§ Question again proposed, "That the Bill be now read a Second time."
§ Mr. Molson
As I was saying, I ventured last year to criticise the Budget which was introduced by my right hon. Friend on the grounds that it did not impose a sufficiently heavy burden of taxation on the people of this country and because it did not introduce the principle of compulsory saving. It is therefore natural that this year I should congratulate 1665 him most cordially upon his present Budget. I feel that this is a Budget which will have the effect of imposing a burden on the country which is almost commensurate with what is needed and will divert manufacturing effort to the prosecution of the war. So far as Income Tax is concerned, I was extremely glad to hear him say that he had it in mind to legislate in cases where salaries are paid free of Income Tax. It seems to me that with the immense increase in Income Tax these contracts that were once entered into have now become extremely inequitable and that; it is only fair to the employers who entered into these contracts that they should be relieved from them. I think also as a matter of general principle, everybody in receipt of salaries of an amount which makes them liable to Income Tax should be called upon to pay that tax himself.
The system of the rebate payable at the end of the war in the case of the further taxation upon lower incomes is, in effect, the application of Mr. Keynes' principle of compulsory saving. It will not only help us in the prosecution of the war, but will, when the war ends and the great Government expenditure on war machinery stops, provide people with small incomes with the purchasing power to rebuild their homes or start up businesses, and will thus give a valuable stimulus to industry as it turns over to peace production. I do not, however, find myself in agreement with my right hon. Friend's proposals with regard to Death Duties. I have never thought it logical that in the case of a man killed in action a special concession should be made to his heirs. After all, it is the man who has been killed who has made the sacrifice. If that concession is to be maintained, however—and I have personally benefited by it—I entirely agree that in equity it should be extended to the heirs of civilians killed as a result of enemy action.
I heard with great satisfaction the Chancellor's statement about the assistance which Canada is making to our war effort. It gave me special pleasure, as one who is of Canadian origin. I hope the Government are following the policy of using our gold to the greatest possible extent in making payment for what is to be purchased overseas before they begin disposing of the securities they have 1666 compulsorily acquired. Gold is a commodity which does not bring in an annual return in the way that securities which are held in Canada and in the United States do. Therefore, I trust that, although they must be requisitioned and disposed of in order to enable us to make the necessary purchases on the North American Continent, they will not be used until practically all the gold available has first been employed.
Now that Canada is making this special effort to help us, and now that the United States of America have passed the Lease-and-Lend Bill, I wonder whether my right hon. Friend would be prepared to reconsider the provisions under which, persons resident in this country are not allowed to make more than very small contributions towards the maintenance of evacuees in Canada and the United States. There is a very large number of English children who are being cared for in Canada and the United States, and people in this country feel that they would like to make some contribution towards the cost of maintaining those children. While I fully recognise the vital need to conserve all our dollar resources to the greatest extent possible, I hope, now that such generous help is being given to us by the Governments of that Dominion and the United States, this matter may be looked at again and some further concessions made. The generosity with which the children have been treated has been such that I am sure no demand on the part of Canadians or Americans has ever been made, but there are many people who would like, as far as possible, to make some further provision for their children who have been evacuated there.
The Chancellor of the Exchequer stated in his Budget speech that he intended to use public funds for the stabilisation, as far as possible, of the cost of living. I think we should, and do, welcome that provision, but there was no explanation given in my right hon. Friend's Budget speech as to whether this stabilisation of the cost of living is to be connected with a stabilisation of wages. The Minister of Labour has been pressed on a number of occasions to say whether the Government had a wages policy, and on each occasion he has replied that he wished to leave it to the organisation of the employers and the individual trade unions to continue with the established system of 1667 bargaining, a system which has gradually been built up and has in peace time worked extremely well. But if it is the intention to stabilise the cost of living at the expense of the taxpayers, surely it is vitally necessary that one of the principal causes of a rise in the cost of living should be brought under regulation and control. Now, in war-time, when something like 63 per cent. of the productive capacity of the country is being used for the war effort, and therefore, is being bought by the Government, the Government are the principal purchasers, and it is therefore the Government which is chiefly affected by any increase in prices. It has moreover already been pointed out in the Debate that, owing to the Excess Profits Tax of 100 per cent., the employer does not stand to lose by an increase in the cost of production. If now the cost of living is to be stabilised at the taxpayers' expense, that is a third way in which the taxpayer is himself directly affected by a rise in the cost of living.
