SEVENTH SCHEDULE.—(Purchase Tax (Chargeable Goods).)

HC Deb 15 August 1940 vol 364 cc1032-85

5.43 p.m.

Mr. Barnes

I beg to move, in page 41, line 11, col. 3, after "wear," to insert: and school garments that are in the nature of school uniforms. When the Solicitor-General was defining the term "young children," he indicated that the trade sizes in children's wear were normally made up for children from 12 to 14 years of age. During the discussion, the hardship to school children attending secondary and other schools beyond the age of 14 came under consideration. When the problem was submitted to the Chancellor of the Exchequer, he did not appear to be unsympathetic towards the point. When we were discussing trade sizes, the difficulty was considered of dealing with children who were out of the normal sizes, and it was recognised that the trade could not meet a difficulty of that kind. When we come to school garments that are part of a uniform, that trade difficulty disappears. When I put down this Amendment, I recognised that it was impossible to frame it in order to cover those children in secondary schools through State-aided scholarships. The difficulty which I see in regard to this Amendment is that school uniforms for the sons and daughters of comfortably-off persons cannot be distinguished from other school uniforms. It appears to me that one is not justified in placing burdens upon parents in straightened circumstances who are meeting considerable hardships in order to give their children better education, merely on the ground that the acceptance of this Amendment would represent a relief to persons in more comfortable circumstances. Therefore, although I recognise the difficulty, I think this hardship should be met even if by so doing other people escape through the net which the Chancellor wishes to spread for them and which I recognise is not an illegitimate desire on his part.

If you take the burdens of the average householder, whether wage earners or comfortably off, as a general rule the time when expenses are heaviest is when the children are in the stage of being educated, and, therefore, I feel that this is a reasonable request to make to the Chancellor. I thought I detected a sympathetic gleam in his eyes when we were discussing this particular Amendment, and I thought I would chance the possibility of that sympathy having developed into quite a warm desire to meet this difficulty. I therefore put down this Amendment on the Report stage for the purpose of ascertaining whether the Chancellor will meet what I think he will agree is a real difficulty, and I trust that the fact that some people whom he thinks ought to pay the charge will escape will not prevent him from meeting the wide range of persons and families who are interested in secondary school education.

5.48 p.m.

Mr. R. C. Morrison (Tottenham, North)

I do not wish to add to the statement of my hon. Friend beyond saying that I have no doubt that the Chancellor will accept this Amendment if it is administratively workable. I do not profess to be in a position to answer that question, so I must await the answer from the Chancellor as to whether it is administratively workable which will decide whether the Chancellor will accept this Amendment or not.

5.49 p.m.

Sir K. Wood

The hon. Gentleman has put forward his case with his usual power and force. I think he always adds to the value of his speeches by his good humour and the way in which he treats the House. Having examined this matter, I must tell the hon. Gentleman and the House that there is a consideration which, unfortunately, does not allow me to accept the Amendment. In the first place, we must remember that the garments of ordinary children up to 14 are free of tax. With regard to the others above that age and up to the age of 16, of which the hon. Member was speaking, I was discussing this matter with my hon. Friend the Parliamentary Secretary to the Board of Education, whose experience of education is such that I do not possess, and I think it is possible that in cases of that kind a grant can be obtained with the object of assisting parents in relation to this kind of expense. As the hon. Gentleman anticipated, the trouble is the administrative difficulty. The Solicitor-General and I talked this over this morning, and it was interesting to see that this Amendment affects tail coats, fancy striped blazers and tunics of Roedean and Cheltenham ladies' colleges. It might almost be said that although this Amendment would help a number of people whom we desire to help, it would also help the people who can afford to pay for these things. Apart from that, there is also the administrative difficulty. It is impossible to say, in respect of certain goods at the wholesale stage, whether, for instance, a flannel suit or a pair of flannel trousers are intended for a purpose of this kind or not. At that stage one cannot tell to what use the article will be put, whether it would be put to a non-taxable use or otherwise. That is one of the reasons why I cannot accept this proposal. I would add that I think I have done my share in the way of concessions. Apart from that, I cannot accept this Amendment for administrative reasons.

Mr. Barnes

I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.53 p.m.

Sir K. Wood

I beg to move, in page 41, line 16, column 3, at the end, to insert "or quarrymen or moulders."

This Amendment carries out an undertaking which I gave to hon. Members opposite that in this Schedule I would make provision for protective boots designed for use by miners, quarrymen or moulders. I think it can be said that where these boots are designed for quarrymen or moulders it is right to include them in the Schedule, and I propose to do so. The next Amendment is consequential from this Amendment.

Amendment agreed to.

Further Amendment made: In page 41, line 21, column 3, at the end, insert "or quarrymen."—[Sir K. Wood.]

Sir K. Wood

I beg to move, in page 41, line 21, column 3, at the end, to insert: Sewing thread and mending and knitting wool. I also gave an undertaking to make it quite plain that sewing thread and mending and knitting wool should be exempted from tax.

Amendment agreed to.

5.54 p.m.

Mr. Frankel (Mile End)

I beg to move, in page 41, line 32, column I, after "bedding," to insert "(other than blankets)."

If this Amendment has no other virtue, it is at least easily administratively possible, and would not contain any of the difficulties mentioned by the Chancellor in relation to a previous Amendment. The Chancellor also said that he had gone a long way in making concessions, but I hope that he will be able to go one step further and exclude blankets from this tax. In previous discussions the whole subject of bedding was discussed by the Committee and the Chancellor did not find it possible to exclude bedding, but I think most hon. Members will agree that sympathetic consideration is needed in this respect. It is a most expensive necessity which a householder is compelled to buy from time to time. It is not the sort of expenditure which can be dispensed with even in war-time. It is not an expenditure which can be postponed in many cases, and especially in homes with children, for reasons which I need not give the House, it is a recurring expense. I agree in the main with the purpose of this Bill and I wish to support it to its closing stages, but I hope the Chancellor will see his way to make this further concession which I am sure will be of very great value in just the kind of homes which none of us wants to injure any more than we need. When one thinks of last winter and the terribly cold spell which we had, I think it will be appreciated that this question of blankets is one of the most important of household necessities.

5.57 p.m.

Mr. Pethick-Lawrence (Edinburgh, East)

I think blankets come into a very special category by themselves. For one thing the raw material is grown in this country and special industries are required for making blankets and, therefore, they would not be easily converted into factories for other purposes. I cannot feel that the limitation of the sale of blankets will be of any great economy to the country. At the same time the taxation of blankets will be a real expense to the people and particularly the poorest of the population. There may be some slight difficulty, but I should have thought it was administratively possible to distinguish between blankets for beds and other forms of covering. This Amendment intends to exclude the taxation of blankets altogether. If the Chancellor cannot go as far as that, will he go to the extent of putting them into column 2? I cannot see the Chancellor would lose a great deal of revenue, and I hope he will see his way to make a further concession.

5.59 p.m.

The Financial Secretary to the Treasury (Captain Crookshank)

In supporting the Amendment the right hon. Gentleman asked me whether it would not be administratively possible to distinguish between different kinds of blankets. It is not possible. It has been considered— as, of course, every item in this Schedule has been considered—from the point of view of the purposes of the Bill as well as to see what is administratively possible, and I am afraid the answer is that it cannot be done. There is a considerable manufacture of blankets and bed coverings of an expensive nature. A luxury blanket certainly does exist. If one is to deal with bedding at all I should have thought it would be very difficult to justify the exclusion of blankets—I speak subject to correction— because I should have thought that among the various coverings used on a bed, blankets do not wear out quite as quickly as the other things. Sheets or pillow cases, which have to be frequently washed, are probably less durable than blankets. It would be very difficult, therefore, to justify leaving out blankets, and leaving pillow cases and the rest in. Once you start, you are in a field where distinctions are difficult. Another reason why my right hon. Friend does not feel able to accept this Amendment is that there is a good deal of money involved, estimated at something like £500,000. We have already given away quite a lot on the Schedules during the Committee stage, and my right hon. Friend does not think that he can afford this further loss now. I hope the hon. Member will not press this Amendment.

Amendment, by leave, withdrawn.

Mr. Deputy-Speaker (Sir Dennis Herbert)

Before calling the next Amendment, in the name of the Chancellor of the Exchequer, I must refer to a point of procedure in connection with the Amendment. The right hon. Gentleman has put it down in the form of leaving certain words out of column 2 and inserting other words in their place. This Amendment, although put on the Paper as one, necessarily has to be put in two parts. Hon. Members who were in the Chamber during the Committee stage will realise the difficulty which there is in dealing with a Schedule with columns of this kind, where one has to deal with the text line by line, instead of dealing with one column before the next. Therefore, in cases where it is proposed, as in subsequent Amendments, to leave certain items out of column 2 and then to put them into column 3, and so to exempt them, the first Amendment, taken by itself, would have the effect of increasing the tax, and, therefore, would not be in Order on Report. It must be understood, therefore, that in all those cases the two Amendments are taken together. The first can be dealt with only on the understanding that the hon. Member or right hon. Member in charge of the Amendment intends to move and the House intends to pass, at a later stage, the subsequent Amendment, to put the words into the other column.

6.4 p.m.

Sir K. Wood

I beg to move, in page 41, line 39, column 2, to leave out "earthenware or semi-porcelain of table or kitchen use," and to insert: china, porcelain, earthenware, stoneware or other pottery ware, of a kind used in the preparation or serving of food or drink. You have my assurance, Mr. Deputy-Speaker, that it is my intention to follow the course you have indicated. This Amendment is to give effect to an undertaking which I gave on the Committee stage, arising out of the representations made to me by my hon. Friends that, as cheap table and household china was competitive with similar earthenware, it should be treated on the same basis. My hon. Friend the Member for Stone (Sir J. Lamb) was one of the most vigorous advocates of that, and a deputation from the trade with great force also stressed the point. I am meeting that contention, and putting both kinds of goods on the same basis, as will be evident if this Amendment and a subsequent Amendment are considered together. The only other point is that I propose to insert, in place of the words for table or kitchen use, the words, of a kind used in the preparation or serving of food or drink. That is being done after discussion with the trade.

I observe that there are Amendments on the Paper asking for complete exemption of these articles. The hon. Members responsible for those Amendments have done their duty in putting them down, but, at any rate, I have done mine in bringing forward this Amendment.

6.6 p.m.

