CLAUSE 13.—(Income Tax for 1946–47.)

HC Deb 27 November 1945 vol 416 cc1182-225

Captain Crookshank (Gainsborough)

I beg to move, in page 12, line 30, leave out from the third "the," to end of line 44, and insert: Table in Subsection (I) of Section seven of the Finance (No. 2) Act, 1940. Let me say straight away that I recognise that the wording of this Amendment may not be apt for the purpose intended, and it may be that it should have been drafted in another way. I tell the Financial Secretary that, because I hope he will not try and argue the case on that. If he is prepared to accept the spirit of it, and what we intend, I am quite prepared to leave the drafting of it to the Government draftsmen. The object we have in mind is to call attention to the changes in the Surtax, and to the fact that while the standard rate is being reduced, not this year but in the next financial year, Surtax steps are being altered. First of all, the steps are being altered and the effect of what is being done by the relief in the standard rate of 1s, is that the Chancellor is giving something with one hand and in some cases taking back all of it to all intents and purposes with the other hand. It therefore raises in our minds the whole question of the very high taxation of higher incomes and earnings, and we think that the Committee and others outside the Committee should pay some attention to what, in our view, are some of the evil consequences of that action.

It is the fact that very often when a Chancellor takes off taxation in a Budget he looks round and puts on more taxation somewhere else, because he is aiming at a balanced figure. Our experience in the past has often been, for example, that it has been tea's turn one year and whisky another, and so on, and there has been a certain alteration in order to balance budgets. The question put to the Chancellor as to why he should not do something else has always had the reply that he cannot afford it because it would unbalance the sum that he wants to arrive at in the finish. That argument cannot be adduced on this occasion because the Chancellor's estimate of what this increase in surtax is going to be is some £7,000,000 a year, and yet in his Budget he said that the sum total value of the various Income Tax reliefs was£322,000,000 —

Mr. Dalton

Gross.

Captain Crookshank

Yes, gross—and £7,000,000 gross in the Surtax. Seven as to 322 does not make an argument of it. Not only that, but of course in the Debate on the Vote of Credit the Chancellor said he had no idea how much of the Vote of Credit was going to be required, and he might very well fall £200,000,000 or so under what he was asking for. I merely state those figures to show that the stock argument about having to balance or take one thing into consideration with another, or what the expenditure is going to be, does not arise at all. Therefore, we look to see why the Chancellor should have taken this action. That does raise various questions which I want the Minister to look at.

There may be all sorts of theories in the Chancellor's mind. It may be that no one should have a net income over a certain level whether earned or unearned. It may be that he wants equality at whatever level and not quality on the lines mentioned by the right hon. Member for the City of London (Mr. Assheton). It may be that it does not matter how much or how hard a man or woman works, or how much or how greatly skilled a person may be, or how much they have earned at the end of the day, they must still only retain a very small maximum portion of those earnings. It may be that he does believe there is no incentive value in lower taxation though to be sure he does, by the reliefs he has given, indicate that he gives some weight to the argument used during the last two or three years that the burden of taxation on the lower incomes is resulting very often—I read all about this in the papers—in men and women not working the full overtime that they might ordinarily have done because they do not want to get into the higher Income Tax rate. If there is any truth in the statement there has been a decrease of incentive among workers paying taxation at the lower levels, the same would apply to the higher levels. But whatever the Chancellor has at the back of his mind, this I think remains true, that you get to a state of taxation being so high that you encourage gambling, and evasion and on the other hand you discourage the taking of risks—that you discourage skill and discourage savings.

It is these four points which I would like the Committee to look at for a minute. If you take taxation to too high a level you do invite and encourage gambling. I am sorry to say so but it is undoubtedly true from all the evidence you get that there is a great increase in betting and gambling throughout all sections of the community. As a matter of fact it is almost bound to happen I think where there is over-taxation. I must say that I never expected to live to the day when I should hear two hon. Members of the party opposite explain to us just exactly how easy it was to go in for gambling and make money. They both told us how for years they had played the Stock Exchange and had been clever enough to get out at the right time, and fortunate enough not to go back again. I see the Chancellor by his smiles is congratulating his friends. How times are changed. But the fact remains that there is undoubtedly a certain amount of gambling which is stimulated and encouraged by the high level of taxation on the higher levels of incomes.

The second thing which you encourage is evasion. There is no question about that. As a matter of fact this is the first Finance Bill for years, in which there are no anti-evasion laws, so that it looks as though, between us, we had stopped up all the holes—

Mr. Dalton

For the moment.

8.45 P.m.

Captain Crookshank

Yes, for the moment. It is quite true that the House has done its best to deal with these illegal expedients. There are always borderline cases, where clever people try to find devices by which they can avoid taxation and Parliament does its best to stop them for the time being. All this is the result of high taxation. There are also the sort of transactions that we read about in the papers and the actions of certain people which really are nothing but downright deceit. I am sure the Chancellor will have official information about the black market, where people pay very large sums in notes of l0s. or £1. That is not done for convenience whatever else it is done for and it is obvious I should think that it is some form of evasion. By not having books or records they can presumably escape the inspectors and collectors of taxes. Then there is the third way in which you encourage evasion and this perhaps is more widely exercised than those illegal or semi-illegal acts. By having too high a level of direct taxation you tend to encourage the claiming of perquisites as part of a salary.

The Chancellor was for a long time at the Board of Trade, and I am sure that in that office he must have heard of many people who were working during the war in business or as temporary civil servants and who did not take any salaries. They said they would prefer to have it all in travelling allowances, housing allowances and so on. I remember hearing of someone who actually asked to be paid in petrol coupons. That was a facility that was very valuable to him and enabled him to travel in a car instead of in crowded trains or buses.

Mr. Dalton

The coupons would of course be issued by the Ministry of Fuel and Power.

Captain Crookshank

I am not sure where they came from, but he paid for the petrol. Anyway, that is what happens in cases where the incidence of taxation is too high. For that reason the people most strictly concerned cannot be sure what such people are actually receiving. Shareholders cannot be certain what the director or the managing director or the chairman is getting because of what is being claimed and paid in allowances which do not appear on the balance sheet. The same is even true of this House. I am sure the right hon. Gentleman will acquit me of using an example because I am afraid it may come home to him, yet it is a simple example. A salary of £5,000 has been considered by this House as the right sort of salary for people with great responsibility. It is the salary which the judges of the High Court get, the salary which Ministers get and in almost every one of those cases where we set up a board or a corporation, the paid chairman receives a similar amount. It is considered the kind of income which should be received by such people for their hard work, to enable them to live in sufficient comfort.

Mr. Gallacher

I am interested in this.

Captain Crookshank

It is leading up to a point which I think will interest the hon. Member even more. In 1938/1939—and I thank the Financial Secretary for letting me have these figures—I looked to see at what level was the Surtax and how much was left at the end of the day when all the taxes had been paid. In this case a married man, with no children, earning £5,000 a year was left with £3,500 a year in 1939. That was the case with judges, Ministers, the chairmen of corporations, the heads of big business firms, and so on. In those days Ministers of the Crown had no official motor cars, with the exception of two Ministers, the Home Secretary and the Postmaster-General, both of whom had official cars for very special reasons. Official cars were not provided for other Ministers, and presumably the assumption of the House was that if a Minister thought he required a motor car, he could get it out of the £3,500 that was left of his salary of £5,000. That was the generally accepted thing. When we come to the new rates in the Budget statement, the £5,000 a year man will be left with £2,413, that is to say, about £1,000 a year less than he would have got in 1939 if he had been in the same position. That is a big drop. Coincidentally with this—and this is the point—we heard a few days ago, in reply to a Question, a statement by the Chancellor of the Exchequer, to which no great attention was paid at the time, that in future Ministers would have official motor cars.

Mr. Dalton

Ministers of Cabinet rank.

Captain Crookshank

Yes, Ministers of Cabinet rank are to have official motor cars. One might deduce from the fact that in the last pre-war year they had £3,500 net, while in this first post-war year they have £2,400 net and are to have a motor car, that the motor car is being produced because it is assumed that they cannot run it on the £2,400. Instead of getting another £1,000 they are to be provided with a motor car. This is the whole point that I want to make about perquisites. If the Government had taken the other view and said that before the war the net income of the £5,000 a year men was £3,500, and that, in spite of the changes in prices, they thought those men could live on more or less the same scale, with the same facilities as they had before the war, if they still had £3,500 net, then on these figures they would have to be given a salary of £10,000 a year. When the Chancellor comes to the House and says at Question Time that Ministers of Cabinet rank are to have motor cars, nobody says anything; but if the right hon. Gentleman had taken the other view and brought forward a Bill to raise all Ministerial salaries to £10,000 a year, the House, and the country, would probably have been rather surprised. Yet I argue that it is exactly the same thing, and that is the danger. I hope the Chancellor will not mind my taking this as an example. The same thing applies throughout industry—probably very much more so, according to some of the things I heard in my time at the Treasury, as probably the Chancellor has heard in his time. The result is that people do not know what remuneration, what gross advantages, facilities and so on are being received. All this is part and parcel of having too high taxation on the higher ranges of income.

Those are the only two arguments I want to put to the right hon. Gentleman. First of all, as is admitted, he is encouraging gambling. He is encouraging evasion, whether it is dishonest evasion or evasion that is doubtfully legal, or whether it is those vague cases which are not evasion, but come within the field of perquisites. On the other hand, let the Committee consider what the right hon. Gentleman is discouraging. He is discouraging a great number of people from taking genuine risks with their own capital. If a person risks his capital in an enterprise and the enterprise goes wrong and he loses his capital, he hopes that things will change, and that next time he will be more fortunate; but if next time he is more fortunate and makes a considerable sum, and then is allowed to retain only a minute fraction of it as income, he will be tempted to say, "Why should I bother about risking my capital at all?" But if capital is not going to be risked, how is the country to be able to introduce new and untried methods of business or production? Obviously, however much the State may go into business, it will leave that sort of thing to somebody else. I hope, at least, it will not enter into purely hazardous and semi-gambling enterprises. On the other hand, unless somebody does so, a great deal of new production and a great many inventions will never see the light of day. There is a risk that that situation will arise if there is discouragement of the genuine taking of risks with capital.

