HC Deb 24 October 1945 vol 414 cc2031-106

Again considered in Committee.

[Major MILNER in the Chair]

Question again proposed,

"That it is expedient to amend the law relating to the National Debt and the public revenue, and to make further provision in connection with finance."

4.29 p.m.

Mr. Benson

There is a small point on which I would like my right hon. Friend the Chancellor to give me an answer. It has been fairly widely assumed that one of the important reasons for an interim Budget was the problem set by the changing of the codes for P.A.Y.E. The printing of these millions of codes involves a great deal of time and labour, and it cannot be done until after the announcement of an Income Tax change has been made, with the result that if it is desired to make a change in the Income Tax in April there must be an Autumn Budget and an Autumn Finance Bill. Whether or not that is so, I do not know, but it has been fairly widely stated.

I do not know whether or not that is correct. But if so it raises a very important point. Hon. Members will remember that in the White Paper on Full Employment, one of the important questions was the variation in the rate of Income Tax. Income Tax should either be increased or decreased according to whether the Chancellor wished to decrease or increase consumption. The essential factor of control as an effective weapon against trade cycles, is that it shall be capable of being put into action immediately. If the Government are aware of an undesirable trend in trade, it is no use waiting for six months to put counter measures into operation. These must be put into opera- tion immediately the trend is felt. If we cannot vary our Income Tax law without six months' notice, then one rather effective measure in the control of the trade cycle and the maintenance of full employment has been struck from our hands. If that is so, we shall have to consider whether it is not possible to make some very drastic simplification in P.A.Y.E.

The Chancellor's reduction of E.P.T. to 60 per cent. will be generally welcomed. I cannot conceive of any other tax which is more destructive of any incentive to efficiency and economy than an 100 per cent. E.P.T. As a war-time tax, nobody will dispute that it was essential and that we were, perhaps, in the rather fortunate position of being able to control, at any rate its worst effects. The Government were the purchasers of anything between a half and two-thirds of the total production of British industry and we had, at the same time, a vast and elaborate system of costings, which is impossible in peace time. And so, the sooner we can get rid of E.P.T. the better. I noticed that the Chancellor said there was to be no deficiency repayment after the end of 1947.

I do not know whether I am correct in making a surmise from that, but it almost looks as if the Chancellor proposes to abolish E.P.T. in two strides, one the 60 per cent. already mentioned and the other to take place in January, 1947. Mention has been made by the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) of the proposal to repay 20 per cent. to industry for "ploughing back" purposes and that, I have no doubt, will be greatly welcomed, but it is very easy indeed to over-rate its importance.

The requirements of British industry for the change-over are not financial. There are no financial worries, taking industry as a whole. Certain individual firms might possibly be short of finance, but as a whole British industry is in a more liquid position than it has ever been before. It has thousands of millions of pounds of liquid resources at its disposal. A very large proportion of the enormous bank deposits are held by industry. Industry holds some thousands of millions of Government securities. There is no shortage of cash. The real problem of the industrial change-over is something far more intractable than the mere provision of finance. It is the provision of the actual plant which is necessary, and that does not depend on tax remissions or tax repayments or on financial capital, but upon the amount of resources of labour and material the country is prepared to allocate to capital formation. That is a very much more difficult problem. There was a very gloomy article on the subject in last week's Economist, in which the writer attempted to assess how much of our resources were likely to be available for such transformation. It is an extraordinarily gloomy subject.

To begin with, the size of the problem is so colossal that it is very difficult to see where it begins and where it stops. If we look back over the history of the last 15or 16 years, right through the 'thirties, we see that no new capital whatsoever on balance was put into British industry. Apart from engineering, there has been no possibility during the war of replacements, and so we can assume, on general principles, that the bulk of British plant outside engineering is at the present time largely obsolete and partially worn out. We have had one or two inquiries and have confirmed that general conclusion. The Platt Report, the Reid Report, and the much less known and unofficial report by the Potteries trade unions into the industrial conditions of the Potteries, confirm the worst forebodings we can have about the position. I want to stress the future struggle that this country is bound to face. In view of our future difficulties, the efficiency of British industry should receive a great deal more attention from this House than it has done in the past. We must also realise that we cannot take the old British pre-war standard as a standard of efficiency. We have to take the standard of our competitors, and our major competitor is the United States of America. We find, taking American factory production as a whole, that their output per man-hour is double the output in this country, and that is linked very closely with the fact that United States industry employs twice the horse-power per head of employees that British industry does. What does that mean? It means that we have to double our industrial equipment per employee, and that we have to take an entirely new standard because the old British standard of efficiency is as obsolete as British plant.

Another factor is that the United States is certain to equip devastated countries with modern up-to-date equipment. Her own surplus production is going to be so colossal that she will equip the Far East, China and India. For some time, she has been busy equipping South America with the most modern industrial equipment. It is that type of equipment abroad, the modern up-to-date equipment of American standards, that this country will have to realise it is up against industrially in the post-war world. Equipment out of our own resources, on anything like the scale necessary and in anything like the time that will be allowed to us, is out of the question. If we are to equip ourselves on the scale that we must and which will be forced upon us ultimately by foreign competition—it is no use retying on our own resources—we shall have to look to the United States for a very large proportion of our re-equipment of plant in the near future.

The Treasury at present are desperately concerned with the conservation of dollars, and I am well aware that it is extremely undesirable to borrow a single avoidable dollar if that dollar is to be used on current account. The borrowing on capital account is a horse of an entirely different colour. There is at the moment in the United States an organisation known as the Export and Import Bank. It is for the purpose of lending on capital account at extremely low rates of interest. Before very long I hope that we shall accept the Bretton Woods proposals, and Part II is designed to facilitate capital re-equipment at extremely low rates of interest. Nobody will deny that we cannot afford to borrow a single unnecessary dollar on current account, but borrowing at low rates of interest will enable us to re-equip our industry rapidly on the most modern lines, and this is not only desirable but absolutely essential. If we are to do that, the Government will have to put as much drive into stimulating our industrialists to borrow on capital account as they have into resistance against borrowing on current account. If we do not do that, then clearly, we shall be faced with an attempt to re-equip ourselves out of the residual amount of national resources, which is quite inadequate for the job in hand.

The record of British industrialists, as far as efficiency is concerned, in the last 20 or 30 years is not a happy one. We now have a Labour Government. We realise that despite that Labour Government and that Labour majority, for a long time to come the majority of British industry will be in private hands, but, having our majority, we can coerce British industry into efficiency, if we cannot persuade it. I, for one, hope that, if we cannot persuade it, the Government will not hesitate to take the steps necessary to coerce.

4.45 P.m.

Sir Stanley Holmes (Harwich)

The Chancellor of the Exchequer yesterday reminded us that this is the first Budget in time of peace after we have had a series of wartime budgets. I feel that this is an appropriate occasion on which we should pay tribute to 'the men who, during the war, have drawn up the financial policy of this country—a financial policy which has been so successful. I refer, of course, to the three Chancellors of the Exchequer—Lord Simon, the late Sir Kingsley Wood and my right hon. Friend the Senior Burgess for the Scottish Universities (Sir J. Anderson), who addressed us this afternoon, and I think I might add the right hon. and gallant Member for Gainsborough (Captain Crookshank), who was Financial Secretary to the Treasury under all three of them. When we think of it, a most remarkable achievement was brought about by this country. We were able to raise the huge sums necessary for carrying on the war for six years, and more than half of them by taxation, and, during that time, interest rates not only did not rise but actually went down, and the amount of inflation which we had in this country was, comparatively, very small indeed. I think it is worth while to trace how, by successive methods of taxation, this result was achieved.

The first new tax put on by the then Chancellor of the Exchequer, and this was actually before the war, was the National Defence Contribution, which was quickly followed by the Excess Profits Duty, and the Committee will observe that the first two taxes introduced were put on business. Reference has been made to the Excess Profits Duty—the hon. Member for Chesterfield (Mr. Benson) referred to it a moment ago—and we all know that it was a burdensome tax and one that removed all incentive to economy, but it was a necessary tax, in time of war particularly, when it was raised to 100 per cent., because everyone was agreed that, in carrying on this war no one should make any money out of it, and that was the best way of assuring that result. Then, the Chancellor of the day proceeded to raise both Income Tax and Surtax, and did it to such an extent that, eventually, over a certain income, a man was paying19s. 6d. in the £ and retaining only 6d.

I remember, a number of years ago, the present Chancellor of the Exchequer making a speech which created something of a sensation. I am not sure whether it was in the House or outside, but he said that no man should have more than £10,000 a year. He did not have to wait to be Chancellor of the Exchequer in order to arrange that. His predecessor had done it for him by means of Income Tax and Surtax. If a man has the fantastic income to-day of £70,000 a year, he retains £5,000 of it and the Chancellor, in Income Tax and Surtax, takes £65,000. [Hon. Members: "Shame."] I am pointing out that the Chancellor himself is not having the opportunity of putting into effect his own view that no one should have more than £10,000 a year, because, already, his predecessors have seen to it that no one has more than £5,000, and very few people as much as that.

The next thing that was done was to tax up to the hilt what one may call non-necessaries—wines, spirits, beer, tobacco and entertainments. After that, still more money was required, and the Chancellor of the day had to come down to the people with the lower incomes, so he reduced allowances in various ways, and then, finally, we had the Purchase Tax. Nobody likes the Purchase Tax, but everybody admits that, when goods are short, it is a most desirable tax to impose. These were the methods by which this financial policy, which has proved so successful, was imposed on the nation by the National Government in time of war. I feel that now has come an opportunity, when we have come to times of peace, as it were, to cast our minds back on these methods and see how they fit in with the present Budget and how they are likely to fit in in the future.

It is quite obvious that all the proposals that the Chancellor put before us yesterday would not have been included in the Budget of my right hon. Friend, if he had still been Chancellor, but I do not think there would have been very much difference. The first change which the Chancellor proposed was to modify the existing provisions regarding the liability to duty of oil used in premises classified as "refineries" so as to relieve from duty hydrocarbon oils used as materials for processes of chemical synthesis. I am bound to say that the right hon. Gentleman the Member for the Scottish Universities did not think of that one, so I think the Chancellor, to that extent, started with something that would not have been put in if the National Government had remained in office. Apart from that, I think everything done by the Chancellor in this Budget would have been done, with, possibly, some modifications, by the National Government if they had remained in power. One might almost quote a French writer of 100 years ago:

"Plus ça change, plus c'est la même chose."

In a House in which the tone has been raised since the General Election, there is no necessity for me to translate.

Mr. Medland (Plymouth, Drake)

Not at all; it is as intelligent as the rest.

Sir S. Holmes

What did the Chancellor do yesterday? In the first place, he proposed a very slight alteration in the Purchase Tax on domestic articles that are very desirable. I think he might have gone further, and I think my right hon. Friend on this side of the House would have done so, had he been in the right hon. Gentleman's place. The Chancellor gives us something back in regard to allowances, and very properly too. I quite agree that the lowest income earner should be the first to receive relief, but he has not given them quite as much as he might have done. My right hon. Friend referred to the fact that the earned income allowance has not been restored, and I would like to point out that, whereas in the past the first £165 a year of taxable income was taxed at a reduced rate, the Chancellor is now only going to do it on the first £125. The tax is going to be 3s. on the first £50 and 6s. on the next £75, making an allowance on £125, as against the previous £165. So far as taxes on non-necessities are concerned, no alteration has been made.

There is one tax on which, I believe, if there had been another Chancellor—one who had carried on from the previous Government—a concession would have been made, and that is Entertainments Tax. It was discussed and considered sympathetically on the last two Budgets. It concerns Entertainments Tax on games and sports events, but not including those in which horses, dogs or other animals are involved. The Committee will remember that, some years ago, in 1935 actually, it was agreed to reduce Entertainments Tax for theatrical performances, the purpose being to protect the living stage from competition with the cinema. Games and sports events suffer equally from competition with the cinema. Sports bodies are usually run by honorary officials, and, in many cases, get their funds for the purpose of the extension and development of the game or sport and use that money for the purpose of improving the physical well-being of the nation.

I propose to give two short examples. One is the Amateur Boxing Association. This association has used practically all its surplus money for years in teaching boxing to boys through the schools and training them in the noble art of self-defence. They used to have an annual championship, and, in 1938, the receipts were £1,843, and the Entertainments Tax was £288. The result was that, after they had paid expenses, they had £916 to devote to their propaganda work. They have held only one championship since the war began, and that was in July, 1944, when the receipts were £913, and the duty on £913 was £402, and the result was that the profit left to them for propaganda purposes was £59. My other example is the Amateur Swimming Association. They devote their time to promoting the art of swimming among both sexes and they encourage the teaching of children in schools. They had a small swimming gala last summer, and the total receipts were £56. Out of that, nearly £22 was taken in taxation, and the net profit on the evening was £6. I do not want the Financial Secretary to deal with this at any length in this Debate, because I hope I may give notice that, together with a number of hon. Members of the Committee, I propose to put an Amendment down to the Finance Bill, when the matter can be discussed in detail.

The next alteration that has been made by the Chancellor is Income Tax and I think we are all prepared to agree to his proposal. Frankly, I do not think any people with high incomes will grumble at the fact that although their Income Tax has been reduced by 1s. in the £ their Surtax has almost correspondingly been put up. It is obvious that we all have to be thankful we are alive to-day. Business men have to be thankful that they can carry on their businesses, and we have all to be prepared, for many years, to pay our full quota from the means we have, so I shall not object in any way to there arrangement of Income Tax and Surtax.

With regard to Excess Profits Tax and National Defence Contribution, the proposals will undoubtedly be of the greatest possible value to all businesses in preparing themselves for the great trade fight that we have before us. I am sorry that the Chancellor appeared to feel so badly with regard to directors of companies. I could not help feeling that he spoke in a somewhat sneering way, as if their only idea was to pay additional, dividends, and that there had been neglect in the past in equipping factories in the way they should be equipped. I can talk with some experience with regard to factories. The difficulty, right through the war, has been to get machinery. One has had to improvise by getting hold of second-hand machinery and keeping it going. We have a tremendous battle against America so far as trade is concerned. America has not felt the war at all. They have carried on in their factories in exactly the same way as they did in time of peace. All their machinery has been improved and is new and up to date. They have gone a tremendous distance during the war in regard to new kinds of packages. What has happened to all our people who used to sell various goods wrapped up in cartons and so on? They have been forbidden to use them, so while America has been striding on with new and attractive ideas, we have been prevented from doing anything at all.