Mr. Ellis Smith (Stoke)

We are in a difficulty owing to the procedure in regard to this Amendment. I am not complaining about that, but it is necessary that we should state our case on behalf of the people whom we represent. Although we appreciate the action of the Chancellor in putting down this Amendment, it is still not satisfactory, and the observations just made by the Chancellor indicate that the attention to which this matter is entitled has not been given to it. We do not expect complete exemption for the whole of the products, but we thought we had a reasonable case for asking that products within the narrow limits of what was suggested, for table use, should be exempted. In the first place, let me express, on behalf of myself and those with whom I am associated, our appreciation of the Chancellor's action in putting this Amendment down. I hope that he is prepared, even at this late hour, to reconsider the matter, and that he will take into consideration the very limited proposal that we have made. We ask for action to be taken to prevent irreparable damage being done to the pottery industry. When a market is lost, it takes some regaining. Since the Committee stage I and several of my hon. Friends, particularly the hon. Member for Burslem (Mr. MacLaren) and the right hon. Member for Newcastle-under-Lyme (Mr. Wedgwood) have had letters urging the importance of exemption for articles of the kind suggested. I will read an extract from a letter, in order that the Chancellor, and the House in general, may appreciate the importance of the matter: We have been hoping to extend very considerably the sales of our ware in the United States of America and throughout South America. A pursuance of this policy will not, however, be possible if we are unable to make deliveries to the home market. A reduction of the amount which we manufacture for the home market, with a consequent reduction in our general output, will obviously affect very seriously the cost price of the goods which we manufacture for export. We are advised"— I hope the Chancellor will take special note of this— by our New York office that any increase in our prices will have a very serious effect on our sales in that country, and, from information to hand, we also believe that the chances of developing the South American market will be reduced to a minimum if it is necessary for us to increase our prices further. The President of the Board of Trade, the Secretary for Overseas Trade, and other Ministers during the past week or two—and, indeed, it was referred to on the wireless last night—have stressed the importance of maintaining, and, where possible, increasing, our export trade. We appeal to the Chancellor, even now, to reconsider his decision. Anyone familiar with the pottery industry is aware of the very severe foreign competition that it has had to contend with, during the past 10 years in particular. I shall never forget my hon. and gallant Friend the Member for King's Norton (Captain Cartland), who used to stand over there, coming to Staffordshire, and visiting a factory at Stoke. When he came back to this House that hon. and gallant Gentleman could not get to me fast enough to express his admiration for the workers there and the products that they were making, but he expressed his indignation at other matters, about which I shall not speak now. That hon. and gallant Gentleman was proved right on almost every occasion on which he spoke, even when others were stabbing him in the back. If he were here to-night that hon. Member, as a result of his experience on that occasion, would be supporting us on this matter.

I understand that this tax will not affect imported goods, but only those that are to be used at home. Suppose merchants import a large quantity of goods. I understand that only those for home use will be subject to the tax. Will those merchants be able to import large supplies, make a little alteration, and then export them from Britain? I hope that that will be watched, because in the pottery trade and in the textile trade we have had experience of that kind of thing. It is important that something should be done to prevent certain groups of people from exploiting the community in that way, I hope that the Chancellor will reconsider the Amendment, and arrange that pottery manufactured for table use shall be exempt from the tax altogether.

6.14 p.m.

Mr. MacLaren (Burslem)

I did not take part in the previous discussion on this matter, because I had reason to believe that there would be liberal allowances. I heard the right hon. Gentleman saying just now that the hon. Member for Stone (Sir J. Lamb) visited him with a very powerful and influential deputation.

Sir J. Lamb

No, he did not say that.

Mr. MacLaren

Then I will not proceed with that parenthesis. I will just say that I am not committed to anything which may have transpired between the Chancellor and any deputation. The Chancellor knows that I believe in taxing nothing that mankind produces and that mankind wants. Therefore, my views on taxing china are on a par with my views on taxing women's knitting frames, and on taxing men for wearing trousers when going to work. I think the Chancellor might have pushed earthenware into the third column had it not been for a suspicion that he has that china and porcelain are rather expensive commodities. Poets and dreamers have always used porcelain as a sort of simile. We remember how in his "Queen Mary," Tennyson writes of That fine porcelain Courtney Save that he fears he might be cracked in using, and Byron, who exclaimed: Thrice fortunate! Who of that fragile mould The precious porcelain human clay 'Break with the first fall.' It is a delicate production, of which the Potteries, and more especially the English Potteries, are justly proud, and it is a production which I would beg of the Chancellor of the Exchequer to consider from this point of view. It is perhaps one of the most widely known industries. It has a worldwide reputation, and it is not too much to say that the pottery industry in the Potteries has now come almost on to an equal plane of development with the highest production of the Ming period. It is an industry of which this country should be particularly proud. It is therefore unique in the markets of the world and in the field of British industry itself. It is an industry which is not altogether industrialised in the sense that there is still in the industry a large element of the personal, artistic touch which brings out rare qualities among the people that I have the honour to represent in this House. The products of this industry have such a reputation abroad that even to-day in America people will pay enormous sums, and even higher tariffs, in order to place on their table or in the china-cupboard some specimen of English manufacture. I would beg of the Chancellor to view the industry from this point of view. It is one of those industries which carries the reputation of a great tradition far afield into almost every country. It has been argued with some force that this industry, in order to carry on a successful export trade, must have a very successful internal market within the country itself. That is the plea that is put before the House now.

Why should we spend enormous sums of money upon the so-called Ministry of Information in order to carry propaganda abroad when one of the finest pieces of propaganda, in terms of industry and production in this country, is our English china porcelain and earthenware? Why should we impair it in any way by putting a tax on and injuring its internal trade at the expense of external trade? I see the words "china and earthenware" together in the Amendment. I never look at the Chancellor of the Exchequer without thinking what is given as a definition of what porcelain really is. It says that porcelain is a fusible earthy mixture along with an infusible, which when combined are susceptible of becoming semi-petrified and translucent. It is also defined again as a fine kind of earthenware having a translucent body and a transparent glaze. May I beg the Chancellor not to injure this excellent product by the weapon of taxation? But perhaps my pleading is all in vain! If I were capable of supporting my plea with the language of Shakespeare and the wisdom of the gods, it would not, I am afraid, dispose the Chancellor to remove this tax under present circumstances. But for the future I would ask the Chancellor, when he is looking for a source of revenue, to look directly somewhere else and look askance at this industry. It is one of the few rare things in industry that carries our English tradition marked in the highest artistic form which other countries are proud to receive and which we are specially equipped to produce. It is propaganda embodied in rare form which should be encouraged rather than burdened by taxation.

6.21 p.m.

Sir J. Lamb

I do not want to impinge in any way upon what has been said by hon. Members opposite in asking for more, but it would be rather ungracious not to thank the Chancellor of the Exchequer for fulfilling a pledge on suggestions that I made previously on this matter. Oliver Twist asked for more, and, while I cannot keep on asking for more, I appreciate that the Chancellor of the Exchequer has embodied in the Amendment which he has put forward the "half-way house" I offered him on the previous occasion. I would like to add a word or two to what has been so eloquently said by speakers opposite about the industry itself. It is one of which the country as a whole needs to be very proud indeed. Anybody who, in better times, has had the privilege of going to the British Industries Fair and has seen the display of pottery there, must have felt a very great sense of admiration for an industry which could make an exhibition of that description. It has been admitted by foreigners from all countries, and by people from the Dominions, that from the fine-art point of view, it was an exhibition unequalled by any other industry.

6.23 p.m.

Sir K. Wood

I entirely agree with what has been said about the value of this industry and the admiration for what it has achieved. Such great strides have been made and so excellent are their goods, that I hope this small Purchase Tax will not unduly hamper the industry. With regard to the question put by my hon. Friends opposite as to the exports drawback. As I understand the position, the drawback is only paid where the tax has been paid. In these circumstances it is not clear that the device which my hon. Friend mentions would be profitable to the importers. I will look carefully into that matter and if necessary let him have further observations upon it. I feel that I have done all that I can to meet my hon. Friends as much as possible. I have gone half-way, and I expect them to come half-way to meet me. I hope that, having achieved something, they will not think it necessary to press me further.

Amendment agreed to.

Mr. Deputy-Speaker

I have a manuscript Amendment in the name of the hon. Member for Stoke (Mr. E. Smith), and that is the next I propose to call. It is in page 41, line 42, column 1, after "second," to insert "or third." Taken by itself it would appear nonsensical, but it is obviously introductory to the Amendment following in the names of the right hon. Gentleman the Chancellor of the Exchequer and the hon. Member for Stoke. If that latter Amendment were to be carried this one would be necessary. As we could not then go back to make this Amendment, the Amendment I now call the hon. Member to move must be regarded as introductory to the next one, which must be discussed with it. Therefore the latter Amendment can only be put for the purpose of decision and not for debate, the Debate being on this one.

6.25 p.m.

Mr. E. Smith

I beg to move, in page 41, line 42, column 1, after "second," to insert "or third."

I thank you for that advice, Mr. Deputy-Speaker. The object of the Amendment is to put sanitary ware into the same position as all other building materials. We believe that a mistake was made by the insertion of sanitary ware, and although I am not complaining of that mistake, I am desirous of rectifying it while there is time. It is well known that sanitary ware is a product for the building industry, and for sales purposes throughout the commercial world, it is looked upon as building material. Therefore, it would have been undesirable and unfair that one section of the products required by the building industry should have been taxed, while all other products were left free from tax. Most of this sanitary ware is manufactured in the area which we represent, and alongside the manufacture of the sanitary ware is the manufacture of products such as glazed tiles, roof tiles and drain pipes, which are all necessary for the building industry. The industry say—and the operatives for whom I speak are of the same opinion—that it is not right or desirable, if the products I, have mentioned should not be taxed, that sanitary ware should be taxed. The industry felt that it was unfair to pick out a wash basin, sink or some other sanitary ware and leave the products that I have already mentioned out of account. Therefore, I think the House and the industry generally will agree that it is reasonable that an Amendment of this character should be moved, and I desire to express on behalf of the industry and the operatives our appreciation of the fact that the Chancellor of the Exchequer is prepared to accept it.

Sir J. Lamb

I beg to second the Amendment.

In no case can these be considered as luxury articles, but they are necessaries of the building trade. It is almost foolish that tiles, drain pipes and all the other accessories of a sink should be free of tax while the sink itself should be taxed.

Sir K. Wood

I accept the Amendment.

Amendment agreed to.

Further Amendments made:

In page 41, line 44, column 2, leave out "sanitary ware" and insert "and third columns."

In line 46, column 2, leave out "table or kitchen use," and insert: a kind used in the preparation or serving of food and drink.

In page 42, line 45, column 1, leave out "second" and insert "third."—[Sir K. Wood.]

6.31 p.m.

Sir K. Wood

I beg to move, in page 44, line 11, column 3, to leave out "Medical and surgical appliances and."

Mr. Deputy-Speaker

In this case we must discuss this Amendment with the next one on the Order Paper, in page 44, line 14, column 2, to leave out "and medical and surgical appliances."

Sir K. Wood

The purpose of these Amendments is to carry out an undertaking which I gave to the House, and they are designed to exempt from tax a number of surgical and medical appliances such as not only those originally contemplated in the third column, i.e., artificial limbs and spinal jackets but also surgical boots, crutches, trusses, aids to the deaf and other medical and surgical appliances which might have been held to be liable to tax. The House will remember that medical and surgical instruments used by dentists are not taxed, and by this Amendment medical appliances including operating tables, surgical bandages and other similar goods made up for surgical use will also not be taxed. The effect of these Amendments will be to exclude all such things.

Mr. Barnes

May I ask the Chancellor whether a boot specially made for correcting physical deformity would be classified as a surgical boot?

Sir K. Wood

Such a boot, if made by a manufacturer, would be exempt.

Amendment agreed to.

Further Amendment made: In page 44, line 14, column 3, leave out "being appliances or drugs."—[Sir K. Wood.]