I was glad that my right hon. Friend referred in particular to the importance of preventing the costs of transportation being raised. Freights upon the railways probably affect the cost of living more directly than any other single item which goes into the costs of production and the sale of articles in the shops. We know that at present the old peace-time machinery for the adjustment of railway wages is operating and that a claim for increased wages has been made by railway workers. I hope I shall not be accused of being unfriendly to labour, or of desiring unreasonably to restrict wages, and certainly not of beating them down. But if we are to have a clearly organised and coordinated economic policy for the prosecution of the war, it is necessary that the purchasing power of the pound sterling inside this country should be maintained. I hope therefore that this great step forward which the Chancellor of the Exchequer has announced means that the whole matter is to be considered from the point of view of establishing a regulated, co-ordinated and fixed level of wages and prices. The increase which is now taking place in many industries in the rates of wages paid is causing a good deal of resentment among soldiers who have been called up and are required to make their contribution to the war effort without 1668 sharing in the increasing prosperity of those, frequently their brothers, cousins or neighbours, who have not been called up and work in industry.
I hope in this same connection my right hon. Friend will give sympathetic consideration to the proposal for family allowances. I am not urging that that should be instituted as a separate step in social reform, but rather to justify and facilitate the stabilisation of wages. The varying requirements of wage earners can be provided for by the family allowance and so that in that way it will be possible to maintain a standard of living of the worker and to fix wages at about their present level, which have already shown a very substantial rise above what it was before the war. I should like once more to congratulate my right hon. Friend upon the character and scope of his Budget and of the Finance Bill, but I hope that in the Government reply we may hear that the Budget is not merely the work of my right hon. Friend and the Treasury, but a first step towards a more logically worked out economic and wage policy than we have so far had during the present conflict.
§ The Financial Secretary to the Treasury (Captain Crookshank)
It is never very easy in winding up the Second Reading Debate on the Finance Bill to gather together, at least into an artistic whole, the various threads that have run through the Debate, because the problems that have been discussed have been partly financial, partly economic, with a few references to Clauses in the Bill, one or two kites flown, and from my hon. Friend the Member for East Wolverhampton (Mr. Mander) certainly an oddity. The Finance Bill as it comes to this House every year is really the legislative channel through which the Budget proposals pass on their way to executive action, and it rests with this House either to block and dam the channel or to clear it, so that it gives it an easy passage. It seems to me, from the reception which was given to my right hon. Friend's speech and to his proposals on an earlier occasion, that there will be very little of the former and that we shall all unite in trying to get this Bill through as quickly as possible. By and large, everybody has realised that it is, as the hon. and learned Member for Ashford (Mr. Spens) said, a financial revolution in its proposals. In spite of that, it has been accepted by hon. Members and by the 1669 country as the only kind of structure which was suitable for this year 1941.
The right hon. Gentleman who opened the Debate was very kind in what he had to say. He made an interesting review, as he always does, of the financial policy, and he pointed out one thing which should be to our advantage in the years to come. That is, that we should make use of the experience which we had as a result of what occurred immediately after the last war. It is a terrible catastrophe to any of us sitting here to have had two wars in our life-time, and if we have suffered this catastrophe, let us gain such benefit as we can from the experiences that we have already undergone. While I am not prepared to discuss the question of the Gold Standard to-day, any more than the right hon. Gentleman was, I did wonder, when he said that the return to the Gold Standard, which was approved by this House, was the result of currency cranks disguised in orthodox uniform, whether the right hon. Gentleman who was Chancellor at the time could be identified as a currency crank or could be recognised as being dressed in any kind of orthodox uniform. The right hon. Gentleman has since then passed into a sphere which has made him the admiration of the whole world, and I should be sorry if he were called a crank.
§ Mr. Pethick-Lawrence
The right hon. and gallant Gentleman will remember that later on, in 1931, the right hon. Gentleman who adorns that bench admitted that it was rather against his judgment that he should be pushed into this course by the people to whom I referred as currency cranks.
§ Captain Crookshank
The right hon. Gentleman is referring to the people in the background as the cranks. Whoever they were, the step was accepted by this House as good policy then, and, like a lot of other things, it has not turned out as people anticipated. That is why I say that it is very useful to learn from the past, and the fact that the right hon. Gentleman called attention to that matter will not be lost sight of.
We have heard a good deal during the Debate on the subject of our general borrowing policy, partly on the question of savings and partly from the right hon. Gentleman on the ordinary arrangements for borrowing. I should like to say 1670 something about what he said in an aside, but which might be misinterpreted, when he referred to the maximum interest rate of 3 per cent. That is not quite the case. It is true that a statutory maximum was put in one of the Bills, but that was dealing only with short-term borrowings, namely, Treasury bills and Ways and Means advances. There is no statutory 3 per cent. maximum for ordinary Government borrowing, but it is the general policy of the Government that that is the sort of rate which should not be exceeded, and my right hon. Friend does not withdraw in any way from the position which was adopted by his predecessor.
