions, they had a dividend of five per cent., and in 1935 they had 10 per cent.
What does the Chancellor hope to get? One has only to turn to the morning's newspapers and see at once the effect of his proposals. One newspaper has carefully divided the businesses into two classes. One is described as vulnerable to the National Defence Contribution. It consists of the producers that have gained nothing. The other class, the invulnerable, have been making high profits throughout the period. On the invulnerable there has been a slight drop such as one might expect because of the natural excitement on the Stock Exchange, but on the vulnerable there has been a drop of three per cent. in one day alone. That is bringing it home to them that they are going to be attacked. The Chancellor is going to punish the Bradford Dyers, the Lancashire Cotton Spinners, the shipowners, the shipbuilders, the mines and the producers of the raw materials and primary commodities. There is a pat on the back for the caterer, but heaven help the producer of the food; there is nothing for him except the possibility of further taxation.
That is my main objection to this tax. But there are other objections. It offends against so many of the canons of proper finance and taxation. The right hon. Gentleman the Member for Hillsborough 1962 mentioned the tremendous expense that this tax will involve to the community at large. There is no company or trader in the land that will not be calling on accountants to go into all the figures possible to enable him to decide which of the two options is going to pay him better. You are going to upset every office while you go through your valuations. These, I now understand, are to be made upon the cost of the business. Why discriminate between one person who happened to buy when the market was high and the man who came in later at a low period? Concerning valuation, we are told nothing about what is going to happen in regard to goodwill. That is often the most valuable thing the company has got. Many people will be employed upon the work of valuation and their figures and documents will then be presented to the Inland Revenue. Is the Inland Revenue going to accept them on the face of the documents? Of course, it is not. It cannot, and the hardest worked Department of the Government to-day is the Inland Revenue. Yet you put the further great burden upon its back of checking all these valuations.
Look at the enormous expense it must involve to the community as a whole. Innumerable disputes will arise, as they did under Excess Profits Duty. Years will elapse before final agreement is reached, and then, as happened under Excess Profits Duty, a slump will inevitably come. Heaven forbid that it should be as bad as we have gone through, but it will come—it may be in five or ten years. By that time the Government will be satisfied as to the amount due. In one case, under Excess Profits Duty, it found it was entitled to £3,000,000, but the company was then in the hands of the Receiver and there was not a penny piece for the Government. Lawyers and accountants had had a rich harvest but the Government got nothing.
What is to be the effect of the tax on the holding and subsidiary companies. A question was put to the Financial Secretary to the Treasury last night with regard to that, but he asked that the question be postponed. Dare I suggest that possibly the Chancellor of the Exchequer has not thought out all the ramifications and repercussions of this tax before proposing it on the Floor of the House, and that the answer as to what is to happen to the holding and the subsidiary companies 1963 is not easily forthcoming. Take the holding companies that have their subsidiaries abroad. What is to happen in regard to them? If they are induced to keep their earnings abroad, that will lessen the amount of invisible exports, at a time when everyone—the Chancellor of the Exchequer and the President of the Board of Trade—are crying out for increased export trade.
May I ask another question? What is to happen in the case of a company which has absorbed another company? I know of a case of two companies trading side by side in the same commodity, both manufacturing and both selling, where one company made an offer to the shareholders of the other company and said that if they would take the shares of company A in return for company B, the two companies could then be amalgamated. The company still remains the old company A. I suppose that during the coming years it will have the profits of the two companies added together, and presumably, since the two companies are now working as one instead of being in competition, the profits ought to be increased. Are they to be taxed on the basis of the old profits of company A in 1933, 1934 and 1935? I hope the Chancellor will bear that point in mind.
It is said that this is an abnormal time, that abnormal profits are likely to be made, and that it is right that those profits should be taxed, just as they were when the Excess Profits Duty was imposed during the War. There is, however, a fundamental difference between now and that time. Up to 4th August, 1914, trade had been running normally and profits had been normal. On 4th August, the cataclysm came. Prices went up, expenditure went up, and it had to be met; it was met rightly and fairly by asking for a further contribution from those excess profits that were being made. There was there a comparison between the excess and the normal, but in this case we have passed through the abnormal period, and the Chancellor is going to take that abnormal period as the normal. That will be his standard. He has fixed the years 1933, 1934 and 1935—years when we were just through the abnormal period—and he has said that they are to be the standard, that he will tax on that basis, when we have just got into the 1964 normal period, having come through the abnormal period.
Moreover, why is there this differentiation? Why attack the ordinary shareholder and leave unattacked the preference shareholder? Both of them depend upon industry and trade. The ordinary shareholder has had to suffer all through the period of depression, and he has gone without a penny piece of dividend. If there was anything left which might have gone to him, he was the man who had to see that the buildings and the plant were kept in order, because if they failed and if the companies failed to pay preference dividend, the whole thing collapsed. The ordinary shareholder had to bolster up everything, especially the preference shares. The preference shareholder will continue to pay his Income Tax and in some cases his Super-tax; but in the case of the ordinary shareholder, before he begins to draw anything, having seen to the preference shareholders, having seen to the payment of debenture interest, and having seen to capital, if there is any profit left over, the Chancellor will compare it with the profits in 1933, 1934 and 1935, and say that he will take one-third, one-fourth or one-fifth as the case may be. Then, on what is left, the ordinary shareholder will pay what the ordinary man pays. Why punish the ordinary shareholder who is, after all, the man who is really doing the work—he is the worker —whereas the preference shareholder is always protected?
Finally, it was emphasised that this is to be a temporary tax, but I noticed that the Chancellor refused to commit himself as to the length of time. When he spoke about its being temporary, I wonder whether he watched the faces of hon. and right hon. Gentlemen opposite. I realise that there is the possibility of a slight difference of opinion between them as to whether the tax is a good one or not, and I realise that not all hon. and right hon. Members opposite belong to the co-operative wholesale movement, a movement which this tax will undoubtedly hit. Moreover, there will come a change, there is bound to be a turn of the tide, there is bound to come a time when another Chancellor of the Exchequer from the benches opposite will be on the Treasury Bench: does the right hon. Gentleman think that in that event another Chancellor will willingly discontinue this tax?
1965 Will he not call it by some other name, such as a "social reform tax"?
I would ask the Chancellor of the Exchequer whether he recalls one incident told to me by the late Sir Austen Chamberlain of the occasion when his late father had been invited to go to Hawarden to see Mr. Gladstone, after his retirement. It came as a matter of great surprise to me that the two were on specially friendly terms, considering what had happened. Sir Austen went on to say that when Mr. Joseph Chamberlain ca me back, they all gathered round to find out what the old man had said, and the reply of Mr. Joseph Chamberlain was that the old man had spent the whole time denouncing Harcourt's Death Duties as being unsound finance. Mr. Joseph Chamberlain was in favour of them, and tried to defend them, but the old man was so adamant that at last Mr. Chamberlain fell back into saying, "Well, it is only a small tax and will never be increased," and at once the old man pounced and flashed back, "Wait—whenever you get a Chancellor of the Exchequer who has to find more money and has not got the strength to add to the Income Tax, he will go to the Death Duties in order to make up his deficit." That is precisely what has happened.
The Chancellor says that this is a temporary tax. Does he really believe that? Once a tax is imposed, it is practically impossible to take it off. What does he hope to gain? I assure the Chancellor, if he does not know it already, that not a single vote which is being cast for the other side will be cast for him because of this tax. This tax is a bad tax fundamentally, and I am opposed to it. As I said earlier, if I believe conscientiously that it is a wrong tax, I shall not only speak against it, but I shall vote against it.
§ 5.25 p.m.
§ Major Owen
I have listened with a great deal of interest to the attack which has been made by the hon. and learned Gentleman the Member for Montgomeryshire (Mr. C. Davies) upon the new proposal in the Budget. What has struck me particularly is the difference between the reception given to that tax in the Chamber and in discussions outside the Chamber. It can safely be said that it was received with the greatest gloom by 1966 hon. Members opposite when it was announced by the Chancellor on Tuesday, and that when hon. Members went into the Lobbies and into the Smoking Rooms the language which they used about the tax was language which certainly would not be permitted within the confines of the Chamber. I might even say that the language was rather turgid in quality. [An HON. MEMBER: "Give an example."] I am afraid that if I were to give an example, I should be called to order immediately. However, the remarkable thing is that the tax has been received so quietly within the Chamber. If it had been introduced by Mr. Snowden, when he was Chancellor of the Exchequer in the Labour Government, there would have been the greatest imaginable outcry. But what has happened in this case? The President of the Federation of British Industries gave it his blessing, almost immediately after it was announced and before either he or anybody else could have had time to understand its implications. Because it comes from a Tory Chancellor in a National Government, everything is all right, and we must accept the tax without any further discussion.