Sir K, Wood

I beg to move, in page 44, line 27, column 2, to leave out: Account books and plain books (whether ruled or not) and to insert those words in column 3.

This follows an undertaking I gave the other evening in relation to books, newspapers, periodicals, etc., and leaves out of column 2 books and plain books whether ruled or not.

Mr. Barnes

I must apologise for putting this point, but it is very important. I want to know whether loose-leaf transfers, which ultimately become account books and are purchased loose in quantities, and counter check books and invoice books come under the definition of account books, whether plain or ruled, or under the definition of note-paper or other stationery?

Sir K. Wood

I will inquire and let my hon. Friend know.

Amendment agreed to.

Further Amendment made: In page 44, column 3, leave out lines 37 to 41.—[Sir K. Wood.]

6.37 p.m.

Sir J. Lamb

I beg to move, in page 45, line 6, column 3, after "tramcars," to insert "trolley vehicles."

Mr. Deputy-Speaker

This is another case where, I think, this Amendment and the next Amendment, in page 45, line 6, column 3, to leave out "omnibuses and char-a-bancs," and insert: and public service vehicles as defined in the Road Traffic Act, 1930, might be taken as one.

Sir J. Lamb

I was told that trolley vehicles were in the definition of tram-cars, but there is some doubt in the industry as to whether that is so, and I put this Amendment down so that there will be an opportunity of making it clear in the Bill.

6.38 p.m.

Mr. E. Smith

I beg to second the Amendment.

I do so for the reason that over a long period it has been the policy of municipalities and local authorities in general to convert their tramcars and trolley buses whenever they possibly could. In areas where they have no underground system of the kind in London, more and more enlightened municipalities are embarking upon conversion of this character. In addition to that we find an increasing difficulty is the importation of petrol and oil for diesel engines, and it has been found in many areas that trolley vehicles running upon home-mined coal is preferable to vehicles whose motive power is derived from imported oil. Progressively-minded organisations have pressed upon municipalities and Government Departments—and deputations have waited upon the Central Electricity Board and others—the need for the encouragement of this conversion policy. It would be a calamity if this tax was placed upon trolley vehicles and others were to be exempt as the Bill now stands.

6.40 p.m.

Captain Crookshank

Last time we discussed this matter my hon. Friend wanted the words "trolley vehicles" inserted after "omnibuses," but this time he wants the words inserted after "tram-cars." It would have exactly the same effect wherever you put the words. I have already explained, on the Committee stage, that it was not the intention that trolley vehicles should be treated differently from tramcars and omnibuses, and I gave the assurance that the word "omnibuses" does in fact cover trolley vehicles. It is unusual in legislation to say the same thing twice over, but if my hon. Friend is particularly anxious that trolley vehicles as such should appear in the Schedule there would be no harm in putting in the words because they add absolutely nothing to what is already there. However, if he would like it I will accept it.

Sir J. Lamb

I would like to thank my right hon. and gallant Friend for accepting nothing which I appreciate as such.

Amendment agreed to.

6.42 p.m.

Sir J. Lamb

I beg to move, in page 45, line 6, column 3, to leave out "omnibuses and char-a-bancs," and to insert: and public service vehicles as denned in the Road Traffic Act, 1030. Again, this is a question of clarification. The words of the Bill say "omnibuses and char-a-bancs," but there are other words in the 1930 Act which define what is meant by public service vehicles, and I think it would be better if the words of my Amendment were inserted to make quite clear what it is intended should be brought in.

Mr. E. Smith

I beg to second the Amendment.

6.43 p.m.

Captain Crookshank

I am not very clear as to what exactly is the object of this Amendment, but I understand it was put down in order to ascertain exactly what is meant by a sentence in the third column. I should have thought that it means exactly what it says, "tramcars, omnibuses, trolley vehicles and char-a-bancs." That seems to be simple. If you take them out and say "public service vehicles as defined under the 1930 Act" it does not seem to be equally clear. Among other reasons people will have to find out what it was that was in that Act. Whether it is intended to deal with these vehicles from the point of view of their use instead of the actual vehicles themselves, it is quite unacceptable, because all through the Bill we have made the definitions quite clear. I do not think my hon. Friend need have any fears about this, but if he suspects the words "tramcars, omnibuses, trolley vehicles and char-a-bancs," are not perfectly clear, there will be an opportunity for discussing the matter with the trades concerned and we have power to make a definition and bring it before the House under Clause 19.

Sir J. Lamb

In view of what has been said I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.45 p.m.

Sir J. Lamb

I beg to move, in page 45, line 9, column 3, after "Ambulances," to insert: vehicles used for or in connection with the extinction of fires or the protection of life or property in case of fire. The Chancellor of the Exchequer has an Amendment to leave out fire-engines. I take it that means that fire-engines will be exempt. A fire-engine is used for a specific purpose, but it is not the whole of the equipment used by a fire squad. There are other vehicles for the carrying of hose, and others which are quite as essential in the full equipment of a fire-fighting brigade, and we think those should be exempt at the same time. A fire-engine by itself without the others would be of very little use in comparison with the services supplied by the whole equipment.

Mr. E. Smith

I beg to second the Amendment.

6.46 p.m.

Captain Crookshank

I am sorry for my hon. Friend because he has again moved an Amendment which we are unable to accept. I think I have explained why my right hon. Friend is going to remove the words "fire-engines." It is because they got in there by mistake. The class of vehicles with which We are concerned, which are charged at the basic rate, are vehicles solely or mainly for the carriage of passengers, and therefore it is obvious that fire-engines should not be there because, of all the purposes which they serve, the carriage of passengers is the least important. Fire-engines therefore are out of the picture. It follows from that that they are out of the picture whether complete, or whether used with trailers, or whether they are engines to deal with fires. The normal case is outside the Schedule altogether. I think that is what my hon. Friend wants. But of course the words of his Amendment would open the door to wholesale evasion, because a vehicle used in connection with the extinction of fires might imply an enormous number of different kinds of, say, private cars used by the higher staff of the fire brigade who have to go and see fires. That might be a vehicle used in connection with the extinction of fires. A great number of private cars might be adapted for trailers. We have seen a great number of London taxicabs driving about with firemen in them and with hose attached. It would be easy under the Amendment to make a very big hole in this provision. The words "fire-engines" are to be omitted, and that is really what my hon. Friend intends. I hope he will not be too disappointed.

Sir J. Lamb

You will very likely have big fires if you have fire engines and no firemen. They must be got there and they must have a vehicle of some description to get them there, and I do not see why that vehicle should be taxed. I will withdraw the Amendment but I am very disappointed.

Amendment, by leave, withdrawn.

Amendment made: In page 45, line 10, column 3, leave out "fire-engines."—[Sir K. Wood.]

Sir J. Lamb

I beg to move, in page 45, line 13, column 3, after "perambulators" to insert: and spare parts required for replacement in the re-pair of any vehicle of the class specified in this column If these vehicles become unusable because of some particular part which is not available, it appears that they will have to pay tax on the repair of an article which is, as an article, exempt.

Captain Crookshank

My hon. Friend is really very unlucky to-day. We have not been able to give him very much. This Amendment is quite unnecessary. What he wants is already in the Schedule, because parts are not taxable.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Bill be now read the Third time."

6.52 p.m.

Lieut.-Colonel Moore-Brabazon (Wallasey)

This moment must be a very happy one in the mind of the Chancellor it of the Exchequer, the Financial Secretary and the Solicitor-General. It means h that their vast labour is over. It really does not matter what is said on the Third Reading. They can sit there and smile because their long and arduous task is finished. But it would be unfair to let the moment go by without congratulating the Chancellor on the way he has conducted the whole Parliamentary procedure, a He is a superb politician. He knows the House of Commons inside out and how to deal with it. In fact, he knows it so well that I suspect he deliberately put some things into his Finance Bill which he intended to give away right from the very beginning. I should like also to pay a tribute to the Financial Secretary. If I were a Minister, I cannot imagine anyone that I should like better as a second string than my right hon. and gallant Friend. It is rather disappointing to some of us to see him sitting on the Front Bench without a top hat rather than over there, when he used to give us such enjoyment, but it only shows how successful it is to take a poacher and make him a gamekeeper. No one can perform his duty better.

Budgets in war time are a great deal easier to get through the House than in peace time. The papers tell us that everyone is very disappointed at not having been taxed more. I do not take that view myself, and it is a very curious one to see expressed in the Press, but I think it is based on this thought, that it really does not matter what occurs to your own private fortune when other people are giving their lives. I think that is the reason why no one really minds what happens to his own welfare. In spite of all the praise that I give to the Chancellor, I think there is a sort of vague general feeling that the Finance Bill does not entirely fill the bill. There seems to me a lack of grasp and imagination of the difficulties. I feel inclined to quote: The old order changeth, yielding place to new, and to continue with the lines a little less known: And God fulfils himself in many ways Lest one good custom should corrupt the world. We are in a new world in conditions which we have never met before, and yet the imagination of the Treasury has not gone with the time. All that they are doing is to strain and stretch the old Gladstonian idea of finance, which really has not moved in thought for many years. Of course, our generation never knew the horror which was caused to the country by the imposition of the first sixpence of Income Tax. That has been flogged to death now. It is not a question of how much we pay but of how much is left in the pound. In the case of great incomes, only 3s. is left out of a pound. The theory vulgarly described as "soaking the rich," which sounds very attractive, seems even entirely to have broken down in virtue of what the Chancellor said in introducing the Budget: If one took the whole of all incomes in excess of £2,000 a year, they would only produce in extra taxation some £70,000,000 per annum."—[OFFICIAL REPORT, 23rd July, 1940; col. 640, Vol. 363.] That is the death knell of "soaking the rich." You have to find your money in other quarters. I do not think enough emphasis has been laid in these Debates on that definite statement. Yet we go on year after year increasing Income Tax and Surtax, knowing the whole time that that will never bring the money that is required.

I am going to take the side of a class of person whose welfare is very seldom voiced in the House, but I think it is a duty to put it before the House. That is the position of those people who have between £2,000 and £3,000 a year. Whether it is derived from investments or whether it is earned income does not matter from the point of view of what I am going to say. That class of person pays his Income Tax regularly and is one of the backbones of society. The way he conducts his life is based upon the continuity of the income that he enjoys. He has his responsibilities, his house, he pays his rates, educates his children, and maintains a certain style of life. He pays his Income Tax usually late from the point of view of receiving his income. Behind him the whole time there is the threat and the fear of Surtax having to be paid out of his slender income. Those who have any experience of sailing a boat will know that, when running before the wind, a great wave follows and looks as if it is going to break upon you and crush you, but you always just keep away from it; but something may occur, and you are pooped and you are sunk. Very small things may occur to make that happen. It is just what the Chancellor has done this year, which will bring disaster and ruin to many of these citizens. May I say what has happened to that type of man? He has first of all had his fixed income reduced, because dividends have gone down throughout the world. He has had his Income Tax increased and, what is more, a thing which I do not think has been pressed enough upon us, is that those people who pay their Income Tax several months late are going to be penalised this year by virtue of payment at the source. In fact, they will have to pay their Income Tax very nearly twice in one year. That means that to face the demands of the Treasury is impossible for a man in the position I have described.