The right hon. Gentleman is also discouraging saving; in fact, he is making saving almost impossible. If the right hon. Gentleman wereable—which he is not—to analyse the different amounts which were put into War Savings Campaigns, the whole object of which was to get savings out of income, by those with very large gross incomes, he would find that they put in little, because they had very little to save. The overheads, after their sheer living expenses, did not enable those people to put in the sort of savings which ordinary folk would have thought very probable on looking only at their gross incomes. There is one other risk that is being taken. It is that the full use of skill and enterprise is being discouraged. The time will come when the business man will say, "No, I will not take on any more jobs; the President of the Board of Trade wants me to go on to some semi-governmental organisation which will take up a lot of my time and to which not very much remuneration -is attached; I would like to do that as a service, but it will take up so much of my time, and if I cannot in the time that is left to me make enough to live on and save for my old age; I will take the easier course and cut off some of this heavier work." [Interruption.] The hon. Member opposite was not present at the beginning of my remarks when I spoke about the incentive on all ranges of taxation being something about which we must be very careful.

9.0 p.m.

The other difficult case is that of the professional man. Take the case of a surgeon who has come right up, has started in the elementary school, as many have, and who has this great gift of God in his hands, or in his eyes, by which he can perform wonderful operations. There is only a small period in their lives when such men have accumulated sufficient experience to be right at the top of their profession. The same thing is true of the legal profession. A surgeon during those years—and a part of his time will be taken up with the services which surgeons freely and voluntarily give to the hospitals—will hope to make sufficient income to recoup himself for his training expenses and to put enough by to provide a sufficient income for himself in old age. If the tax is too high during that critical period of his life and he cannot on that account put by what he was hoping to put by for his old age, what is the temptation which he is up against? It is a very obvious one. He will keep on too long at his job, after his hands have lost some of their skill, after his eyes are not as good as they might be. That is a danger; and it is the sort of thing that has to be watched.

What the Cohen Committee said about company directors furnishes a very good case in point. They recommended that directors should have to give up at the age of 70, and presumably so many old hands stay on for the reason I have given. I said "presumably" and it is a perfectly reasonable assumption. If a man during his working life has been so highly taxed that he is unable to put by enough for his old age to live in the way he hopes to live, it is not unlikely that he will keep on at his job too long in the hope of earning a little more, or possibly he may even die in harness and never have any old age in which he is a pensioner.

These are considerations which should be borne in mind by any Chancellor of the Exchequer in these days. I would repeat them: the encouragement of gambling, the encouragement of evasion, and the discouragement of genuine savings and skill and enterprise. If this country is to go full steam ahead and make some progress in this great new world about which the right hon. Gentleman talked we shall need all the skill, all the enterprise and all the work that is possible. Everybody is entitled to his remuneration and to rewards adequate for what he has done. If we put the taxes too high we are pro tanto slowing down the whole scheme we have in mind. I do not know what arguments the right hon. Gentleman was given before he made his changes in the Budget. He said the other day that he made them because he though they were fair. "Fair" is a difficult thing to evaluate, because what may seem fair to one person may seem extremely unfair to another. All I would say is that we think it would have been reasonable had he reduced the rate of taxation on these high incomes. It would have brought some alleviation to the people of whom I am speaking. The fact that there are not many of them is not relevant, because it is the business of the State to do the right thing and not to consider numbers. The right hon. Gentleman said there was only 125,000 of them all told. If that is so, there has been a considerable increase during the war, because according to the last prewar figures there were only 89,000. [HON. MEMBERS: "They have done well."] They must all have worked very hard, because owing to the 100 per cent. Excess Profits Tax the opportunities did not exist in this war which we were told existed in the last war, though they may have existed along the lines of getting the perquisites to which I have referred.

I do, therefore, on behalf of my right hon. Friends and myself ask the right hon. Gentleman to take sound advice on these matters. If he will not take it from me—and I would not expect that—there are economists, there are writers, there are even advisers in his own Department who study these things over a period of years and who will tell him that if you make it impossible for a man to save in his lifetime before long you will entirely dry up the yield of the Death Duties, because there will not have been any, capital appreciations out of which they would be payable. We shall be interested to hear what the right hon. Gentleman has to say in justifying the changes he has made, and I hope, if he is not going to make any alterations by accepting this Amendment, that when Budget time comes again in the Spring he will look again at the whole problem and see whether we are not right in telling him that there is a limit beyond which he cannot safely go in the interests of production, enterprise and the benefit of the nation as a whole by taxing incomes too much.

Mr. Montague (Islington, West)

Would the right hon. Gentleman mind my putting this point? It is to be presumed that a certain amount of money is required by the Chancellor. Is it not reasonable to ask him if he says it is undesirable that certain people should be taxed to provide that money, to tell the Committee where the Chancellor is to get the money from and who should be taxed?

Captain Crookshank

All I can say is that the Chancellor is getting only £7,000,000 more from Surtax against £325,000,000 of relief, and he admits that he has no idea within £200,000,000 of what his expenditure is likely to be.

Sir I. Fraser

I do not doubt that this Debate will offer hon. Gentlemen opposite ample opportunity for saying in their constituencies: "Here are the Tories, true to type, looking after their own." I do not doubt that that evokes an echo opposite, and is to be noticed, but may I put to the Chancellor of the Exchequer and the Committee a point which I venture to think is in the national interest, and not in the interest of any class? The point is that this is a country in which any man, if he has the ability, and if he is able and willing to work hard, can get into the position where he can earn a good salary. [HON. MEMBERS: "No, no.") There are countless examples which show that this is true. On the other side of the House are many men who, within a few months from this day, were in the ranks of our gallant Forces, or young officers, who had no prospects whatever comparable with those which now lie before them. How have they won this? By their ability; by their hard work; by taking a chance.

If it is good for them, is it not good for others? On the Front Bench opposite are men whom we admire—I admire very much the men on that Front Bench, or men in any front place who have come from very difficult beginnings, with very limited education and have worked from a very early age in pit, factory, or on the land. The fact remains that they have gone from those difficult beginnings up to the highest places in the land. In the trade union movement you have men starting under difficult circumstances, without well-to-do fathers to sustain them, who find their way into the front ranks. You have others who go up on the mana- gerial side, who become foremen and managers, and, eventually, directors with good salaries. If we are entering into an era of the Socialist State in which some of the prizes due to private initiative, and to the building up of small businesses under private ownership, are to be taken away, it is all the more important for those who have the ability and the capacity to work hard that there should still be prizes in the ranks of management. If you take away from management all incentive, I will not say to make a fortune, but a good place for themselves and their family, and to give their children a good chance, you will be taking away one of the most vital springs in our economy. Until you can replace this by some ideal of service to the State, which is notably present on the benches opposite, but which has not yet permeated to the whole of our people, of making money, of getting on in the world, and doing the best you can for your family and providing for your old age you have to admit that it is one of the vital springs which leads to enterprise and initiative.

If we are to get our country out of the difficulties of the present time and tackle the export trade and make our country rich once again; if we are to save ourselves from starvation in the next year or two, we have to make use of all the enterprise of which our people are capable. We have to give encouragement to investors to invest and get a fair return on their capital—and that includes a high profit upon risky investments—and if they do not risk money, there will not be the capital coming forward to promote good and new enterprises. There is in the sphere of management the vast project of the better training of young people which my right hon. Friend the Member for Saffron Walden (Mr. Butler) introduced in the last Government. There are all these opportunities to improve or to put their abilities to better use, and if, at the end of it, they are not able to make and to save some money, one of two things may happen. They may seek their fortune in the United States or in our Dominions and leave us without the leadership and the brains that we need for our living, or, alternatively, they may become academic and say, "I can jog along. I can do moderately well by working moderately hard. Why should I put in that extra bit of effort which is going to lead to my promotion and another £200 or £300 a year on my salary, of which the Chancellor takes Three-quarters or a half, or even nine-tenths?" You are going to dry up the springs of enterprise and industry and thereby do harm to the masses of our people. My argument is not based upon the view that the selected 130,000 Surtax payers should have more in their pockets for their own benefit. It is based on the view that if you do not make it possible for the able men, who represent a very small percentage of our people, to get the same training, the best training in the world, there will remain the fact that men with drive, foresight and the power of leadership will be penalised. If you deny them the opportunity of making good money and of putting some by for their old age and for their families, you are depriving our country of one of its greatest opportunities for revival.

9.15 p.m.

There is another aspect of this matter, and that is the argument that was made by the interrupter. [An HON. MEMBER: "It was the hon. Member for West Fife (Mr. Gallacher)."] No, it was one who stands a little lower down physically in the House, but is less loquacious. The hon. Member interrupted me to ask, "Where are you going to get the money from if you don't take it from those people?" Where does money come from? Hon. Members opposite know where money comes from. It comes from some bottomless purse belonging to the State, whatever that may be. All you have to do is to dip into it and, like the widow's cruse, there is always more there. Hon. Members opposite may find that kind of thing brings them votes at elections, hut it will not enable them to bring our country back to prosperity.

Where does the money come from? Money, as a token either of available wealth or accumulated wealth, all comes out of the work of the workers. [HON. MEMBERS: "Hear, hear."] I knew that that statement would evoke a cheer. It is one of the oldest flies that we Tories throw to our political audiences. Money all comes out of the work of the workers. Who are the workers? Are they exclusively the hon. Gentlemen sitting opposite? Are they exclusively the people who work with their hands? The members of the Labour Party are anxious to establish themselves now as a moderate bour- geois party, appealing to the middle classes, because without the support of middle and lower middle class votes, they can never hope to retain power in this country. Even the Labour Party are adding the word "brain" to "hand." [Interruption.] An hon. Member says "Some of them." I believe, all. In the Labour Party Manifesto we find it suggested that all who work by hand and brain are workers. Is the worker worthy of his hire? Is the craft worker worthy of being paid more than the ordinary labourer, or is 'he not? At any rate, the National Union of Railwaymen and the Mineworkers' Union and even the professional Football Players' Union take the view that their workers are worth more money, and should have more money, than the ordinary labourers in the general unions—and of course all members of unions are worth more than those who are not members of unions.

If this be so, we have established two principles. One is that some people work by hand and brain, or hand or brain, and the other is that there are different values to be set upon the work, one value for craft union workers, for the trade unionist, and one for the other fellow. Possibly even Members of Parliament are worth a little bit more than they are paid. Who are the most important? En masse those unskilled men, the patient masses of the working class, are the most important. They are the least well-paid, according to their trade union standards.