I do not wish to cover the ground which was covered by the hon. and learned Gentleman the Member for Montgomeryshire, but this tax differentiates between different industries and even between different companies in the same industry. It makes two classes of the companies engaged in industry. There are, in the first place, those who went through the years of depression and maintained a fairly even level of profits. It is the company which has been struggling to maintain its existence, which has taken upon itself the duty of putting its finances in order, and which has not paid anything in the way of dividends that is going to be very severely penalised. I believe there is truth in what has been said in certain organs of the Press and what has been said freely in the Lobbies of the House. This tax will penalise those companies which have followed a policy of financial probity and soundness, but it will give an advantage to those companies which have watered their capital, issued bonus shares and all that sort of thing, practices which we know in the past have led to serious difficulties in trade and industry.
1967 What is to happen to those industries which have been struggling to maintain their existence during the depression—for instance, the cotton industry? For years they have been struggling in Lancashire and now they are beginning to see a revival in world trade, but the Chancellor comes along and tells them that he is going to compare their profits now with their profits in 1933, 1934 and 1935, that he is going to find their standard rate of profits for those years, and that if they make any profits now he is going to take one-third, one-fourth, or one-fifth of them before they have time to build up fresh reserves. I am very glad that the hon. and learned Gentleman opposite is opposed to it. He is the first who has had the courage on the Floor of this Chamber to draw the attention of the Chancellor to what has been freely and generally said outside. There is, I think, some of the language that I heard which I can quote without being unparliamentary. One description of the tax that I heard was that it was "Communism without bloodshed."
A good many hon. Members above the Gangway received the proposal on Tuesday with a great degree of favour. It reminds me of the old Latin saying, "Timeo Danaos et done ferentes"—"I fear the Greeks, even when they bring presents." I think that there must be something behind it. Why has the Chancellor introduced this tax at this time when he hopes to get only a paltry £2,000,000 from it? He could have all he needed by an extra 3d. on the Income Tax, and the whole country would have been prepared to receive it and to defend it. What is there behind it? Is it, as has been hinted by the hon. Gentleman opposite, a bit of a sop to the Labour party? Is it because the Government fear labour troubles in the country and are putting this forward as a political stunt to curry favour with the working classes? This is really a question which the House is entitled to ask. Why is it that a tax of this kind, cumbersome to collect, which will put industry into serious difficulties and cause a great deal of expenditure has been imposed at this time when the Chancellor expects to get only £2,000,000 from it this year, and even in a full year no more than £25,000,000, and possibly only £20,000,000?
1968 Is it worth while to put an imposition of this kind upon industry just as it is beginning to recover? We all sympathise with the Chancellor's intention, if it is his intention, to prevent profiteering by armament firms, but is there not a better and shorter way of doing that? Could not the Chancellor, with all the technical information at his disposal, have brought forward something simpler and fairer than this cumbersome, unwieldy and costly experiment: Speaking on the Budget proposals 12 months ago, I mentioned the great increase that has taken place in indirect taxation, and I made an appeal to the Chancellor then not to increase the burden which was already so heavily laid on the shoulders of the working classes. There has been a natural increase last year in the Customs and Excise duties. There will be an increase again this year. That burden is continually going on, and I want to congratulate the Chancellor, at any rate, for having taken compassion on the working classes by not adding to the indirect taxation in this Budget.
The thing that strikes one first in this Budget is the staggering and stupendous size of the total amount. When we look back to 1914, we find that to-day, in a time of peace, when there is no war, at least, in the immediate offing, the total of the Budget is nearly five times as much as it was in 1914. It is twice as much as the Budget total in 1915, even after the War had been in progress for a year. This is a staggering total, and yet it is being done in a time of prosperity. I remember the Chancellor saying that he now saw the opportunity of leaving "Bleak House" and entering "Great Expectations," but he has taken us back into a far bleaker house than anything he took us out of. May I again emphasise the real danger which may arise from the Government's policy of rearmament and in taking from industries, which are just recovering from the slump, some portions of the profits which might otherwise be used in order to get ready to meet the next slump? I was reading yesterday the report of the Director of the International Labour Conference which has been published this week, and I would like to quote a paragraph from it. This is what he said:Perhaps the most outstanding lesson of the slump is to be found in the profound change which it has produced in ideas about monetary policy. In this field more than in 1969 any other lies the key to economic prosperity and social progress. The demonstration that in one country after another the upturn in business and employment coincided not with the reduction of wage rates, the cutting of costs, or the deterioration of working conditions, but with the abandonment of deflation and the adoption of monetary expansion has made a deep impression upon the world. As a result, the whole outlook on the future of social and economic policy has undergone a radical change.To the conviction that Governments must Intervene to ward off or to attenuate depressions is added the belief that that if the secrets of a new technique can be mastered, they can take effective and appropriate action.… For the first time, we are witnessing the deliberate attempt by Governments, such as those of Sweden and the United States, to construct machinery for arresting the downward swing of the pendulum when it sets in, and thus averting another economic cataclysm. Instead of passively awaiting the onset of the next hurricane in the old spirit of fatalism, some measure of forethought, contrivance and calculation is now being applied in order to withstand it.I would like to ask the right hon. Gentleman whether he is providing any measure of forethought, contrivance or calculation in order to withstand the slump that is to come upon us. It would have been far more beneficial to the country as a whole had it found in this Budget some preparations which would enable the country to face the future with equanimity and to enable it to overcome whatever slump may be ahead.
§ 5.40 p.m.
§ Mr. R. C. Morrison
I hope that the Chancellor will not be misled by the scanty attendance on these benches and the benches opposite into thinking that the proposals of the Budget are likely to go through easily, if I may judge by the reception that they have had outside. The forceful speeches delivered by the right hon. Member for Hillhead (Sir R. Horne) yesterday and the right hon. Gentleman this afternoon give some indication of the feelings which are running among business people about the Budget. The right hon. Gentleman has been a little unfortunate inasmuch as his sixth Budget is the least popular and that his Coronation Budget has not been a startling success. The Chancellor is having what is called a bad Press, but not only in the Press, but in the buses, trams and tubes one can hear the general trend of conversation. I have not heard one word of eulogy of the Chancellor and his Budget. Indeed, I heard an expression used by a bus conductor to-day 1970 when he was discussing the matter with some of the people inside his bus. I fail to understand it, but there may be some hon. Members who understand it. He said that "The N.D.C. was N.B.G."
One of the bitterest comments in the newspapers this morning was that even a Labour Chancellor could not have done worse. Had this proposal been introduced by a Labour Chancellor I think that hon. Gentlemen opposite—to use a colloquialism—would have lifted the roof off. The House of Commons would have been crowded. There would have been deputations of people seeking for the head of the Chancellor on a charger. When I saw a headline in one of the leading financial papers to-day—"Chancellor's Budget; panic on the Stock Exchange" I opened my eyes and wondered whether it was a Conservative Government and a Conservative Chancellor. I thought that the brightest and most entertaining part of the Chancellor's speech was that in which he dealt so eloquently with the remarkable number of suggestions for new taxation which had been sent to him, and which he had collected together alphabetically. While I was reading through the financial columns of the newspapers this morning I came across such a remarkable variety of expressions in regard to this Budget that I fell into the Chancellor's new habit of collecting them alphabetically. These are some of them "anger," "astonishment," "bludgeoning," "bleeding industry"—
§ Mr. Morrison
The right hon. Gentleman need have no fear. There were also "dismay," "disaster," "erratic," "enrage," "farewell," "folly," "futile," "Gradgrind Chancellor." Not being a learned person I betook myself to the dictionary to see what on earth "Gradgrind" might mean, and it is defined asOne who regulates all human things by rule of compass and the mechanical application of statistics, allowing nothing for sentiment, emotion and individuality.The word is derived from Thomas Gradgrind, of Charles Dickens's "Hard Times." Then there were "height of folly," "hamshackled," "insecurity," "instability," "Jerry," "Jumping Jack," "knavish," "loose," "malignant," "numb," "oppressive," "perilous," "quarrelsome," "ramshackle," 1971 "slapdash," "tangled," "unwarranted," "unfair," "violent," "vicious," "wicked," "wanton." There was not one word for "X," and so I had to use the word "extraordinary." A word appears in another paper which I did not understand, "Yahoo," and so again I looked at the dictionary, and found it defined as "a despicable character." When I had got to "Z" I thought I ought to look for something a little less unkind to the right hon. Gentleman, and I found that one paper refers to his Budget as being the Budget of a "zealot," and my dictionary says that a zealot is "one who is warmly engaged in anything."