The sooner the machinery makers of this country can be got going—and there must be plenty of men who would be delighted to work for them, and plenty of skill as a result of working in war factories—the quicker those machines can be turned out the quicker will all the other factories which send goods all over the world get going. So I hope the policy of the Government with regard to finance will continue on the present lines. I want the Chancellor to believe that in giving a reduction in Excess Profits Tax, in promising to pay back part of that 20 per cent. which has been retained, it will be used by nearly every responsible industrial leader in this country to build, if necessary, new factories—because very many are needed owing to the numbers destroyed during the war—in putting in new machinery, or in making arrangements overseas for promoting the export trade that is so necessary. I am sure he will get the utmost co-operation from everybody engaged in industry in pursuing this plan.

5.6 p.m.

Mr. Mallalieu (Huddersfield)

In one way or another I have watched and loved this great House for some 29 years, ever since my father brought me here as a small boy of 10; and one of the qualities of this House which I have liked most is its immense patience—the patience with which it submits to lectures on procedure by comparatively inexperienced Members like the hon. Member for Oxford (Mr. Hogg) and, above all, the patience with which it listens to the wholly inexperienced Members who, like myself, ask the indulgence of the House for their maiden speeches. There have been signs in this House of Commons that that particular patience is coming near breaking point and I shall try, by sitting down very soon after a quarter-past five, to avoid being the last straw.

I welcome this Budget. I welcome it in detail and, above all, I welcome it for the principle which lies behind it, the principle—which the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) sought to undermine—of removing that inequality which we on this side of the House consider to have been our country's social and economic curse. I welcome the first steps that the Chancellor has taken towards removing that inequality, those steps being the increased Income Tax allowances. I am glad he has done that. I hope he will do more. I know the indignation that people living near the subsistence line have felt when they have had to pay Income Tax on their very small earnings. I myself for 13 months, whilst serving as an ordinary seaman, was paid each week the sum of 21s. in cash and you can imagine, Mr. Beaumont, the indignation that I felt on coming in from long weeks at sea to receive a demand for tax upon that miserable pittance. I do not have to mention to the seamen in this House what I did with that demand.

One thing I specially welcome about this concession of allowances is the indication it gives of the Chancellor's mind that the sum of £2 7s. is the bare minimum for subsistence for a single person, and that £3 10s. is the bare minimum for a married couple. I beg him to bear his own figures in mind when it comes to the consideration of what really is an adequate old age pension.

Now the Chancellor has begun in direct ways to help the poorer paid people of our country, but there are many indirect ways as well in which he could help. I only want to press one or two upon him at the moment—he will receive pressure from many quarters and on many aspects. The first is about the Purchase Tax. I would ask him to consider removing altogether the Purchase Tax from public playground equipment, for this reason. Hon. Members know—particularly those of them who are fathers—that individual private toys at the present time are not merely shoddy in material but exorbitant in price. They are an example of how the less reputable advocates of private enterprise, if left uncontrolled, will form nasty, mean, petty rackets. Because of that, the only way in which so many of the poorer children can get any mechanical enjoyment is upon the swings and the slides we used to see in our public parks. I have been told that there is plenty of this equipment available—there is no question of diverting supplies to manufacturers—and the only thing which is preventing public authorities from buying it is the exorbitant price, and that is due to the Purchase Tax. I would ask the Financial Secretary to consider this matter to see whether or not it is possible to remove that tax.

A second point in which, indirectly, the Chancellor can greatly help the happiness and well-being of the poorer section of the nation, is on the point raised by the hon. Member for Harwich (Sir J. Stanley Holmes)—the reclassification of sports into live entertainment. I happen to be particularly concerned for my own pleasure with the sport of Association football, and I know that as a result of the war, very large numbers of these "soccer" clubs are in a shocking way. They have had their grounds blitzed, they have had very poor gates, and they have lost money. Some of them have been closed down.

I was told the other day by the hon. Member for Devonport (Mr. M. Foot) that the board room of Plymouth Argyle could now pretty well be classified as a special area. I think if the right hon. Gentleman could make this reclassification of games, into the section of live sport for the purposes of the Entertainments Duty, it would be possible for these clubs to build up reserves. They are not like industrial firms, who have been building up reserves in the war. They have not been able to do that. Let them, therefore, build up their reserves against the day when it will be possible to provide labour and material for the rebuilding of their grounds. Because, remember, the game of soccer is the weekly delight of hundreds of thousands of ordinary people, and among ordinary people I include the Foreign Secretary, the First Lord of the Admiralty, the hon. Member for Devonport and myself. I would beg him, therefore, to consider this change in the tax.

I cannot expect the Chancellor to give wholesale concessions to right and left—what he gives to one group with one hand he has made perfectly clear he will take away from another group with the other hand. I was a little surprised that he did not make the task of giving further concessions a little easier. I was a little surprised that he did not consider putting some further limitation on inheritances. I first heard the name of Rignano from the Chancellor of the Exchequer. He was at one time a very great advocate of the Rignano plan, and I hope that in subsequent Budgets at any rate, we shall find a still further drastic scaling-up in the limitation upon inheritances. I cannot expect hon. Members opposite to approve of that, for it is curious that they who, in their public speeches, demand that people shall stand upon their own feet, that they shall not be spoon-fed, seem to be the very first people who demand that their children shall be silver-spoon fed.

Now, I do not think that by putting up Death Duties you can get all that the Chancellor will require. I further think that it will be impossible for him, under the present system, to get more by direct taxation. I believe that the limit of direct taxation in a system of private enterprise has not only been reached, but has been passed. It has been proved conclusively that getting a reasonable living and serving the public is not sufficient incentive for private owners of the means of production. They seem to need something else, and we can only give them that something else by a reduction in taxation. By that means we can get the increased production which we must have. But if we are to suffer a reduction in direct taxation we shall have to cut something, probably the social services. Except for a few museum pieces, there are not many hon. Members even among those opposite who are prepared to advocate cuts in the social services. So there is the dilemma. The only way private enterprise can be get to work is by a cut in direct taxation, and that cannot be done without cutting the social services.

What can we do? I suggest that what we as a Labour Government can do is to do what we were sent here to do—get away as quickly as we can from the old ideas of private individual enterprise to those of public enterprise, where profit is no longer the motive and where a reasonable standard of living for oneself, combined with a desire for public service, is the main incentive. I know well enough that most hon. Members opposite will not approve of that, and I do not expect them to because they do not believe in it. But we on this side believe in it with all our hearts. With the great majority that we have here I believe that we should listen courteously and earnestly to the individual views of Members opposite on matters of detail. I do that myself, and I learn a great deal. But when it comes to questions of fundamental political and economic philosophy, for their philosophy I do not care a rap. That philosophy does not matter any more, at least for the next four years, and I ask our Front Bench to ignore it entirely. I ask them to turn this way and to realise that if they go forward on the road towards Socialist public enterprise they will receive the united, vigorous and selfless support of the Members on the benches behind them.

5.18 p.m.

Mr. Spearman (Scarborough and Whitby)

I consider I am fortunate inas- much as it has fallen to me to congratulate the hon. Member for Huddersfield (Mr. Mallalieu) on his maiden speech. I think he impressed the whole Committee with his sincerity and modesty, and, if I may add it, his commonsense. I am sure he will not misunderstand me if I say that I do not agree with all his views, but I am sure the Committee will wish me to say that we all look forward to hearing him again soon.

The Chancellor of the Exchequer has received praise for his speech yesterday from such important quarters that I am a little diffident of adding my own congratulations. But as one who knew him long before I came into this House, I would like to ask the Financial Secretary if he can find the time to pass on a tribute from me to his right hon. Friend. I think the Chancellor gave the most brilliantly lucid exposition of a difficult subject that we could possibly have had. While he was speaking I thought how very different his position was from that of his predecessor in 1929 and 1924. First, there is the obvious difference that Mr. Snowden was in the rather perilous political position of being at the mercy of a combination of our parties, whereas my right hon. Friend is in the very strong position of being supported by an overwhelming majority of Members, and thereby being able, to a great extent, to do just what he likes. There is another difference which, I think, wants emphasising. At the time Mr. Snowden was Chancellor, this country was a great creditor country; now we are the greatest debtor country in the world. I know it is fashionable among some hon. Members opposite to decry the value of foreign investments, but I think they have come in useful on more than one occasion, and I suggest they can act, to some extent at any rate, as a shield against the consequences of any rash act by a Government. I suggest that it does behove the Chancellor to mix a great measure of caution with the boldness and vision which he possesses.

There is a third difference, perhaps the most important of all—the complete change in the outlook on taxation. Once upon a time we considered Income Tax as a weapon exclusively for raising revenue, and on the skill of the Chancellor depended upon how well he was able to devise measures for raising that revenue with the least burden to the taxpayer. Then there has been the growing view that it was a weapon with which to redistribute the wealth of the country, and now there is a general recognition that perhaps the main function of Income Tax is as a weapon to regulate total expenditure, to see that the expenditure of the consumer, plus that of the State, does not attempt to exceed the total resources of the country, but ensures that there is expenditure sufficient to absorb all that the country can produce. I am perhaps not so keen as hon. Members on the other side on extending the functions of the State, but I have always held that the State must do what only it can do and what it can do immeasurably better than anybody else. We might very much disagree as to what things the State can do better than other people, but I think we can all agree that the function of assessing what are the total resources of the country, and calculating what consumers will take, is something which can only be done by the State. I am confident that the Chancellor has at his disposal brilliant members of his staff who are well qualified to undertake that great task, to enable him in future adequately to gauge what ought to be spent and to encourage or discourage consumer expenditure according to their calculations.

I am rather disappointed that the Chancellor did not give us any estimate of what he thought our total resources might be, or what total demands would be. He appeared to be pre-occupied, as I thought, with the more old-fashioned view of examining the matter entirely from the narrow outlook of Treasury receipts and expenses. As I see it, the Chancellor has three birds to hit. First, he has to balance the Budget. He made it clear that there was not much prospect of that for some little time to come, and I do not quarrel with that at all. I would not, perhaps, go so far as those economists who say that it does not matter for how long you have a deficit on the Budget so long as the interest on that deficit does not represent a growing proportion of the national wealth. It is, however, quite clear that he have had deficits for some time which have not led to inflation, and it is quite clear that a Budgetary deficit need not lead to inflation. So, I would not put that objective in an order of high priority. Next, there is the question of the redistribution of the national wealth.

That I am sure the Chancellor would wish to take further and, in fact, as we know, he took it further yesterday. He probably intends in the years to come to go still further. I would like to emphasise just what has happened in the last few years by quoting from the White Paper issued at the time of the last Budget. I am not sure that Members opposite are always fully aware of what an immense change there has been in the distribution of the wealth of this country. Unlike an hon. Member who spoke earlier, I am rather diffident about my French accent, so I will translate the French proverb which I think is applicable to this point. It is, "There are occasions when it is worth while holding back in order to jump higher later on."

In 1938, the number of people in receipt of incomes between £250 and £500, the lower income group, after taxation, was 1,800,000. To-day it is 5,300,000. In 1938, the number of people in receipt of over £2,000 net was 75,000; now it is 33,000. In 1938, the number of people with net incomes of over £6,000 a year was 7,000; now it is 80. There are only 80 people, according to this White Paper, with incomes over £6,000 a year net, as compared with 7,000 in 1938. The total net incomes of everybody over £2,000 a was £340,000,000 in 1938; now it is only £211,000,000. As compared with that, the total income of everybody in receipt of £250 to £500 a year was just under £600,000,000, and now it is just under £1,600,000,000. Without denying that hon. Members opposite will want to go further with the redistribution of wealth, I suggest that this is not the moment when it is so imperative to do it that it is worth upsetting the other objects in view. I would have thought that we had gone far enough for the moment to satisfy all except those who aim at the complete so-called equality so beloved of authoritarian States. That, I submit, really means giving up our freedom and independence for a régime of class distinction and privilege which, we hope, we have put behind us in this country.

The third bird at which, I suggest, the Chancellor must aim is far the most important: that is the restriction of consumption at the present time. The Chancellor has seen fit to aim at two of these birds. I must admit that I am not confident that his aim can be so superbly good that he can achieve both these results. I cannot help wishing that, at this particular juncture, he had put first things first, and concentrated on restricting consumption, thereby defeating the menace of inflation. What the Chancellor has actually done has been to release fresh purchasing power amounting to £315,000,000. He has done comparatively little to stimulate further production. He has made a comparatively small reduction in E.P.T., and I would ask him why, if he looks at these matters from a modern attitude, he should keep that tax at all. What effect can that have on consumption? It does not help us there in any way. I cannot see what object that tax performs except to discourage production, which is a vital objective in these days.

I wish, too, when he was raising the allowances, he could have restored the earned-income allowance, because that seems to be the most obvious way to encourage incentive among those taxpayers. I feel, as I think was stated in "The Times" leading article to-day, that what the Chancellor has really done in raising these allowances is more a mitigation of hardship than an increase in general incentive. I entirely agree with the choice of those he wishes to help, from the point of view of equity and fairness. I think that those he relieves are those we should most want to relieve, and that the extra taxes are certainly placed on those who are most capable of paying them, but whether this will benefit the country in the long run, I am not so sure. I feel myself that the Chancellor has been torn between a duty to perform and a desire to please. We know that he has got a strong head, but I think that, on this occasion, his kind heart has been the dominating organ. I only hope that, in the years to come, the whole country and more particularly those he has tried to help to-day, will not wish that we had a sterner-hearted Chancellor of the Exchequer in 1945.

Of course, the real answer to all these difficulties is to increase the supply of goods. I would like to ask the Financial Secretary if he is really confident that we are making the conversion from war to peace as rapidly as we ought to, and as rapidly as we hear it is taking place in America, Canada and elsewhere. I am bound to say, from all the reports I can get, that there is a lack of vigour and drive in Government action in this respect. I have felt for a long time how urgent was the question of releasing from the Forces men and women not engaged in vital work, because of the hardship entailed on them and on their relations. I feel that, in considering this Budget, that need is doubly strong, and that it is vitally necessary to get back at once, every skilled man who can possibly be spared, regardless of any other consequence It is absolutely vital for the resurrection of the trade of this country and foreign commerce and to provide the goods necessary to defeat inflation. I think that the Chancellor would think it a good stroke of business to sanction substantial increases in pay to those retained in the Forces, if that would enable us to get back at once the skilled men most urgently needed in the country now.