Mr. Callaghan (Cardiff, South)

On a point of Order, Mr. Douglas. May I ask what all this has to do with the Amendment?

The Temporary Chairman (Mr. Douglas)

The Debate has ranged lather wide. It would be better if the discussion was confined more closely to the Amendment.

Sir I. Fraser

I was endeavouring to present an argument strictly in line with the terms of the Amendment which has been moved. The point I am making is that it is to the interests of the masses of our people that those rare, relatively few people, from whatever class they come—and I hope, in fact I know, they will come in increasing numbers from our primary and secondary schools—should have the opportunity, as they grow up into middle age, of making some money and of reaching a standard of life which gives them leisure and enables their brains to fructify in work.

Hon. Members may like it or not, but it is a fact that the hardest work in the world is the work that calls for decision. The brainwork which wears men out and uses up their vital force is the work which calls for decision, and it is also the rarest gift—this gift of decision—so rare that we find only 2 or 3 per cent. of mankind possessed of the gift of immediate decision. Any nation which fails to give due regard to the value and importance of these gifts, which does not encourage these people to come forward and take chances and get on with their work, even to work 10 or 12 hours a day, if need be, because they want promotion or in order to save a bit of money—any nation which neglects this neglects one of the quickest ways to give the masses of the people a better standard of living. I hope very much that the Chancellor of the Exchequer, who himself had the advantage of—well, I would hardly say a good education, but, at any rate a very expensive one—will, at least, see the force of the argument and give us this Amendment for which we are asking.

Mr. Callaghan (Cardiff, South)

It is a pleasure to se the benches opposite so full tonight. This is the sort of occasion on which we expect the serried ranks to appear. Even though the speeches which hon. Members make are not particularly relevant to the Amendment we are discussing, it is still nice to see them there. We can now get on to the discussion of what the Amendment is really about—to alter the rates of Surtax payments, and it is to that that I would like to draw the attention of the Committee. On the Second Reading of the Bill, the right hon. and gallant Member for Bristol West (Colonel Stanley), in reference to this matter of Surtax, said that what, in fact, the Chancellor had said was, and I quote him roughly, that whatever the finances of this country, whatever their improvement, and whatever the Budget surplus available, in no circumstances was any of it to be devoted to the reduction of taxation for the higher scales of income. I see that the right hon. and gallant Gentleman nods his head. I am sorry he still thinks so, because the figures show completely that he is wrong. There has been considerable relief given to these people in the higher ranges of the Income tax and Surtax field.

I am sorry that the right hon. and gallant Gentleman the Member for Gains-borough (Captain Crookshank) is not still here, because he repeated what the right hon. and gallant Member for West Bristol, said, that what the Chancellor gave with one hand he took away with the other. I would ask them to be more precise, and to say at what point in the salary scales in the Surtax levels this holds true. It is not a debating challenge; I do want to know. I have been through these Tables very carefully and I can find no point at which the statement of the right hon. and gallant Gentleman can be justified. Indeed, I would go further and say this—and this from a Socialist bench is not perhaps a particularly good thing to say—that the gap between the lower salaries and the higher salaries has been increased as a result of this Budget; that those who are at the top end of the scale are, in fact, going to be further ahead than those at the bottom end of the scale.

I will take a couple of illustrations but, unlike the right hon. Gentleman the Member for the City of London (Mr. Assheton), I do not have to pick about, I can take them from anywhere in the Tables. Let me take the man with £300 a year and' the man with £3,000 a year—the man at the bottom and the man at the top. The difference in their net salaries—their "take home pay" as the Americans like to call it—has been increased by £67 in this Budget; in other words, the Surtax payer has gone £67 further ahead than the man getting £300 a year. Or take £400 and £4,000 a year. There the difference in the "take home pay" as a result of this Budget gives the Surtax payer an additional £110. That is my reading of these Tables; I am open to be corrected if I am wrong, but I am pretty certain I am not wrong. The plain truth is that when the right hon. and gallant Member for West Bristol says in a flight of rhetoric that no improvements at all are given to the Surtax payer, he has not, in fact, studied the Tables as completely as he might have done.

I come now to the next point, and that is what the right hon. and gallant Member for Gainsborough was talking about in relation to gambling, evasion, perquisites. I do not know whether his friends like to be described in that way; perhaps they do, perhaps that is the mentality and the outlook of people getting more than £2,000 a year. We on this side would not know a great deal about that.

Mr. Walter Fletcher (Bury)

May I draw the attention of the hon. Gentleman to the salaries of Ministers, which are about £2,000?

Mr. Callaghan

That is a fair debating point to make, but it does not make much difference to what I am saying now. I would prefer, and I am sure the hon. Gentleman who has just interrupted me would prefer, a description of the over £2,000 a year given by the right hon. Member for the Scottish Universities (Sir John Anderson), who said: I would say this—I throw it out for consideration—that economic inequality, from a national point of view, is not an evil thing but is positively good … why weaken or destroy that incentive? And here comes the bouquet to hon. Gentlemen opposite— Why weaken and destroy the incentive of the small number of men, exceptional individuals, whose services to the nation may far transcend that of battalions of ordinary men? To be deprived of the services of such exceptional men—we all know some of them—might be an immeasurable loss to the community. Some very exceptional ones might go on struggling and striving, even if all reward were denied them, but we have to take account of the world in which we live, and that is certainly not the common experience.''—[OFFICIAL REPORT, 24th October, 1945, Vol.414, c. 2022 and 2023.] It was with that in mind that I read the Amendment which appears on the Order Paper in relation to Surtax. It referred me back to the second Finance Act of 1940, so I turned it up to see what it was that right hon. and hon. Gentlemen apposite want to do to encourage this spirit of enterprise, to encourage this initiative, to make us all go forward, to reward these exceptional men. Let us see what it is they want to do. Let us take some specimen figures. The minimum on which their relief can be applied is £3,000 a year. The incentive which they want to offer under their Amendment—and they want us to take it seriously—to the marl getting £3,000 a year is £6 10s.

9.30 p.m.

Let us take the £4,000 a year man. Here you get the real giants of industry; the people who take decisions; the men who matter. These are the people who have to be encouraged; the chaps who have to have everything put in their way. What is it that this Amendment, which stands in the name of the right hon. Gentleman, wants to give to them?—£31 a year, another 10s. a week, and that is going to do everything. I hesitate to spend more time on this, because I do not think the Amendment is really worth it. Why is it that dogs which always bark do not bite? Why do not they put down an Amendment that would really mean something, if they feel so strongly about it as all they are saying tonight really indicates, instead of putting down this pettifogging nonsense? If that is unparliamentary I withdraw it. When hon. Gentlemen opposite ask the Committee to take them seriously by suggesting that the man whose "take-home" pay is £41os. 5d. is deprived of all initiative and all risks and all willingness to venture unless it is put up to 7s. 8d., then I suggest there is only one thing to do, and that it is to throw up the Amendment. It is not a genuine Amendment. The right hon. and hon. Gentlemen opposite accused the Chancellor of the Exchequer of "playing to the gallery" in what he was doing. They are playing the fool, and they are also window-dressing.

Colonel Erroll

I have already been fortunate enough to address this Committee twice today on non-controversial matters, and I feel now that it may be my fate to be laughed at for the first time by the opposite side. However, it has been said that that is an honour. The point I wish to make is that our Amendment suggests not that Surtax should be reduced but merely that it should be kept where it is. We feel it is particularly unfortunate that Surtax alone should be increased at the present time. Nothing has been said, either today or in the earlier stages of the Finance Bill, to suggest that we are now embarking on a period of particular financial stringency. Nevertheless, one class of individual, and one alone, is singled out for an increase in taxation, and that is the Surtax payer. [HON. MEMBERS: "No."] He is the one class, and I suggest that this savours strongly of what I can describe as a vendetta legislation.

We on this side of the Committee are not asking for the removal of Surtax, but are asking that the present absurdly high rates should be kept where they are, and not increased. I have listened with great pleasure and amazement to the jeers from the other side on the subject of enterprise, and I have been pondering during the past few days over the Government's decision to go in for the supply of building materials in a big way, because it seems to me that hon. Gentlemen on the other side of the Committee are so enamoured of this idea of enterprise and speculative adventure that they are determined to go into it, and are going to do it, very wisely, with somebody else's money. I suggest that the amount of money which would come from the increased Surtax— which is only £7,000,000—could far better be found by reducing from £100,000,000 to £93,000,000 the amount which it is proposed to give the Minister of Health and the Minister of Works. Let them be a little less speculative about a very hazardous undertaking.

9.30 p.m.

There is one class which an increase in Surtax will hit extremely hard, that is, the novelists and actors and actresses. They represent a very small number of people. Their votes will certainly not make much difference to the composition of this Parliament or any other, but they deserve to be considered. They make a large amount of money for two or three years perhaps, and then seldom have another opportunity of making large sums. Particularly is that the case with actors and actresses. They are brought into prominence by public fashion and public whim, and as quickly thrown overboard. They make large sums for perhaps two or three years, and then have nothing more to which to look forward. A large proportion of such money is now taken away in the form of Surtax. Under this Bill more is to be taken away. The case is even more serious in respect to the novelist. He may work for two or three years on a novel. He is paid for it in one year, and his product of three years' work is charged at high Surtax rates, whereas if he could be paid in instalments, as he writes, chapter by chapter, he might not pay Surtax at all. There was a case in the newspapers only the other day of a well-known actor whose name I will not mention here. He said he was not prepared to undertake any further work at the present time because he was only going to get 6d. in the £ for doing it. It may be said that that is not particularly charitable or artistic, but the fact is that great artists, like lesser artists, work for money.

Mr. Evelyn Walkden (Doncaster)

He could work for E.N.S.A. for only £10 a week.

Colonel Erroll

He had worked for E.N.S.A.

Mr. Walkden

He could entertain the troops.

Colonel Erroll

That particular artist had already done his quota with E.N.S.A.

Mr. Walkden

Six weeks—leaving 46 free.

Colonel Erroll

Then there is the case of surgeons and others, who reach the peak of their abilities for only a few years, and work at very high pressure, under considerable nervous strain. They are entitled to the relaxation which their position should give them. They are entitled to be able to get away from the towns and hospitals in a good motor car to a country cottage for the weekend—

Mrs. Braddock (Liverpool, Exchange)

What about the old age pensioners?