I am glad that it was not a Labour Chancellor who introduced this National Defence Contribution, because I think that in its present form it is not going to work, and I propose to give one or two reasons for that view. There is a puzzling note running through the financial writers to-day. They cannot understand why the Chancellor of the Exchequer has indicated that only something like £20,000,000 will be derived from this tax next year. One paper goes so far as to say they think that something nearer £200,000,000 will be collected, but they add that they have no doubt that the people who advise the Chancellor of the Exchequer are people of great wisdom and understanding and that probably their estimate is not very far out. The only explanation I can find of why the Chancellor anticipates getting only £20,000,000 is that his advisers have made adequate allowance for avoidance of tax. My objection to the tax is that it falls on the just and largely misses the unjust. Investors in home industries will suffer a loss of capital and reduced dividends, while holders of foreign stocks will escape free. If this tax had been imposed a year or two ago, to take one company, the well-known Mond Nickel Company, the shareholders would have been hit by the tax, but within the last year or two the Mond Nickel Company has been absorbed by the International Nickel Company of Canada, with the result that the investors in the Mond Nickel Company, now that they are shareholders in the International Nickel Company of Canada, will accidentally escape. The Rand Gold producers and most South 1972 African ventures escape altogether, but, on the other hand, West African gold companies and Rhodesian copper mines shoulder the new tax.
How long are these people going to pay these taxes? Just as long as it takes them to transfer their English domicile somewhere else. It is stated that there is something like £400,000,000 of British capital invested in rubber companies, and everybody knows that the shareholders of rubber companies have had an exceedingly bad time over a period of years, and that only now, when the rubber regulation scheme is getting into force, are their dividends beginning to mount up. There have been several years in which many companies have not paid any dividends at all. These rubber companies have only got a clerk in their London offices. How easy it would be for them to escape the incidence of the tax by transferring the clerk to Malaya, or wherever the rubber is grown, where he can do the work just as well as in London. It only means transferring the registration from England. It has been recalled in one of the financial papers that when the old Excess Profits Duty was imposed Aramayo, Burma Corporation, and De Beers Consolidated all shook the dust of London off their feet and migrated to Geneva, Rangoon, and Kimberley, and there is no doubt that we shall see a continuation of that process.
The Chancellor of the Exchequer made a surprising statement. Nearly everybody expected that he would impose a stamp duty on medicines, and he said that he had not done so and was not going to do so for two reasons. The first was that the subject was very complex and difficult; and, secondly, he said that he was afraid it would take a lot of Parliamentary time. What Members understood was that owing- to the long recess the House is to have at the Coronation the Government were desirous of getting the Budget through as expeditiously as possible, and therefore decided that this proposed medicine duty, which people anticipate will mean a considerable revenue for the Treasury when it is imposed, must stand over for another year till he can look further into the complexities of the position. Does not the same consideration apply to the National Defence Contribution? Certainly 1973 it is complex. If the Chancellor doubts that he has only to read the newspapers, and to read the speech which I am now delivering. The subject is certainly complex and will take up a considerable amount of Parliamentary time, because meetings of manufacturers all over the country are being summoned by telegram, and they are not going to put up with the new tax without some fight.
would bring to the notice of the Committee one case which is known to me personally in which a man, together with the members of his family, put £18,000 into a business which he has been building up. He has been engaged in pioneering for seven or eight years and has made no money. The members of the family who put in money have had no returns upon that money, and he has been drawing only just enough to keep going, because he thought he was "on a good thing." He was engaged on the production of a refuse container. Within the last few months he has begun to see a chance of winning through. He has received certain substantial orders which may enable him to make up what he has lost. This man is engaged on making an article for the public health service, nothing to do with national defence or armaments, but he is going to suffer when he reaps the harvest of his seven or eight years' pioneering. And apart from his product having nothing to do with national defence he will be penalised because of the national defence programme, as all his materials will cost him more than otherwise would be the case.
My final point is that the Budget is not dependent on this £2,000,000 which the Chancellor will get from the National Defence Contribution. Why should he insist upon taking up a good deal of Parliamentary time, interfering with the Coronation, stirring up a great deal of hostility and bad feeling throughout the country at a time when we want peace and good will, for a beggarly £2,000,000 which does not make any difference one way or the other to the present Budget, whatever it may do for future Budgets. A few years ago a predecessor of his, the right hon. Member for Epping (Mr. Churchill) introduced with a great flourish of trumpets in one of his Budgets a proposal to tax bookmakers. We did not have to wait long before the right hon. Gentleman had to admit that the matter 1974 was too complicated, and that it was impossible to make anything out of it. The right hon. Gentleman frankly admitted that, and the tax was ultimately abandoned.
§ Mr. Morrison
There is a saying in America that the man who gets on in life is not the man who never makes a mistake, but the man who never makes the same mistake twice. I am suggesting that the Government should not make the same mistake twice by forcing the National Defence Contribution through the House, because in my opinion it is not going to work, and even if it does it will not produce any considerable revenue. I suggest that the matter might be left over in the same way as the Medicine Stamp Duty for consideration during the year, so that the Chancellor, if he is going to pursue this matter further—and I am not sure that I should be opposed to it—should be able to bring it forward after much greater consideration had been given to it, to ensure that the incidence of it shall be much fairer than it will be under the present proposals.
§ 5.58 p.m.
§ Sir Arthur Salter
I feel very happy that the first Budget speech I should hear as a Member of this House was one that was at once so fascinating to listen to and so interesting to study. It is with considerable diffidence that I rise to make my first speech here on a subject which is both so important and so complex, particularly as such experience as I have collected in regard to Budgets and public finance has been mainly in other countries and with regard to other systems. For this reason I shall, with suitable modesty, circumscribe the scope of what I have to say. I shall not attempt to go over the wide ground traversed by, for example, the right hon. Member for Hillsborough (Mr. Alexander) this afternoon. I do not propose to discuss our general financial policy, our general financial situation or our general financial structure. I do wish, however, to make a few comments on some of the specific proposals made to us by the Chancellor on Tuesday afternoon. I can at least promise that whatever views I express will be completely uninfluenced by any views which I have on the Government's policy in other spheres and on other matters.
1975 Incidentally, that enables me to illustrate what I conceive to be the proper position of an independent Member. The independent Member is still a rare, though I am glad to say not an entirely solitary, animal, in this House. There has been a good deal of speculation, and I think a good deal of misunderstanding, as to what I meant when I said to my constituents that I proposed to stand as an independent. I remember a few years ago a right hon. Gentleman who has taken a considerable part in the Debate but is not here at this moment, asking me what I understood to be the position and character of an international officer. I did my best to explain to him, and when I had finished he said, "That is all very complicated. An international officer is a queer kind of creature. I should call him a kind of hermaphrodite." That expresses the view that many people have of the position of an independent Member. My own view is that it is at once his privilege and his duty to express his views on specific proposals without regard to what may be his views on other matters.
I propose then to assume and take for granted everything that we knew when we came into this House on Tuesday afternoon, and to comment only on the new proposals then made. With that limitation, which is of course a very important limitation, I say at once definitely that I very cordially welcome the main principles upon which the new proposals for taxation are made, in the first place because those proposals are for direct taxation. I have very greatly regretted the way in which, for a number of years, the proportion of indirect taxation has increased, because I remain of the view that normally, though not, of course, in every case, indirect taxes operate as a kind of Income Tax graduated the wrong way round, bearing more heavily upon income in proportion as the class affected is poorer and has a smaller income. I do not think this country has yet realised how far, for example, the cost of the great extension of the social services in recent years corresponds with an increase of indirect taxation. The extension of social services has to a very great extent operated not to redistribute wealth or income, but has had a contributory character, being mainly paid by an increase 1976 of indirect taxation by the classes benefited by the social legislation.