I hoped that the Chancellor would give us an estimate of what he considers are the total resources of the country—not what he can get for the Treasury—in goods and services available. It seems to me that some of the supporters of the Government, perhaps not in this House, think that a Socialist Government can, as is were, wave a magic wand and produce the resources for any desirable object. I am quite sure that the Chancellor would agree with me that we are absolutely limited by the men and material available. Of course there may well be a difference of opinion as to how these men and material can be made most productive. I am sure hon. Members on the other side of the Committee consider that the nationalisation policy of the Government will lead to greater national wealth; whereas we on this side may perhaps think it unfortunate that the Government should have given way to the views, which, in my opinion, are old-fashioned, of some of their followers in adopting a nationalisation policy, which, I suggest, will severely handicap the Government in their great task of production, and raising the standard of living. That is a matter of opinion on which we shall disagree. Where we can agree is that nationalisation by itself is not going to produce any magical results. It can only increase the resources of the country if it brings about conditions where management is more enterprising and efficient, where men work harder, and where the equipment of the factories is better. Only if it does that can it possibly produce greater wealth.

Where do we stand at the moment? In 1938 the total expenditure by the public on consumer goods was round about £3,600,000,000. The total expenditure by the State and public authorities on real resources—I am not talking about transfer payments—was £940,000,000, and expenditure on capital re-equipment was £345,000,000. In that year we only met the balance between expenditure by the public and the State, and on capital equipment on the one side, and actual resources on the other by selling £70,000,000 worth of foreign investments. That is a thing which it is not quite so easy to do today. Therefore, I do feel, assessing the position now, that we ought to make, and I wish the Chancellor could give us, some calculations of what the national income may be in the first normal year. We can expect an increase over 1938, because the economic knowledge which we have now acquired should, I think, enable us to get over the slumps to which we have been accustomed in the past, and have something resembling full employment. That will be offset, if there is any substantial reduction in the hours of work. I think we all want to see shorter hours of work, but I question whether this is not premature at this time. If the hours of work were reduced to 40 hours a week, I calculate that the loss in national resources would be greater than if every unemployed man in 1938 were back at work. Then we can truly expect substantial increases owing to new inventions and better technical equipment. But against that we may well lose in regard to the "terms of trade."

Most of what we sell is manufactured goods, and a great deal of what we buy is raw material. In a sellers' market, we have to pay more in terms of what we sell in order to get what we want to buy. It would seem to be a fairly optimistic guess that we may increase the 1938 national income by 20 per cent. which is about £1,000,000,000. If that is the case, how is that going to be divided between the great demands for increased consumption. It must be remembered that in 1938 there was unemployment. These men are now in employment and they will want to spend. There has been a great transfer of wealth to those with smaller incomes—that is from those who save to those who spend. There has been accumulated about £8,000,000,000 of savings during the war, some of which people want to spend. It is going to be a big job to keep consumption down even to the 1938 level, and that does not allow much for extra State expenditure and for re-equipping the country, which we all agree is so vital. In view of the impetus which the Budget must give to spending, I feel that if inflation is to be avoided, there has to be either a drastic temporary reduction in expenditure by the State, or we have to face an extension of rationing, and a lengthening of queues or else a disastrous loss of capital for the re-establishment of capital equipment in this country. I am sure the Committee would agree that should be the very last matter in which we should economise. "The Times" put it very well yesterday: To-morrow's output, not to-day's consumption, will determine the future of the country. I understand that the Chancellor in his broadcast last night, which I am sorry to say I did not hear, hinted at concessions in indirect taxation in his next Budget. I would like to ask him to draw a distinction between indirect taxation which is avoidable, and that which is unavoidable. At the present time, I think that about three-quarters of the indirect taxation is what—anyway those of us who are non-smokers would say is avoidable. When taxation is on sugar and tea it is on necessities, and it is a most regressive tax, and I would welcome all the reduction he can possibly make. But I think there is a big distinction between those taxes which are more or less unavoidable without hardship, and those where reduction of expenditure is within the power of the consumer.

In the beginning of my remarks, which I am afraid have gone on all too long, I referred to our position as a debtor country. I said that we had lost vast assets and had vast commitments here and abroad. I do not want to end on too gloomy a note, but I do not think there is any call for excessive pessimism. I believe we have gained great opportunities which may more than outweigh those assets that have been lost. We have made great advances in technical knowledge, and there is an immense advance in our economic knowledge. But we can only take advantage of these opportunities by very hard thinking and planning by our rulers and hard work by the people of this country. A very heavy responsibility will rest on the shoulders of the Chancellor, and I feel that, regardless of party, we all ought to wish him at this juncture success in his great task.

5.45 p.m.

Mr. Clement Davies (Montgomery)

Before I speak about the Budget, may I take this opportunity of adding my congratulations to the hon. Member for Huddersfield (Mr. Mallalieu) on his maiden speech. Some of us have very happy recollections of those great days when his father was here, and I would like to say with what real emotion I listened to his eloquent, thoughtful and sincere speech. I am looking forward to more contributions from him. As one who still adheres to the old Radical faith in which he was brought up I wish also to endorse the advice and warning he gave to the Treasury Bench. I only wish there had been a fuller Committee to hear the sincere utterances of the hon. Member.

With regard to the Budget, I begin by adding my congratulations to those which have showered on the head of the Chancellor of the Exchequer. I am not sure what his own feelings may be this afternoon, and whether they are not now rather mixed. The speech of endorsement by the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) makes me wonder whether his Budget is really on the right lines or not. But I sincerely congratulate him on his presentation of his Budget yesterday. It has been my good fortune, or otherwise, to hear many a Budget statement from the Floor of this House or from the Gallery of the House. Never have I heard one made more clearly, lucidly and simply than that of the right hon. Gentleman. It was also masterly. It was, of course, an interim Budget. It was not that full statement, such as, I hope, we shall get when he presents his Budget next April. I only wish he had gone a little deeper into the Government policy, and not merely contented himself with giving what I might call an accountant's pro forma statement of the figures on either side.

The right hon. Gentleman departed from precedent, and rightly so, in foretelling what he proposes to do, not on Budget day but some months ahead. That is right. It is not good policy nowadays to give people jolts and jerks. Let them be warned as much as possible for as long as possible about what lies ahead so that they can make their arrangements accordingly. The main feature, of course, was the drop in the Income Tax and—it comes to the same thing—the increase in the allowances. It is right from many points of view to ease the burden upon the shoulders which are weakest. But, in addition to that, it will undoubtedly give an incentive and so, from both those points of view, it is right. The Chancellor is really releasing some £90,000,000 more purchasing power to the community. There would have been danger in that, owing to our great shortage of supplies, if he had not proceeded to emphasise, and rightly so, his determination to maintain controls. We heard nothing to-day, as we did during the Election, about getting rid of those controls. In fact all that we heard was the very strongest approval and endorsement of what the Chancellor stated, both with regard to prices and strict rationing. These must be maintained; otherwise we might get into that dangerous state of inflation.

The Excess Profits Tax is, except in time of war, a very bad thing. It offends against every canon of taxation. In time of war, it was absolutely justified, as there is something repulsive in people being allowed to make what one might call blood money. That is why, when it was introduced, all of us in the old House were in favour of it. But as the Chancellor must admit, as time went on it had repercussions which it would not have had if the period of the war and the period of the tax had been shorter. It has worked unfairly because some who have had a hard struggle, or who were just beginning to get into production when the war broke out, had a low standard, and have been penalised accordingly. On the other hand, some were getting on to quite a high standard, and some were doing so by producing and exporting to Germany goods which were needed for war purposes. It is an unfair tax. It also means that there are no reserves with which to rehabilitate plant and machinery. Very rightly the Chancellor proposes a reduction, but he frankly confesses that he has not made up his mind finally in regard to the tax. May I very humbly suggest that his best course would be to do away with it altogether. He could not afford to lose all the money it brings in, and he has to think out some other tax. I have a suggestion to make which might appeal to the Chancellor, because he was very anxious yesterday about how this 40 per cent. now being released will be utilised; he was very anxious that it should not be used merely for presents in dividends to shareholders, but put back, "ploughed in" again, in plant and machinery. Might I suggest consideration of a tax on excess dividends, rising rather steeply?

Mr. Gallacher (Fife, West)

Would the hon. and learned Member recommend and support the first National Defence Contribution which was introduced by the late Neville Chamberlain? You will not get a better or fairer tax. That is why the City condemned it.

Mr. Davies

The hon. Member will remember that I was the first to attack it.

Mr. Gallacher

I was its only supporter.

Mr. Davies

I think the hon. Member was, because we had the extraordinary spectacle of the Chancellor of the Exchequer who had introduced that tax, standing at that Box when he had become Prime Minister, and saying it was a bad tax. It was a tax which, if carried to its logical conclusion, would have been stultifying to production. Surely no one wants it.

I expected the Chancellor to tell us more about Government policy with regard to finance. The sooner we know about this, the better for everybody, better from the Government's point of view, and from the individual point of view, and especially from the nation's point of view. I regard the position of the Chancellor of the Exchequer to-day as having altered. Prior to this war he conceived his position as being that of merely the banker of Government Departments. Our view of the Chancellor is changing. We are coming to regard him as a trustee for the nation. One therefore wants to know how he proposes to direct and guide finance. The nationalisation of the Bank of England, which we on these Benches will support, will accomplish little, and everybody realises that. What we need is a picture of the national wealth, how it is created, where it is created, and, on the other side, the national expenditure and how that money is being spent. That expenditure goes down three channels. The first is the Government's own channel, for governmental purposes, the second is private consumption and the third is capital investment. During the war, the main part of the expenditure has been down the channel of the Government. Private consumption has been strictly regularised and kept within control as much as possible. The one which has suffered has been capital investment, and that is the one which will be of the greatest immediate importance. That is after six years of war.

Before I deal further with that point I wish to emphasise why I feel it necessary for the Chancellor to broaden his statement, taking this Committee and the country into his confidence. It has become almost a truism to-day to speak of a revolution in ideologies that has been going on throughout the world. Undoubtedly that revolution has been going on steadily over the last half century, and is still going on. The war itself was the grim, horrible, outward manifestation of it. But although the military war is ended, no one knows and realises better than the Chancellor that the war against inequalities, injustice and poverty still goes on not only in this country but the world over. We all know through figures and statements carefully vouched for, and given to us by the right hon. Member for the Scottish Universities, about the great number of people in this country who prior to the war lived below the poverty standard. I was very much struck the other day by a statement from America that as many as two-thirds of the people of the world live below the poverty line and have not enough to eat. So this war against poverty will still go on. There is suffering, not only in Europe, China and India but, in fact, throughout the world.

Great changes have been taking place during the last 50 years, but the greatest change of all has taken place in the last six years during the war. There has been a greater distribution of wealth during that six years, than ever before in the history of this country and the effect is the extraordinary one that, in spite of war, the health of the people of the country was never better than it is now because of the better distribution of the necessities of life. [An HON. MEMBER: "All due to control?"] I would ask the Chancellor in this Interim Budget not merely to look at Government expenditure. All Budgets prior to the war merely looked at that portion of expenditure which the Government proposed to make during the year, and merely considered how the revenue to meet that expenditure should be raised. The doctrine of those days was that, of course, the Budget had to be balanced even to the last penny. We now realise—and I think that is what was in the Chancellor's mind when he talked about a five years' plan—that annual Budgets are futile. We are at the beginning of a new era where the Chancellor will have to consider a far wider prospect than mere Government expenditure. Government expenditure can affect, of course, the welfare and conditions of the community. It can help initiative, it can affect the enterprise of each individual. Hon. Members above the Gangway very often talk about more freedom for the individual, for his enterprise, initiative and so on. I wonder, do they realise that the period between the two wars did more to curb and stifle and smother private individual initiative than any period in war. The tendency was to have control in the hands of the few. There was little room for the smaller firms or individuals. No wonder that we had to deal with distressed areas. I look forward to the future—

Mr. Beverley Baxter (Wood Green)

The hon. and learned Member is making this constantly reiterated accusation about the period between the two wars. We on this side admit that it had many bad features, but never in any similar period did the living conditions of the ordinary man advance to such a degree as they did in the period between the two wars. Is it not time that the Liberal Party left that slander to the Party opposite?

Mr. Davies

I am very glad I gave way. Never in the history of this country had we such a high percentage of unemployment. Never did we know such terrible distress among families. I wish I could take the hon. Member back to my country and down into the Rhondda Valley and Ebbw Vale to see the suffering there. It is a period of which I should have thought everyone would have been ashamed. That is what I mean when I say I look forward to the future much more optimistically.

Mr. Spearman

The hon. and learned Member referred to unemployment. Under which Government?

Mr. Davies

In the whole period. From the moment that the City fired its first shots in 1920, until the war broke out in I939.

Mr. Beverley Baxter

Is it not a fact, that owing to totalitarian experiments arising out of the tepid beginnings of Socialism in many countries, the whole world was upset, and all commerce and trade conditions were upset; and is it not a fact that only under the leadership of private enterprise, was this country able to maintain a higher standard of living than almost any other country in the world?

Mr. Davies

A higher standard of living for the people generally in this country was due to the war when there was distribution of food. I am glad that hon. Members have made these interruptions, because the circumstances of the period at the end of the last war and those of to-day are very similar. Hon. Members above the Gangway take a pessimistic view of the future. They stress the loss of investments abroad, the loss of our Merchant Fleet, the lack of machinery and the fact that a great number of people have been taken away from industry and have not yet been restored. They remind me of nothing so much as Rabelais' will, in which he said: I owe much, I have nothing, I leave the rest to the poor. Never was this country prior to to-day, as well off and as wealthy as it was when the war ended on November 11th, 1918. Never had it so much productive capacity, never so many factories, never so many trained men.

Mr. E. P. Smith (Ashford) rose

Mr. Davies

I have given way many times. You will tempt me to make the kind of lengthy speech which my great old leader, Mr. Lloyd George, would have made.

The Deputy-Chairman (Mr. Hubert Beaumont)

I am not tempting the hon. and learned Member at all.