Colonel Erroll

I quite agree—when the old age pensioners have done as much for the rest of humanity as some surgeons. In any case I am sorry that the hon. Lady did not consider it more important to put up old age pensioners' salaries, before voting for putting up her own salary.

Miss Bacon (Leeds, North-East)

What sort of salary?

Colonel Erroll

The Parliamentary salary. This increase in tax discriminates against the best brains and talents we have. It is but further proof that the Socialists offer nothing to the enterprising. It is another step in reducing us all to mediocrity.

Mr. Malcolm MacMillan (Western Isles)

I can only say, summing up the last speech, that the last state of the Debate on the other side of the Committee is certainly much worse than its first. I would like to address one or two remarks of commiseration to the right hon. and gallant Member for Gainsborough (Capt. Crookshank). We were touched by the fervour of his characteristic solicitude for the poor—the poor in spirit, at all events—round about him. It was touching in the extreme to hear his fellow feeling for the under dog, or perhaps it was a fellow feeling for his pocket book; I almost expected to hear him mention hardship committees to deal with the case he gave us of those who were suffering with over £5,000 a year. The remarks he addressed to this side of the Committee on tax dodging and evasion might have been addressed more appropriately to other hon. Members. He attacked rather bitterly—

Mr. Jennings

Did he not address his remarks to the Chancellor? He was not accusing the other side.

Mr. MacMillan

I would hesitate to say he was addressing the suggestion to the Chancellor as a taxpayer. He might have specialised his criticism and addressed his remarks to his own supporters who are, in a greater proportion, enjoying larger incomes than Members on this side. I might answer one of his points by referring to the Noble Lord who sits for South Dorset (Viscount Hinchingbrooke) who referred to gambling and betting.

Viscount Hinchingbrooke

Not me. It was the right hon. and gallant Member for Gainsborough (Capt. Crookshank).

Mr. MacMillan

If you discourage savings and thrift, which have been so much eulogised on that side of the Committee, one of the channels into which the money, which might well have been saved, might go is the anti-social one of gambling and betting. He should have addressed his remarks to the Noble Lord on that point. Does the right hon. and gallant Member for Gainsborough state that £5,000 should be the top level income? He said it was sufficient for a man in a responsible position using his brains full time. I do not know whether he meant it was a necessary minimum for a man using his brains full time in a responsible job. I can only suggest if he did, that he has not been using his brains full time since he left the job of Postmaster General in the late Government. There is one solution. They can still be patriotic and refuse to accept anything more than the £5,000 if they wish to do so and then allow themselves to pay tax on that. The right hon. and gallant Gentleman's appeal was touching, and we commend his consideration for the poor taxpayers. Yet they responded to our election appeal and not to his. Perhaps if he had distinguished himself in the past by taking the side of the genuine bottom dog as he adopted it on this point tonight, he might have had more success, and not be on that side of the Committee criticising a Measure proposed from this side.

9.45 p.m.

Sir Frank Sanderson (Ealing, East)

In rising to support the Amendment, I find it very difficult to arrive at a conclusion as to whether the increase of Surtax is being imposed in order to raise revenue or whether it is being imposed as a political expedient. I find it very difficult to appreciate how it can, in fact, increase the revenue for my right hon. Friend. Looking at the revenue which the Surtax has brought during the past years, one sees that as the rate of Surtax has been increased the amount it has produced shows a lower return for the Chancellor. The revenue derived from the Surtax in the year prior to the war, in 1939–40,it will be seen was £79,000,000. At that time the rate of Surtax was comparatively reasonable. When, however, during the war the Surtax was increased to 9s. 6d. in the £, giving a total Surtax and Income Tax at the high level of 19s. 6d. in £, one finds that the amount derived from Surtax shows a declining figure namely £76,000,000 for the year 1940–41 as compared with £79,000,000 before the outbreak of the war. The following year, 1941–42, Surtax revenue decreased still further to £74,000,000.

That was followed by a further reduction in the following year, and for the year ending 5th April last, Surtax brought in some £6,000,000 less than the figure for which the Chancellor of the Exchequer budgeted. The figure was £73,500,000 which is the lowest amount of Revenue received from Surtax since the beginning of the war. These figures demonstrate that the incidence of excessive high direct taxation has reached saturation point, and that in fact it has not increased but has reduced the revenue. I think I have cause to ask the Chancellor of the Exchequer whether he has increased the Sur- tax charge for political expediency or for the purpose of raising revenue? With regard to the £7,000,000 he hopes to raise with his increase in the Surtax rate I think he will be as disappointed as his predecessor. I would likewise bring the House to a realisation of what the £7,000,000 really means. This amount is equivalent to about 1d. in the £on Income Tax. Surely the right hon. Gentleman does not suggest that he intends this as a means of Revenue raising? Would it not be better for him to take the Committee into his confidence and to tell hon. Members what would appear obvious, that he imposed the tax purely as a political expedient.

I would like to make one point to hon. Members opposite who talk about the larger incomes which are enjoyed in this country today. The result of taxation during the war has been this that the number of those with incomes between £250 and £500 a year after tax, have risen from 1,820,000 in 1938–39 to 5,300,000 in 1942–43. I do not expect there are any hon. Members in the Committee who take exception to that great increase in the number of those who enjoy incomes between those two, figures, but let us look at the other end of the scale. If one looks at the incomes of those with £6,000 a year nett and over for the year 1938–39 one finds the number was 7,000, which number was reduced to under 80 in 1942–43. This small minority have the right to consideration equally with those 5,300,000 to whom I have just referred.

The final point which I wish to make is this. The other day when the right hon. Gentleman the Prime Minister was in America he made what I thought was a very brilliant speech during which he referred to that country as the greatest country standing for freedom and democracy on the earth's surface. I think we all agree. [Interruption.] It is that democracy and freedom which they enjoy which has enabled them, along with their Allies, to win the greatest war in history. The right hon. Gentleman the Chancellor of the Exchequer was right when he said in his Budget speech that Income Tax has pressed hardly upon people with small incomes; that it has depressed morale, reduced incentive and has in the aggregate diminished production; that it is undesirable in relation to its effect upon productive activity and that it was necessary to increase the allowances to Income Tax payers in the lower ranges of income in order to give them cause for working hard. He said the people required an incentive, but further on in his speech, when he came to deal with Surtax payers, I anticipated a reduction in the rate. Yet instead of reducing Surtax, he increased it. The right hon. Gentleman thinks that hon. Members behind him require some reasonable incentive, but when he deals with those who have built up the great industries of this country—[Interruption]—as hon. Members know full well, most of the great industries in this country have been built up from the smallest beginnings—is it his deliberate policy to destroy and to kill the romance, initiative and enterprise in industry? If so, I ask him to say so frankly. Is he doing it in order that 'the industries of this country shall be nationalised and or controlled by the Government? If so, will the right hon. Gentleman tell us so?

Mr. James Hudson (Ealing, West)

The hon. Member for East Ealing (Sir F. Sanderson) shares with me the privilege of representing the borough of Ealing, and I am very glad of this opportunity to say a few words about the contentions that have been urged by the hon. Gentleman and the Tory Party in support of this Amendment. The case they have made is that the whole of individual enterprise and initiative and the power of industrial recuperation in this country will be imperilled by a high rate of taxation imposed through Surtax, and yet they have failed entirely, although their attention has been drawn to the matter, to give any reason why the number of Surtax payers, during a period when Surtax has been high, has increased from about 80,000 to over 100,000. Despite all that has been said about perquisites, about the desire to have a motor car as part of salary, and all the other things that have been so inconsequentially raised tonight, there remains the fact that in a period of high Surtax the number of Surtax payers has increased. In my judgment that in itself is a public scandal. Hon. Members opposite delight in the thought that when, during war time, everybody was assured that while men were giving their lives there should be no increase of private wealth, and indeed the statement was made that wealth was conscripted by our tax system—

10.0 p.m.

Sir F. Sanderson

I was referring to post-war taxation. The taxation we are considering does not commence until 5th April, 1946, and is for the year ending April, 1947. No one takes any exception to the incidence of high taxation during the war.

Mr. Hudson

The hon. Member thinks that may be the case, but I am still of the opinion that a war which, from every point of view, should have prevented the acquisition of great sums did not prevent it. In spite of all that has been said about the Surtax, there has been an increase of wealth in the wrong hands. I, therefore, ask myself what really is at the bottom of this Amendment. I have noticed on two or three occasions recently that when financial questions have been discussed hon. Members opposite, and particularly right hon. Members on the front benches, have laid great emphasis on Cabinet Ministers and their motor cars. They have spoken in terms of apology as if they realised that they were really cutting rather low down from the point of view of argument. Hon. Members on those Benches know as well as we do, that the growth of the Cabinet Minister's duties and the necessity to get about quickly from place to place require a motor car in his case, as much as in that of any other individual in the community.

There is no question then of any issue of perquisites in the way suggested when question of the Cabinet Minister's motor car was raised. In fact, I would suggest that what is happening tonight is just a little reminiscent effort on the part of the Tory Party—an effort to continue the controversy that Mr. Neville Chamberlain started in the days of Mr. Ramsay MacDonald when, again, it was a question of the motor car used by a Cabinet Minister, and when they fought an election or tried to fight it, on the issue of the Prime Minister's car. I submit that the effort to discredit the Government Front Bench is discounted by the fact that it is only being made now, in the time of a Labour Government, when it could have been made just as easily during the last Parliament when there were Conservative Ministers enjoying the same privilege. I protest against These occasions being used for the old, worn-out and disreputable controversy upon and disreputable controversy upon which the Conservative Party thrived a few years ago. It might have been a good thing in those days to have turned our backs on it.

Mr. Jennings

I would like to ask the hon. Member whether he has not been listening to the same arguments that we had to listen to in the last Parliament, when attempts were made to discredit our Front Bench.

Colonel Ropner (Barkston Ash)

I suggest to right hon. and hon. Gentlemen opposite that the matter under discussion should receive their careful consideration. All I can say to the hon. Gentleman who has just sat down is that he has either misunderstood or is intentionally misrepresenting the argument used by the right hon. Gentleman the Member for Gainsborough (Captain Crookshanks).