I rejoice therefore that the Chancellor with his present proposals is stopping, and to some ex tent correcting, this development. I welcome for another reason the principles on which the proposals are based. I am very glad that he has not limited his vision, or his provision, to a single Budget year. He might so easily and so reasonably, on the general statement of the finances he put before us, have confined himself to the practically undisputed increase in the Income Tax, and left to his successor the odium of providing for the greater expenditure that will follow in later years; but he resisted that temptation, and in doing so he chose a tax which presents, or certainly is likely to present, very considerable difficulties to himself in the course of this Debate. One of the most amusing parts of his extremely interesting speech was the description he gave us of the many kinds of suggestion made to him by correspondents for additional taxation. There was one feature common to all proposals; each of them desired to remove the incidence and inconvenience of any new tax as far as possible from himself, his own circle and his own friends. No one can charge the Chancellor of the Exchequer with being animated by any such desire when he chose his National Defence Contribution, and for this reason I greatly welcome the main principle upon which these proposals are based.
At the same time, it would be both presumptous and premature to express a definite opinion as regards the practicability and equity in all possible cases of the National Defence Contribution. I do not think we have yet sufficient information, despite the very considerable enlightenment given to us by the Financial Secretary last night. It is only when we get the Finance Bill, and indeed only later when in practice the adjustments are worked out, that the country will be able to judge how equitably this tax is likely to operate. I would venture, however, to make a few tentative reflections and to ask a few tentative questions. In the first place, the rate of duty rising to one-third, while it would of course be very low if a duty were confined to those industries which are making increased profits as the result of the new armament 1977 expenditure, is rather high when applied to all industries making increased profit for whatever reasons. If we were considering only the armaments industry, I think we should all feel that we should like a very much higher rate, and I sincerely trust that these proposals will not be alternative to the unanimous recommendation made by the Royal Commission.
We understand in any tax of this kind, the difficulty of drawing a line. These proposals apply to all industries, including those which are not getting their increased profits as the result of armament expenditure, Government expenditure or Government action, but as the result partly of the up-turn of the trade cycle and partly as the result of special skill and enterprise. In these cases, I daresay it has occurred to many of us that the results may very often be such as will result in considerable hardship and also discourage a very desirable increased activity in the depressed areas and elsewhere. Those hardships and inconveniences are limited by the special provisions which the Chancellor has explained. It is difficult to estimate the exact working of those provisions at present. In particular, it is very difficult to realise what would be the precise character and effect of the capital assessment which is so integral and vital a part of the whole of the scheme. The capital assessment is, of course, vital, not only if one chooses the capital standard but even if one chooses the profit standard in determining that the rate of tax according to the "region" in which the particular industry falls.
We do not know what will be the precise definition of capital for this purpose, but I venture to express a doubt, however capital is defined and whatever adjustments are made, whether any definition can be found that is quite strong enough to bear the weight which is imposed upon it by this scheme. I would venture very tentatively to ask whether the Chancellor of the Exchequer could not, perhaps without reducing the total yield which he contemplates, produce the same result with less hardship and less inconvenience if he reduced simultaneously both the exemptions and the maximum rate of tax. I throw that out just as a suggestion for which I would ask some consideration.
That is all I propose to say on that particular proposal, but I would like to 1978 add one word on the third proposal of the Chancellor which I also cordially welcome, namely, his proposal to limit evasion. I wish he had gone rather further. I do not think his present proposals deal with some of the most serious forms of evasion. In the Budget of last year I think he introduced in Section 8 of the Finance Act a provision under which certain assignments to children were deemed not to be irrevocable, and thereby he stopped a certain evasion of Income Tax within that sphere, but that sphere was limited only to assignments to children. I wonder whether the extension to certain other cases would not be extremely useful in stopping certain devices particularly those known technically as accumulator devices. I would venture to suggest that the point might be considered.
That is all I have to say, with one exception, on the Chancellor's statement, but in passing I would like to comment on the remark that he made to the effect that our situation, difficult as it is, would be much more difficult had our credit been weakened by large expenditure on public work during the time of depression with the view of stimulating economic activity. I have no quarrel with his actual statement as he made it, but I fear it may in some quarters be interpreted as indicating the view that public expenditure and Budget policy cannot be usefully employed to correct the workings of the trade cycle. On this point I entirely agree with the right hon. and gallant Member for Ripon (Major Hills), who spoke on the subject yesterday. There is no point, I think, on which economists are more generally agreed—although they are agreed on a great many more points than is generally admitted—than that it is extremely useful that expenditure on public works should expand at times of depression and be restricted at times of prosperity. While, of course, the precise moment at which the armament increase is required is imposed by external events, I think we should all recognise that it is from the economic point of view regrettable that it should come at this moment rather than during the period of depression.
That is all I wish to say on the Chancellor's statement, but if the Committee will allow me a few minutes I would very much like to add a few remarks on one aspect of wider policy. I very 1979 cordially agree with the opinion expressed by several Members that the whole environment in which any particular Budget has to be framed, would be substantially improved if we could restore, in conjunction with other countries, our international trade more widely and more extensively. There were in 1931 very special reasons, the strength of which I personally recognise, for imposing certain restrictions at that time upon the inflow of foreign imports. But I think there are at this moment, in 1937, equally strong reasons which should convince even the most convinced Protectionist that there is a strong case and urgent need for modifying our present policy in some respects. Our danger now is not too rapidly falling prices but too rapidly increasing prices. Our danger now is not surpluses but shortages, and if we have not succeeded in re-establishing the framework of external trade, I am certain that when armament expenditure slackens and the downward turn of the trade cycle comes, the position will be infinitely worse and more disastrous than it would otherwise have been.
I believe we have a great opportunity of joining with other countries now in re-establishing international trade. We know the attitude of the United States, of France and the other countries which recently met at Oslo. What is our own attitude? Many Members must, I think, have read with great regret the memorandum handed by the Prime Minister to the deputation on 22nd March. I personally read it with dismay. On reflection I was a little less dismayed, for this reason: I have been a humble student of the Prime Minister's speeches and writings for many years. I sometimes admire his policy; I always admire his literary style; and I am convinced that, while he may have approved of this memorandum, he certainly did not write it. More than that, on further reflection it seemed to me that it was quite clearly just a defence—a not very vigorous defence—of the past, and not an exposition of a recently formed policy of the Government. Later indications are much more promising, I think, of what is the real mind of the Government in this sphere.
I am, indeed, convinced that, if the Government will consider the whole of 1980 this problem broadly, taking into account not only the immediate but the longer-term economic effects, and above all, perhaps, the political effects, of securing an agreement which will enlarge international trade, they will come to a right conclusion. What I am much more afraid of is that, in the absence of any definite decision on trade policy which will determine the instructions to those who engage in specific negotiations, those negotiations will be on too narrow a basis, and will pay too little regard to the broader aspects of the question. I agree with the right hon. Gentleman the Member for Hillhead (Sir R. Home), who said that perhaps the first step is to secure an agreement with the United States of America. I believe that that is practicable if the instructions given are, as I say, based upon a broad view of policy.
I would add that I should like to see any agreement made with America extended to France, to the Oslo countries, and even still wider. We all know that the triple declaration at the time of the franc devaluation served an extremely valuable purpose. It would be much more valuable if it proved to be, not the end, but merely the beginning of a much wider movement. I am convinced that, if this country and the Dominions would, in the weeks which precede the Imperial Conference, face the whole of this situation with full regard to the political results of any agreement, a step forward of the utmost importance could be made.
May I say one last word in relation to the international situation generally? I think we are all conscious of the fact that during the last few months there Las been a sensible, though still indecisive, improvement in the general state of international relations, due to many factors, among which personally I should put very high the personality of M. Blum. If we could throw, into the balance of the forces making in the one direction and in the other, the effect of the visible and successful co-operation of the three great countries of the world in extending the range of peaceful commerce, I believe that the task in every sphere of diplomacy would be appreciably assisted, and I believe that the whole international situation would be transformed.