Mr. Davies

Never was the country so wealthy as it was at that time. Never were there so many trained men. The position is exactly the same to-day. Some time in 1920, from the City came the message that expenditure was too great and the Geddes Axe was invented to cut down expenditure. Then began this period of unemployment and distress.

Lieut.-Commander Gurney Braithwaite (Holderness)

Who was Prime Minister then?

Mr. Davies

He was very much under the control of the Carlton Club.

Mr. Beverley Baxter

A Liberal Prime Minister.

Mr. Davies

And Tory people behind him. What I hope the Chancellor of the Exchequer will do is to guide and direct investment towards greater production. I was hoping we would hear from him yesterday that the Government themselves would encourage small firms, new enterprises and so on. The creation of a National Investment Board, I believe, is part of the policy not only of hon. and right hon. Gentlemen opposite, but of others. In that way we can get this country marching towards normal full production. When that happens, I can see this old country again flourishing and we need not take a pessimistic view of the future. There are many great things to be done. The Government will be undertaking tremendous tasks which will absorb much labour and a great amount of material. They will be nationalising the mines, nationalising transport, improving roads, and there are houses to be built. I would like to see them nationalising the mines—I have always said so. But with all that, must go side by side the development of the full productive capacity of the people of this country.

I often feel that an over-emphasis is placed upon exports. The right hon. Gentleman the Chancellor of the Exchequer informed us that, in the main, we were an importing country. We throw our ports open, and, he said, we buy from everyone, and our exports were paying for these imports and more than paying for them. I still think we can look on ourselves as being the finest customers of every country in the world, but we, above all, must set production going. There is plenty of new plant and new machinery. We want tooling up badly and when that is done I think we shall get a flourishing policy.

6.13 p.m.

Mr. Diamond (Manchester, Blackley)

It is the custom in this House that, when a new boy rises to make his maiden speech—if I may mingle my genders—he should say with all due modesty that he requests the indulgence of the House. That is a custom to which I most gladly subscribe, and I shall need that indulgence in great measure. There is a further custom that he should also say how delighted he is to have caught your eye, Mr. Chairman. I have such a high regard for truth that I must beg to be allowed not to follow that custom. Rather am I reminded of that ancient Chinese proverb which says—if I may, with deference to hon. Members, translate it straight into the English language: Beware what request you make, lest it be granted. My feelings are not entirely unpleasant, as might easily be the case. I am very conscious that I am enjoying that anticipatory pleasure which that other idiot enjoyed when he was banging his head on a wall. He said that it would be so nice when he stopped doing it.

In my profession I have fought the Inland Revenue hard for many years, and I find it a little difficult and unusual to realise that the Chancellor of the Exchequer is now on my side—at all events, we are both on the same side. Of course, we now have a very different Chancellor of the Exchequer. No-one who had the privilege of listening to the Budget speech yesterday could doubt the breadth of vision and the wide sweep of the present Chancellor. We can, for example, boil and freeze, completely freed from Purchase Tax. Is it open to anyone to doubt any longer that my right hon. Friend is full of the milk of human kindness? I would go further. Is it not plain to every hon. Member that my right hon. Friend takes most practical steps to replenish that store as often as occasion arises? In those circumstances I beg to offer one or two very ordinary suggestions and remarks to the Chancellor of the Exchequer.

The first point with which I want to deal is that of the unearned income relief. As I sat listening to the very lucid speech of my right hon. Friend yesterday, I was astonished to find that the logic of his argument, as it appeared to me, was not carried to the full. I am referring, of course, to post war credits, which I have always understood to be in the form of an enforced loan—a very suitable measure—from the taxpayer. It was a system by which the Revenue said to the taxpayer: "You pay what you should pay, and in addition you pay a little more, which we shall return to you in due course." The calculation of the amount of that post-war credit, as hon. Members will be aware, is shown quite clearly on the back of each post-war credit certificate. Everybody will know that the first item in calculating post-war credits is the difference between earned income relief at the pre-1941–2 rate and the earned income relief at the rate calculated on that form. The logic of the situation, as it appeared to me, was that if one is getting back to what the Chancellor was good enough to call pre-war allowances, but which the post-war credit certificate only refers to as the "pre-1941–2 allowances," one should do more than deal with personal allowances; one should also deal with earned income relief, or one is not entirely completing the logical argument.

I say with all deference that the earned income allowance should have been brought back to, at least, the rate of one-sixth at which it stood before the post war credits started or, if one is going to the pre-war rate, it should have come back, so far as my recollection goes, to one-fifth. If I am not exceeding the bounds of controversy, or of the caution which members of my profession use in certifying figures, I think it is right to say that one-fifth is approximately twice one-tenth. That is purely a mathematical calculation, but it did seem to me that it was good Socialism that one should distinguish, especially to-day, between earned income and unearned income.

I am, therefore, asking the Chancellor to be good enough to give this matter further thought. It is not a case, as I can well appreciate, of there being an opportunity to deal with this matter in the next Budget, inasmuch as Pay-as-you-earn will have to be re-coded and recalculated between now and next April, and anything which affects earned income relief, will have to be dealt with now, and not in the next Budget, if it is to have effect prior to 1947–48. I imagine—I know—that the Chancellor of the Exchequer has taken steps to cover the whole orbit of taxation and I imagine that he has considered the position in relation to earned income relief. No doubt he has also considered the position of the old-age pensioner and people in that category who rely upon a small amount of unearned income. In the age allowance, account is taken of that of course, but it did seem to me that I might, with deference, ask the Chancellor to be good enough to look into that point once more.

The next point on which I wish to touch is the much debated point of Excess Profits Tax. I have only one small suggestion to put to the Chancellor with regard to it, and that is that he should abolish it altogether, for two reasons. In the first place, again the logic of the situation impresses itself upon me. The Excess Profits Tax was described by the Chancellor himself as an appropriate tax for a short war. It has now got to the stage where it ceases very largely to appear to be equitable so far as the taxpayer is concerned. I am quite sure that it is not beyond the ability of the Chancellor and his advisers to devise a tax which would be equitable, will appear to the taxpayer to be equitable, and will produce to the Revenue the same amount that Excess Profits Tax would be likely to produce in future without any difficulty whatsoever.

The second reason why I was disappointed not to hear that E.P.T. is to be removed is that I imagine, from my limited experience, that it will be the sort of tax which will produce very little in the immediate future because of the tremendous reduction of war contracts and war profits. I do, of course, realise that the Treasury has information which is far in excess of that which the ordinary citizen can come by, but perhaps, dealing with the accounts of businesses, I do get at that level information a little earlier than it reaches the Revenue who, after all, only get the answer when the balance sheet reaches the Inspector of Taxes. Then there is the matter of deficiencies. The Chancellor was good enough to give to businessmen of every grade of morality a very full warning that he was going to continue to allow deficiencies to be taken into account as long ahead as 31st December, 1946. He was thus inviting businessment of every grade of morality, to protect themselves as they might think fit. When I saw it reported in one newspaper to-day—or rather misreported—that the Chancellor was referring to "efficiency" payments, I am not sure that it was misreporting but rather the cynicism of the reporter.

The next point I would like to touch on in regard to this tax is the refund of 20 per cent. It has already been mentioned that it will be extremely difficult to arrange this refund in the desirable manner. This is a case where, I think, if I were on the other side I should have the better end of the stick than the Chancellor or the Revenue. I hope, therefore, that, irrespective of what measure is designed in the Finance Act, the Chancellor will make it perfectly plain that, repugnant as dealing with taxation retrospectively is to the sense of fairness of every Member, he will, if there is any substantial measure of avoiding the intentions and spirit of the refund, introduce retrospective legislation to put the matter right in accordance with what is intended on all sides of the Committee. It might not be inappropriate at this moment to refer the Chancellor, when he deals with the business world, as he will have to do in the near future, to the rules of the road as they appear in the central police station in Tokio. They are in English, or, at any rate, in the English which can only be found in the central police station in Tokio. One of the rules reads: When a passenger of the foot heave in sight, tootle the horn; trumpet at him melodiously at first, but if he still obstacles your passage, tootle him with vigour. That seems to me not entirely inappropriate.

The terminal payments in connection with the cancellation of war contracts is a matter which, I imagine, concerns the spending Departments more closely than the Chancellor, but it is a matter in which he is deeply interested. I hope he will take great care to see that his view is clearly expressed to the spending Departments that the claims for cancellation of contracts should be examined with scrupulous care. It is extraordinary to find, as soon as a contract is cancelled, how completely valueless the partly manufactured articles are made to appear, in spite of the fact that an enormous value in labour and material has gone into them. If I may make a small suggestion, it is that payments on account should be made for the time being to give the contractor the opportunity of carrying on with his business, but that no final pay- ments should be made until the machinery which already exists is used to the full, to make sure that there has been no excess spending of the nation's money on this purpose.

That is all I have to say about the Budget, but I would like to crave your special indulgence to make a personal statement. This House means a tremendous amount to me. It signifies freedom and it signifies all those things for which the Armed Forces have been fighting. As one who was not called upon to fight in His Majesty's Forces I appreciate the service and sacrifice they have made so that freedom could live and so that it could be possible for an ordinary citizen like myself to get up and address the Chancellor at such close quarters. For those who have come back, I hope that I shall never be found lacking in energy to pursue their just causes. For those who unfortunately will not return, I hope that I may do my share in seeing that it may be truthfully said of them that they fought in the last of the wars.

6.31 p.m.

Mr. John R. Thomas (Dover)

If I had been six months ago in the jungles of Africa and had not heard of the General Election, but had a radio and listened to the Budget speech, and if anyone had asked me whether it was a Conservative, a Liberal or a Labour Budget, I should have had to think for some time. I would have said, "There is no mention of food taxes or indirect taxes, so it cannot be a Liberal Budget." Then I would have recollected that there were to be some adjustments in Income Tax and Surtax, and I would have asked myself, "Who is benefiting?" I would have found that the advantage of this surplus is going, not to the lower grades, but to the Surtax payers. I would, therefore, obviously have concluded that it was a Conservative Budget.

I am sorry to have to stand here on this side of the Committee and ask what benefit the lower paid classes are getting from this Budget. I am thinking of the agricultural worker. It was the agricultural worker and the miner who sent me here, and I should feel that I was betraying my trust if I did not go a little further into the question of taxation relief. I do not think that the published Schedules showing the differences between the exist- ing tax and the tax payable under the new rate take into account the post-war credits. If that is so, there is little to be gained from the change by those with an income of under £500 a year. On the other hand, a married man with an income of £5,000 a year stands to gain £150 per annum. I can only conclude, in the old Biblical phrase, that "unto him that hath shall be given."

It was not however on this subject in particular that I wanted to ask for the indulgence of the Committee. I wished to refer to indirect taxation, which in previous Debates has been treated with a certain amount of levity always. In the year that I was born the then Chancellor of the Exchequer said that the indirect taxpayer of this country was very moderately burdened, indeed he was very lightly burdened, if he neither smokes nor drinks. But man lives not by bread alone. I am referring to three indirect taxes which I believe primarily affect the working classes of this country, namely, the beer, tobacco and entertainments taxes. [An Hon. Member: "What about whisky?"] The person who can afford whisky in these days, is certainly not the working-class man whom I am here to represent. The total sum collected for these three duties in the year 1944–45, according to the latest estimates, amounted to no less a sum than £700,000,000. That is equal to over half the amount collected from Income Tax, one and a half times the amount collected from E.P.T., six and a half times the amount from Estate Duty and—note this—ten times the amount received from Surtax. An hon. Member opposite referred to motor taxation as a major problem in this Budget, but the £700,000,000 represents no less than 25 times the amount received from motor taxation.

How does this affect the individual? I have worked out the estimated Budget of a married man with two children earning £5 per week. I am proposing to allow him and his family one visit to the pictures per week, one pint of beer per day for both him and his wife. [An Hon. Member: "Too low."] I am glad to know that is a modest estimate because I purposely want to keep my figures low—and 20 cigarettes a day between them. That represents a payment of about 17s. 6d. per week or £45 per year in these three indirect taxes, equal to no less than nine weeks' wages per annum. One hundred years ago, agricultural workers and other workers whose weekly income was 13s. 2d. per week, on which they had to keep a wife and perhaps four children, paid in indirect taxation—which in those days included food—an amount equal to three and a half weeks' wages. To-day it amounts to no less than nine weeks' wages, which, expressed in another form, is equal to something like 3s. 4d. in the £ indirect taxation. A man with £1,500 a year, allowing a slightly higher estimate for his modest amenities, would pay indirect taxes of is in the £, and as we go up the scale of income and reach the Surtax stages, the incidence of indirect taxation is almost negligible.

I was shocked indeed to find that this Labour Budget did not follow the lines of the first Labour Budget. The then Government were not in the position of having a majority, but even so a remission of indirect taxation was made to the extent, I believe, of something like £28,000,000. I do not think that any relaxation of indirect taxes to-day could possibly lead to inflation. The reason is that one cannot consume more beer to-day, one cannot get more cigarettes, because they also are in short supply. There is no justification for these taxes on moral grounds. I would not expect, and nobody could expect, the Chancellor to make any drastic modifications in this particular Budget, but I was hoping for a gesture from him to the indirect taxpayers. I was hoping that in his programme we should get some encouragement to think that the lot of the indirect taxpayer would be relieved eventually. Indirect taxes—and this was a statement made in a famous journal read, I believe, by most hon. Members on the other side: Indirect taxes are contrary to social justice because they have to be paid irrespective of income, that is, they weigh much more heavily on those least able to afford them. I would commend to the Chancellor of the Exchequer, not as an interim measure, but for consideration in connection with his long-term policy, the advisability of some measure whereby indirect taxation could be gradually lifted and transferred to the direct taxpayer. The only just method of payment of tax is not according to this or that theory, but on the basis of annual income. What I suggest to the Chancellor is that over a period, as surpluses become available, there should be some change of policy so that the electors whom I primarily represent will get a measure of relief far greater than they have got in this interim Budget.

6.46 p.m.

Mr. Norman Bower (Harrow, West)

Before I make one or two less popular remarks, I wish to congratulate the hon. Member for Blackley (Mr. Diamond) and the hon. Member for Dover (Mr. J. K. Thomas) on their most admirable and successful maiden speeches. Both of them displayed fluency and sincerity, and the hon. Member for Blackley particularly showed himself to be a master of his subject. I am sure the Committee will agree with me that both hon. Members emerged most successfully from the ordeal which all of us have to face at some time or other, just as surely as we have to face death itself, although nobody knows which is the worse. We shall look forward to hearing the hon. Members in future.