I have some figures here, which are not uninteresting, giving the average rate of borrowing during the war to show how we have profited from the experience of the last war. Whereas then we borrowed at 4½, 5 and even 6 per cent., we have not in this war issued a loan at more than 3 per cent. We paid in the last war 5 and even 6 per cent. on the shortest term loans we raised, that is to say, Treasury bills, as contrasted with 1 and 1⅛per cent. now. So there, again, a very great improvement is discernible, and that is an achievement which, as I think my right hon. Friend said in his Budget speech, we should constantly try to improve upon. In fact, about a year ago I did make a considered statement in this House on the general structure of borrowing, to which we adhere, but it is worth bearing in mind that we have recently been improving the position, so far as the Exchequer is concerned, because during the last year we have been able to increase the periods of our borrowing while keeping the general level of interest the same. That, as hon. Members will realise, is a very advantageous thing, and it speaks well for the credit of the Government.
As an example, the first War Loan, issued in March, 1940, carried 3 per cent. for a maximum period of 19 years, whereas 3 per cent Savings Bonds, which are now on tap, carry the same interest for a maximum period of 25 years, or 6 years longer. In the same way, the first National War Bonds carried 2½ per cent. interest for a maximum of seven years, whereas the maximum period of the 2½ per cent. War Bonds now on tap 1671 is eight years. In both those respects we have improved the position as compared with what it was a year or more ago, and it is the hope of my right hon. Friend that we may be able to continue along those lines. But the small point which I wanted to put right, in case anyone outside is mistaken about it, is that this is being done as a matter of policy, adopted by the Government and endorsed by the House, rather than as a statutory obligation.
The hon. and learned Member for Montgomery (Mr. C. Davies) who, unfortunately, cannot be here now, made a speech which was somewhat gloomy for those who heard it. His theme really was that we were still not spending enough on our war effort, and yet at the same time he pointed out that our expenditure, which is reflected in part by the taxation in this Budget, was bringing very great hardships upon a great number of people. He made certain suggestions as to what ought to be done, and I do not know that I necessarily take exception to all of them, because a number of them are already being done. It may be that we are not doing them as intensively or as rapidly as he would like, but it is no good pretending that we are not doing them. He said that we must conserve all possible shipping space. If he knew what had to go on to bring imports into this country, and if he studied the import returns, he would know that precious little, if anything, now comes here from overseas which is not absolutely vital for either the nation's war effort or for food. He said that we must wherever possible substitute war manufacturing for peace-time manufacturing. I think the President of the Board of Trade must be spending a good deal of his time on that problem in dealing with the concentration of industry.
Then he said that we must get all we can from the land, whether in the shape of coal, minerals or food. The Secretary for Mines is at the moment engaged in discussions to see how far coal production can be increased, and my right hon. Friend the Minister of Agriculture and the Noble Lord the Minister of Food are in constant consultation with their colleagues about the maximum of food production in this country. Then he suggested that we must cut down consumption to the bone, and said that all articles in this country 1672 should be rationed. It is an easy thing to say that everything should be rationed, but anybody who has had any experience of the administrative problems involved knows that there are limits to what can be rationed; and when he says that everything should be rationed, I assume he is going into a larger area than is covered by foodstuffs and the difficulties would be very great. But if that is merely a corollary of cutting down other forms of consumption, there are very few instruments which are going to be more effective for doing that than the taxation imposed in this very Finance Bill. I do not quarrel with what he says ought to be done, but I say on behalf of His Majesty's Government that the great bulk of it is already being done. It may be a question of speed and degree, but his suggestions have certainly not been ignored. Then my hon. Friend the Member for Kidderminster (Sir J. Wardlaw-Milne) was speaking, as was the hon. Member who has just sat down, on the question of a general policy for wages. It is not for me, in winding up this Debate, to embark upon that fascinating problem, but, of course it is one of major importance, and hon. Members need not think that the whole of that aspect of our economic life is completely and entirely ignored. But that is quite a different thing from my making a statement on the spur of the moment about it, and I must respectfully decline to do so.
Those are the chief specific points from earlier speeches which I had it in mind to answer. The hon. Member for Ealing (Sir F. Sanderson) gave us a most interesting speech pointing out, as it is necessary to point out, how great this burden of taxation is going to be, but I think he went a little too far, because I understood him to say that incomes over £10,000 a year are taxed at 19s. 6d. That is not the case. What happens actually is that the slice of income which is over £20,000 is taxed at 19s. 6d., and if my hon. Friend will look at the actual tables, he will see that the effective rate at £10,000, in the case he quoted of a married couple without children, all investment income, is 13s. 10d.—heavy enough, but not as bad as 19s. 6d., if that is any consolation to those with an income of that amount.