§ 6.20 p.m.
§ Sir William Davison
I should like to congratulate very sincerely the hon. Mem- 1981 ber for Oxford University (Sir A. Salter) on the thoughtful and most happily phrased speech with which he has just delighted the Committee. I feel sure that the House will look forward to an early intervention from the hon. Member again in our Debates.
I do not propose, in the few remarks which I intend to address to the Committee, to follow the three hon. Members who preceded the hon. Member for Oxford University, and who spoke at length on the National Defence Contribution tax, and, indeed, discussed it literally from A to Z. I trust, however, that the Chancellor, when replying to the many weighty points raised by those hon. Members, will be able to reassure many of us on this side of the House who have grave doubts at present as to the wisdom of this form of taxation. Before making a few general criticisms of the Budget, I should like to be permitted to join with other Members who have addressed the Committee in congratulating my right hon. Friend the Chancellor on the manner in which he has administerd the finances of this country during the past six years, whereby they have been lifted from a quaking quagmire on to the hard highway of prosperity. I regret, however, that, owing to the all too long delayed necessity of putting our national defences in order, it has not been possible for the Chancellor to fulfil what he expressed to the House in his Budget speech last year as his desire to reward the long and patient endurance of the taxpayer in bearing his burden, and to give him some measure of relief.
So far from that desire being fulfilled, the direct taxpayer has once again had his burden increased, and the Chancellor has also failed to implement the promise which has been made repeatedly to the Surtax payer, that, when national prosperity returned and the cuts instituted in 1931 were removed, his additional special burden of 10 per cent. would also be abolished. That promise, I beg leave again to point out, has never yet been fulfilled. The Chancellor's record so far as the direct taxpayer is concerned is, I think, well summed up in the masterly cartoon which appears in the current number of "Punch," in which the Chancellor is depicted, not now as leaning on a team of patient oxen, but as a Bedouin Arab with a donkey burdened with six huge bales of taxes, while he takes leave 1982 of the weeping, overburdened beast with these words:Good-bye, old friend You've never failed me yet, and I hope your next master will be as fond of you as I have been.I am indeed sorry in the national interest that the Chancellor, with his great ability and his great driving power, has done, during his six years of office, little or nothing to broaden the field of taxation and increase the number of direct taxpayers so that a larger number of the citizens of this country than is the case at present should have a direct interest in national policy involving increased expenditure and increased taxation. The net of taxation is, indeed, narrower than before. The total number of Income Tax payers is now only 3,500,000 out of a population of 45,000,000, of whom some 30,000,000 are voters; and, of these 3,500,000 Income Tax payers, only some 80,000 are Surtax payers. Yet this tiny minority of the population, if you add the Death Duties, which practically they alone pay, pay 50 per cent. of the whole expenditure of the country. I submit that it is not in the national interest that so small a fraction of the population and of the electorate should bear so large a proportion of the national expenditure.
This same small number of the electorate are now being asked, not only to shoulder a further 3d. in the £, following an increase of 3d. in the £ last year, bringing the Income Tax up to a total of 5s. in the £, and also the Surtax, to which I have already referred, and which still has the 10 per cent. which was put on at the time of the cuts and has not been removed, but to shoulder in addition a new impost in the form of the National Defence Contribution tax. I am bound to say that, as at present advised, I am seriously perturbed as to what the effect of this resurrected Excess Profits Duty will be, not only as regards its suitability for preventing profiteering on the manufacture of armaments necessitated by a national emergency—a thing which we would all desire—but as to the use to which this new tax could be put in the future, when the present emergency has passed, to cripple private trading and discourage individual enterprise.
Before I sit down, may I say one word as to the Death Duties? Once again, nothing has been done to enable taxpayers to make provision on reasonable terms during their lifetime for the payment of 1983 this enormous capital duty which is levied at their death, and which is estimated to amount next year to no less than £89,000,000. Schemes prepared by eminent actuaries showing how this could be met during the lifetime of the taxpayer have been submitted repeatedly to the Treasury, and have always been turned down. The Treasury have actually refused to say why it was that these schemes, which, as was stated when they were sent to the Treasury, would not involve material loss to the nation and would be of material benefit both to the taxpayer with little, if any, loss to the Exchequer and to the country as a whole, have been rejected. These schemes have been rejected, and no details have been given of the reason for rejection. I trust that, when the Chancellor in due time is in a position to look at this important matter from a more elevated and detached point of view, he will appoint a committee of experts to go into these schemes which have been submitted to him, and any others, to see if it is not possible to enable this tremendous capital levy to be provided for during the lifetime of the taxpayer, when he is able to earn the money, without any material loss to the Revenue.
I should like to ask two questions in conclusion. Will it be made clear that the National Defence Contribution will not apply to public utility companies, such as water, gas and electricity undertakings, which are in no way affected by the heavy expenditure on rearmament and are for the most part administered under statutory rules which fix their dividends? It is possible that, unless they are expressly excluded, they might come within the ambit of this tax. The second question is what is the present position with regard to the recommendations and suggestions of the Income Tax Codification Committee as to putting into coherent shape the present anomalous statutes and rules dealing with Income Tax.
§ 6.32 p.m.
§ Mr. Richards
We have listened, I gather, to the last financial statement that we are to get from the Chancellor of the Exchequer. I understand that, like his predecessor, who sat at the receipt of custom for a great many years, he is to be called to a higher place. I am sure that the good wishes of all the House will 1984 go with him to that exalted office that he is going to occupy by and by. I have been puzzled, however, as to who is going to call him to this particular office. Is it to be the recording angel, who has taken note of all the good things and some of the bad things that he has done in the course of his six years of office as Chancellor, or is it that much more sinister, ghostly and ghastly angel, the angel of death, who at any rate has been rather well served during the two past years by the Chancellor. It seems to me that if the Chancellors of Europe would only do what our Chancellor has been doing and attempting to do, the angel of death would be found again to be abroad in this land, and in other countries as well. I could not help sympathising with the right hon. Gentleman because I felt that he was rather conscious of that terrifying spectre. He referred to it on more than one occasion. He said:That last year, this year and for several years to come, the national finances have been, and must continue to be dominated and governed by an overshadowing consideration, namely, the vast expenditure upon Defence."—(OFFICIAL REPORT, 20th April, 1937, col. 1601, Vol. 322.]Later on he amplified it, and said:It was clearly laid down (in the Defence Statement) that although it was not yet possible to determine which year would see the peak, the level of Defence expenditure was likely, over the next two or three years, to be very much heavier than; in the present year."—[OFFICIAL REPORT, 20th April, 1937; col. 1614, Vol. 322.]These are tragic circumstances under which to vacate that very responsible position. It has already been remarked that in all his Budgets he has been up against the same difficulty, that is to say that not a single one has been balanced. Unbalanced Budgets, I am afraid, are the result, among other things, of bankrupt policies, particularly in the foreign field, and I think the Government as a whole must share the responsibility for that failure, which is one of the responsibilities which have been shouldered by the Chancellor of the Exchequer. The present financial statement does not reveal the whole extent to which this Budget is not balanced. For example, £80,000,000 is to be borrowed this year for the purpose of defence, and for some reason or other the Chancellor suggests that borrowing in future years will probably have to be greater when it reaches 1985 the peak and still, for some reason about which I am not very clear, he has decided that borrowing for the next four years is to be at the annual rate of £80, 000, 000.
The defence for this is that it is part of a scheme to throw a portion of the burden of rearmament upon future generations. The simple fact is that that cannot be done. The shells and guns and ships are wanted in this year of grace, 1937, and not in 1950 or 1960. You cannot fire a shell in 1937 that is going to be produced in 1950. The things that we require in the way of rearmament have to be paid for now. If the Government say they cannot pay for them now, of course, the Government is bankrupt. But it does not say that. It says it is not going to pay for them, but it is going to use its credit to borrow the £80,000,000, and the other £320,000,000, in order that it may throw a portion of that burden upon future generations. He said:I am proposing for that purpose to borrow a sum estimated at £80,000,000. In view of that fact it would be absurd at the same moment to attempt to start a sinking fund for the redemption of debt.—[OFFICIAL REPORT, 20th April, 1937; col. 1605; Vol. 322.]This is a very striking statement to make. He is adding to the National Debt and, unlike most Chancellors, he is making no provision, as far as I can see, for repayment of that debt.