I have always regretted that Surtax and Income Tax are not amalgamated and made into one tax. I must confess that I know too little about the intricacies of the Exchequer to appreciate why Surtax and Income Tax cannot be one. I am quite sure that the majority of the electorate throughout the length and breadth of this country, when discussing Income Tax, forget that there is such a thing as Surtax and that when their attention is drawn to Surtax and the amount paid by Surtax payers, they forgot that these same Surtax payers are paying Income Tax.

There has already been reference made to the words of the Chancellor of the Exchequer when he spoke with regard to the deterrent effect of Income Tax and I would remind the Committee of what the Chancellor said on that occasion. In discussing Income Tax he said: There is plenty of evidence to show that it has depressed morale, reduced incentive and has, in the aggregate, diminished production. To this extent it has been a bad tax which must be judged in the field I am now speaking of as on balance undesirable in relation to its effect upon productive activity.''—[OFFICIAL REPORT, 23rd October, 1945; Vol. 414, c. 1892.] I quite agree with the Chancellor of the Exchequer. It is true that Income Tax at a level of 10 shillings in the pound discouraged enterprise among those men and women whose level of income just brought them into Income Tax payment. When they had reached a certain standard, they either knocked off for the day or took a day off, or, if on piece rates, they adjusted their work so that their income did not come within the Income Tax limit. It is true that Income Tax at that level discouraged enterprise.

If it was natural for a 10 shilling Income Tax to discourage work and enterprise, why do hon. Members opposite think that a combined Income Tax and Surtax ranging up to 18s. 9d. should not have the same effect on what are the wealthy sections -of this community? I cannot follow their line of reasoning, or argument, or the jocular fashion in which a suggestion from these Benches was treated that penal taxation of 19s. in the pound should not discourage enterprise, when the Chancellor of the Exchequer, with their agreement, appreciates the fact that 10 shillings in the pound Income Tax does discourage it.

There is a great deal of bunkum and humbug spoken with regard to the motives which incite men to work. I know of the unselfish toil given by many people to their country not only in days of war, but in days of peace. I am not by any means alleging that there are no unselfish motives which cause people to work. But we should appreciate on both sides of the House, that the vast majority of the workers of this country work for themselves and for their own. It is equally true, whether we are talking in terms of wages, salaries or of profits. I have never attempted to disguise the fact that men work for themselves and their own. I believe that to be a high motive. I do not think that it is anything to be ashamed of for a man to work for his wife or children, or, for that matter, his grandchildren and his great grandchildren. I believe it to be equally laudable in the case of wages, salaries and profits. Therefore, it is altogether wrong for hon. Gentlemen opposite to think that there is something shameful for a Surtax payer to case up on his work when 18s. 9d. is taken away from him.

The President of the Board of Trade has recently been lecturing various trades and industries—lecturing and threatening; and I do not think that I am wrong when I say, frankly, making himself look rather foolish in the process. What is the good of the President of the Board of Trade attempting, by one means or another, to encourage industrial leaders to increase production and to have care for the export trade and so on, when, at the same time, the Chancellor of the Exchequer is taking away the incentive to do so. We probably all know of cases that are happening today where men are refusing to return to the city or to the jobs they left when they went and fought for their country, or from which for one reason or another they have been parted during the last six years. It simply is not worth their while to sweat and toil and worry, with great responsibilities in the city.

Mr. Messer (Tottenham, South)

Will the hon. and gallant Member say who are those that sweat?

10.15 p.m.

Colonel Ropner

The work that wears a man out is undertaken by the leaders of industry; by the men who work 16 hours a day with all the worry and not by those who work only eight hours, with no responsibility. The men who are earning large incomes to-day have fought their way to their position through sheer ability. I do not stop, as other hon. Members have done, at incomes of £5,000 a year. I am ready to base my argument on incomes considerably larger, £6,000, £7,000, or £10,000, such as is earned by the Solicitor-General. A previous speaker told the Committee that these men are 1 or 2 per cent. of the population. They are nothing of the sort. They are one or two in 10,000. Those are the men who believe in encouraging our industries—or who should believe in it and who did so in the past and built this country into a great industrial nation. [Interruption.]

The Chairman (Major Milner)

I must ask hon. Gentlemen to refrain from interrupting.

Colonel Ropner

The men who earn very considerable incomes are very few and they deserve the reward which they receive. The rate of taxation levied on those men should not be at the penal level which it is today, or at least if it is necessary that it should remain so today, hon. Gentlemen opposite are wrong in taking a delight that that should be so.

I would like to draw attention to another argument used by the Chancellor of the Exchequer. He said that one of our great achievements on the home front during the war was that by a series of war Budgets there had been a notable advance towards economic and social equality. Everybody, he said, had recognised that in wartime this was right, and if it was right in wartime it was not wrong in peace; a dangerous argument. The right hon. Gentleman was not Chancellor of the Exchequer in wartime. If it was right that he should occupy a less important position in wartime perhaps it is wrong that he should be occupying the position that he occupies in peacetime. Does the right hon. Gentleman really believe it is right to have economic equality? I believe there really are some hon. Members opposite who would answer "Yes" to that question.—[HON. MEMBERS: "Yes.''] To my mind it is a tragedy. There never will be economic equality, and it is altogether wrong that that should be the aim of any Chancellor of the Exchequer, or even of the lesser men who sit behind him. If they ever did achieve economic equality they would ruin the country in the process. The equality which they would achieve would be of an order far lower than has ever been suffered in this country, even amongst the poorest members of our society. You might get a sort of drab reflection of the appalling, dull and poor uniformity which we should find if we went to a country which was one of our great Allies during the war. I would suggest to the right hon. Gentleman that he would be doing the best, not only for the wealthy of whom we are primarily thinking this evening— [HON. MEMBERS: "Oh''.] —by "primarily thinking" I mean that the Amendment which we are discussing deals with them —but for all sections of the community if he accepts the Amendment. We in this Committee are drawn from all walks of life and are of all shades of opinion and our approach to all questions must be guided by our views as to which is best for our people. It is a perfectly genuine and quite sincere submission for the consideration of the Committee that we will best serve the interests of most people in this country if the men who could lead our industry are encouraged to do so and are rewarded according to their ability. That is a perfectly sincere conclusion to submit for consideration in the deliberations of this Committee.

I have said nearly all I wanted to say. [HON. MEMBERS: "Hear, hear".]— Well, I will add this, and I did not mean to. I think that the most tragic moment which I have experienced in this House of Commons in the whole of my service here, was when the Chancellor of the Exchequer announced that there was going to be a reduction in Income Tax, and there was a commendable cheer from the benches opposite, as there was from these benches—but when he announced that he was going to add to the Surtax, there was a much louder cheer than there was when he announced that he was reducing the burden of Income Tax. If that is really the spirit in which this House of Commons is going to tackle these grave economic problems of today, I am not optimistic for the future of this country under the present Government.

Mr. Dalton

This Debate has touched deeper chords of emotion than any of those which have preceded it today, not excluding that regarding wireless receivers for the blind. It would be supposed, listening to a number of the speeches, that the effect of this Finance Bill was to increase the taxes on rich people. It is nothing of the kind. Indeed, in the very remarkable speech made by my hon. Friend the Member for South Cardiff (Mr. Callaghan), the effect was made very clear by simple numerical illustrations. None the less, the delusion has persisted in later speeches, and I think it is necessary to bring the Committee back to a sense of simple reality by pointing out as is very clearly done in the White Paper issued with the Budget, that every person, no matter whether above the Surtax level or below it, so long as he is subject to income Tax at all, is going to pay less next year in terms of Income Tax and Surtax than this year. This Finance Bill distributes relief from taxation, but it seems to be a grievance with some hon. Gentlemen opposite that, although something is distributed to all, more is not distributed to the rich. That is the complaint in a phrase, in a nutshell, and, on the whole, I am very much astonished at some statements that have been made.

The hon., and gallant Member for Barkston Ash (Colonel Ropner) has sat with me through a number of Parliaments. I think he was here in 1931 when I was not, and it may be that I was here when he was not, but I was very shocked to hear him say that he had never been so deeply moved to distress in Parliamentary Debates in this House, and had never thought anything more tragic in the whole of his experience, than when some of my hon. Friends applauded my proposal not only to reduce Income Tax but to increase the Surtax. Well, I thought that was a very curious thing to say, because he and I have sat here and, I believe, taken part in Debates on such matters as the distressed areas, unemployment, bad housing and the miserable poverty which has so long prevailed in large parts of this country.

Colonel Ropner

The right hon. Gentleman has misrepresented me.

Mr. Dalton

No.

Colonel Ropner

Yes, he has. I did not say that I was shocked, or anything else, at a joint cheer as a result of an announcement that there should be a reduction of Income Tax and an addition to Surtax. I did not say that. I said there was a much louder cheer from those who sat behind the right hon. Gentleman when he added to the Surtax than there was when he brought relief to a much larger number of taxpayers in this country.

Mr. Dalton

I quite understand what caused the hon. and gallant Gentleman this sense of emotion. He has accurately described what caused this sense of tragedy. What I said was that I found it rather odd that, having sat with me and with many others through these Parliamentary Debates on these far more distressing—to most of us—situations, covering much larger numbers of people, that the climax of tragedy was reserved for this occasion. Remarkable things have been said by other hon. Gentlemen. The hon. and gallant Member for Altrincham (Colonel Erroll) made the constructive proposal that we should not increase the Surtax rates, that we should thereby incur less rapidly the expenditure of £7,000,000 a year, and that should be taken out of the provision for housing which the House was discussing yesterday on the proposition of my right hon. Friend the Minister of Works. I prefer that the Surtax payer should pay a bit more and that we should get more houses.

Mr. Godfrey Nicholsonrose—

The Chairman

The hon. Gentleman knows very well that he is not entitled to interrupt when the right hon. Gentleman remains on his feet.

Mr. Nicholson

The right hon. Gentleman was about to give way, and this is a most crucial point. Is the burden of the right hon. Gentleman's argument that it is lack of another £7,000,000 which prevents another £7,000,000 being given to housing, because that is not the gist of his Budget?