With regard to the main structure of the Budget and the Chancellor's long-term financial plan, with the emphasis which he laid upon balancing the Budget in future over a period of years rather than of taking each year individually, and of having a deficit in bad times and a surplus in good times, in accordance with the policy of the White Paper on Employment, I have absolutely no quarrel. I think it is a perfectly sound and admirable exposition of what our long-term financial policy ought to be in future.

There are two points of criticism that I want to make with regard to the Budget. I do not think the first will be a particularly popular thing to say from an electoral point of view, but nevertheless it ought to be said. It is this. Unlike the Chancellor and my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson), I am not at all convinced that it is a wise thing at the present time to relieve as many as 2,000,000 people from all obligation to pay Income Tax and thus, in a period of steadily increasing social services, to remove from them all sense of responsibility for the level of national expenditure. I have always believed—and I believe more strongly than ever under present circumstances—that everybody, no matter how small his income, no matter how small the amount of taxation he pays, should pay something in direct taxation, so that there shall always be a direct connection which he himself will be able easily to perceive between the amount which he pays and the amount which the nation spends. So far as wage earners are concerned, just the same as with other classes of the population, I think the payment of Income Tax cuts both ways.

In some cases it certainly may act as a deterrent. It may make people less willing to work over-time and put forward an extra effort, and it may therefore tend to reduce production; but in other cases—probably an equal number of cases—the payment of Income Tax will act as an incentive, and will make people work harder in order to earn the same income and thus cover their obligations and commitments. That is an argument which is often used by hon. Members opposite when it is a matter of taxing people in the higher income grades. It is an argument that has often been used in favour of raising the Income Tax or of not reducing it too much. I think that argument is equally applicable to people in the lower ranges of incomes. It seems to me that already there is a tendency, more particularly among supporters of the Party opposite, for people to be under the impression that in some way or other the Socialist Government will restore the country to prosperity while they just sit back and take it easy. I believe that the removal of this very large number of people from the obligation to pay Income Tax will rather accentuate that tendency.

I come now to the second point that I want to make. I am not altogether happy about the Chancellor's attitude towards savers and national savings. His attitude towards them seems to be very equivocal, to say the least, and on the whole he seems to have a distinct bias against people who save and invest their money. I think we are all inclined to be a bit equivocal in our attitude towards saving. When there are national savings weeks and we want people to produce the money, we make all sorts of appeals to their public-spirited and patriotic instincts; but then at a later time, when it is a matter of paying interest on the money that has been saved, we usually refer to the saver as a rentier, a word which I think has acquired in the minds of many people a rather anti-social and reprehensible significance. The Chancellor said yesterday that saving would have to continue for a considerable number of years to come, and he made an appeal to people on that basis. It seems to me that saving in some form or another will always be necessary, and not only for the next few years. If my economics have not got very much out of date—which I freely admit they may have done—unless there is always some form of saving it is extremely difficult to see how the re-equipment of industry, which has to go on all the time, and which the Chancellor said, quite rightly, is vitally necessary at the present time, is to be financed.

I cannot feel that there was any real encouragement for the saver in the Chancellor's speech. In the first place, the right hon. Gentleman said that the long-term rate of interest is to be further reduced. That means that it will be virtually impossible in the future—it is practically impossible now—to live on income derived from savings; in future it will be absolutely impossible for people to do that. I do not deny for one moment that unnecessarily high rates are extravagant and wasteful, but we have to strike a reasonable balance in this matter and to realise that not all the vice is on one side and all the virtue on the other. In the second place, it seems to be the Chancellor's policy that whatever profits are made by industry, and whatever concessions are made in the way of reducing Excess Profits Tax or Income Tax, the profits must never on any account be used to benefit the shareholders or to increase their incomes. I think we have to make up our minds clearly and definitely as to what part the saver is to play in the future structure of society and what function we expect him to fulfil, and having made up our minds on that, if we do consider that he has an important part to play and an indispensible function to fulfil, we must give him sufficient incentive to enable him to play that part and to fulfil that function. I cannot feel that the Chancellor was very helpful in that respect in his Budget speech.

6.55 p.m.

Captain Richard Adams (Balham and Tooting)

In rising to speak in this Committee for the first time, I wish to beg the indulgence of its Members, and I am sure that that indulgence will not be denied merely because it has been granted so frequently during the past few weeks. I am particularly happy that I shall be able to speak on this occasion—the occasion of the first Budget presented by this Government. I have the honour to represent a constituency which forms part of the vast dormitory of South London, and I can tell hon. Members present that there was considerable rejoicing there last night, when the news came through of the recommendations made by the Chancellor. I hope this will be the first of a series of Budgets for the little man. I congratulate the Chancellor on listening, on this occasion, to the voices in the back streets of our towns and villages, instead of, as so often in the past Chancellors have listened, to the voices of the banking barons and men of big business. I can assure him that the rejoicing among those 2,000,000 workers who, during the war, had to bear that extra burden of taxation in addition to the hard work they put in in the factories and offices, will more than recompense the little sadness among a small group of Surtax-payers who may think they have not been so well treated.

I knew, before this Debate started, that the hon. Member for South Dorset (Viscount Hinchingbrooke) would not agree with the views expressed by the Chancellor on the need for continued savings. I was, therefore, very glad to note that a more august person, to wit, the right hon. Gentleman the Member for Woodford (Mr. Churchill), only as recently as Monday, gave his blessing to the intentions of the Chancellor. I would remind this Committee that the right hon. Gentleman said that one of the vices of capitalism is the unequal sharing of its blessings. This Budget has achieved, above all else, a lessening of the gap between extremes of incomes, and I am sure, if only for that reason, it will earn commendation throughout the country. I am not so happy about a further remark made by the right hon. Gentleman the Member for Woodford yesterday. He gave three causes of inflation in this country. I think we all agree about the first two, namely, the use of the printing press which has distinguished other countries in the past, and, secondly, the insufficiency of the supply of goods. Then he gave us his third reason—when a Government have to come and borrow thousands of millions of pounds. I sug- gest that that is rather facile and general, and I can only conclude it was offered yesterday in that kind of way. I would remind members of this Committee that that is precisely what the Government had to do during this war, and that, despite the fact that it borrowed thousands of millions of pounds, it did succeed, largely as a result of its borrowing, in pegging down the cost of living to 131.

I would ask hon. Members to look more closely at this effect of borrowing because I think it is likely to be the essence of future Budgets on the part of the present Chancellor. I suggest that inasmuch as the Chancellor borrows out of income, the only effect that borrowing has is to transfer spending from one direction to another, and, inasmuch as it is a wise and sensible Government that is redirecting that expenditure, we can only conclude it will be to the social good. To the extent that that borrowing is for a long-term purpose, it will even have a deflationary tendency, and, at a time like this, when we all know there is not the supply of goods available, it is a good thing, not only through taxation, but also through borrowing, to defer that expenditure to a later stage. I am quite certain that, in the years to come, the money that is withdrawn from circulation through borrowing now will be used to greater advantage. Therefore, I hope that the Chancellor will continue that policy of borrowing.

I would remind hon. Members, too, that this is the first Labour Government with a real majority, and that it has entered office after six years of the devastation of war. It would be most improper to let money circulate freely at this time, since it could only have that inflationary tendency which we all desire to avoid. If the money which we borrowed is, as I am sure it will be, used for social and material reconstruction, then the advantage that will accrue will, I believe, be to the satisfaction even of hon. Members opposite, in the years to come. In that connection, I was particularly pleased to learn from the Chancellor that he does not propose, in the immediate future, to close the gap between income and expenditure because, once again, in my view, that would be a most unreasonable thing to do at present, or even for some years to come. No commercial concern attempts to balance its accounts every 12 months, except on paper. In good times, it builds up reserves, in order to be able to pay a dividend when times are not so good. It has various ways and means open to it to create hidden reserves, and to depreciate its assets, so as to create those hidden reserves, against a more unfortunate future.

I suggest, therefore, it is the greatest concern to all that, when times are good, we should accumulate reserves, both obvious and hidden, and use them to steady our accounts when times are bad. Times are bad now, and are likely to be bad for a few years to come. Therefore, rather than close this gap, rather than present this year, or next, a set of accounts which look very nice on paper, I would encourage the Chancellor to continue to borrow, and to continue to leave that gap unclosed until, as a result of his wise expenditure, he can arrive at better times and can begin to accumulate further reserves

In conclusion, I am mindful that, on this first occasion, it is unwise to press too hardly on the indulgence of hon. Members, but I would like to end on a philosophical note, and take from its context a line of Shakespeare, and say of this Budget: …it is twice blessed; it blesseth him that gives, and him that takes. Even those who are asked to give in the form of Surtax have the satisfaction of knowing that they are giving for a good cause—I think even hon. and right hon. Gentlemen opposite will agree with me that it is in a good cause—and, incidentally, of knowing that, in many instances, they are likely to get some money back through the reduction of Excess Profits Tax. I would say to that gloomy individual who glances morosely round his baronial hall, wondering how he is going to make do on a mere £5,000 or £10,000 a year, because of his extreme position, to be of good cheer because soon, and very soon, the Government are going to relieve him of much of his worry and responsibility.

The Government are going to relieve him of that worry and responsibility that attaches to his Bank of England stock and his mining shares, and the heavy burden of the broad acres that surround his ancestral hall, and, what is most probable, they are even likely to make provision for him in that grand scheme of National Insurance which is now in preparation. Likewise I would also bid the little man in the street to be of good cheer, because I am sure that these concessions which have provided so much rejoicing and happiness to-day reflect but a tiny gleam of that splendid future to which we are all stepping forward together, that new era, the era of the common man.

7.7 p.m.

Lieut.-Commander Gurney Braithwaite (Holderness)

I am sure that hon. Members on all benches of the Committee will be unanimous in expressing their congratulations to the hon. and gallant Gentleman who has just addressed us, on an extremely eloquent, successful, though not altogether non-provocative, maiden speech. I well remember, 14 years ago, making my first venture on my feet in the late Chamber on a Debate on the Budget Resolutions, and while listening to the hon. and gallant Gentleman I, in retrospect, wished that I could have been as successful then as he has been this evening. I am sure that whenever he catches the eye of the occupant of the Chair in future, he will be certain of a welcome and attention from all of us wherever we may sit in this Chamber.

The Chancellor, by the time he comes to reply to-morrow evening, will, I am sure, be weary of the spate of congratulations which has descended upon him, but at the risk of adding yet another small quota to what has already been said, may I congratulate him on an extremely fine Parliamentary performance yesterday? I entirely agree with what has already been said. In my time I have not heard a Budget statement more successfully delivered. The right hon. Gentleman has many forensic attributes. The two which I would select are, audibility and emphasis, both extremely desirable, and I would only say that I enjoyed the Budget speech quite as much as the right hon. Gentleman enjoyed himself in delivering it. I cannot offer higher praise than that. So successful was the right hon. Gentleman in his oratorical effort that I thought he concealed with great success, by adding what I would describe as the sauce piquante Dalton, the Snowden flavour which proved so unpalatable many years ago and which persists in some respect in the proposals he has laid before us. The right hon. Gentleman could not see the faces of some of his supporters. If he had, he would have seen a furrowed brow here and there at the path of financial rectitude he has selected on this occasion, and, indeed, the scene in the Cabinet must have been a little harassing. The genial countenance of the Lord Privy Seal must have lengthened as the Chancellor explained to him that £ s. d. are indeed symbols pregnant with meaning, and that inflation is a real live enemy on the doorstep rather than a figment existing in the imagination of wicked men in the City of London, that area where no standard bearer can be found to carry the flag of the Socialist Government in the by-election which is about to take place and to uphold the financial proposals of the right hon. Gentleman.

He announced his stern resistance to the danger of inflation and I am certain that on these benches he will have the strongest possible support in those efforts. Indeed, I would predict that before his allotted span has expired, he may be leaning with considerably more comfort on the buttress provided by the Tory Party than he will upon those who sit behind him. He may well be the victim of attacks from behind, one or two whispers of which have already been heard to-day. But this inflationary danger is no bogy. I suggest to the right hon. Gentleman that we are already slipping—we are defending as strongly as we can—in this respect but the purchasing value of the £ is, in fact, falling. Great efforts are being made to mitigate this course and the right hon. Gentleman declared, with the emphasis to which I referred just now, his intention of maintaining the cost-of-living subsidies, and went on to say that these have risen or are about to rise from £200,000,000 per annum to £300,000,000 per annum and he intends to protect the people from the consequences of the rise in prices, which is, in fact, taking place. With the best wills in the world, we are embarking on what is, in fact, camouflaged inflation. I do not think that any useful purpose is served by endeavouring to conceal that from ourselves. Inflation is here and it is a real danger.

The right hon. Gentleman set up what I believe is a record yesterday, certainly during my time in the House. I cannot remember a Budget statement in which the Chancellor addressed us for the usual length of time without the words "beer" and "tobacco" once passing his lips. He has caused disappointment to another hon. Member, the hon. Member for Dover (Mr. J. R. Thomas) who delivered a successful maiden speech just now, I was very glad tohear—

Mr. J. R. Thomas

On a point of Order. That disappointment is not in regard to my consumption.

Lieut.-Commander Braithwaite

I do not think that that is a point of Order. I would have given way at once if the hon. Member had wished to correct what I said, but he did, as I understood him, put forward a claim on behalf of the indirect taxpayer for consideration in this Budget, and I was very glad to hear him say it. No one has done more to support the Revenue in time of war than that very excellent person the beer drinker, and also the consumer of tobacco and, in some ways, their conduct has been more patriotic because they have given their money to the Exchequer. They have not indulged in any savings campaign or in seeking any return of interest or in the building up of the necessary Sinking Fund. [An Hon. Member: "Drinking Fund?"] No, I said Sinking Fund. The consumers of all those articles have played a very fine part in supporting the Revenue during the war, but it was not on beer and tobacco that I wish to speak.