I want to suggest another thought in connection with this borrowing. It means that you are taking out of industry a certain amount of capital which would presumably have gone into the production of ordinary commodities, and that means, among other things, that the prices of those ordinary commodities, as we see, are going up because of the difficulty of getting capital to produce them. You must pay for these shells and things that are produced now, and you must get hold of capital to pay for them, and you are taking that amount of capital from the market, and from other industries, with the result that the prices of other commodities are bound to go up because of an insufficient amount of capital to produce them. Another point is that you have to pay interest on the capital that you borrow, and that means that at the end of a certain period, when repayment comes, the shell which would cost you, say, £10 if you paid for it now, 1986 will, with interest over a number of years, cost £15 or £20. It is a most extravagant way of producing these things and it is, of course, an argument for putting the total cost of rearmament, as was argued during the War when costs were very much greater, upon present taxation, because throwing it on the future simply means a more expensive system of production—a more extravagant system altogether.
It means another thing. One result of taking capital from the market and using it in rearmament is to increase the cost of other things to people who require them. By borrowing in this way we are really redistributing the wealth of the country. Those fortunate people who have the money to lend to the Government are able to place a lien upon the future production and the future taxation of the country. This is the way in which we made millionaires during the late War. We are depressing one class because of the increased cost of ordinary commodities and we are improving the position of another, the rentier class, because we are offering them a rate of interest for lending us the money, and the result will be not only that shells will cost more, but that the extra cost will go to the fortunate people who have been in a position to lend money to the Government. That is exactly what you have in every period of rearmament and every period of war. Some people are infinitely poorer at the end of a war and others, as we saw in the case of the late War, finish up by being infinitely richer than ever they dreamed they would be, and that is going to be the case with rearmament. Whether it lasts a long or a short time, we are gradually redistributing the wealth of the country in favour of the wealthy and against the poorer classes. The Chancellor, it is true—I think he was speaking his own mind with regard to this point—said:I might, of course, increase indirect taxation, but the prices in the shops which particularly affect wage earners … those prices already show a tendency to rise, and I did not want to do anything to push them any higher."—[OFFICIAL REPORT, 20th April, 1937; col. 5655, Vol. 322.]Borrowing is an insidious way of pushing those prices higher and of improving the position of certain wealthy classes in the community at the expense of the poorer ones.
1987 This Budget is remarkable for one thing. It has been described, quite rightly, as being of the nature of a War Budget in peace time. I was sufficiently interested to look up some of the War Budgets and I was astounded to find that not until 1918–19, when the War was at its height, did they reach a figure of over £800,000,000. I am not referring, of course, to borrowing, nor am I referring to borrowing in the case of the figures for this year. In 1918–19 the Budget figure was £889,000,000. The standard of prices was very much higher than it is to-day. The index figure then was 230. If you correct the figures in relation to the purchasing power of the £ the Budgets work out in this way. In 1917–18, when the War was at its height, £382,000,000; in 1918–19, £436,000,000; in 1920–21, £639,000,000. The present Budget is £863,000,000. Therefore, this Budget is higher than the highest of the Budgets of the War period and it is no exaggeration to speak of it, as it has been described more than once, as a war Budget.
A rather more difficult calculation, but it is a very important one, is to try to find out what proportion of the total annual income of the community is absorbed by these Budgets. It is an extremely difficult calculation, but a very careful calculation was made in 1924 as to the total annual income of the community and, roughly speaking, it was a little over £4,000,000,000. Out of that total annual income Lord Snowden's Budget was for £795,000,000, or 20 per cent. I have tried to calculate the present total annual income, and I do not think I am very far wrong in suggesting that it is somewhere in the neighbourhood of £3,000,000,000, reckoning for changes in the index level. Out of that £3,000,000,000, the Chancellor of the Exchequer is proposing to take £863,000,000, or nearly 3o per cent., as against the 20 per cent. of Lord Snowden's Budget, although in the period of Lord Snowden's Budget times were much better than they are to-day.
I am not going to enter into the very debatable question as to the new suggested taxation, but I should like to say a few words about it. We on this side of the House feel that whenever there is a move in the direction of rearmament or whenever there is a war in the world, 1988 certain people gain very considerable advantage out of it. Our attitude is that the Government ought to be strict in controlling profiteering. Apparently they have not the courage or they are afraid to tackle it from that point of view. Therefore, we on this side are, on the whole, very glad that the Chancellor of the Exchequer, quite rightly, is trying to take back some of the money that he is pouring out into industry at the present time.
We hear a great deal about individual initiative and the character of the work that is being done by industrial leaders in this country. I do not think we can deny the fact that it is the money that is poured out by the Government that is stimulating industry. We have already heard from the hon. Member for Oxford University (Sir A. Salter) that if anything happens to withdraw this assistance we shall be faced again with one of those catastrophic failures of the economic machine in which the economic machine will completely fail to function. We have recently had too much experience of that. In face of these facts, is there anything wrong, speaking generally, in the Chancellor of the Exchequer trying to recoup himself by taking back a proportion, I wish it were larger, of the money that he has poured out in order to stimulate industry? I hope very sincerely that he will make this piece of legislation watertight, so that nobody will be able to escape the taxation that he intends to impose.
§ 6.50 p.m.
§ Sir Robert Rankin
I desire to say a few words concerning certain aspects of the Budget in regard to which I find some concern outside the House. That concern is not based upon nor connected with the large sums which now have to be spent in strengthening our national defences. I find that it is concerned with the ever-increasing permanent cost of our social services for, splendid though many of those services are, it is difficult in some cases to find any full or adequate return. The concern of which I have spoken is intensified by the tendency in the past of successive Governments, of all parties, to use the capital resources of the country, including the Death Duties, for the annual expenditure of the country, quite irrespective of the requirements of sound finance.
Less than 10 years ago, in the financial year 1929–30, as pointed out by the 1989 well-known economist Mr. Kiddy, the total expenditure by the Exchequer was £701,000 excluding Sinking Funds. Last year it was £790,000 also excluding Sinking Funds. The actual rise in Supply expenditure was, however, much greater than £90,000,000, for the amount required last year for Consolidated Fund Services was £106,000,000 less than in 1929. It must be pointed out that whereas last year's extra expenditure on the Votes for the Fighting Services represented an increase over 1929–30 of £73,000,000, the Votes for the Civil Service and social outlays increased by no less than £123,000,000, and that notwithstanding a substantial decline under the head of War Pensions. When in 1932 the Government effected an annual saving of at least £30,000,000 by converting 5 per cent. War Loan into, a 3½ per cent. issue, and effected large savings in subsequent debt conversions, the investor was comforted by the thought that compensation would be forthcoming in the shape of reduced expenditure and lower taxation. But although for a brief spell Income Tax was lowered by 6d. to 4s. 6d. in the £, it was soon raised to 4s. 9d. and on Tuesday we heard that it was to be raised again to 5s. so that the taxpayer, nearly 20 years after the end of the War, is suffering a loss of income with practically no relief in taxation.
The last occasion on which the word "economy" was mentioned in this House was during the crisis of 1931, when economies were effected to the tune of about £70,000,000. As a consequence, confidence both at home and abroad was restored and balanced Budgets were the foundation upon which the present trade recovery of this country has been based. There was, however, something besides lack of equilibrium in the national balance sheet which was responsible for the financial crisis of 1931. That something was, among other features, indifference to the growth in unproductive expenditure and eagerness to obtain the bulk by revenue by direct taxation. Today there are signs that these tendencies are reasserting themselves. This consideration would not weigh so greatly in the country if there was a clearer recognition of the need for economy in nonessentials. The yield from Income Tax and Sur-tax at the present time may remind us that there is a limit to the yield 1990 from direct taxation, while, similarly, the recent setback in gilt edged securities is also a warning that even cheap money cannot sever the close connection between extravagance in national expenditure, high taxation and the state of the national credit. I should like to repeat that I believe the concern outside this House is not aroused by temporary necessary abnormal expenditure on armaments for defence, but by the permanent increase of permanent expenditure not warranted by the facts and requirements of the present day situation.
§ 6.56 p.m.