Mr. Dalton

No, the burden of my argument was a quotation from the hon. Gentleman's gallant Friend sitting behind him. It is possible that the hon. Gentleman was not in the Committee when the hon. and gallant Member for Altrincham spoke. I was saying that the hon. and gallant Member for Altrincham had recommended that we should leave this £7,000,000 in the hands of the Surtax payer, and balance our operations by spending £7,000,000 less on housing. That was his proposal.

Colonel Erroll

Surely my proposal was that £7,000,000 less might be spent on a highly speculative enterprise.

Mr. Dalton

Well, the accurate version of all this can be read in the OFFICIAL REPORT of this Debate, and can be given such publicity as is desirable in the public interest. As to speculation, I had thought that one of the other arguments adduced on the other side of the Committee was that speculation was desirable, that it was a form of enterprise that should be encouraged, and that one of the objections to my proposals regarding Surtax would be that the Surtax payers would fall back into such a state of drab lack of enterprise that, possibly, British industry would suffer.

The hon. and gallant Member for Barkston Ash made a point with which I wish to deal with complete frankness and directness, because it is very desirable that this should be understood so far as the intentions of this Government and of the majority in this House are concerned. He did not like the passage in my Budget speech in which I said: One of our great achievements on the Home Front during the war, with the aid of a series of war Budgets has been a notable advance towards economic and social equality. I went on to say that if that was right in war time, it was not wrong in peace time and I added:

We must not give ground now, when the men who won the war are coming home."—[OFFICIAL REPORT; 23rd October, 1945; Vol. 414, c. 1894.] It would indeed be a miserable welcome that we should give to our fighting men, but for whom we should not be here at all tonight, if we said, "Now let us return to the old pre-war ways. Pray, let us re-establish all the old arrangements, including that grave state of inequality, that grave state of social injustice, emerging in inequality which disfigured our community before the war."

10.30 p.m.

Colonel Ropner

I am sorry to interrupt, but I think the right hon. Gentleman knows that he is again misrepresenting what I said. 1 did not object to the quotation I read out from his speech. He knows perfectly well I did not say I objected to it. I asked a question, and he is not answering it. I asked him if it was his object to attain economic equality by means of Budgets.

Mr. Dalton

I am going to answer it. I am saying, if I may repeat what I said in my Budget statement, that it would be a miserable welcome to offer these men to say we are going to re-establish the pre-war inequalities in our society, and that that is not a welcome which this Government and this Parliamentary majority seeks to give them.

Hon. Members

Who suggested that?

Colonel Ropner

I did not suggest that.

Mr. Dalton

If hon. Members will allow me to develop this matter, they will get a perfectly straight answer. [HON. MEMBERS: "Do not make allegations."] I am not going to withdraw any allegation because everything I have said is perfectly true. We in this Parliament are going to advance considerably further towards social and economic equality. I hope we are. But that does not mean we shall arrive at a state of complete, flat, uniform equality. Of course it does not. [HON. MEMBERS: "Why not?"] In this community, wealth is most unequally distributed, and not at all according either to merit or to service. There has been great idealisation of the Surtax-paying class, and I will come to them in a moment. In this society of ours, in which there is great inequality, which cannot be justified, we are entitled to say we intend, and our programme we put before the country entitles us, to go a considerable distance in that direction. I would quote in answer to the hon. and gallant Member some words I used—not in the House—and which may have been reported in the Press. I apologise for repeating them, but they give the best answer. They are words by Jeremy Bentham:

Perfect equality is a chimera, but what we can do is to reduce inequality, and that we should do. I add to that, we shall do a great deal in this direction in this Parliament. But when this Parliament comes to an end, there will still be inequalities in this community; there will still be great differences; but I hope they will be smaller than now, and more justifiable than they are. I hope that is a complete answer to the hon. and gallant Gentleman's question.

Mr. I. J. Pitman (Bath)

I think part of this misunderstanding arises out of an apparent contradiction. I believe the Chancellor is right, that there has been during the war—

Hon. Members

Speech.

Mr. Dalton

I think the Chairman would suggest to me, that although I am very willing to give way to a question or a brief interjection, I do not think that at this stage I ought to give way to a lengthy observation. I venture to say that there has been considerable idealisation of the Surtax-paying class. A great number of Surtax payers do no work at all. They do not even claim to have any earned income. Her, I can speak on what is revealed in the records of the Inland Revenue Commissioners which were published before the war. I hope we shall have another report of the Inland Revenue Commissioners taking account of the war years before the next Budget, so that the House can see the facts as they are. A large number of Surtax payers; as I say, do no work at all. A large number of them live on incomes derived from investments, much of which has been inherited from parents or grandparents, and they do not make any contribution at all to—

Mr. E. L. Gandar Dower (Caithness and Sutherland)

I would ask the Chan cellor of the Exchequer if, in this year of grace, the management of property is not a job.

Mr. Dalton

It depends on what sort of property and what sort of management. But I venture to observe, and I am sure this will not be contradicted by anyone who has studied the facts, that there is a good deal of property which yields its income quite painlessly, and without any effort by its owners. I merely make this point in order that we shall not get our ideas wrong in discussing this Surtax business. Some Surtax payers work very hard; some do not work at all, and there are all sorts of intermediate stages.

Viscount Hinchingbrooke

The Chancellor of the Exchequer does not discriminate between the good and the bad. He damns them all.

Mr. Dalton

I am dealing with the Amendment as put down on the Paper, and that does not propose to discriminate. That proposes to let them all off. Now if the Noble Lord had drafted an Amendment designed to differentiate between different classes of Surtax payers, according to the degree of contribution they make to the common good, the Government would have been very glad indeed to look at it sympathetically. He will have a chance next April. Between now and then I hope he will exercise his knowledge of these things in preparing an Amendment of that sort. But in this Amendment we are asked to let them all off, and to let all Surtax payers enjoy the full consequences of the reduction of a shilling in the standard rate, in addition to the increases in allowances which, although they may seem small beer to a Surtax payer, are the same all the way up the scale. The hon. and gallant Member for Barkston Ash quoted another statement which I made about the depression of morale but he did not quote fully what I said. I am not making any complaint, only supplementing his quotation. This is what he did not quote today: The Income Tax has pressed hardly in the last few years upon many people with small incomes, whether small earners or small rentier incomes, many of whom never paid the tax before. The hon. and gallant Member left that out. Then I went on to use the words that he quoted, about how it would depress morale and reduce incentive, and then I said:

To this extent it has been a bad tax, which must be judged, in the field I am now speaking of.''—[OFFICIAL REPORT, 23rd October,1945; Vol. 414, c. 1892.] He quoted these words, but did not quote those which defined the field I was speaking of. It is a bad tax in the field where it falls upon very small incomes, and that is why I have made the proposal for an increase in the allowance, thereby taking two million people out of the field of taxation altogether. I do not think that the Surtax field is a bad field, nor did I say so in my Budget speech. When you get up to the Surtax level there are some who "toil not neither do they spin" but merely draw income from property which is managed by others. On the other hand, there are others who do exert themselves very greatly. They do not do it, in my belief, principally—

Colonel Ropner

Why cannot the right hon. Gentleman be fair when he is answering me? I would appreciate it if he would answer me in the genuine way. When I was making a quotation from his speech I left nothing out. I read a passage from the speech. I did not begin at the beginning of his Budget statement and I did not finish at the end. I read a perfectly fair passage.

Mr. Dalton

The hon. and gallant Member need not get disturbed about it. I am not disturbed. In order that the Committee might understand the significance of the bit that the hon. and gallant Member quoted, I read the preceding sentence. I say that in the quotation he made, I was speaking not of the Income Tax generally and not of Income Tax payers in general but of Income Tax as falling upon persons of small means and small incomes. In that sense I meant what I said. In the wider sense I did not mean that at all.

Colonel Ropner

I also meant what I said. The Chancellor has attempted to misquote what I have said.

Mr. Dalton

I do not think we need go on with that. The quotation was correct, and mine was correct also. But mine was one sentence longer than the hon. and gallant Gentleman's. I want to turn to the Surtax payers; they are the object of this Amendment, and I want to be perfectly frank about their position. I have said that some of them do not work at all and some of them do work. I do not want to detain the Committee too long. I am anxious to get on with my argument.

Colonel Gomme-Duncan (Perth) rose—

Mr. Dalton

I am anxious to get on with my argument. Hon. Gentlemen must not be so sensitive about this. Some Surtax payers work and some of them do not. Is that denied?

Colonel Gomme-Duncan

Does the Chancellor realise that if people do not earn the money on which they pay Surtax, they work very hard without pay?

Mr. Dalton

Some do and some do not. I am surprised at all this controversy. I thought I was making a series of harmless and unprovocative platitudes, but apparently not. I was venturing to call to the attention of the House the fact that the Surtax payers who do not work are drawing large incomes without showing the enterprise of which hon. Members have spoken.

Sir G. Fox rose—

10.45 p.m.

Mr. Dalton

On the other hand, those who do work hard do not work only for money. Some of them work out of a sense of public spirit—and do not let the Tory Party deny that—and they would work just as hard whether they had a thousand pounds more or less. Do not let the Tory Party spoil the record by denying that. Some of them work because they like power. They like to control great enterprises. Many of them conduct those enterprises well, and others less well. Some of them work because they like the prospect and possibility of recognition in one form or another. Since I have been a Minister of the Crown, that has been borne in upon me. That is a tremendous stimulating agent in economic activity and it is very good that it is so, because you get a large number of people who are willing to work for public recognition without claiming these astronomical salaries thought to be necessary.

Why is it thought to be such a shocking thing to collect £7,000,000 extra? The hon. Member for East Ealing (Sir F. Sanderson) said £7,000,000 was nothing. Yet hon. Members also say, Why am I not more economical and why am I not reducing expenditure? "Only a penny on the Income Tax," said the hon. Member. I think it is worth collecting and I think it will help to pay for many of those things we are intending to pay for Supposing I were to accept this Amendment? I am going to ask the Committee to vote against the Amendment, and I hope the hon. Members who have made such passionate speeches are going to have the courage of their convictions and not run away when the Division is called.