I understand that the right hon. Gentletleman broadcast last night, but I am sorry to say that I did not hear him. I preferred to listen to the right hon. Gentleman who sits on the bench in front of me, and who was speaking at the El Alamein dinner. The Chancellor, however, said that, while the indirect taxpayer had got nothing this time, he had hopes of alleviation on future occasions. Well, let us leave it there for the moment. There was another subject about which I was surprised. I thought that the first Labour Chancellor to face us in the full glory of power and majority would have had a good deal to say on the subject of tax evasion. I want to make a brief reference to that. I do not think it will be denied that there has been a great increase during the war years in tax evasion, nor do I hope that I shall rouse too much indignation if I say that the wider the area of control the greater the likelihood of black market operations. There is that tendency here at home, and I am sure I shall carry the right hon. Gentleman with me, and it really is not good enough for the taxpayer of this country, to whom the right hon. Gentleman paid a well deserved tribute, whether indirect or direct taxpayer, who has shouldered his burden so manfully, that there should be this amount of tax evasion which is going on at this moment. There are transactions in cash—cash which is never banked, for the very excellent reason that the right hon. Gentleman's inspectors might become curious if too large balances were accumulated in banks of one sort or another.

I am going to make a suggestion. The right hon. Gentleman may say that it is quite impracticable. But this Committee is here for the purpose of making suggestions. Suppose the right hon. Gentleman were to announce that, as from, let us say, 1st January, 1946, the existing Treasury notes are no longer legal tender. Let him call in his Treasury notes. The Noble Lord reminds me that it has been done in other countries. One would have to exchange the present Treasury note for one of a different colour. I hope the right hon. Gentleman will not be deterred by the paper shortage or anything like that, from doing it, because I believe he would bring into operation machinery which would stop these wicked men and immediately send scuttling to their holes the rats who take advantage of the rest of us in this country. I leave it there. The right hon. Gentleman has his advisers, and I am sure that I carry him with me in the intention—

Mr. Dalton indicated assent.

Lieut.-Commander Braithwaite

The right hon. Gentleman will be acclaimed by the whole country, if he will take some steps in that direction. At a moment when we are endeavouring to save a sum of £1,000,000 by sending vessels round Cape Horn to avoid the Panama Canal dues, how much richer a harvest there would be if the right hon. Gentleman put his finger on these very gross abuses. I want to put to the right hon. Gentleman two questions, which I hope he will welcome if only for the reason that I do not expect a reply in this Debate, and for two reasons. Much to my regret, it will be impossible for me to be in my place when the Financial Secretary replies to-night or when the Chancellor replies to-morrow, and, as I am not going to be present, it would not be proper to ask for a reply across the floor of the House. Secondly, they are matters which, I am certain, will require some consideration and some time before a reply will be possible, and, when the right hon. Gentleman rises to-morrow, he will have a sufficient number of points to cover, and so perhaps I may content myself that a reply will come from one source or another in due time.

My first question refers to post-war credits. The right hon. Gentleman announced in his speech yesterday that post-war credits have now reached the formidable figure of £800,000,000.

Mr. Dalton

By the end of next March.

Lieut.-Commander Braithwaite

The right hon. Gentleman said he could hold out no hope of these credits being drawn, and he gave perfectly satisfactory reasons. To release this huge sum would be to endanger the whole framework of his financial policy. My question is this. When post-war credits were first introduced by the late Sir Kingsley Wood, I took part in the Debate and I asked whether I could have an undertaking that they, would not be used to be set off, let us say, against taxation. It might be just a piece of machinery for the Chancellor to say, "I have £800,000,000, and I propose to set it off against tax liability." I received a reply that evening from the men Financial Secretary, the right hon. and gallant Member for Gainsborough (Captain Crookshank), who gave an undertaking that these credits would, in fact, be paid in cash. I want to ask the Chancellor whether, under this Government, that undertaking still holds good, or whether some change has come over them.

My second question refers to capital issues. I gather that the Government are following very largely the policy of their predecessors in this respect. The right hon. Gentleman said that, I think, when speaking on the Debate on the Address. Obviously, the policy of the right hon. Gentleman at the moment, as I understand it, is for cheaper money rates and the building up of the gilt-edged market, presumably as a preliminary to the launching of some large Government loan. It would, possibly, be a loan to finance the housing of the people, and, for that reason, the right hon. Gentleman is anxious to hold off market investment in other things. But the time will come when he will wish to divert investment from gilt-edged securities to industry. The remission of Excess Profits Tax, welcome as it is, is like patriotism, not enough. The time is coming when it should be necessary to have new capital issues, and the right hon. Gentleman has his machinery for the control of investment—a fearful bogy to some people, but it has, in fact, been operated for a long time through the Stock Exchange Capital Issues Committee.

Obviously, he is not going to allow the building of greyhound tracks in preference to industrial plants making goods for export. Will the Chancellor give some indication of when it will be possible to reopen the new issue market for industry under proper arrangements and control, and can he give us some indication of the priorities he has in mind? The first thing which springs to mind is that export industries should be first in the queue. Could the Chancellor give us some information on when that process is likely to start? I mention that, not with a desire to press capital issues upon him at this stage, but because, as he very well knows, plans have got to be made well in advance, with the preparations of prospectuses, underwriting arrangements and all the other things which take time, and, like everything else in this world, if notice can be given, it is in the interests of everybody concerned. Must industry wait for his proposed changes in company law before the Government are going to carry out the Cohen recommendations?

In conclusion, it struck me yesterday when the right hon. Gentleman was speaking that there is not really a case for an interim Budget at all, apart from the moral effect. The right hon. Gentleman has announced not jam to-morrow but jam next April. An interim Budget really becomes necessary for two or three reasons—some drastic fall in the estimated revenue, some sudden increase in expenditure such as the outbreak of war provided, some emergency which has upset the whole of the estimates of the normal April Budget. But that has not been the case. The right hon. Gentleman told us yesterday that the revenue estimates of his predecessor were approximately correct, taken over the 12 months purview, and that the expenditure estimates were some few millions out—nothing very serious—so there is not really a case, as such, for an interim Budget at all. I am rather surprised that the Government, with such a heavy programme, is taking up the time of the House for that particular purpose, unless it be merely—

Mr. Jennings (Sheffield, Hallam)


Lieut.-Commander Braithwaite

My hon. Friend says "propaganda"; I used the words "moral effect." I welcomed the speech of the right hon. Gentleman yesterday because I think it has definitely had a good moral effect in the country. It is quite true that a number of people, less informed perhaps than those in this Committee, imagine that the 1s. relief of Income Tax takes place forthwith, but jam to-morrow is a great deal better than no jam at all, and we shall see to it that there is not only jam in April but a larger helping too.

Captain Cecil Poole (Lichfield)

I think the hon. and gallant Member will agree that it was understood by all Members of the Committee that the Budget introduced last April was purely a formal Budget, and that an interim Budget would have been introduced whatever party had been returned at the polls. I think that was understood by the late Chancellor of the Exchequer—in fact an announcement to that effect was made in this Committee. Had the hon. and gallant Gentleman's party been successful at the polls, I think we should still have had an interim Budget, only then we should not have been told that it was for propaganda purposes.

Lieut.-Commander Braithwaite

The last thing I want to do is to get at cross-purposes with the hon. and gallant Gentleman. I did not describe it as a Budget for propaganda purposes; I have not said that for a moment. It is quite true that the previous Chancellor in April last said that circumstances might arise making it necessary to introduce an interim Budget. The point I was trying to make, which I think is legitimate, is that there is not that difference in the out-turn of the year—I think the Chancellor will agree with this—as originally envisaged, which might have been expected. That is one point of criticism on this side of the House. There ought to be a considerable difference in the estimate of expenditure in the financial year ending on 31st March. It ought to be possible to bring in very considerable economies.

In the meantime this, as the right hon. Gentleman himself said, is the first instalment. We shall expect much greater and happier things from him in the Spring—a further easing of the taxpayer's burden—and I hope he will wield with a lusty arm the economy axe—not the Geddes axe but the Dalton axe. That in itself could do great things. The right hon. Gentleman has distinguished himself greatly. He has told us that we are living in critical and historical times, as indeed we all know. He has our good will on this side of the Committee in the task to which he has set himself, but I would again warn him of the pressure he will receive from his back benchers. When in trouble he can look in comfort across the Floor—as, indeed, he looked with comfort upon us before when we sat behind him not so very long ago. Finally I would say this: One day some historian will write the story of our times. How lamentable it would be if he had to relate that, 130 years after the victory of Waterloo, the financial battle of Britain was lost on the playing fields of Eton.

7.30 p.m.

Mr. Walter Fletcher (Bury)

A maiden speech is always an occasion of great fear to the Member who is making it. We were told the other day that Members on this side produce synthetic fury; the fear I suffer from at the present time is very real and by no means synthetic. Indeed, there are three fears—the first is that I shall speak too long; the second is that I shall get well off the point; thirdly, that when I sit down I shall have said not one of the things I intended to say.

I had the honour during this war to serve under the Chancellor of the Exchequer when he was Minister of Economic Warfare. Then his task was the destruction of the economy of enemy countries, the breaking up in every way of the trade and industries, of their whole economic structure, and we all know that he made a great success of it. On the good old principle of the successful poacher being selected for gamekeeper, that is possibly the reason why he is now Chancellor of the Exchequer, and we look upon him as the great support and buttress of our trades and industries in this country

I listened, as all new Members must have listened to their first Budget, with great care and also with astonishment at the ease and clarity with which a complicated case could be placed before this Committee by those with Parliamentary experience. I felt how very much the "new boy" has to learn before he can arrive at the point where he can present even the modest points of criticism he wishes to put over with clarity and vigour. I feel certain that, taking it by and large, the Budget which we have had presented to us must be acceptable in the main to everybody in the country. I have the honour to represent a working man's industrial constituency, Bury, in Lancashire which, for reasons I have not been able to fathom, abstained from the midsummer madness that overtook the rest of the country in early July. I feel that in that constituency—which has an unexcelled record for savings and for war effort—this Budget will be looked through carefully and approved by practically everybody. Naturally there will be questions raised, and my already considerable mail will be increased.

There was one thing absent from the Budget, however, I felt and that was charity. We are told in matters of charity that we must not let our right hand know what our left hand is doing. There is one thing about the Chancellor, however, which is absolutely certain—his right hand knows full well what his left hand is doing. When he presented us yesterday with a gift, which, at first sight, looked to be appetising and glittering, with a few seconds his left hand shot forward and took it away from us, leaving us rather worse off than when he started. I have only known one other individual who could do that with the same adroitness, ease, and grace and he must be known to a good many Members of this Committee who have travelled in the Middle East or in the East. He lives at Port Said and is known under the curious name of" Gully-Gully."

This Budget is a Budget of continuity; it was the natural follower-on of all the war Budgets that have gone before, and they were an admirable series of realistic documents showing that the people of this country, when the position was put clearly and fairly before them, were capable and willing of every sacrifice. This Budget was, therefore, a commonsense follower-on from the previous one, but it has certain very definite differences and I would like to deal with one or two of them. On the question of Income Tax and Surtax, I have listened with interest to the sometimes hidden and sometimes open gibes that have been passed at the taxpayer and at the Surtax-payer.

I have often submitted in the House without protest, to being promoted from an ordinary business man to a robber in the city. When praise is being given, as it is, most deservedly and unstintingly, to the Savings Movement and to the savers of the country equal praise is due to the Income Tax and Surtax payer. On the whole they are the admiration and envy of every other country, and I would like to give one proof of that. Many years ago, just before the last war, I happened to see the dossier of an upright citizen of Paris who was at police headquarters. On the debit side there were these words: Citoyen extraordinaire paye ses impots, which meant that he was an extraordinary citizen, who paid his tax. Here, the record of our taxpayers is quite the opposite. There is less tax evasion and more willingness to meet the burdens of expenditure than anywhere else in the world. As an Income Tax and Surtax payer I do not in the least object to what the Chancellor proposed yesterday, with one proviso, which is that I want to see that I am getting good value for my money. I do not want to see money frittered away and wasted unnecessarily. The Chancellor objected very much to the use of the phrase, "Geddes Axe." An axe is used primarily to behead people, and when you behead them then they are no longer meat for the Chancellor. I propose a more up-to-date weapon than that. We on this side are often accused of not being willing or able to learn, but I suggest that on this occasion we can learn. The Chancellor's colleague, the President of the Board of Trade—whose efforts to take under the wing of his Ministry so many other functions prove that he has, at any rate, rather inflationist tendencies—has recently produced what he calls working parties. The working party and the constitution of it has caused a certain amount of uneasiness in Lancashire and other places, but it certainly is a modern and up-to-date method by which the Government can overhaul industries and trades, and see whether they are functioning properly and helping the national effort. I think it would be a good thing if trade and industry and the taxpayers were to be allowed to form their own working parties for the overhaul of Ministries. That, I think, would be only fair. They would certainly have to start on the Chancellor's own Department, because I believe that too much Treasury control is one of the things that we must break down.

I am by no means against control; we all know how necessary it is in many ways, but those who have sat on Government committees know what happens. There will be a meeting, at which four or five Ministries are represented. There is only one predictable thing about such a committee, and that is that it will sit again. Towards the end of the meeting, when they are about to come to a conclusion a still, small, voice, more powerful than that of conscience itself, the voice of the Treasury official, will say, "I think this is a matter which I should refer to the Treasury because the public interest requires…"and so he goes on. We all know that speech. The matter is referred back to the Treasury, and in the end the forward looking policy which was being put forward is very often brought to nought. In the overhaul which has been promised by the Chancellor to save the maximum amount of taxpayers' money, and money which could be expended on social security and other purposes, we must see that too much Treasury control is not allowed.

On the question of controls, I believe we are suffering at the present time from an over correction of an agreed evil. The days when we had no controls certainly brought great harm in their train, but today we have swung too far in the other direction. One of the dangers is that other countries with fewer economic systems are going in the other direction. Fairly soon, we shall be arriving at the epoch when the cold, keen winds of competition will be blowing round us again and the zephyrs of international agreement and control will be lessened. There is already every sign of it. During the Recess I spent about a fortnight in America, and the first headline I saw in a newspaper there read, "All curbs off by February." The American word, "curb," for control has an implication which was not lost on some of us.