It is immensely unfair that a man who has done no wrong at all should by legislation and taxation be rendered bankrupt as the Chancellor of the Exchequer will render these people bankrupt if the Special Commissioners are to press their claim. It is possible to reorganise one's life, but that takes time. What I plead for most earnestly is that the Chancellor will instruct the Commissioners to deal gently and slowly with these people. If anybody with that type of income has capital, of course, he can pay the demands of the Treasury out of capital, but if he has not capital, he is entirely in the hands of the Government as to whether he is solvent or not. That is the point I want to press on the Chancellor of the Exchequer, and I ask him to deal with it sympathetically. Taxation of that type of man is really a capital tax. That, of course, is not a new thing in our legislation. A capital tax takes place by virtue of death duties, and it will take place, of course, owing to the present legislation, but I maintain that the man in that class of society who lives on an assured income, whether earned or from investments, is a very worthy member of our society and from the national point of view ought not to be extinguished. In the scientific world Newton, Cavendish, Clerk-Maxwell, and hundreds of other people have ornamented our country, and they have all sprung from that class of society.

Among people with capital there are, of course, people who derive their income from it and do nothing else. It does not matter very much to them whether you indulge in a capital tax and reduce the Income Tax or do it the other way round, because the net result to them will be the same. But there is another class—I mean the type of man who uses his capital for adventure. That man is not to be despised. He is one who goes into adventures. I do not mean speculation on the Stock Exchange but industrial ventures, the starting of industries and getting going on new ideas. If such a man fails, he is generally termed a reckless speculator, but if he succeeds, he is praised for his far-seeing wisdom and generally arrives at the House of Lords, and later when he dies is described as an Empire-builder. But they are all the same people—people who have done their best to start industries. I have seen those people in my own life in the world of aviation. I want to speak of them because they were pioneers. They had no money in the early days, but they had great vision, and they gambled on the future of aviation. They were experimental scientists. There was no assurance that aviation would be a success. I have told the House before that when we went to the War Office offering to lend them aeroplanes they told us that they were no good for war. That was not very encouraging. The other day I happened to look in the Betting Book at White's Club, and I read this entry, dated January, 1912: Mr. Claud Russell bets Lord Basil Blackwood an even £5 that aviation will fizzle out. One of those men at any rate had no great vision, but that entry shows that everyone was not convinced. Those who went into the industry at that time were not putting their money on a certainty. When I meet Handley Page, Short, Fairey, Sopwith, Roe and others, millionaires as they are, I take my hat off to them and thank them. Had it not been for their vision and their work we should be in a very different state to-day. We cannot keep for ever the 100 per cent. Excess Profits Tax. It is related to war needs, of course, but the Chancellor and the Government must give an indication that initiative and invention and development in this country are to be allowed to go on after the war. If anybody thinks that it will be possible to develop industry after the war on the basis of Government factories he had better think again. It is not going to happen. The Minister of Labour has very rightly got this 100 per cent, tax now, but if equality of sacrifice means anything, then the Income Tax must be brought to those making the money at the present time—that is, the well-paid workers in the factories—though it would be impossible, of course, to ask them to pay the rate of Income Tax which is demanded from those higher up in the income scale.

Underlying our thoughts there must always be the question how we are to keep these people employed and keep up wages. We can, of course, rely on the co-operation of the trade unions. They have their ears to the ground, and they will co-operate as much as possible. But the people who are engaged in industry need as much encouragement as possible, and we have not found that in this Bill which we are about to pass. There are two classes of rich men. To illustrate my meaning, I will quote two American' cases, because I think that is better than referring to anyone in this country. Take Mr. Ford, for example. He never took wealth from other people to himself. He made his money by creating something. Nobody was deprived of money or swindled because he bought a Ford car. Mr. Ford created wealth.

Mr. Kirkwood (Dumbarton Burghs)

Will the hon. Gentleman tell us exactly what he means by the word "create"? Is not the meaning to make something out of nothing? I do not think any human being ever did anything of the kind.

Lieut.-Colonel Moore-Brabazon

Surely, to create wealth is to put work into something and make it something that is useful instead of useless. The raw iron and the other things from which a motor car is made are useless until the whole fabric of the factory works on them and makes them into a motor car, and from that moment certain wealth has been created. I have given an example of a man who made a vast fortune, without swindling anybody, by creating wealth. There is another type of millionaire, a man like Mr. Smith, an American, who made an immense fortune out of selling short on a bear market. That is a discreditable thing to do, for it adds to the poverty of everyone. Under our present system of society, both people have been allowed to make a fortune. My point is that I do not think the Government or the Treasury have ever really discriminated enough between those two types of people. If we are to have prosperity after the war, we must encourage the industrialist and not so much the financier. It is easy to go to the industrialist, for he is at his works or in his building; it is easy to attack him. Yet the financier wriggles about making profits here and there, and the only time at which you sting him is when he is dead—and a lot of them die too late. I hope that when the Chancellor of the Exchequer comes before us again he will tell us that the financial type of money-maker is being chased out and that encouragement is being given to the industrialist.

7.12 p.m.

Mr. Tinker (Leigh)

I cannot compliment the Chancellor of the Exchequer to-night. This Budget is one of the worst Budgets the House has dealt with since I became a Member. It contains certain points which the House would not have agreed to had it not been for the exceptional circumstances in which we are placed. The Tobacco Duty has been increased beyond all measure, and it hits many people very hard indeed. We have accepted that. But the worst feature of all in the Budget is the Purchase Tax. Hon. Members on these benches have had to agree to something which certainly hits our class harder than it does anybody else. We accepted the Purchase Tax because of the peculiar position in which we are placed, and I do not think that in any other circumstances we would ever have thought of doing anything of the kind. To agree to taxation of many of the commodities used chiefly by the poorer classes seems to me to be out of all reason, and I think we have made a grave mistake in accepting it, but we did so in the hope that it might be the means of smoothing over the difficulties which we are encountering. On almost every occasion when I went into the Government Lobby, against many of my hon. Friends, I did so because I accepted the principle of the Purchase Tax, and having accepted the principle, I felt that it would not be right to dodge, as it were, in the case of certain items, when I thought that the whole thing was wrong. It seemed to me that if I were to give way on any point, it would mean that I was trying to escape my responsibilities, and I did not want to do that.

What I should like to ask the Chancellor is how far the concessions which he has made have cut into the total revenue which he expected. Perhaps he will be good enough to tell me that when he replies to the Debate. The reason I object to the principle of the Purchase Tax—although I supported it—is that I think there are other means of getting the money. It is here that I differ from the hon. and gallant Member for Wallasey (Lieut.-Colonel Moore-Brabazon). I cannot understand him when he tries to defend millionaires. I have always understood that the sole thought of the men he has spoken about, the great men of industry, ought to be— and I believe largely is—to create something for the benefit of humanity, but they do not benefit humanity if they make themselves millionaires out of the poor people. The real way to benefit humanity is to say, "I have done my duty, and I do not want to have all this vast wealth behind me." The hon. and gallant Member may argue that the wealth which these men have can be put into industry for the purpose of creating further things, but he cannot get away from the fact that they have the wealth, and if taxation is to be imposed, it must be imposed on the people who have the wealth.

7.16 p.m.

At this point in the proceedings there was an air-raid warning, and MR. SPEAKER suspended the sitting.

On resuming

7.40 p.m.

Mr. Tinker

If those who control industry are able to get a fair competence, say anywhere up to £500 a year, while the nation is in dire distress, that ought to be sufficient for their needs. The hon. and gallant Gentleman may have settled himself to a mode of life which needs £2,000 or £3,000 a year to keep up. I claim that that is wrong. I suggest that when the Chancellor sets out to draw up his financial statement at a time like this he should start from the basis of allowing people a fair standard of life and after that take all the wealth that he needs for the country's efforts.

I confess that I was disappointed with his Income Tax proposals in this year's Budget. I thought the Income Tax would have been more. I pay Income Tax and should have been prepared to pay more, knowing very well that so long as I am in a position to pay Income Tax I shall always have enough left to provide me with a decent standard of life. The man who has to pay Income Tax can always meet his liabilities and still be better off than the lower-paid sections of the community. With Super-tax, too, the Chancellor ought to go to the full length. There is an idea that he has killed the goose that lays the golden egg, but I shall have to see that it has been killed before I shall believe it. There are the Death Duties also—all these things could have been gone into deeper at a time like this. I know very well that on the Third Reading we cannot alter the Finance Bill, but we are entitled to comment upon the provisions which it contains, in the hope that when the financial situation comes before us for examination again—and that may be earlier than we think, because we shall want all the wealth this country can yield— the Chancellor of the Exchequer will not adopt the view of the hon. and gallant Gentleman who has spoken for the richer people but take the view of hon. Members on this side of the House, who I think have a better grasp of how to deal with the situation than many others who sit in this House.

It has come to my knowledge that the richer people have a way of evading Income Tax and do not meet their responsibilities in that respect as do the poorer section of the community. In making that statement I admit that I cannot bring any proof of it; I only suggest that the richer people seem to have an easier way of evading their responsibilities than do the poorer people. The lower-paid man who is subject to Income Tax meets his responsibilities with an openness of mind which I think is commendable. He has a fixed income and knows what he has to meet, and he makes provision accordingly. Richer people have vast ramifications of money invested here and there, and in some cases, with the assistant of the lawyer class to work things out for them, they are able to evade their responsibilities; and, what is worst of all, in doing that they do not regard it as a sin. It is a possibility—and I say that it is only a possibility—that Herr Hitler may succeed in his designs, and where will the rich people be then? It will not be a question of handing over a proportion of their wealth—the whole lot will go. For that reason I hope the Chancellor, if he remains in his present office, will not pay too great regard to where the wealth is but take as much of it as he can, and not engage in so much borrowing. I realise your tolerance to-night, Mr. Speaker, in allowing me to go very wide of the mark, but I wanted to put my point of view in the hope that the Chancellor might be impressed by what I have said when he comes to prepare his next Budget and draw it up OF the lines which I have indicated.

17.42 p.m.

Rear-Admiral Beamish (Lewes)

The Finance Bill has now come before us for judgment, on Third Reading, after having been stripped to some extent of many of the good points which it had originally. Personally, I agree with the step-by-step policy in the matter of imposing more direct taxation, and I very wholeheartedly congratulate the hon. and gallant Member for Wallasey (Lieut.-Colonel Moore-Brabazon) on the gale of commonsense which he brought into the Debate by his remarks on the way in which fortunes are made by alert people who work so hard in the public interest. But what troubles me at the moment is that I feel that certain vested interests have been working, as they often do, against our Budgets in a manner which is opposed to the national interest and in disregard of that interest, and at times I feel almost angry that this should go on. I regret that medicines have not been put into the right column in Schedule 7, and I hope that the Chancellor will carry out his promise to look into this matter in the immediate future with a view to putting a tax upon patent and other medicines. When I recall that in August, 1914, one of the best, clearest and cleverest reports that has ever been drawn up on the subject of patent medicines was issued and that nothing was done about it, and that a further excellent report was drawn up in 1937 with similar results, I am moved to ask whether it is necessary to have two dreadful wars in order to persuade us to deal with a gravely anomalous position. Therefore, I urge the Chancellor to start straight away to carry out the pledge which he has given.