Let me tell the Committee just what would happen if we accepted their Amendment. This is what would happen: Under my proposals, Surtax payers with incomes of £15,000 and upwards—that is where the ceiling is reached in the proposals I have made—are getting as a result of this cruel Budget an addition to their incomes of £352 a year. Many a poor man could live on that without the rest. Three hundred and fifty-two pounds more for every millionaire, £352 as a result of this cruel Budget.—[HON. MEMBERS: "Cheap."] Is it not cruel? What has been the argument? That this is a cruel Budget. What happens under the Amendment? The man with £15,000 would get £746 a year. When you get up to £20,000 a year under my Budget he still gets £352, under this Amendment £996. With £50,000 he gets £352 under my Budget, under this Amendment £2,496. And, finally, with £100,000 a year I suppose there are some who get that—from me he gets £352 more. They are getting equality on a high level. Under this plan, on which we are now, I hope, going to take a vote, he would get £4,996 a year. The Conservative Party wants a scale of relief. I have just been reading it and I think I have gone as far as is reasonable, in giving reliefs, amounting, as I said, to £352 a year extra for everyone in the Surtax scale.

Colonel Oliver Stanley

We are going to vote in a very few minutes. We certainly have no desire to run away from an Amendment which was put forward from this side of the Committee, and which we sincerely hoped, would have been seriously argued. I confess, strange as it may seem, that I am disappointed in the right hon. Gentleman. We quite realised that with the Amendment coming on at a late hour, and with people anxious to catch trains every effort would be made to avoid a serious argument, to impart prejudice, to ascribe improper motives and to sneer and jeer at the party to which I belong. We knew, of course, what would happen and were prepared to face it, but we did, at least, think that the Chancellor of the Exchequer would deal with the Amendment as a serious matter, not from the point of view of vote-catching, not from the point of view of personal comparisons between one income and another, but from the point of view of the one thing of importance—the effect of this taxation upon production. Of course I know that this argument, coming from these benches, would immediately be suspected by hon. Members opposite. So I would ask him to consider this—interested though they might say it is, selfish, old-fashioned, obscurantist—[An HON. MEMBER: "You certainly know."]—because I am going to ask the right hon. Gentleman to forget our argument tonight and to turn to a Debate which took place in this House last May. I ask him to read a speech by that right hon. Gentleman now one of his colleagues, Lord Pethick-Lawrence. Surely hon. Members opposite will cheer the name of such a good Socialist, so youthful, if not in years, in outlook—[An HON. MEMBER: "What about your leader's age?"]—who has accepted one of the most responsible posts. At any rate he will be accepted as being no partisan, as being of unselfish intentions, without selfish feeling—

Mr. Gallacher

That is a good build-up to what is coming—

Colonel Stanley

The right hon. Gentleman, that noble Lord as he is now, put in a great plea for that reduction of this penal taxation on that higher income ranges. He did not do so for any selfish motives, or for the love of the rich; he did it because he claimed that in that way production would be increased, national revenue would be increased and gain resulting from it would not be merely a direct, financial gain to those who made that remission but would affect a very much wider circle, because of the benefit from increased production. That was a serious argument. It is an argument, I agree, on which hon. Members can take a different opinion, but it was the sort of argument which the right hon. Gentleman himself did not attempt to meet, and which no Member on the opposite side has dealt with at all. Instead, we have been put off with these cheap jeers and sneers. The right hon. Gentleman made a great point that, as our Amendment says, we had made no distinction between that portion of the Surtax payers to whom he paid tribute as working hard for their money, and those who lived on interest. [HON. MEMBERS: "No, no."] The Chancellor drew attention to that. The right hon. Gentleman will read his speech in HANSARD tomorrow, to refresh his memory, and he will find he made great play with the point about how we had drawn no distinction between those two sorts of taxpayers; and, indeed, he almost went on to say that had we drawn such a distinction he might have been prepared to consider the Amendment. We shall have another opportunity at another stage of drawing that distinction and seeing whether the right hon. Gentleman's was merely a rhetorical interruption or one that was seriously meant. But I must confess that in failing to draw any distinction between earned and unearned income, we had only been following the example of the right hon. Gentleman through the whole of this Budget. We thought such a distinction was distasteful to him, and that he was more likely to pay attention to an Amendment which did not draw an unpalatable distinction. May I refer to the speech—the remarkable speech—by the hon. Member for South Cardiff (Mr. Callaghan)?

Hon. Members

What did Lord Pethick-Lawrence say?

Colonel Stanley

I have it with me and will read it out. He said: Take a very rich man who is paying not only Income Tax but also a substantial slice of his income in Surtax. He may be faced with a proposal to embark his capital in some fairly hazardous enterprise. If he felt sure that if he made a profit he would get it and that if he made a loss he would have to forgo not only a profit but the capital itself, he might still be willing to engage in that hazardous enterprise. Very good sense from the right hon. Gentleman's colleague. To go on: But at the present time such a man is faced with this position: If his enterprise fails he loses his capital; if he makes a profit, no insignificant part of every pound of that profit goes in tax. Therefore, very often the rich man will hesitate about embarking on the hazardous enterprise, even though it might be very much to the benefit of the country as a whole that he should undertake it." —[OFFICIAL REPORT, 25th April, 1945, Vol. 410, c. 8512.1]

Mr. Sydney Silverman (Nelson and Colne)

Is it not the fact that Lord Pethick-Lawrence in that passage was not referring to Surtax at all, but to Excess Profits Tax? Will the right hon. and gallant Gentleman withdraw?

Colonel Stanley

On the contrary, let me remind the Committee that the passage begins, Take a very rich man who is paying not only Income Tax but a substantial slice of his income in Surtax.

Mr. Silverman

I heard that first sentence at the first reading. I still say that the speech was about the Excess Profits Tax and not about Surtax. I ask the right hon. and gallant Gentleman if that is so.

11.0 p.m.

Colonel Stanley:

No, it is not. That is not my reading of the speech. I was about to refer in conclusion to the speech of the hon. Gentleman the Member for South Cardiff which the Chancellor referred to as a remarkable speech. I only hope that the result will be that before long, the hon. Member will be placed by the right hon. Gentleman among the ranks of the Surtax payers. I apologise to the

hon. Gentleman. His complaint against as was that he was unable to support us because we had, by this Amendment, made the relief of the Surtax payer too small. He pointed out that in some cases it was only £30, £40 or £50. We will try on the Report stage, perhaps in consultation with him, to see if we cannot devise an Amendment which will give relief more in accordance with what he thinks is a necessary and right incentive. I hope we shall get his support.

Finally, the Chancellor of the Exchequer made great play about equality, although he did not approach to that final aim of equality which did receive a few scattered cheers from his supporters. What we hope is that, when this process of complete equalisation takes place during the next few years, as it has been taking place for years past, it will be an equalisation up, and not an equalisation down. It is easy enough for any Government, for any party, any Chancellor of the Exchequer, to equalise down; it will require statesmanship to equalise up.

Question put, "That the words pro-posed to be left out stand part of the Clause."

The Committee divided: Ayes, 275; Noes, 116.