I do not say that in this country, where we have not the same economy of surplus and plenty as they have in America, that is in any way possible, but they are going to be competitors throughout the world. If we believe that we in our economic sphere can exercise control, and not meet competition which will knock it out of its stride, then we are living in a fools' paradise. The chances of arriving at any good international system in trade, industry and commerce over the next few years cannot be regarded very optimistically. Whether on civil aviation or on matters of higher policy, with the best will in the world—and this is in existence between such Allies as America's and ours—it will be difficult to prevent those economies from taking divergent paths when, in Kipling's words, "The ties of common funk," are removed. That does not mean that there is enmity, but it does mean that there can be and will be commercial rivalry. When I was in China I saw from a distance how these different economies are working, and I believe that too great a belief in the result of our control systems, as they have been put before us, is very dangerous. I am not certain that the patron saint of the Government is not King Canute. You will remember that King Canute, surrounded, as are the Government, by a certain number of flatterers, was persuaded that he controlled the tides. He got his feet wet. The Government start with the advantage that a great many of their ideas are "wet" before they begin and we greatly fear that the strong irresistible tide of economic truth and forces will drown them, which will be a matter of infinite regret to everybody on this side of the House.

There is another point to which I would like to refer. Invisible exports are hardly ever mentioned when the word, "export," is used. We are obviously in a period when this country will be hard put to compete in the world by the export of goods. We have heard much of the difficulties in getting our own machinery going again. There is no harm in admitting it; it is due to the fact that our country made a total war effort from the first day of the war to the last.

We are still paying for it now and we shall have to continue to pay for it. What we can do, however, is to increase, and keep an eye on, our invisible exports. They are largely connected with the fact that this country has been for many years the centre of the world's confidence in shipping, insurance, storage, banking and open markets dealing with commodities. I believe, with the sacrifices we have made, of our immense revenue, and, above all, our good standing, we can build up our export in goods later; I plead with the Chancellor of the Exchequer, therefore, to keep an eye on those who will try, in due course, to sacrifice one of the greatest assets which we have. In a balance sheet there is very often the word "goodwill," and it is highly valued. It is hard to describe it. It is often the greatest asset in any business, and, over many centuries, goodwill has been built up in this country, and should not be lightly thrown away.

The word "inflation" appears frequently in this Debate and in others, and I would very much like to have a real definition of it. I have seen it in many countries. I have even seen what must be a joy to any economist, "inflation within a vacuum." In China there was no contact with the outside world, and yet enormous inflation took place. There is a great deal of mistaken thought and lack of knowledge on the difference between inflation and depreciation due to visible and preventible causes. There is never in the public eye the fear of inflation if one thing is present: Any inflation due to honourable causes, such as ours, cannot harm a country badly so long as the people of the country themselves retain their faith in their own currency. In this country, I believe, it is the desire of everybody to defend and continue their belief in the currency of this country, because without that, all our plans must come to naught. There is one role which the Chancellor of the Exchequer has to play which is of great importance. He is the curator of the purse of the country—of the public purse. Occasionally that function cuts across an even higher one—that of the curator of public honour. Far too often on the question of claims by members of the public against Government Departments there is a sharpness in deal- ing, an unwillingness to take the part of equity, a willingness to hide behind a small legal point that I would like to condemn.

I believe that more important than anything else is the care of the public honour, and it must take precedence of the public purse. Very often the most humble members of communities are not in a position to know how to pursue their claim. They are bewildered by the difficulties, and even when it is explained to them they often do not understand it fully. I earnestly request the Chancellor of the Exchequer to see that in all these things he puts equity above law and reasonable generosity to those who have suffered during the war above any attempt to save what in the aggregate is little compared with the size of Budgets nowadays.

This Debate, I think, will go down to history as the "amber light" Debate. We on this side of the Committee are not certain whether it is not rather like a good deal of the legislation that has been put forward: it looks perfectly all right on the surface, but it has a catch in it somewhere, whether it is the Bank of England Bill with one odd Clause, the extension of control powers from two years to five with no adequate explanation. It is certainly a good Budget on its own merits, but taken against the background of other legislation it is, I think, the "amber light." We shall not know until April whether it is turning to red or turning to green. Until then I think we must give it a fair trial and do everything in our power to persuade our constituents that it should be respected as an honest and admirable effort to get out of the difficulties of war-time finance into the possibly equally difficult but different period of peace-time finance.

During the war this country only started to do well when the three Services worked together in "combined ops." When the Services worked in water-tight compartments, victories were small and costly. I believed that lesson of "combined ops" must be brought into trade and industry in this country. Capital, labour and management must work together—the cement that will hold them together is finance, and I feel that in the Chancellor of the Exchequer in the lead which he has given us we certainly have a workman who is doing his best in the public interest.

7.52 p.m.

Wing-Commander Millington (Chelmsford)

It is a very great pleasure to follow the hon. Member for Bury (Mr. Fletcher). Listening to him, we heard him ask why his constituency failed to follow the general mid-summer madness that swept throughout the country on 5th July. I venture to suggest that he has shown us to-day one of the very strong reasons why he has been returned for that constituency. I have not made very many speeches in this House—this is only the third or fourth—but for us to have a maiden speech from a new Member who has the weight of information and experience that he has, and at least one quotation means that whenever he gets to his feet again we shall all listen with great attention, knowing that we shall get entertainment and knowledge from what he has to say.

I find that I, too, have to make a quotation before I can get down to the substance of what I have to say in this Debate. We have heard one quotation from Japan, one from China, two from France, and one or two from England, but the one I have to make is a Latin quotation: "Timeo Danaos et dona ferentes," which means "I fear the Tories when they congratulate me." Were I in the position of the Chancellor of the Exchequer I would have been filled with horror and amazement when, after introducing my first Socialist Budget, with full Socialist support in the House, the right hon. Gentleman the Leader of the Opposition got up and said: "This is a Bill which can do no harm, even though it can do no good," and if I were to listen in the next two days to speech after speech from my confirmed political enemies saying, "This is a magnificent piece of work; we will give it all the support we can, and we will even go back to our constituencies and try to persuade those who voted for us to give it their support," I would be most alarmed.

I want to dissociate myself to some extent from the general atmosphere of congratulation which has surrounded the right hon. Gentleman the Chancellor of the Exchequer. I feel that he has given us a suave, smooth exposition of his Budget statement which has been easy for hon. Members to follow. I was intrigued at the cat-and-mouse technique with which he dangled something in front of the eyes, particularly of hon. Gentlemen of the Party above the Gangway here, and' then snatched it back again—a very fine feat of forensic and histrionic skill. I should have felt that this was an opportunity for which the Labour and Socialist movement in this country have been waiting—for a broad statement of the attitude towards money and finance which is held by Members of His Majesty's Government and by the Members on the benches behind them, and that we could have had perhaps a little more philosophy and perhaps a little less accountancy. I do not want to comment or criticise too much, but particularly on the income side he should have supported the claims of Socialist thought and should, as one hon. Member making his maiden speech declared, have rebutted the claims of our opponents that there is any moral right contingent upon having a rich father. Yet the first Socialist Budget, albeit an interim Budget, does not touch the Death Duty at all.

It is on the broader field, on the way in which money is to be used, that I wish to ask one or two questions. First of all, the Chancellor has been asked many questions during the last few weeks, and in his benign manner he has answered practically the whole of them by saying, "Wait until I make my Budget statement." On many of these questions the Members of this Committee had a right to expect a much fuller answer from him. The first about which I desire more information is the amount of subsidy which is to go to local authorities for their rehousing schemes. We listened just a week ago to the Minister of Health, who gave us a very forthright Socialistic exposition of his attitude towards housing. I noticed that it was one of the Governmental speeches which was not received with so much acclamation by His Majesty's Opposition. In the speech made by the Minister of Health we did not get very much information about the financing of the new housing schemes, but we had been told on the same day by the Chancellor of the Exchequer that it was the intention of His Majesty's Government to assist local authorities by subsidies. If it is his intention to pay a subsidy rather than take the financially sound but rather more revolutionary method of floating an interest-free loan, that subsidy will have to be of a considerable character, and I feel that it may meet with some opposition from Members of this Committee.

We were told by the Minister of Health that money can be obtained by local authorities from the Public Works Loans Trust at 3⅛ per cent. The average cost of the house which I envisage will be built by local authorities at current prices is something of the order of £1,000, it may be a little more or less, but not much. If we are to pay 3⅛ per cent. on that £1,000 it means that £31 5s. per annum has to go on to the rent in order to pay for the money which is being used for building the house. That will mean a very considerable cash subsidy per house if the Government are to compensate the tenants of the houses in anything like the same proportion as they would have been assisted if an interest-free loan had been raised. There is no moral reason, to a Socialist thinker, at least, why there should be any interest on a loan to which no risk is attached. I would ask the Chancellor to reconsider the possibility of further investigation, although I should think, from my knowledge of his background and experience, that he has investigated considerably the question of interest-free loans. I ask him to reconsider his decision because to ordinary people who will have to pay rent a burden of 10s. or 11s. a week is a very considerable one.

I should like the Chancellor to clear up a considerable doubt which exists in the minds of a large section of the public and of the party which now forms the Government on the question of gratuities. I believe it is true that 80 per cent. of His Majesty's Forces voted for the Labour Party in the last Election. I believe that one of the campaign slogans which won their vote was that they were told that the Labour Party, at its Blackpool Conference, had adopted a resolution which said it would pay equal gratuities for equal service, regardless of rank or sex. Hon. Members who sit behind the Government front bench must have been asked by constituents who are private soldiers, aircraftmen in the Royal Air Force or seamen in the Royal Navy, whether it is the intention of His Majesty's Government to implement the promise which was made by their Party, at any rate at their Conference if not during their Election campaign. I know what the answer is, because I wrote to the Chancellor of the Exchequer and asked him for information, but it will be far better if the Government are anxious to maintain the good will which they have, and which this Budget has assisted in keeping, with His Majesty's Forces, for the Chancellor to make a statement in the House, setting forward the reasons why he is not to follow the policy that was agreed at the Labour Party Conference at Blackpool rather than that I should read—

The Deputy-Chairman (Mr. Hubert Beaumont)

I have allowed the hon. and gallant Member considerable latitude, but I must point out to him that this is not an occasion for discussing the expenditure of money. This is a Committee of Ways and Means, and we are now dealing with the raising of money to meet expenditure.

Wing-Commander Millington

I beg the Committee's pardon, and I trust I may be fortunate enough to catch the eye of the Chair when we are discussing that expenditure.

I would like to go back to what I had intended to say originally when I sidetracked myself by catching sight of a note I had underlined rather heavily. There is very little purpose in having an interim Budget at this stage if it is to be a Budget of continuity, but there is considerable purpose if this is to be a Budget of change, and particularly if it is to be a Budget of revolutionary change. I can see ample and adequate reason why the Chancellor cannot get up at the moment and say "To-morrow—or even next April—we will receive income from this or that industry which we have socialised, or which we intend to socialise," but I think he owes it to the Socialist movement and the Socialist faith and philosophy which has been propagated for so many years, to make it clear at the earliest opportunity that the people of this country will go forward into prosperity on a national income which will belong to the people of this country in the not far distant future, instead of belonging to the present owners, namely, the shareholders of industry.

So I cannot, Mr. Beaumont, fully share in the congratulations which have been accorded. I must, in fairness, say that nobody welcomes more than I do the levelling out of the burden of taxation. Throughout the country there has been a certain amount of qualified hostility towards the Government on such questions as demobilisation. The fact that they have approached the question of raising the national income on a fairer basis than any Government before them, and the fact that they have remitted from 2,000,000 people the onerous burden of having to pay Income Tax on small incomes, will go a long way to reinstate them in the good opinion of people who might feel that they are not getting all that they ought to get under the demobilisation plan.

I wish the Chancellor of the Exchequer and the Government the very best of good luck and good fortune in the arduous task that they have in front of them. They have to take a revolutionary line with the finances of this country in the not far distant future. It is a revolutionary line which is made more imperative by the cessation of Lend-Lease and the fact that we have to stand on our own economic feet in this country. The final comment perhaps is to say that even the slight changes and deviations from Coalition-mindedness which we have seen in this Statement have strengthened the power of the Commission which we have in the United States. It must show to the American people that the British people mean economic business.

8.7 p.m.

Mr. David Eccles (Chippenham)

The Chancellor of the Exchequer in his speech yesterday stressed the need for continued savings and capital investment. I want to address my few remarks to this topic. I think we are all agreed that we shall not succeed in rehousing the people, re-equipping industry or paying for our imports unless, in the next few years, we devote to capital investment very much more money, labour and materials than we did before the war. The point was well put in an article in last week's "Economist" where it was said that without a broad stream of new capital investment "stagnation was certain and decadence was not impossible." I agree with that statement, as I say that unless we save and invest at a rate quite unprecedented in peacetime this country will shortly and definitely cease to be one of the Great Powers.

I make no apology to the Committee in asking their consideration for the question where the capital is to come from and by what means labour and material are to be withheld from the production of consumption goods in order that our savings may be transformed into physical capital assets. I think the Chancellor of the Exchequer will agree that this is a basic problem of reconstruction which has not yet received the attention it deserves. I need not trouble the Committee with figures. It is sufficient to repeat the calculation of the "Economist" that we require, to meet first priorities only, to save at double the pre-war rate. That is to say that a man who saved 1s. in the £ of his income before the war must now save 2s. in the £ if he wants his country to remain a Great Power.

It is important to stress the well-known fact that one set of people do the saving and another set of people spend the savings. The general public, and only the general public, can provide the savings. If they choose to spend and not to save they will compete successfully for the resources that are wanted for the production of capital goods. Of course, the Government themselves could, if they were so minded, enter this competition without using the savings of the people. They could inflate, and with money created out of nothing they could pay for houses and other things, but such competition would break the price level and would result in misery and chaos. In a period of general scarcity such as we shall go through in the next two or three years, and in which there will be more vacant jobs than men and women looking for those jobs, it is only out of the genuine savings of the public that capital reconstruction can be financed without a quite unpredictable rise in costs and prices.

Whatever sum the public are going to save during the life of this Parliament—I shall come back to this point in a moment—the most disturbing feature of this Budget is that far too much of those savings will be spent by the Government on consumption expenditure and services. It cannot be too often stated that in a period of full employment there is a very real choice between house-building and re-equipping industry on the one hand and, on the other, expenditure on such items as defence, social services and subsidies to keep the cost-of-living down. I calculate that every 50 men kept in the Forces a month longer than necessary would inescapably deprive the community of the resources needed for one permanent house. I expected the Chancellor to come down with the full authority of his office to explain this hard choice to the Committee and to show that there were these solid reasons for drastic cuts in the consumption expenditure of the Government, in order that we might have a sufficient volume of new capital created. Instead of that, the right hon. Gentleman presented us with the striking paradox of his exhortations to the ordinary citizen to save and to invest while he himself continues to spend at the dizzy rates of wartime. This is by far the most disturbing feature of the Budget. What we need as a nation is a steady, large volume of private saving, not absorbed in current consumption by Government expenditure, but matched to a programme of private and public capital investment.