It is all very well to say that taking patent medicines is not a vice. I do not suggest that it is a vice, but I suggest that it is an extreme form of self-indulgence. The consumption of tobacco and of alcohol need not be vices, and I do not call them vices, but their consumption is self-indulgent, and they deserve to be taxed, and so do these patent medicines and other medicines which are poured down the throats of the public. Everybody realises, and even the medical profession laughs at, the credulity of the public in its attitude towards these medicines. Some doctors, I am told, even boast of preying on that credulity. If you cannot control self-indulgence, I say that, as the Chancellor of the Exchequer, my right hon. Friend has every right to tax it. Some of the discreditable mumbo-jumbo on the outside of the bottles, worthy only of witch doctors, will, I hope, be brought to an end by means of the taxation which I hope to see. If anybody wants to realise how this taking of medicine is based upon the credulity of the public, I recommend him to read O. Henry's "The Gentle Grafter," which will make anybody who has never read it before smile and realise how true these stories are.

I turn now for a moment to the subject of the Press, a great vested interest, and to the effect it has had upon the endeavours of the Chancellor of the Exchequer to frame his Finance Bill. I notice that criticisms of the Press are always moderated, and the reason is not far to seek. There is very much good in the Press which deserves support, even though there may be a depraved and sinister streak running through it. It runs through what in this country is grand, and it is that sinister and depraved streak to which I so strongly object. It has been said that the Jewish question will never be solved because nearly everybody has a pet Hebrew and—

Mr. Speaker

I cannot see that the hon. and gallant Member's remarks have now anything to do with the Bill.

Rear-Admiral Beamish

I apologise if I am getting away from the point. I listened to and read with the greatest pos- sible interest the speech of the Chancellor of the Exchequer when he had to withdraw the tax that he had proposed to put upon books and newspapers. No wonder he hung his head, because it was the speech of a deeply disappointed man struggling to raise the necessary money, in the national interest, for the prosecution of the war. I cannot help commenting on the spectacle of a vested interest being able to bring such pressure to bear upon a Chancellor of the Exchequer. That giant's strength has once more been used to bring great injury upon the national finances. I will not pursue this point, which I know lies outside the area of the Bill, but I wish to add that the Press can easily cut out the canker which has caused the trouble of which I speak. The Government could do the same, but neither the Press nor the Government seem to be able to dare to do so. I repeat words that were written long ago to the effect that when people asked for freedom it is: License that they mean when they cry 'Libertie'. It is the anonymous aspect of the thing which is most displeasing. I deplore again that books had to be handled in the same way. I do not say that all books are bad, but some are better than others. There is nothing so priceless as a good book, but a good book can bear a tax, and a bad book is better strangled by a tax than published. One has only to glance around the bookshop, secondhand or otherwise, to realise the enormous quantity of rubbish that is published. So we arrive once more at the last stage of another Finance Bill No. 2. It has come, and is very nearly gone. It will shortly be a law of the land. Day by day the costs of the war mount, and the age-long hatred—which I do not share and never did—of taxation persists; but the enemy is at the gate.

7.56 p.m.

Mr. Glenvil Hall (Colne Valley)

I congratulate the Chancellor of the Exchequer and the Financial Secretary to the Treasury on piloting their first Budget through the House. When the hon. and gallant Member for Wallasey (Lieut.-Colonel Moore-Brabazon) was speaking, my mind went back to the time, about 10 years ago, when the Chancellor of the Exchequer used to sit in the corner seat below me, and the Financial Secretary to the Treasury used to sit in a corner seat behind me. They in those days made themselves extremely objectionable to the Labour Government then in office. If there was a weakness in any of the Measures which the Labour Government put through the House at that time, they could be relied upon to find it. Now, they have had to suffer in the same way. Although much that is in the Finance Bill is good and is approved by all sections in this House and by the great body of people outside, some of the proposals in the Bill have nearly brought the Chancellor of the Exchequer down. If he had not given way upon the Purchase Tax in respect of books and newspapers, the Government might, in my view, have suffered a defeat thereon.

I was very interested in the speech which the hon. and gallant Member for Wallasey made, especially when he told us of the entry in the Betting Book at White's, dated 1912. It crossed my mind that much of the economics which he expounded to us might be said to bear the same date. He chided the Chancellor of the Exchequer on being Gladstonian in his finance, but some of the points made by the hon. and gallant Member himself were not very progressive as we on this side of the House think of progress. The pioneers of aviation were certainly entitled to some benefit for the risk, sacrifice and ability which they put into their inventions, bur I would remind the hon. and gallant Member that their work could not have been accomplished but for others who had gone before and for the workmen who carried out in practice their ideas. The difficulty is, as my hon. Friend the Member for Stoke (Mr. E. Smith) reminds me, that nine times out of ten the inventor does not really get the benefit of his invention. To-day it is not the inventor who is making the money out of aeroplanes, but the great body of shareholders who have done no more than put their money into the companies.

I suggest to the Chancellor that when we come to the next Budget which he, or his successor, will bring before the House, he should follow out another suggestion which the hon. and gallant Member made and be a little more imaginative. I see no reason why the Chancellor should not go to other sources in order to get revenue. Some years ago I took the trouble to examine the speeches of the late Viscount Snowden, who, as the House will know, was Chancellor of the Exchequer 10 years ago. It was very interesting to realise that he began his public career by imagining that most of the inequalities of our social life could be ironed out by the weapon of taxation. Rightly or wrongly—I do not wish to go into it—when at last the Chancellorship was in his hands and he had an opportunity to carry out his views, he obviously came to the conclusion that there was a limit to the amount of taxation which could be levied. What that limit is I do not know, but it is obvious that there is a limit to the taxation which can be imposed. Therefore, it is necessary that the Chancellor of the Exchequer should seek fresh sources from which money can be raised. I think it is a pity that the Clauses in a previous Finance Act dealing with the taxation of land values were expunged. They would have provided an excellent weapon for the Chancellor to use to-day.

Mr. Speaker

The hon. Member ought to have referred to that subject at an earlier stage of the Bill, and not on the Third Reading.

Mr. Hall

I bow to your Ruling, Mr.Speaker. I do not know whether it is in Order to suggest that a Chancellor should look to the enormous sums which are now spent on betting and greyhound racing—

Mr. Speaker

That subject cannot now be discussed either.

Mr. Hall

I apologise, Mr. Speaker, but I thought that, following earlier speeches you were perhaps allowing a little greater latitude to-night. I, of course, will not pursue that topic any further. Before I sit down, however, I would like to refer briefly to the Purchase Tax. The hon. and gallant Member for Lewes (Rear-Admiral Beamish) took the view that the Purchase Tax is good and that so far as books are concerned the Chancellor should retain books, periodicals and newspapers in Schedule 7. I think the Purchase Tax is a bad tax. It bears very heavily on the most deserving poor. It penalises those with large families, and it does not bring in as much as the consumer actually pays. It is levied on the wholesaler, and because that is so the consumer pays more than the actual Purchase Tax which has been put on the article in question. I would remind the Chancellor that there is a great deal of feeling against the Purchase Tax, and especially a Purchase Tax levied on books and newspapers. I was very perturbed the other night when the Chancellor told the House that he would withdraw books, periodicals and newspapers from the Schedule, to hear him say that he would probably have to include them in on a future occasion. That is a threat which is hanging over the industry, and it is an undeserved threat. My view is that public opinion is such that he will never be able to implement it, and I would like the Financial Secretary to the Treasury, if he is to reply, to give us some indication, before we finally part with this Bill, that the chances of that tax being put on books and newspapers are so remote that none of us need worry.

I conclude by saying that I hope it will not be long before we get another instalment of this interim Budget, which seems to run on throughout the year, and that when we do get the next instalment the Chancellor will go to fresh sources of revenue, and in a most drastic way will take from those who reap large rewards for very little and see, in the words of the hon. and gallant Member for Wallasey, that people who are receiving excessive incomes without any creative effort on their part pay a higher share of taxation, that must be levied in order to carry the war to a successful conclusion.

8.6 p.m.

Mr. Hely-Hutchinson (Hastings)

My hon. Friend the Member for Leigh (Mr. Tinker) pointed to the difficulties which a rich man experiences in endeavouring to enter the Kingdom of Heaven. My hon. and gallant Friend the Member for Wallasey (Lieut.-Colonel Moore-Bra-bazon) pointed out what a tough and difficult time the rich man has while he is here below. So that between the two of them it seems that there is not much to be said for being rich. It would be intriguing to carry a little further the Debate on the merits and demerits of private enterprise, but I am afraid, Mr. Speaker, you would not let me go very far on that, and I will therefore attempt the difficult feat of making a Third Reading speech within the Rules of Order. What my right hon. Friend the Chancellor said about the financial needs of the situation, when he was introducing the Budget, and what he has found possible to put into this Bill provide such a contrast as to make it abundantly clear that what is needed and what is politically expedient do not coincide. The contrast further shows that this is not really the Chancellor's Bill but the Cabinet's Bill. The Chancellor has put into the Bill what he has been able to persuade the Cabinet to stand for.

I agree wholeheartedly with my hon. and gallant Friend the Member for Lewes (Rear-Admiral Beamish) in his approval of the Purchase Tax, and I would like to congratulate, by the way, my hon. and gallant Friend on his very courageous speech on other matters. The Purchase Tax, as far as it goes—and it does not go very far—is a move in the right direction, both as regards reducing individual private expenditure and from the point of view of raising revenue. The real heart of the Bill, which passed practically unnoticed, is the provision which my right hon. Friend the Chancellor has inserted with regard to the collection of Schedule E Income Tax- at the source. That is the corner-stone on which the Government must build, for the effective prosecution of the war, in diverting from individuals to the State the power to spend money

The Major criticism of the Bill is to be found in the huge gap which has been suffered to lie between the deficit on the income account and the amount that is being raised by taxation. That gap is left to be covered by borrowing. I must say that the borrowing is being practically allowed, so to speak, to do itself. That feature of this Bill—which I quite appreciate is due to the Cabinet's view of what is politically expedient—makes it a gambling Bill. The Bill gambles on the help that we may hope to get from America, after our foreign resources—which are finite—have been exhausted. Is it wise, is it right, is it even politically expedient, to take such a gamble, and to take the United States for granted in that way? When will we learn to rely on ourselves alone? I have followed the Prime Minister's advice, and have looked back over my own previous speeches on the war-time Budgets. Through all of those speeches runs the same note, that it is mass economy, mass self-denial, and mass sacrifice which will enable us to win the war; and that only a Government which dares to demand mass sacrifice will lead us to victory. My complaint about this Bill is that the Government have not dared to demand this sacrifice.

8.12 p.m.

Mr. David Adams (Consett)

The general feeling of relief which we feel on reaching the Third Reading of the Finance Bill should not prevent the House recognising the very great and valuable labours of the Chancellor and his lieutenant, and the manner in which they have extended concessions, as far as they were able to do so. But for certain aspects of the Bill, it might have been possible to accept it with comparative calm, and even with some melancholy rejoicing. But, in view of those aspects, the foundation upon which the Budget is built is, in my judgment, unsound, and therefore unsafe. It should have been based on the taxation of known wealth.