Division No. 29.]	AYES.	[11.4 p.m.
Adams, Capt. H. R. (Balham)	Burden, T. W.	Driberg, T. E. N.
Adams, W. T. (Hammersmith, South)	Burke, W. A.	Dugdale, J. (W. Bromwich)
Allen, A. C. (Bosworth)	Callaghan, James	Dumpleton, C. W.
Allen, Scholefield (Crewe)	Champion, A. J.	Durbin, E. F. M.
Alpass, J. H.	Chater, D.	Dye, S.
Anderson, A. (Motherwell)	Chetwynd, Capt. G. R.	Ede, Rt. Hon J. C.
Anderson, F. (Whitehaven)	Clitherow, R.	Edwards, John (Blackburn)
Attewell, H. C.	Cluse, W. S.	Edwards, N. (Caerphilly)
Awbery, S. S.	Cobb, F. A.	Edwards, W. J. (Whitechapel)
Ayles, W. H.	Cocks, F. S.	Evans, E. (Lowestoft)
Ayrton Gould, Mrs. B.	Coldrick, W.	Evans, S. N. (Wednesbury)
Bacon, Miss A.	Collick, P.	Ewart, R.
Baird, Capt. J.	Collindridge, F.	Fairhurst, F.
Balfour, A.	Collins, V. J.	Farthing, W. J.
Barstow, P. G.	Colman, Miss G. M.	Fletcher, E. G. M. (Islington, E.)
Barton, C.	Cook, T. F.	Foot, M. M.
Belcher, J. W.	Corbel, Mrs. F. K. (Camb'well, N.W.)	Forman, J. C.
Benson, G.	Corlett, Dr. J.	Foster, W. (Wigan)
Berry, H.	Crawley, Flt.-Lieut. A.	Fraser, T. (Hamilton)
Beswick, Flt.-Lieut. F.	Crossman, R. H. S.	Freeman, Maj. J. (Watford)
Binns, J.	Daggar, G.	Freeman, P, (Newport)
Blackburn, A. R.	Daines, P.	Gaitskell, H. T. N.
Blenkinsop, Capt. A.	Dalton, Rt. Hon. H.	Gallacher, W.
Blylon, W. R.	Davies, Edward (Burslem)	Ganley, Mrs. C. S.
Bottomley, A. G.	Davies, Clement (Montgomery)	George, Lady M. Lloyd (Anglesey)
Bowden, Flg.-Offr. H. W.	Davies, Ernest (Enfield)	Gibbins, J.
Bowles, F. G. (Nuneaton)	Davies, Harold (Leek)	Gibson, C. W.
Braddock, Mrs. E. M. (L'p'l, Exch'ge)	Davies, Haydn (St. Pancras, S.W.)	Gilzean, A.
Braddock, T. (Mitcham)	Deer, G.	Glanville, J. E. (Consett)
Brook, D. (Halifax)	de Freitas, Geoffrey	Gooch, E. G.
Brooks, T. J. (Rothwell)	Delargy, Captain H. J.	Goodrich, H. E.
Brown, George (Belpsr)	Diamond, J.	Grey, C. F.
Brown, T. J. (Ince)	Dobbie, W.	Grierson, E.
Buchanan, G.	Douglas, F. C. R.	Griffiths, D. (Rother Valley)
Griffiths, Rt. Hon. J. (Llanelly)	Mikardo, Ian	Snow, Capt. J. W.
Gunter, Capt. R. J.	Mitchison, Maj. G. R.	Solley, L. J.
Haire, Flt.-Lieut. J. (Wycombe)	Monslow, W.	Sorensen, R. W.
Hall, W. G. (Colne Valley)	Montague, F.	Soskice, Maj. Sir F.
Hamilton, Lieut.-Col. R.	Moody, A. S.	Stamford, W.
Hannan, W. (Maryhill)	Morgan, Dr. H. B.	Steele, T.
Hardman, D. R.	Morley, R.	Stephen, C.
Hardy, E. A.	Morris, P. (Swansea, W.)	Stewart, Capt. M. (Fulham)
Hastings, Dr. Somerville	Moyle, A.	Stokes, R. R.
Haworth, J.	Murray, J. D.	Strachey, J.
Henderson, A. (Kingswinford)	Neal, H. (Claycross)	Strauss, G. R.
Henderson, J. (Ardwick)	Nally, W.	Stross, Dr. B.
Hewitson, Captain M.	Nichol, Mrs. M. E. (Bradford, N.)	Symonds, Maj. A. L.
Hobson, C. R.	Nicholls, H. R. (Stratford)	Taylor, H. B. (Mansfield)
Holman, P.	Noel-Buxton, Lady	Taylor, R. J. (Morpeth)
House, G.	O'Brien, T.	Taylor, Dr. S. (Barnet)
Hoy, J.	Oldfield, W, H.	Thomas, George (Cardiff)
Hudson, J. H. (Ealing, W.)	Oliver, G. H.	Thomas, I. O. (Wrekin)
Hughes, Hector (Aberdeen, N.)	Orbach, M.	Thomas, John R. (Dover)
Hughes, Lt. H. D. (W'lhampton, W.)	Paget, R. T.	Thomson, Rt. Hon. G. R. (E'b'gh, E.)
Hynd, H. (Hackney, C.)	Palmer, A. M. F.	Thorneycroft, H.
Hynd, J. B. (Attercliffe)	Pargiter, G. A.	Tiffany, S.
Isaacs, Rt. Hon. G. A.	Parkin, Flt.-Lieut. B. T.	Tomlinson, Rt. Hon. G.
Janner, B.	Paton, Mrs. F. (Rushcliffe)	Turner-Samuels, M.
Jeger, Dr. S. W. (St. Pancras, S.E.)	Paton, J. (Norwich)	Ungoed-Thomas, Maj. L.
Jones, Maj. P. Asterley (Hitchin)	Peart, Capt. T. F.	Usborne, Henry
Keenan, W.	Perrins, W.	Vernon, Maj. W. F.
Kenyon, C.	Platts-Mills, J. F. F.	Wadsworth, G.
Key, C. W.	Poole, Major C. C. (Lichfield)	Walkden, E.
Kinghorn, Sqn.-Ldr. E.	Porter, G. (Leeds)	Walker, G. H.
Kirby, B. V.	Pritt, D. N.	Wallace, G. D. (Chislehurst)
Lang, G.	Proctor, W. T.	Walace, H. W. (Walthamstow, E.)
Layers, S.	Pryde, D. J.	Watson, W. M.
Lawson, Rt. Hon. J. J.	Ranger, J.	Webb, M. (Bradford, C.)
Lee, F. (Hulme)	Rankin, J.	Weitzman, D.
Levy, B. W.	Rees-Williams, Lt.-Col. D. R.	Wells, P. L. (Favarsham)
Lewis, A. W. J. (Upton)	Reeves, J.	Wells, Maj. W. T. (Walsall)
Lewis, J. (Bolton)	Reid, T. (Swindon)	Whiteley, Rt. Hon. W.
Lewis, T. (Southampton)	Rhodes, H.	Whittaker, J. E
Lindgren, G. S.	Richards, R.	Wigg, G. E. C.
Lipson, D. L.	Ridealgh, Mrs. M.	Wilkes, Maj. L.
Logan, D. G.	Robens, A.	Wilkins, W. A.
Longden, F.	Roberts, Sqn.-Ldr. E. O. (Merioneth)	Willey, O. G. (Cleveland)
Lyne, A. W.	Roberts, G. O. (Caernarvonshire)	Williams, D. J. (Neath)
McAllister, G.	Robertson, J. J. (Berwick)	Williams, Rt. Hon. E. J. (Ogmore)
McEntee, V. La T.	Rogers, G. H. R.	Williams, J. L. (Kelvingrove)
Mack, J. D.	Royle, C.	Williamson, T.
Maclean, N. (Govan)	Scott-Elliot, W.	Willis, E.
McLeavy, F.	Sharp, Lt.-Col. G. M.	Wills, Mrs. E A.
MacMillan, M. K.	Shurmer, P.	Wise, Major F. J.
Mallalieu, J. P. W.	Silverman, J. (Erdington)	Woodburn, A.
Mann, Mrs. J.	Silverman, S. S. (Nelson)	Wyatt, Maj. W.
Manning, Mrs. L. (Epplng)	Skeffington, A. M.	Yates, V. F.
Marshall, F. (Brightside)	Skinnard, F. W.	Younger, Maj. Hon. K. G.
Mathers, G.	Smith, Capt. C. (Colchester)	Zilliacus, K.
Mayhew, Maj. C. P.	Smith, Ellis (Stoke)
Medland, H. M.	Smith, Norman (Nottingham, S.)	TELLERS FOR THE AYES:
Messer, F.	Smith, S. H. (Hull, S.W.)	Mr. Pearson and Mr. Simmons.
Middleton, Mrs. L.	Smith, T. (Normanton)
NOES.
Agnew, Cmdr. P. G.	Crosthwaite-Eyre, Col. O. E.	Headlam, Lt.-Col. Rt. Hon. Sir C.
Allen, Lt.-Col. Sir W. (Armagh)	Crowder, Capt. J. F. E.	Hinchingbrooke, Viscount
Amory, Lt.-Col. D. H.	Cuthbert, W. N.	Hollis, Sqn.-Ldr. M. C.
Astor, Hon. M.	Darling, Sir W. Y.	Holmes, Sir J. Stanley
Baldwin, A. E.	Davidson, Viscountess	Hope, Lt.-Col. Lord J.
Barlow, Sir J.	Dodds-Parker, Col. A. D.	Howard, Hon. A.
Beamish, Maj. T. V. H.	Donner, Sqn.-Ldr. P. W.	Hulbert, Wing-Comdr. N. J.
Beattie, F. (Cathcart)	Dower, Lt.-Col A. V. G. (Penrith)	Hurd, A.
Bennett, Sir P.	Dower, E. L. G. (Caithness)	Hutchison, Lt.-Cdr. Clark (Edin'gh, W.)
Birch, Lt.-Col. Nigel	Drayson, Capt. G. B.	Hutchison, Lt.-Col. J. R. (G'gow, C.)
Boles, Lt.-Col. D. C. (Wells)	Duthie, W. S.	Jarvis Sir J.
Bower, N.	Eccles, D. M.	Jeffreys, General Sir G.
Boyd-Carpenter, Maj. J. A.	Erroll, Col. F. J.	Jennings, R.
Braithwaite, Lt.-Comdr. J. G.	Foster, J. G. (Northwich)	Joynson-Hicks, Lt.-Cdr. Hon. L. W.
Bromley-Davenport, Lt.-Col. W.	Fox, Sqn.-Ldr. Sir G.	Keeling, E. H.
Buchan-Hepburn, P. G. T.	Fraser, Lt.-Col. Sir I. (Lonsdale)	Kerr, Sir J. Graham
Bullock, Capt. M.	Galbraith, Cmdr. T. D.	Kingsmill, Lt.-Col. W. H.
Carson, E.	Gates, Maj. E. E.	Legge-Bourke, Maj. E. A. H.
Clarke, Col. R. S.	Gomme-Duncan, Col. A. G.	Linstead, H. N.
Conant, Maj. R. J. E.	Gridley, Sir A.	Lloyd, Maj. Guy (Renfrew, E.)
Cooper-Key, Maj. E. M.	Hare, Lt.-Col. Hon. J. H. (Woodbridge)	Lucas-Tooth, Sir H.
Corbett, Lieut.-Col. U. (Ludlow)	Harvey, Air-Cmdre. A. V.	MacAndrew, Col. Sir C.
Crookshank, Capt. Rt, Hon. H. F. C.	Haughton, Maj. S. G.	McCallum, Maj. D.

Mackeson, Lt.-Col. H. R.	Pitman, I. J.	Stoddart-Scott, Col. M.
McKie, J. H. (Galloway)	Poole, Col. O. B. S. (Oswestry)	Stuart, Rt. Hon. J.
Macpherson, Maj. N. (Dumfries)	Prescott, Capt. W. R. S.	Taylor, Vice-Adm. E. A. (P'dd't'n, S.)
Maitland, Comdr. J W.	Price-White, Lt.-Col. O.	Thorneycroft, G. E. (Monmouth)
Manningham-Buller, R. E.	Prior-Palmer, Brig. O.	Thorp, Lt.-Col. R. A. F.
Maude, J. C.	Ramsay, Maj. S.	Touche, G. C.
Mellor, Sir J.	Robinson, Wing-Comdr. Roland	Wakefield, Sir W. W.
Morrison, Maj. J. G. (Salisbury)	Ropner, Col. L.	Wheatley, Lt.-Col. M. J.
Morrison, Rt. Hon. W. S. (Cirencesier)	Ross, Sir R.	White, Sir O. (Fareham)
Mott-Radclyffe, Maj. C. E.	Sanderson, Sir F.	White, Maj. J. B. (Canterbury)
Neven-Spence, Major Sir B.	Scott, Lord W.	Williams, C. (Torquay)
Nicholson, G.	Shephard, S. (Newark)	Williams, Lt.-Cdr. G. W. (T'nbr'ge)
Noble, Comdr. A. H. P.	Smiles, Lt.-Col. Sir W.	Young, Maj. Sir A. S. L. (Partick)
Nutting, Anthony	Snadden, W. M.
Orr-Ewing, I. L.	Spearman, A. C. M.	TELLERS FOR THE NOES:
Peake, Rt. Hon. O.	Spence, Maj. H. R.	Mr. Drewe and Mr. Studholme.
Peto, Brig. C. H. M.	Stanley, Col. Rt. Hon. O.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

The Parliamentary Secretary to the Treasury (Mr. Whiteley)

In view of the lateness of the hour we do not propose to sit very much longer, and I beg to move, "That the Chairman do report Progress, and ask leave to sit again."

Committee report Progress; to sit again Tomorrow.