§ Mr. Bellenger
I rise with some fear and trepidation to take part in this Debate, after the broadsides that have been delivered from three different angles. I do not pose as a financial expert, but I should like to say a few words from the point of view of, shall we say, the man-in-the-street. In these days the man-in-the-street, as he is commonly called, is very much neglected. I listened with considerable interest to what the hon. and learned Member for Montgomery (Mr. C. Davies) said, but I have the feeling that big business can take care of itself quite well and will do so during the Committee stage of the Finance Bill. I should like to refer to a few of the remarks made by the hon. and learned Member for Montgomery because I think he overpainted the picture from the point of view of big business. One of his remarks was that the ordinary shareholder is the worker.
It is a well known fact that the ordinary shareholder is the holder of the equity, and if we take for a number of years the returns paid on ordinary shares—it is no good referring only to the lean period; we must take the fat periods also—we find that the financial newspapers and financial experts have tabulated the returns paid, and I believe I am right in saying that over a period of 30 years ordinary shares are the best holding in any company. Debenture and preference shareholders get fixed payment during slump periods, and during better periods, but the ordinary shareholder when times are good reaps the big benefit. I do not think that the Chancellor of the Exchequer's tax on the ordinary shareholder is wrongly conceived, but I shall have a few remarks to make about that tax later. As I 1991 listened to the hon. and learned Member for Montgomery when he read out the list of companies that paid good dividends I thought it was a question of dog eat dog. It was one portion of big business against another portion of big business, and as the hon. and learned Member happens to be concerned mostly with that portion of big business which is not so lucrative and has not been so lucrative during the past few years he is naturally concerned about the new tax that the Chancellor of the Exchequer proposes to levy.
I do not agree with those who say that the Income Tax should have been increased by more than 3d., certainly not if that is to be done to the advantage of the proposed Excess Profits Duty. In our present system of economics I believe that direct taxation is probably the fairest form of taxation in order to distribute the wealth of the country. If the Chancellor of the Exchequer is persuaded, as I hope he will not be persuaded, to levy a greater tax on the Income Tax payers and to do away with the Excess Profits Duty, it would be very unfair, because, generally speaking, the large number of people who pay Income Tax derive their incomes from more or less fixed sources. With the rise in the price level to-day that will he an additional tax on the man-in-the-street, the ordinary wage-earner and that vast body of professional men, the middle classes, who only get a fixed income and cannot expand it as big business can in times like these we are now experiencing.
The hon. Member for the City of London (Sir A. Anderson) yesterday referred to the large Budget which the Chancellor has introduced. I regret these large Budgets but they are inevitable. They are inflated because the expenditure side is inflated. When we consider the inflation that is taking place to-day in the prices we are paying for our rearmament, we must also admit that that inflation could be considerably cut and then the necessity for this Excess Profits Duty would not arise. Instead of paying these inflated prices for our rearmament we should exercise some control over the industry, and then the Chancellor would not be compelled to introduce a Budget of these proportions. The hon. Member for Huddersfield (Mr. Mabane) yesterday made some very provocative remarks, and I do not propose to deal with them except 1992 to say—perhaps I may be allowed to give this illustration as two or three speakers have quoted Charles Dickens—that perhaps the hon. Member has "Great Expectations."
I would like to draw attention to one or two features of the White Paper. On page 8 I notice that there is a decrease of some 3,000,000 odd under the heading of roads. Am I right in assuming that that is largely due, if not entirely, to the roads which have been taken over by the Ministry of Transport, the trunk roads, and therefore less is required for contributions to local authorities? On page 10 I notice the amount collected in rates by local authorities has been increasing steadily since 1913–14, and there is no doubt that local rates are an additional form of taxation, but with this difference: that whereas national taxation is derived to a large extent from Income Tax payers, local taxation is derived from all classes of people. Everyone who pays rent contributes to these local rates, and therefore I am disturbed somewhat to notice the steady increase which has taken place in local rates. As regards social services, it has been remarked by previous speakers that these are paid for to a large extent by those who receive them, but I would like to direct the Committee's attention to two sets of figures, one on page 11 and the other on page 12. On page 11 the estimate of the cost of the Consolidated Fund Services is £235,000,000, and the amount to be spent on the Supply Services is another £198,000,000. These two figures almost equal the amount derived by the Inland Revenue from direct taxation—Income Tax, Surtax and Estate Duties—so that when complaints are made by those who speak on behalf of taxpayers it can be pointed out that the whole of these direct taxes go to pay for the Consolidated Fund Services management of the National Debt, and so on, and the Supply Services, the Army, Navy and Air Force.
There is one feature which the Chancellor has left out, arid which I should have liked to have seen in, and that is a bigger allowance for children. I know that last year he was able to make an additional allowance. Perhaps the Committee will forgive me if I speak as an entirely interested party, because I happen to have four children, and I know from personal experience the demand that is made on the average parent's budget. 1993 Probably the largest demand on the average parent's budget is for the upkeep of his family, especially if he has a large one; and if I am ever Chancellor of the Exchequer—a remote possibility, I must admit—I give notice that I shall look much more favourably on parents who have large families than is done at present. Not only from the point of view of the parent himself, but from the point of view of the State, it is being emphasised more than ever now, even in this House with its large complement of bachelors, the necessity for large families. I suggest to the Financial Secretary to the Treasury, I am afraid with no hope of his paying sympathetic attention to what I am saying, that it might be possible for the Chancellor to give bigger and better allowances for children.
As to this Excess Profits Duty, when hon. Members criticise the Chancellor they must bear in mind that he has got to raise taxation to pay for the expenditure we are now incurring. We cannot have our cake and eat it. This House has passed huge sums for the Defence Services, and they have got to be paid for. On whom should the Chancellor put this tax. On whom should rest the responsibility of paying for these huge Defence measures with which we are saddled in this present mad armaments race? Should it be on the poor or on the rich? The answer is obvious. It should be on the rich. To a certain extent our defences may be for the purpose of defending our people against a possible foreign aggressor, but in the main these Defence Forces are for the purpose of defending property, and therefore the propertied classes should bear the biggest burden of the increased cost.
Either the Chancellor or the Financial Secretary told the Committee that rates on Treasury Bills during the past year had averaged 11s. 8d. per cent., and I noticed that in the White Paper, page 11, the 1937–38 Estimate for the interest and management of the National Debt is put exactly the same figure as for the previous year, £224,000,000. I wonder whether the Chancellor can rely on this 11s. 8d. per cent. being maintained. I rather doubt it, and I think that there are many who understand finance who are inclined to say that interest rates are bound to rise. However the Chancellor has budgeted for the same amount, and we shall see whether these figures come 1994 out true at the end of the next financial year.
The questions which I wish to put to the Financial Secretary are these. First, will this new duty be chargeable in the same manner as Super-tax? Super-tax is charged on the net amount of the taxpayer's income. Income Tax is paid first, but that is not allowed for when Super-tax is charged. Will this new duty be charged in the same manner? My second question refers to holding companies and financial trusts. How is the Chancellor going to deal with holding companies which are probably controlling several subsidiary companies who do not distribute their profits up to the full? It is a well known feature of this modern company finance that subsidiary companies hold back for various reasons a large proportion of their profits, and then distribute them later in the form of bonus shares. It is a process which, I believe, in the financial world is referred to as "carving up the melon." How is he going to deal with these holding companies when their subsidiaries will probably not divide their full profits, but hold them back for later distribution in the form of bonus shares? Third—will the duty apply to building societies? Fourth, how is the Chancellor going to deal with new companies which have come into existence, as many of these armament companies have done, since the four years which he is taking as the standard years? How will he deal with them? Because he has told us that it is the taxpayer who has the option of deciding whether this tax shall be paid on the capital assets or on the profits earned by the company. I suggest to the Chancellor that it is his duty—I do not speak for big business in this respect, but for the smooth working of our industrial machine—to elucidate these points as quickly and clearly as possible because if a tax like this is to be imposed—and I have no objection to his imposing it, although I should have endeavoured to have found an easier way of getting the money—it is the duty of the Chancellor to tell the business world exactly where they stand.