The weakest feature of the Bill is undoubtedly the Purchase Tax. The hon. Member for Hastings (Mr. Hely-Hutchinson) declared that that was an excellent beginning. I take it that he would encourage the Chancellor in future to add in that direction to the burdens of those upon whom the tax undoubtedly falls. Those of us, particularly on this side, who have opposed the Purchase Tax from its inception, and from its re-inception, will watch with some mournful interest the painful effects which, I believe, will fall upon the life of the nation. I believe—and I hope that I am incorrect in my belief—that it will weaken the morale of the nation. Certainly it has impaired the spirit of good will which hitherto has prevailed among all classes. There is undoubtedly spreading, with the increased knowledge of what this tax really means, a feeling that certain classes, and particularly the workers, have received severe body blows. I believe that unless supplementary incomes can be found for the workers, it will lower the standard of life and add depression to already depressed sections of our population. If the Chancellor could have confined the tax to luxuries and semi-luxuries, the country would have rejoiced at that charge, but the tax enters the homes of the workers and places burdens upon them which are bound to add substantially to their difficulties.

I turn to the burdens that have been imposed on the hospitals. The voluntary hospitals are struggling to maintain themselves, and are appealing with ever growing intensity for public subscriptions. We know the great services that those hospitals are rendering. The municipal hospitals, with their sanatoria and other institutions, have been continually expanding with the demand for better clinics, consultations and other services, which have been provided almost entirely at the public charge. Both classes of hospitals will suffer very severely from the Purchase Tax. It seems to me that there never was a less well-chosen time at which to impose added burdens upon these institutions. In wartime, when pre-eminent calls are being made upon both classes of hospitals, we are asking them to find large additional sums to meet this Purchase Tax. These new burdens are as unexpected as they are severe, and it is no exaggeration to say that they will bar the road to future progress in many parts of the country, and that preventive and curative medicine will go through a period of stagnation as a result. I am sure that if the Chancellor had given more consideration to the effects of this tax, it would never have been imposed. I have often wondered whether the Chancellor, before framing his Budget, conferred with his Ministerial colleagues.

One could imagine that he did not do so. We have heard of certain of the Ministries making most meticulous provision for raising the standard of life of the industrial workers. We have the great new free-milk scheme with that object in view. We have good will shown by certain Ministries to the extension of the social services, and we have the general Ministerial decision, in which the whole country rejoices, to incur heavy expenditure to prevent a rise in the cost of living in many important directions. If Ministries are doing what they can to relieve the pressure upon the industrial workers of the country, how startling and strange it is that, through the Budget and in the Purchase Tax, the pressure is to be increased in another direction to stultify, and probably even destroy, the beneficent action which has been taken by other Ministerial Departments of the Crown.

But for certain disabilities, the Budget and the Finance Bill are sound, but I believe that a more equitable basis for finding the requisite sums—and we sympathise with the Chancellor of the Exchequer and the Government in that imperial necessity—could have been found in a better way without in any way impinging upon the standard of life of the people. Inasmuch as the Bill has failed to do this, we condemn it, but we rejoice in the finding of the necessary sums without impairing industrial efficiency. The Chancellor of the Exchequer has already predicted that perhaps he himself will be Chancellor when a new and early Budget is introduced, but we warn him not to pursue the direction which he has taken in the Purchase Tax. Let that be, as far as the war is concerned, the final step in that direction, but let us advance in those directions where wealth, and wealth in abundance, is to be found.

8.23 p.m.

Sir John Wardlaw-Milne (Kidderminster)

My right hon. and gallant Friend the Financial Secretary, I have no doubt, will be relieved to know that I do not propose to speak on the Finance Bill generally, because I have had an opportunity of making my views on the Budget and the subsequent Resolutions already perfectly clear. I agree with my hon. Friend the Member for Consett (Mr. David Adams) that another Budget will be essential at a very early date, and I have no doubt that when that time comes the Chancellor of the Exchequer will have to look much wider than he has done to-day for the revenue that will be required. If I differ from my hon. Friend, it is that I do not think that he can look in any one direction. There will be a sacrifice of a very general character required in this country if we are to meet the financial situation with which we are faced—a situation which I am afraid the people of this country do not fully appreciate.

I rise really to ask my right hon. and gallant Friend whether a mistake has not-been made in connection with one comparatively small matter in this Bill. I refer to Clause 29, Sub-section (5), in which it is stated: In this Section references to the exportation of goods from the United Kingdom include references to the shipment of goods as ships' stores. To any ordinary person it seems perfectly clear that stores going aboard a ship are not to be subject to the tax which is referred to in the Clause, and it would be contrary to the usual custom in such cases. I am told, however, that there is a curious kink in the law. It arises out of an Act as far back as 1876, namely, the Customs Consolidation Act, which in setting out the procedure necessary to obtain an exemption from excise duties for ships' stores, refers to vessels of the burden of 40 tons and upwards departing from any port in the United Kingdom upon a voyage to ports beyond the seas. The effect of that Act, I am told, would mean if Clause 29 stands as it does now, that all vessels engaged in the coasting trade would have all their ships' stores subject to tax, whereas all others would be free of tax. I cannot believe that that is the intention of the Government. I should be very sorry to hear that it was, and I am extremely sorry that unfortunately this matter was not brought to my notice, or to the notice of other Members, early enough to have the matter put right. It is unthinkable that we should tend to make the coasting trade of this country, which is subject to very great difficulties in any case, owing partly to the road and rail competition and other reasons, subject to a tax which is not put upon shipping generally. I cannot help thinking that that is a matter which must have been omitted or that there was an oversight when the Bill was drafted. I realise that this is a very late stage at which to raise the matter, and all that I can do at this Third Reading is to ask the Financial Secretary whether he will be so good as to have the matter looked into and see whether there is not some way yet in which this difficulty can be put right. I really do not think it was intended to impose a disadvantage upon one of the most important of the smaller parts of our shipping trade by making it subject to this tax. The coasting trade is a very valuable one from many points of view, particularly of earnings and employment, but also owing to the fact that it provides a very large number of valuable people for defence in more branches than one of the Naval service. I hope that my right hon. and gallant Friend will look into the matter and see whether it can be put right in any way before the Bill finally passes.

8.29 p.m.

Mr. Price (Forest of Dean)

The present Budget has not shown much imagination, although I think it was very much what we all expected. It is just another turn of the screw all round; that is what it has turned out to be. At the same time, as we are obviously to have another one before very long, it is an indication that the Government are apparently feeling their way to new and other measures which certainly will be needed. Anyone who looks at the true financial position will realise that the gap which is being formed all the time is not being filled up except by loans and other measures which will inevitably lead to inflation and a rise in prices. While it is true that Government expenditure is still going up, it is true also that the national income is going up. It is very doubtful by how much the national income has risen, or is rising, but in any case the gap is widening, and we are coming nearer to the danger of inflation. In fact, I have reason to believe that it has already begun.

The various Parts in which this Budget is divided—Parts I to VI—form the stock methods by which money is raised. The increase in Income Tax, the Excess Profits Tax, Death Duties, Estate Duties and Surtax were all very much what we expected and were something of which the House approves. But supposing we took away the income of everyone over £1,000 which is not impossible in wartime, we would still not finance the war. There are other sources of revenue which will have to be found, and I think we shall get to that point before long. Those who have read the writings of Professor Keynes will see that according to the figures he gives—which may not be completely accurate, but which I think are not far wrong—there are incomes of £5 to £10 a week which will have to take a share in direct taxation if proper contributions are to be made to prevent the inflation of commodity prices.

I think it is a good thing that the Chancellor has introduced into this Bill measures whereby Income Tax can be collected at the source from small incomes. It is an innovation which one feels will possibly lead to another step later on. I personally, would like to see the method adopted, although I cannot go into details, whereby direct taxation on these lower forms of income could be linked up with family allowances. I think this would introduce an important measure of social reform as part and parcel of our financial system. In any case, if this taxation from the source on small incomes is to be coupled with some system of family allowance, one sees in it the swallow which may later make the summer. I would sooner see this than the much more dangerous form of the Purchase Tax.

I have not felt it my duty to go into the Lobby against this tax, as have some of my hon. Friends on this side, although I felt strongly about it and have felt I would have liked to have done so. This turn of the screw is not the most equitable way in which this tax ought to be levied. I am afraid its introduction will put fresh burdens on those below the poverty line, whereas the method I have just referred to will leave alone those below the poverty line. If this Budget is a harbinger of other things, and I think it is by the introduction of the principle of taxation of lower incomes at the source, then it is certain that the Chancellor will be taking a step in the right direction, and one which he or his successor must develop in later Budgets.

8.35 p.m.

Mr. Brooke (Lewisham, West)

By this Finance Bill we are raising hundreds of millions of pounds, in order to win the war. But the sacrifice of money means nothing compared with the sacrifice of life. To-day, men and women have lost their lives, and fearless young men have given their lives in the defence of this country. I think we can from this House give the Chancellor a message. It is that he can make any demand whatever on the purses and pockets of ourselves and the people we represent, and all will willingly respond—provided everyone is satisfied that he is endeavouring to spread the burden fairly and that he and his colleagues will see that the money is spent economically.

Those whose incomes have diminished as a result of the war are severely punished by this Budget. It is, one might almost say, a vindictive Budget so far as most Londoners are concerned, because London has been, economically, hard hit by the war. Other parts of the country are prosperous. I must not say that any part is doing well out of the war, because money does not count for every- thing. But money is flowing more freely in some cases, and I maintain that this Budget does not make sufficiently great demands on those whose incomes are enhanced by war. This movement of income becomes very important in times of unusual change like these; it becomes an actual criterion of taxable capacity. The fact that a man's capacity to pay depends so greatly on whether his income has moved swiftly up or down is, so far as I can see, hardly reckoned with in the framing of this Budget and Finance Bill.

Since the Budget was introduced the Government have announced with universal approval that the pay of the men in the Fighting Services is to be increased. What a chance was missed there! Would not this country and House have accepted gladly, cheerfully and joyfully any new tax which the Chancellor had proposed, had he made it known that he was demanding the money in order that it might go towards making our fighting men better off? I know well that this earmarking is contrary to orthodox and honoured traditions of public finance, but if we are to carry this country through to its goal in the war we must reconsider such traditions. I hope the Chancellor, though he may think me heretical, will not be angry with me for asking that he shall not exclude anything of that sort from his mind in future Budgets.

And now we send the Chancellor forth with the good wishes of this House, to range through the country seeking the £2,000,000,000 of savings that he needs to cover his deficit. My personal view is that he has under-estimated the yield of some of the taxes we are imposing here, and that, when the time comes, he will be able to report to us that the revenue is buoyant. Well and good. But he may, too, have under-estimated some of the elements of expenditure, and I cannot help thinking that he will find that the deficit may grow much larger than £2,000,000,000 unless between now and then he consults urgently with his colleagues about means of reducing the number—a far greater number than most Members realise—of Government contracts which are now running on what is, in fact, though may be not on paper, a cost-plus-profit basis with no real control over inflation of costs.

8.41 p.m.