§ Captain Crookshank
That is where my hon. Friend is wrong; it is over £20,000. The hon. Member for Central Leeds (Mr. Denman) raised the question of Clause 26, which deals with the evasion of Excess Profits Tax. My right hon. Friend realises, as we all do, that the powers taken in that Clause are exceedingly drastic. When we come to the Clause in Committee, my right hon. Friend or I would be very pleased to give instances of the sort of evasions which have already been detected and with which we have to deal, and the point I would make in defence of this Clause, if it needs defence, is this: In the past there have been tax avoidances over the whole field of Income Tax and Surtax. There has inevitably been a time-lag in dealing with these matters legislatively, because they had to emerge first. They had to be spotted, and then the appropriate action had to be taken, after bringing the matter before the House. The Excess Profits Tax is; new, and the question of its collection is very important. From its very nature, being at the rate of 100 per cent., it has great repercussions in many directions and we simply cannot afford, on many grounds, to let abuses creep in and have a run of six months or nine months, or whatever it may be, until the next Finance Bill. That is the reason why this very drastic action has been taken. One must remember that, when the tax was raised to 100 per cent. last year, my right hon. Friend stated quite categorically in the House that if there were evasions they would be dealt with, and dealt with retrospectively. Therefore, if anybody has deliberately gone out for tax avoidance, such people have done it at their own peril and deserve no sympathy from any one of us.
The only other smaller observation I want to make is about the speech made by the hon. Member for East Wolverhampton. I hope that those who heard him recognise his wish to bring into the Exchequer all the money that can reasonably be brought in, but we must not get the impression from what he said, that every British subject who is abroad at the present time—many of them busily fostering the export trade, to the importance of which he has so often called attention—is a scallywag and a scrimshanker.
§ Captain Crookshank
That was rather the impression left on my mind. I think he used phrases that people who were deliberately running away and were not suffering from the bombs as we are, should be mulcted.
§ Captain Crookshank
I should imagine that their number is so infinitesimal that we may leave them where they are and not cast aspersions upon other people who are not in that category at all. The problems to which the hon. Member called attention would be very difficult to surmount. However, he has made his point in the Debate, and, like everything else which is stated in Debate in this House, it will receive the consideration which it deserves.
§ Mr. Mander
I do not know whether the Financial Secretary to the Treasury is trying to be funny or not, but I would ask him whether he does not think, if there are persons who are deliberately going to the United States and elsewhere in order to avoid taxation, that they are unpatriotic people and that steps should be taken to make them pay?
§ Captain Crookshank
It is always unpatriotic to avoid taxation. We are at one on that. It is not so easy to go to the United States. We already control people leaving this country, but when it is a question of people already living abroad, going from one country to another, the matter is not so easy to control. While my right hon. Friend was speaking, the hon. Member for Chesterfield (Mr. Benson) asked whether deferred credits would be liable to Income Tax. The answer to the question is that they will not. The matter is not analogous to credits arising as a result of a concession on Excess Profits Tax. The reason is that deferred credits in respect of the Excess Profits Tax will be liable to Income Tax because, at the present moment, the Excess Profits Tax is allowable as a deduction from profits assessed to Income Tax. Therefore, any refund of Excess Profits Tax will have to be treated as additions to profits assessable to Income Tax in order to keep a fair balance between the two. Ordinary deferred credits will not be liable to Income Tax.
1675 I might say a word or two about borrowing, which was referred to by various hon. Members. I was sorry not to have been in the Chamber while the hon. Member for Chesterfield was speaking more specifically about War Weapons Weeks, but I have already dealt with his point, to some extent, in a previous Debate on the same problem; and we are, fundamentally, at one about it. The real test of my right hon. Friend's Budget is whether the volume of genuine savings which can be brought to account this year is such as he anticipates. If he is wrong, that may well upset the balance of the plan that he has in mind; but, as he pointed out, he has good reason to believe that he is not very far wrong in the estimates he made. The position up to date in the war has not been unsatisfactory in that direction.