I would like to end on this warning note. One or two hon. Members have referred to the question of strikes, and I think, viewing all the circumstances, there is a great danger of strikes occurring, with the consequent upsetting of the Chancellor's financial prospects and 1995 upsetting of the workers' own lives if the employers, the Chancellor and the Government do not do something to meet the just demands of labour in these times of rising prices. There is a large proportion of our population who live on weekly wages or a monthly salary. With prices rising they are fearing insecurity, a smaller real wage with which to buy the necessities of life; and if the Government are going to admit the right of industrial concerns to higher profits, then they must admit the right of labour to a higher wage for its labour. During the slump period we were told that it was not possible to pay labour adequate wages, but to-day it should surely be possible to pay better wages than are being drawn by a large proportion of those underpaid people who, after all, contribute largely towards making these enhanced profits on which the Chancellor is preparing to levy his taxes.
§ 7.15 p.m.
Mr. Vyvyan Adams
I should like to join the hon. Member for Bassetlaw (Mr. Bellenger) as a man in the street. I was under the impression that we were in the Chamber of the House of Commons, although I should not like to take anything for granted. I hope the Financial Secretary will be as pleased as I was to hear the general support given to the Government by the hon. Member for Bassetlaw, and I look forward to seeing him with myself and other supporters of the Government in the Lobby supporting the Second Reading of the Finance Bill. I was also glad to hear the hon. Member commit himself in advance, probably at some remote future date, to a widening of family allowances as, since the last Budget, I have myself for the first time become a father. If it is not too late I should like to add my insignificant congratulations to the Chancellor of the Exchequer. On Tuesday he took about 100 minutes to open his Budget, and we all know perfectly well that anything over 30 minutes on our feet is physically tiring. I marvelled at the ease with which he made the essential details of a difficult subject absolutely plain to all.
Before I come to the details of the Budget I should like to say something of particular interest to Members of the Labour party. I have no doubt that later to-night we are going to hear a 1996 good deal about the Special Areas, a term which indeed implies that acute unemployment is now limited to certain specific areas in the country. But for the drastic measures which have been taken during the last half dozen years, the whole country would have remained a Special Area. I should like to prove that by the experience of the city I have the honour to represent, the City of Leeds. In June, 1929, just after the advent to office of the last Labour Government, unemployment in the City of Leeds was 9.2 per cent. or about one in 11 September, 1931, at the time of the downfall of the Labour Government and the formation of the first National Government, the percentage had risen to 24.8, or nearly one in four. On the last date for which figures are available, March, 1937, the percentage of unemployment in Leeds had fallen to 8.6 or about one in 12. Moreover, the insured population has grown in Leeds to 186,000 individuals, and there are to-day in that city no less than 23,000 more insured persons in the labour market than there were in June, 1929. I cannot understand why Labour Members do not cheer these statements.
I agree that in certain areas not nearly enough has been done to alleviate unemployment. But, surely, it is some concern of the hon. Member and his friends that there has been this amazing and unprecedented improvement in many of the great areas of industry in the country, and I cannot understand why they do not show any satisfaction at that fact. And let me tell the hon. Member that this improvement over the last five years has nothing to do with "war spending." The great bulk of this improvement, certainly in the City of Leeds, has been achieved with very little expenditure upon rearmament at all. The rearmament programme has hardly touched many of the great areas of industry in the West Riding, and, like a hundred other centres in the country, Leeds has gone, without any artificial assistance from the rearmament programme, from strength to strength. There is to-day in that city precisely that shortage of certain types of labour which, with some temerity, I predicted in 1931 before crowded and incredulous audiences.
1997 The Budget is the political basis of our industrial life. The Chancellor of the Exchequer's six years of office have shown a steady progression. Well might my right hon. Friend, looking round on some of his less stationary colleagues, adapt a war-time song:I have laid more eggs than any chicken on the farm.I hope that my right hon. Friend in any office which may lie before him in the future will have as illustrious a career as has been his reign at the Exchequer. I hope also that he will stick to the National Defence Contribution. It seems to me as sound in principle as it is ingenious in design. Rearmament should not be regarded as a pleasant opportunity for a general share-out at the expense of some vague, undefined, patient and invisible entities. I am quite sure there might otherwise be a danger that a vast rearmament expenditure would lead to that state of mind. But I cannot for my part understand why the figure for a full year has been put so low as £20,000,000. When we recall the mountainous sums raised by the old Excess Profits Duty I feel that this estimate is extraordinarily low.
On this National Defence Contribution there are two criticisms which seem to me to be mutually destructive. On one hand one has heard in the most surprising quarters a widespread willingness that profits on arms manufacture should be taxed, and yet from the same quarters comes the cry, which I have always felt to be a quite erroneous cry—"You cannot define armaments." You can. For one thing it has been exhaustively defined by Statute in the Arms Export Prohibition Order. Whenever this country or this Government wish to define the effective arms of another country, they know perfectly well exactly what arms are. They knew, for example, at the end of the last War what instruments in Germany's hands were arms, and I should like to see, for my own part, a far closer Government control of the last stages of the manufacture of completed arms. I should also like to see the Arms Export Prohibition Order so rigidly applied that the export of arms would be the exception rather than the rule. No doubt the artificial activity, due to the rearmament programme upon which we are embarked, will spread far beyond armament firms; and here is a way to bring home to the 1998 people that the world would be a richer and saner place if the nations observed Article 8 of the Covenant of the League a little more faithfully than they have hitherto.
This tax, this impost, is comparatively easy to apply, but I foresee, whatever may be the complexion of the Government when the rearmament programme is finished and the expenditure upon armaments sinks to some new average level, great difficulties about its removal. I believe that we are much nearer the possibility of that removal than many think. What we are now doing as a nation is to prove to aggressive States that they cannot outbuild on land, at sea or in the air, this great and powerful nation. This mighty community, of which this House is the pivot and the heart, has nearly reached a stage when it is ready to stand with others in their path. So I believe that disillusionment among dictators will bring about a general limitation of arms. The Chancellor of the Exchequer when he opened his Budget said that the whole of our national finances are going to be dominated for the next few years by the vast and necessary expenditure on armaments. That is true, but I do not think the Government can be accused to-day of engaging in any kind of armaments race. It differs from the kind of armaments race which was prevailing up to the Great War, in this respect, that what is going on in Germany to-day cannot go on indefinitely.
What is happening there is going to result in one of three things. First, it may be an internal collapse of Germany's domestic economy. Or, it may be some collision with a neighbour, in which case I am afraid that we in this country should be inevitably involved. Thirdly—and I think it is the most probable contingency—there is a possibility of agreement for a general limitation of armaments, and consequently a lightening of our burdens here in Great Britain. For that reason I do not think that the rearmament programme, which is the whole basis of our Budget expenditure this year, can be criticised as being in any ordinary sense a participation in an armaments race. If the third and happy possibility becomes apparent I hope the Government will seize any such fruitful opportunity. We have heard many criticisms about the 1999 National Defence Contribution, but the Chancellor of the Exchequer, who I hope will stand firm on the matter, can hardly expect the commercial community to greet the new tax with a whoop of delight. But he will be sustained by the great, powerful and numerous middle-classes in which I am happy to include myself. They will always respect a Government which prefers the sane to the spectacular, and succeeds in uniting practice with principle.
§ 7.28 p.m.
§ Mr. Price
There are two points in connection with the Budget to which I should like to refer. First of all, let me say something about the incidence and effect of indirect taxation. May I call the attention of the Committee to the fact that indirect taxation has been giving an increased yield for several years past, and that as a source of revenue it has become one of the most important sheet-anchors of the Chancellor of the Exchequer's finance during his term of office. Certain hon. Members opposite, however—I am referring particularly to the speech of the hon. Member for South Kensington (Sir W. Davison)—have bemoaned the effect of direct taxation on the Income Tax payer. Let me give one or two facts which will show that the direct taxpayer has not been so heavily burdened as hon. Members would suggest, and to show that the greater part, in fact almost the whole of the increase of social services since the year 1913, have been financed by the increase in indirect taxation. Since 1913 the amount raised by indirect taxation has increased by £245,000,000. If we assume, as we have a right to assume, that four-fifths of this is borne by the wage-earners and small business men, it is reasonable also to assume that this increase has very largely financed the increase in our social services. Since 1913 the cost of social services has risen by £180,000,000.
§ It being Half-past Seven of the Clock, and there being Private Business set down by direction of The CHAIRMAN OF WAYS AND MEANS under Standing Order No. 6, further Proceeding was postponed, without Question put.