Mr. Pet hick-Lawrence (Edinburgh, East)

We have come to the point of parting with our guest—not, I am glad to say, the Chancellor of the Exchequer; he is always welcome in the House—but with the guest that he has introduced to us, his Budget, which is now passing its final stage. We have come to the point of saying "Goodbye." I do not know whether it is like a personal "Goodbye"—very often kiss and "Goodbye." In that case I am not sure that the Finance Bill is so dear to us that we should impress a kiss upon it. At any rate, we are parting with it, and I am afraid it has been rather an unloved guest, as all Budgets which impose considerable taxation necessarily are. It is not that it has stayed too long, but it was never very welcome when it came, and I do not know that it will be welcome to the country now that it has gone. Two things have been said about the Budget as a whole. It is said that the Chancellor of the Exchequer has been unimaginative, and has only imposed taxation of the ordinary kind, whereas he ought to have gone out into the realms of imagination and produced entirely new taxes of a kind unknown before. That may or may not be so, but I honestly think that the people who say that seem to imagine that' by departing from the ordinary methods of taxation they can somehow, like a conjuror, produce money from the air. Whatever forms of taxation the Chancellor adopts, he can get the money only from the people of the country, and, whatever form it takes, it still has to come out of the pockets of the country, and it will still be disagreeable to get it out of those pockets.

Therefore, I do not share the view sometimes expressed that, if only he had adopted some more imaginative new course, the yield of taxation would have been far greater and people would have minded it far less. When you take money out of a man's pocket, it cuts him down in what he has to spend, and it destroys his sense of freedom from money worries. On the other hand, I think there is a good deal of misunderstanding as to how war can be financed. I have always taken the view that it is really the economic questions which come first, and, once that is settled, the financial side of it will sink into its place. I hope before the next Budget is introduced, whenever that may be, the Government as a whole, and the Chancellor of the Exchequer in particular, will look into the whole economic question and see how it can best be planned, because what we are faced with at present is that half the productive capacity of the country has to be devoted to the war, and the corollary of that is that only half the economic productivity of the country can go to the ordinary life of the community, and it may well be that, if the war continues, even more than half the total productivity of the country will go into the war and even less than a half is left over. That will have to apply to the people as a whole, and nothing that we can do can escape from that hard and true fact.

There are two things that arise from that. The first is that we must by all means in our power avoid the fallacy that by financial means we can escape from that economic fact. If we adopt that course, economics will come and hit us in the back by means of inflation. Owing to monetary causes the price of things will rise, just as they did in the last war. We had a practical illustration of it within the memory of most Members present, and that is a most disastrous thing which affects the poorest section of the people most and affects everybody in inverse proportion to their wealth. That is why it is essential in one form or another to try to find the money for the war out of our own resources, by taxation rather than by continual borrowing. It is only new savings which can help to avoid inflation. We have a curious system of paying taxes in this country. The natural, normal thing would be so to arrange the payment of taxes as to spread it more or less evenly over the whole year. We do not do that. Certain taxes are paid throughout the year but others are collected nearly all in the first three months. The critical time is the months in front of us. In those months the Chancellor gets a comparatively small amount of his revenue.

With regard to that, I want to make a suggestion to the Chancellor which I think is of some importance. In the case of nearly all Surtax and a considerable part of the Income Tax the notices which are sent out state that the tax is payable on 1st January. Most people take it that they are not expected to pay until 1st January and do not pay until then, and some do not pay until 1st February or even 1st March. I think it would be of very great value if a certain amount of that Surtax and Income Tax were collected, not in January and February, but in October, November and December. The actual assessments, I believe, are sent out two or three months before the end of the year, and if people could be induced to pay their taxes just a little earlier than usual, it would be a great advantage. The Chancellor did say something about that not very long ago. He suggested that people would be making in effect an interest-free loan if they paid their taxes in advance. I suggest that there should be attached to the assessment form a small printed slip urging people to take that course. Quite clearly, people must save up to pay these taxes. If a man did not save up, he really could not meet the demand in January. Therefore in many cases he will have accumulated between now and 1st January a balance at the bank to pay Surtax or Income Tax when it becomes due. If the Chancellor put a slip on the assessment form as I suggest, asking for payment before January, he might easily get quite a considerable amount of money.

Mr. Woodburn

Would the right hon. Gentleman think it right that those who make an anticipated payment of Income Tax in that way should be given a pro rata discount equivalent to interest on War Loan while those who pay later might be charged interest?

Mr. Pethick-Lawrence

If these were ordinary times, I would suggest a discount, but I think that in these days an appeal should be made to patriotism. I have already advocated that taxpayers who are in arrears should be called upon to pay interest on the amount of the arrears, but I do not know whether it is possible to do that immediately, because probably it would require a Clause in the Finance Bill. I do not think that a man should be given a discount for doing something which is patriotic. If he has the money ready at the bank, he can quite easily pay it. Even if he could not pay in full, he might pay an instalment which I believe is possible now. A man liable for £500 or £600 Surtax might pay £200 or £300. It would help to avoid inflation, which is otherwise likely to take place.

Finally, I want to deal with two innovations in this Bill. The first is one that has received universal approval—that is, collection of Income Tax by employers from their employés. I believe that is generally approved, and that it will be of general advantage both to the community and to the revenue. I await with interest a statement which the Chancellor may or may not be able to make to-day on the particular point that I have raised as to whether there could not be in each bank a branch where this money could be received and dealt with.

The Major innovation, of course, is the Purchase Tax. That tax has been accepted, not only without enthusiasm, but with considerable misgiving by this House. That misgiving is not confined to the Labour benches in this House, nor is it confined to this House. People with such different points of view as members of the British Federation of Industry and hon. Members who sit on these benches, each from their own point of view, have doubts and misgivings, and you have such newspapers as the "Economist," the "Daily Herald" and the "Times" expressing fears about the tax. The Federation of British Industries have raised the question of its effect upon the export trade, and a large number of manufacturers, wholesalers and retailers are concerned about the machinery for the collection of the tax. If these had been ordinary times, such considerations would have meant vigorous opposition, which would probably have killed the proposals. In fact, in its original form the proposal was so objectionable that, war or no war, we could not accept it.

But we all have to take into account the fact that there is a war and that money has to be found, and what weighed with me in deciding myself and in asking my hon. Friends to forgo opposition to this tax was the fear of inflation. I have felt from the beginning that every penny put into the coffers of the State by taxation was a penny holding back the risk of inflation. Hon. Members on these benches have quite rightly said that the poorest classes of all cannot bear even a small rise in the cost of living, and that is true, but inflation might easily mean a rise, not of 3 or 4 or 5 per cent., but of 25, 50, 100 or even 200 per cent., as was the case in the last war. I am not now talking theories, but I am talking of what we saw in the last war, brought about by the failure of the Government of that day to understand finance and to tax us sufficiently to meet the cost of the war in an economic way. I confess that the fear of inflation has shown me that it is necessary to endeavour to stop consumption and to raise as much money as possible. Therefore, in spite of all my misgivings, I decided that it was not right for us to oppose the tax in the amended form on which the Chancellor finally decided, largely, I think, in consideration of the case put forward by me and others.

But we do not know how this tax will work. It is a new experiment in this country. I hope that the Chancellor, now that he has got rid of this Finance Bill, will not say, "That is all right, and next year I can put the tax up again." He has to watch how the tax works. Does it send up the cost of living by only 2 or 3 per cent., as he thinks it will, or by far more? Does it press upon the poorest section of the people? Does it injure the export trade? Does the machinery work as well as he and his advisers expected? I do not say that it will not do so. All I say is that it is the business of the Chancellor to watch it, and not simply think that he has two workable horses which he can drive to any extent, the Income Tax and the Purchase Tax; and that when he wants more money he has simply to turn the screw on each tax, with the knowledge that nobody will like it but that everybody will have to put up with it. I think there is a danger if that should be the right hon. Gentleman's mentality towards this Finance Bill.

The Chancellor has certainly been conciliatory over the Purchase Tax. He has done his best to meet us, and we thank him for that; but we beg him to take the largest view that he can of the whole economic position, and to spare no effort to induce people of all classes to contribute out of their savings to the loans. Unless people double their present offerings, great as those offerings are, we are heading for inflation—inflation which will have all the evils which every one of us dislikes. I beg the Chancellor to consider again the points I have put to him with regard to keeping down the rates of interest, and so on. If he does that, and if he faces the whole economic issue, then when he introduces a new Budget, I hope it will be one that will command the general approval of the House, and if we are not then on the way to the end of the war—although I am afraid we must not yet talk of an end—we may at any rate hope to meet it without a future made unnecessarily gloomy by the same financial mistakes as were made in the Great War, 1914–1918.

9.5 p.m.

The Chancellor of the Exchequer (Sir Kingsley Wood)

There is at any rate one thing on which I can agree with the right hon. Member for East Edinburgh (Mr. Pethick-Lawrence) concerning the position of the Chancellor, and it is that, although the last House of Commons stage of the Finance Bill has been reached, I can expect no period of rest. Whenever I have examined the position of Chancellor of the Exchequer—not that I ever thought I might occupy it—I have never looked upon it as being a bed of roses. There is not much bed about it and very few roses. Therefore, I take to heart all that the right hon. Gentleman has said to me to the effect that, although this stage of the financial proposals is at an end, obviously, in the conditions that face us; at the present time, the task must be continued with all the help and advice that can be given.

I wish to thank the right hon. Gentleman for all that he has done to assist me in connection with this Bill, although he has been the instrument of obtaining very many concessions from me. He and I have endeavoured to meet the present situation in the light of the Government as it exists to-day; I hope he feels that I have endeavoured to meet him, as he, for his part, can be assured that he has placed before me, with the greatest vigour and determination, the views of himself and his hon. Friends. I have endeavoured to respond, knowing as I did that in very many respects many parts of the proposals of the Bill were disagreeable and often obnoxious to the party opposite. I hope that in the result we may have come to a reasonable arrangement. As the right hon. Gentleman says, we must judge from the experience of the next year or two whether certain objections that have been taken are justified or not. I am also gratified by the remarks that have been made con- cerning the assistance given to me by my right hon. and gallant Friend the Financial Secretary. He has helped many Chancellors of the Exchequer in times of a good deal of difficulty. I have been greatly assisted, too, by the Solicitor-General, who has helped me greatly in the passage of the Bill.

It has been very interesting to me to note the criticisms that have been made of the Budget. I was warned when I entered this office that I must expect much criticism and very little praise. Criticisms have been voiced to-night. Some of my hon. Friends have described the Budget as a timid Budget, and the right hon. Member for East Edinburgh has said—and he has repeated what has been said by other hon. Members—that this is a vindictive Budget. I hope that between those two criticisms I may come through all right. But there remains a fact which is often overlooked by the critics, and it is that the people of this country are shouldering very heavy burdens—I am now referring to all sections of the community—that have been imposed during a very short space of time. In all the criticisms that have been addressed to me, I have seen little or no recognition of what has been done, not by the rich alone, but by the rich and the poor and what may be called the middle sections of the community, during the last ten months.