The other day I gave some figures elsewhere, which I will repeat for the benefit of hon. Members, as they are very interesting. In the first 18 months of the war, of every pound of expenditure, we got 8s. 6d from revenue, 4s. 6d. from over-seas resources, and 7s. from personal and corporate savings. The personal savings amounted to 2s. 9d., and the corporate savings were represented by the balance. But I must make this reservation. Corporate savings, of course, are in many cases the aggregation of personal savings. So far as they are, for example, the investments taken out by insurance companies, the amount may well come from the small weekly sums paid in; so far as they come from the non-payment of dividends by industrial companies, they represent what would have been private savings had those dividends been distributed. Out of over £2,000,000,000 secured by public loans in those 18 months, the proportion is this. Forty per cent. came through the floating debt, Treasury bills, and Treasury deposit receipts of banks, 30 per cent. from medium and long-term borrowings, War Loan, and National War Bonds, and the remainder from small savings. So, we have, for the first 18 months of the war, a good record from the point of view of savings. But it must be improved. That is the whole burden of what my right hon. Friend said to-day, and I hope it is the burden of speeches which hon. Members make in the country. It rests a great deal on the shoulders of Members of this 1676 House to impress upon the public the importance of savings.
The hon. Member for Chesterfield took exception to-day, as he did before, to some aspects of War Weapons Weeks. He says that, often, targets are not put high enough, and that they are easily exceeded. But if that is wrong, it is not the fault of anyone except the local committees. The targets are not set by the Treasury or by the National Savings Committee. I agree that I have opened War Weapons Weeks in places where the target was exceeded before the flag went down. I do not know that much harm is done by that, so long as we get a large sum out of it. The real test is whether the general run of savings two or three months after the War Weapons Week is considerably higher than it was two or three months before. You want to have a regular steady flow through the savings organisations, which are largely organised in many places during that week, when public attention is focussed on the need for saving. As one looks at the figures, they do show that general rise. The hon. Gentleman, I gathered, took exception to some broadcast by Lord Kindersley, who has been such a tower of strength in this movement, which compared the weekly savings of 4s. 8d. per head for all the country from December, 1940, to February, 1941, with the £3 17s. 3d. per head contributed in 132 War Weapons Weeks, and he did not agree with those figures. I have made some inquiries, and I understand that in that broadcast Lord Kindersley was speaking of small savings in both cases and was comparing like with like.
§ Captain Crookshank
What he was anxious to show was the stimulating effect during the week. There is no doubt that the week does have a very stimulating effect, but what we want to see is the stimulus kept up continually after the week is over, and there are plenty of figures to show that that sort of thing is happening. This week we have been having, as the Chancellor of the Exchequer said, the London War Weapons Week, and as he quoted the figures for yesterday, so now I am in a position to inform the House that the total at the close of banking hours to-day was the really vast sum—particularly in view of the 1677 fact that there arc to-morrow and Saturday still to come—of £87,750,000. Figures like that in the Capital City show the world its determination to play its part in the financial effort, just as it has player) its part both in the lives of its citizens, and in the lives of its buildings on the physical side. I hope that when the final totals come to be cashed up, the world will realise that it is not only London which is concerned in this business of savings, but every village, every hamlet and every town.
Dr. Russell Thomas
Can my right hon. and gallant Friend say how much of this £87,750,000 has been subscribed by the banks, and how much is genuine savings?
§ Captain Crookshank
On this occasion I could not give any such figure at all, nor would I seek to make that distinction. The banks are perfectly entitled to make their investments in the various forms of securities which are on tap. They may put in more at one time in one place, in one week, for reasons of their own, but it is all part of their investment policy. Even if there was a difference, which I do not accept, it is unlikely that I could have got it so soon after the close of banking hours ready to give to the House now. Just as the savings for the war are of vital importance in the financial edifice which my right hon. Friend has built up, so we must bear in mind as well the very great difficulties which are to be involved upon nearly 8,000,000 as the result of the taxation proposals. Do not let us stress the one without the other. This does represent a real revolution in the situation of great numbers of people, and it is not always realised that, while the Finance Bill means that at the lowest end of the scale a single man earning 46s. a week will now be paying Income Tax for the first time at the rate of nearly 3s. a week—and that is a very heavy burden to bear because he pays indirect taxation on a number of things—at the other end of the scale, let hon. Gentlemen bear in mind, married men earning £10,000, £20,000 and £50,000 a year will be taxed at the rate of 68 per cent., 81 per cent. and 91 per cent. of their incomes, and they have heavy commitments with which it will be very difficult for them to deal as the war progresses. However, everyone in this country is at one. If this is the way which is necessary to finance the war, it will be done this way, and there will 1678 be no squealing on the part of anyone in the community.
§ Question, "That the Bill be now read a Second time," put, and agreed to.
§ Bill read a Second time.
§ Bill committed to a Committee of the Whole House, for the next Sitting Day.— [Major Dugdale.]