It is worth repeating that in September last, when the first War Budget was presented, the total revenue from taxation and other sources was estimated to be £888,000,000. The other side of the picture is that in a full year, as a result of the September and April Budgets and this Budget the increase in the total revenue over the estimated sum of £888,000,000 may be put at £650,000,000; and that therefore, in that very short space of time, the revenue has been raised by nearly three-quarters to a total of £1,500,000,000. That is an astonishing figure. When people say that more ought to have been done, I often think they fail to recognise not only the tremendous amount that has been raised during a very short period, but also the necessity for giving a reasonable time for people to make adjustments to the new circumstances and conditions.

Again we have had the picture painted of the difficulties of people with £2,000 a year. My hon. and gallant Friend the Member for Wallasey (Lieut.-Colonel Moore-Brabazon) has spoken with great conviction and his views are entitled to respect. He has spoken of the difficulties of the man with £2,000 or £3,000 a year in regard to the heavy burden that has been placed upon him, and he is naturally apprehensive, and I am naturally apprehensive, not only of the £2,000 or £3,000 a year man, but of the £400 and £500 a year man to the extent that I want to give him an opportunity, in the position with which we are faced, to make the adjustments which are undoubtedly necessary. He asked what was the position of the Inland Revenue in cases such as he has given to the House; it is a difficult position indeed, and I have heard of many tragic cases during the last few weeks of people who, undoubtedly, have had to face a very serious situation. While it is the duty of the Inland Revenue to collect the tax charged, and to act firmly whenever a taxpayer is, without good reason, refusing to pay, or is being dilatory, it is not the policy of the Inland Revenue to be harsh and unsympathetic in cases where it is shown that the taxpayer has fallen on evil times, particularly if his struggles are due to the war, or to other circumstances which are quite beyond his control.

The collector will, in such circumstances, give the taxpayer reasonable time to pay, or allow the amount outstanding to be paid by instalments. Any taxpayer who finds himself in the position I have described should, in the first place, see the collector and place the facts before him, but if any of my hon. Friends know of any cases in this particular category or any other—I am not confining it to the higher ranges because there are just as many difficulties in the lower ranges, particularly in the case of a man with £400, £500 or £600 a year—in which discussion with a collector fails to arrive at some mutual understanding, then I hope they will communicate with me, and I will look into the matter. Where there is a case where payment ought to be made, then I must see it is paid.

My right hon. Friend has put before the House the position as it is to-day, and he has given some estimate in regard to future taxation. I should like to make a statement to-night on this matter which is a matter of moment to the country at the present time. I think it can be said that it is inevitable that we cannot in wartime make financial plans for so long ahead as in peace-time, and also that we cannot frame our plans simply by referring to a financial year beginning on 1st April and ending on the following 31st March. In response to the suggestions which have been made in this connection, I should like to say to the House to-night that our financial arrangements must be continuously under review. The cost of the war effort will obviously depend from time to time on policy, on the course of military operations, and on the output of munitions of war, and the extent to which, at any stage, we meet that expenditure out of taxation must be a balance between the need for the greatest possible sacrifice by all taxpayers on the one hand, and, on the other hand, their ability for the time being to adjust their financial positions, including commitments of all kinds, to the increased demands made upon them.

I suggest that that is a reasonable presentation of the position, and it is not only a reasonable presentation, but if we do not take up this attitude we cannot get the greatest possible contribution from the taxpayers of the country. It is no good smashing people. You do not get revenue that way. This particular method, I suggest, is designed on the whole to obtain the greatest possible contributions possible. The considerations I have mentioned are not merely matters for 1940–41, but they are what I would describe as long-term factors. We only have one goal, in point of time, and that is the day when victory is secured. From now until then, whenever it may be, all our financial arrangements must be interim arrangements, and it was in that sense that I used the words in my Budget speech.

That further taxation has to be imposed is, obviously, inevitable, and the time at which this must be done must depend on the response to our appeals for Government loans, because on that response we depend not only for the financing of an appreciable proportion of our war expenditure, but also to a large degree for that restriction in civilian consumption which is our surest defence against the evils of inflation to which my right hon. Friend has referred. If savings and lending do not contribute sufficiently to these objects, then the need for still higher taxation will correspondingly grow. I would only say in passing that it is, of course, in times like these impossible for me to make a fixed timetable. The shortness of the interval between the April and the July Budgets was quite exceptional, and need not necessarily be regarded as a precedent. I fully realise the uncertainty and inconvenience of interim Budgets. Take, for instance, the matter which my right hon. Friend has often emphasised—and I heard this long before I occupied my present position—the inconvenience that comes from frequent changes in the rate of Income Tax. I must have regard particularly to the important factors which I have mentioned, and to our general position, financial and economic, in the months between now and April.

I would like to add a word about what has been said by so many Members on the larger economic policy. I was in full agreement with my right hon. Friend when he indicated, as I indicate to-night, that the proposals of this Bill must be regarded as forming part of the larger economic policy, which was discussed in the Debate on the Appropriation Bill last week. Obviously the governing objects of that policy are to concentrate as large a portion as possible of our productive resources on increasing our fighting strength, to ensure adequate supplies of the necessaries of life, to maintain services that are vital to the civilian population and to maintain as far as possible our production for export. I am not permitted in the terms of our discussion to-night to emphasise that matter further. Anyone who has given a moment's consideration to our present problems must regard that as the most vital aspect.

At all times, in connection with the plans that we are framing and designing, we must have particularly in view the elimination of waste in Government expenditure. I have more especially in mind to-night war expenditure, but there is what I may call peace-time expenditure, namely, the expenditure which is necessary to keep running certain services which are not directly connected with the war. I think it can be said that a great effort has been made to reduce that expenditure to a minimum, not only by specific measures taken to stop or reduce the scale of these activities, but also, indirectly by the concentration of personnel on war work and the shortness of supplies of many important materials which have to be directed to the services of highest priority. On war expenditure the primary need is to get value for money over the great range of services that have to be provided for. I can only assure the House to-night that we are endeavouring to keep constant watch in this important connection.

I turn to a subject which has given us a great deal of difficulty, namely the Purchase Tax. It is a tax imposed to meet the present situation and I can well understand that it would be vigorously opposed in normal circumstances. I acknowledge, at once, all that has been done by many hon. Gentlemen opposite in order to meet the present situation and to recognise the fact that we are at war and that money has to be obtained. On the other hand, I hope they recognise that I have endeavoured to meet them. I have made a considerable number of concessions and I hope that by that means I have eased the passage of the Bill. I would like to say a word about the tax from the point of view of what is to happen to bring it into operation and, I hope, to make it work smoothly and successfully. In the first place, I should like the country and the traders to recognise that this tax is to be administered by traders who are required to enter in their accounts their taxable transactions and to pay the tax. It is most important, therefore, that traders shall know precisely what are the taxable goods which are covered by the Schedule. I know that in many cases traders have no doubt of what is covered, but there are other groups where further guidance to traders must be given. We have met a very large number of trade associations, and I want to say that apart from discussing the merits of the tax, with which they were not concerned, they have shown a considerable amount of cooperation in trying to see that the tax shall be fairly and properly administered in order to produce the results designed.

The first step to be taken is registration. That will take some weeks and as soon as this Bill becomes law, a Regulation will be made fixing the date by which registration must be completed. I have no doubt that the greater proportion of traders will readily register, but it should be known, by way not of threat, but of encouragement, that failure to register involves a penalty of £100, and a further penalty of £10 for each day during which the failure continues. The Board of Customs will be issuing to traders in a very short time now, an explanation of the Bill and of what they are required to do. In order to ensure that registration is completed rapidly, and that the tax can come into operation, application forms for registration will also be issued very shortly. At the beginning of next week we shall be sending many thousands of letters to traders, using the registrataion list of the Board of Trade, but, of course, the Purchase Tax covers far more traders than does the Board of Trade Restriction of Supply Order, and no doubt should be left, that the responsibility to register rests upon traders, under the penalties which I have mentioned. It would, of course, be a matter of consequence if the start of the tax should be delayed because registrations were seriously incomplete. Therefore, I appeal to traders to register, and I have no doubt that that appeal will be promptly met, because there is no doubt that all sections of the community wish to help our common cause at this time. With the co-operation of traders, it is hoped to bring the tax into operation at the beginning of October, and this will enable collection of the tax to be made conveniently at the end of the calendar year, when a very large number of traders make up their accounts, and a further collection of the tax will be made before the end of the financial year.

The last matter to which I want to refer relates to deduction of Income Tax at the source. It is the suggestion, one of the many which we always welcome, about payment of the money into an account. Under the arrangements which are contemplated, employers will be required to deduct the tax from wages and salary weekly or monthly, and forthwith to pay the money to the collector. Originally, but as a limiting date only, it was thought that the Inland Revenue would require all tax deducted in one month to be paid over by the middle of the following month. On considering the matter further, it seemed to us that that amount of latitude might well be too great. Whether the tax be paid within seven days or fourteen days, which is the matter we are considering, there seems to be no object, if you can shorten the period, in the money being paid in any other way than directly to the collectors of taxes. It was understood that the idea behind the suggestion was that the money should be paid into a separate banking account so as to safeguard the Inland Revenue in the event of an employer's bankruptcy. If the account belonged to the employer it would not have to be paid over to the Treasury, and would have to be paid over to creditors in just the same way as any other banking account owned by the employer, but if the money were paid into an account in the name of the collector that would be the best course, provided it were properly done, rather than making a separate account.

Mr. Pethick-Lawrence

Does the suggestion mean that the collector should have one account in one bank in the town, or an account in each of the principal banks where the employers keep their money? There are certain advantages in having it within the limits of a single bank.

Sir K. Wood

. If you limit the period, you then safeguard the position greatly, and you avoid the suggestion that there should be some separate account. Provided that the money is promptly paid, or is paid reasonably soon, it is not so necessary to have the separate account.

Mr. Benson

A large number of employers have only one or two employés and their collections will be in pence or shillings a week. Are they to be compelled to pay very minor sums monthly and, if so, what steps are being taken to facilitate those payments? Are they to send a cheque every week?

Sir K. Wood

Cases of that kind will obviously need special consideration. Of course there is power to make an exemption, but where it would be of no benefit to employers, employés or to the State, then this exemption would not apply. [An HON. MEMBER: "Would it be done by stamps?"] We can consider what method should be adopted.

One last word on the Purchase Tax. Although this tax is distasteful in certain quarters, I think at any rate it will have a good run, and it may well be that apart from bringing in a considerable revenue which I cannot otherwise collect at the present time, it would not, in fact, lead to the hardships which many hon. Members fear. As regards the suggestion that I should adopt new methods of taxation, it is rather a curious commentary to suggest that I should indulge in some imaginative flight. As my right hon. Friend has so often pointed out, although I may be accused of stony-heartedness, there is a good deal to be said for following those methods with which we are familiar, and adapting them to the circumstances of the times, so that they will be fair to all members of the community. I desire to thank my hon. Friends for all they have done to assist me in difficult times like these, to bring something into the Exchequer. I have noted all the suggestions that have been made. I have no doubt that some of them will be seriously considered with a view to adoption in future Budget proposals, and when that time comes, I hope hon. Members will not the backward in giving their support to the Chancellor of the Exchequer.

Question, "That the Bill be now read the Third time," put, and agreed to.

Bill read the Third time, and passed.