I now turn to consider the prospects of getting a steady, large flow of private saving. Why do people save? One must answer that question before going on to the more practical point of how much money we can expect the public to save during the lifetime of this Parliament. I think the modern reasons that lead men to save are almost as complex as the reasons, in present circumstances, which determine the rise or fall in the birthrate. As the right hon. Member for the Scottish Universities (Sir J. Anderson) said this morning, the law of supply and demand is not sovereign here.

While it is true that the rate of interest has some effect on the volume of savings, it never has been, and is now much less than formerly, the sole stimulant and governor of the rate of savings. I was perplexed to hear the Chancellor give his speculator's tip to the public yesterday to buy the long-dated Government stocks because it appeared to contain the old-fashioned idea that it is a variation in the rates of interest that really calls forth savings. Of course the return to be expected from an investment is not a negligible feature, and in so far as the Chancellor is successful, as we hope he will be, in his cheaper money policy, he is deliberately weakening one of the motives for private savings and thereby throwing more weight on the other motives.

What are these other motives? I would divide the motives into two categories, personal and patriotic. Men and women always have saved, and always will save, something against a rainy day. They put something in a stocking or a teapot or a bank, irrespective of the rate of interest. That is what I call personal savings. Any family that has no personal savings is always at the mercy of someone—at the mercy of their neighbour or of the State. Therefore, this kind of saving is to be commended because it buttresses the character and self-reliance of the individual. It is a method of foregoing present pleasure to secure future independence.

Mr. Gallacher (Fife, West)

Will the hon. Gentleman tell us why, if this method of saving is to be commended, he and his party penalise those who make such savings by imposing a means test and depriving them of pensions?

Mr. Eccles

I am very much against the way in which small savings are counted in the means test. If I had anything to do with it, I would reverse that position. To come back to my argument, we do not know what effect upon the rate of personal savings a National Insurance scheme would have which guaranteed full subsistence to all men for all time. If it caused a sharp drop in personal thrift, the Chancellor, whether he is a Socialist or a Conservative, would have to find other means of inducing people to forgo present consumption and to provide a flow of savings for public and private enterprise. Be that as it may, taking all the known facts and prospects, it is impossible to anticipate that the rate of personal savings after the war will exceed the rate of total savings before the war. There are good reasons why it should be lower. This total we would all agree will be quite inadequate to the needs of the nation.

Therefore, we must turn to the other motive for saving, which I have called patriotic. Patriotic savings are of the kind which were stimulated in a remarkable way by the common objective of winning a great war. A man will put by additional savings if he considers it his urgent public duty to make a sacrifice of the present for the sake of the future. On my definition, money put into a bank and lent by the bank to the State or to industry, might be personal or patriotic; it depends on whether the amount so saved is normal or abnormal. During the war, the Coalition Government made successful appeals to the public to save at an abnormal rate. No doubt a valuable habit was formed in those six years which is a legacy to the present Government. It will help them very much, I hope, to offset the natural desire of some people to cash their wartime savings and buy goods when the goods are there to buy.

Are the Government going about it in the right way to confirm and fortify this habit? That is the real test of financial statesmanship at the present time If this habit is weakened, if the flow of voluntary savings falls below what is required, the Government will be faced with a dreadful choice. They will either have to abandon all the hope of carrying out the reconstruction programme at a reasonable level of costs and prices, or they will have to use heavy compulsion to restrict spending and to allocate labour and material between the production of capital goods and the production of consumption goods. In my judgment, the British public would not stand for the second alternative Compulsion is ruled out of court. So the fact emerges that if reconstruction is not financed voluntarily it cannot be financed at all. In these matters, as is inevitable in a free country like ours, the Government are in the hands of the public and not the other way about. The Government might continue to win large majorities in the Lobbies of this House, but large majorities will not make the citizen and his wife save at an abnormal rate. They will only do that if they give their warm approval to the objects, and the means to carry out those objects, for which they are asked to save twice as much as they did in the old peace-time days. That is why I compared the motives for this extra savings with those which determine the birth-rate. It all depends on whether you think the future is going to be more worthwhile than the present.

That brings me to the vital issue. I want the flow of private savings to be adequate to the needs of the nation. I am confident that I put those needs in terms of millions of pounds a good deal higher than most hon. Members. A fortnight ago I appealed to the people whom I represent in this House to make the Chippenham Thanksgiving Week a success. I told them that it would be wrong to deny to the Chancellor at the outset of his administration the essential weapon against inflation and the essential means of reconstruction. I am bound to warn the right hon. Gentleman that, as the months go by, the response to all these appeals will be a direct reflection of public confidence in the Government. I can think of nothing more likely to impair that confidence than the sense that taxes and the money derived from savings are being wasted. If the public do not see that Government expenditure, now that peace has come, is drastically reduced, they are bound to conclude that their money is being wasted. I go further and say that if the right hon. Gentleman and his colleagues do not keep their programme and their Parliamentary actions within the wide ambit of the objects and means of achieving those objects on which 90 per cent. of the people are agreed—if, instead of pursuing these common aims and respecting these agreed methods, they use their majority to steam-roller Bills against which there is wide feeling in the country, they must impair that confidence and disrupt the unity which everyone knows have been the backbone of the successful savings campaigns in the war.

The Chancellor must realise that every act of saving is an act of confidence in the future and that confidence depends, not on a mandate cast once every five years, but on the day-to-day actions of the Government. There are many of us on both sides of the Committee who care much more for the recovery and prosperity of our country, weakened by war and beset by so many international difficulties, than we do about the 100 per cent. fulfilment of any political theory. We know that if public money is to be spent in the amounts forecast in this Budget the recovery, if it takes place at all, will be very slow, and we also know that if political doctrines are pressed to the extreme the country will be divided into two camps. That means the frustration of many simple hopes and, among the first of them, all hope of financing the reconstruction programme—the bare minimum of the agreed reconstruction programme—on a voluntary basis. [An Hon. Member: "Why?"] Because the rate of voluntary savings will not keep up unless there is wide agreement in the country about the objects for which saving is invited. I end these remarks with an appeal to the Government not to make inevitable a deterioration in public confidence. They are the masters of this situation. We know the water through which they are guiding the ship is very rough, and we want to see the ship well and safely guided. I am quite sure that if they will, with scrupulous vigilance, cut down unnecessary expenditure and thereby release resources for capital investment, we may be able to re-equip our country efficiently and quickly enough to maintain our standard of life and the very high prestige which we enjoy in the world at large.

8.28 p.m.

The Financial Secretary to the Treasury (Mr. Glenvil Hall)

I think some hon. Members have forgotten that this is an interim Budget. The Chancellor is doing little more this time than implement the undertakings given when the original Budget was introduced during the term of the last Government in the last Parliament. Just as this is an interim Budget, so the speech I am about to inflict on the Committee to-night is in a sense an interim speech. The Chancellor of the Exchequer himself will be winding up the Debate at the end of the discussion which is to take place to-morrow. On the whole, I think we have had a very useful and profitable discussion to-day. Quite a number of legitimate points have been made and, as one or two speakers have pointed out, the Chancellor himself has come in for quite a lot of praise. That is one of the difficulties of replying to the Debate, there has not been a great deal of criticism to answer. But to such as there has been, I will endeavour in the short time at my disposal to reply from the Government's point of view.

The right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) started off by saying that he was a friendly critic, and I think there is no doubt that he is. The criticisms that he had to offer were not grave, nor were they of much substance. He did, however, say that he was disturbed by the Chancellor's statement that the expenditure this year would approximate to the estimate which he himself arrived at when Chancellor, namely, £4,500,000,000. What he forgot to remind the Committee is that as he made that estimate while the war against Japan had still to be finished off and won, it was only a guess. There is no doubt about it that if the war against Japan had continued the sum would probably have been greater. Therefore, the fact that the amount which the Chancellor of the Exchequer now thinks will be the final out-turn for the year does approximate to the sum which the ex-Chancellor laid down is, in a sense, purely fortuitous. What we have to realise is that the expenditure which it is anticipated will be incurred during this financial year is quite unavoidable. As the ex-Chancellor himself said, we have to meet a certain number of end-of-the-war commitments which cannot be avoided—payments for the loss of contracts, money due to men coming out of the Services, and various other items. In spite of the fact that the war with Japan has ended, therefore, it is untrue to imagine, because the amount we are asking the Committee for is the same as the ex-Chancellor asked for when the war against Japan was unfinished, that we are being extravagant. I have to tell the Committee that such is not the case. We have, since we have been in office, made every effort—and will continue to do so—to reduce expenditure to the smallest amount compatible with efficiency and the implementation of obligations into which the Government has entered.

The ex-Chancellor said that he thought the subsidy of £300,000,000 which the present Chancellor mentioned yesterday as necessary to peg the cost of living would probably be insufficient. I think he must have forgotten that the Chancellor himself indicated that £300,000,000 would probably not be enough, that at the present moment owing to the ending of Lend-Lease the subsidies were running at the rate of £250,000,000, were rising and would be likely to reach £300,000,000 and possibly go beyond that. I think the Chancellor carried the whole Committee with him when he indicated that although this was a very large sum it was not too much considering what it was going to do, namely to keep the cost of living stable and to prevent it rising to any very serious extent.

The right hon. Member for the Scottish Universities went on to deal with the present Chancellor's suggestions with regard to taxation and the changes in Income Tax. He said that he did not think it was fair that post-war credits should come to an end, as is proposed, at the end of next March, because although a portion of the allowances to which these post-war credits referred was being restored, the earned income allowance was not. That is quite true. Although some of the allowances have been put back not only to the pre-1940–41 level, but to the pre-war level, the earned income allowance has not been restored to its old percentage. In spite of that fact, it is nevertheless true to say that the allowances that have been put back are larger than the allowances were when they were taken away and the post-war credits instituted.

I am one of those who believe that the institution of post-war credits was a mistake. By the time they come to an end they will cost the British taxpayer £800,000,000, and I am positive that if they had never been instituted people would never have missed them. People would have been quite willing to sacrifice these sums during the war in the same way as they bore other sacrifices. They were in the nature of a free gift to the people who at the time had not expected it. Even to-day there are countless people who believe they will never get the post-war credits anyway. Nevertheless, they are there, and the Government have indicated that they mean to pay them at the proper moment. One hon. Member asked how they would be paid when the time came, and whether they would be paid in cash. The answer is "No." The undertaking given at the time they were instituted was that they would be placed to the credit of the recipient in the Post Office or in some other trustee savings bank. When that time will come, of course, I cannot say, but that it will come can be taken as definite.

I would like now to refer to what the right hon. Member for the Scottish Universities said on the Chancellor's statement concerning the use of the Budget to iron out inequalities between one section of the population and another. The right hon. Gentleman said that tax incentives, when given, should give the maximum benefit to the community, and he indicated that hon. Members on this side took the view that one could tax the rich almost indefinitely and that by so doing one not only provided money which the nation needed but helped to redress social in- equalities. In listening to the right hon. Gentleman, I could not help thinking that he was perhaps confusing the really great with the really rich, because he appeared to assume that the two were one, and that by taxing the man with money one would necessarily rob the community of something which otherwise would be valuable to it. I think we are all familiar with the fact—it is undoubtedly a fact—that many a truly great man has died in a garret.

My hon. Friend the Member for Chesterfield (Mr. Benson) asked a question which it is not easy to answer. He wanted to know whether P.A.Y.E. will make it impossible to use variations of Income Tax as an offset against trade cycles. The simple answer is that the old system did not do it and was, in fact, much less elastic than P.A.Y.E. in its application to the Schedule E taxpayer. I do not see why my hon. Friend should imagine that P.A.Y.E. will in some way prevent the policy outlined in the White Paper on Full Employment from being successfully operated.

Mr. Benson

The point I raised was this. If Income Tax variations are to be used as a weapon against trade cycles, they must be capable of instantaneous variation and application. It has been said that it takes atleast six months after the decision to alter the Income Tax to vary the codes for P.A.Y.E. That means that one could not use Income Tax as a weapon against a trade cycle for six months, which would mean that it would be almost valueless.

Mr. Glenvil Hall

The point I am trying to make is that if the previous method of reaching the taxpayer through the Income Tax had been employed the time lag would have been much worse, because Income Tax was levied on the previous year's income, and it would have taken a year or 18 months to use an Income Tax change as a weapon in this direction if the Government had been minded so to do. At this juncture I might inform the Committee that it would not take six months to get out the new tables that are essential when any change of tax takes place. It would take not more than tour months from the time when the change took place to carry out all the processes of getting the tables printed and distributed in order to carry the thing right through from the decision of the House to the desk in the tax inspector's office.

The hon. Member for Harwich (Sir S. Holmes), who, I think, leads one section of a Liberal Party, ventured the opinion that had the previous Government remained in office they would have brought in the same Budget. There, of course, the hon. Gentleman enters into the realm of conjecture where I, being an ordinary plain man, cannot follow him, but although he may hold that belief, he will find very few on this side of the House who share it with him. The hon. Gentleman was on more realistic ground when he asked for a relaxation of the Entertainments Tax in respect of sports and games. I have to say to the hon. Member and to the Committee that the Chancellor is sympathetic towards his request. We are none of us enamoured of this particular tax. But it is very difficult to know where to draw the line. I have to tell the hon. Member and the Committee that the Chancellor will look at this matter with the utmost sympathy in the hope that at a not too distant date—when it may be, I cannot say—something may be done to help in this and other deserving directions.

The same point was raised by my hon. Friend the Member for Huddersfield (Mr. Mallalieu) who, if I may say so, made a very felicitous and attractive maiden speech. I took a pride in it because he happens to be a constituent of mine, and I have followed his candidature in the constituency he now represents. I sit for the seat which his father previously held, and I gave his brother, who held different views from himself, a very sound beating some years ago. Therefore, as I say, I took a very great interest in the first speech which my hon. Friend made, and I share the hope, expressed afterwards, that we shall have many contributions from him in the weeks to come, which will be valuable, constructive, and helpful to our Debates. He expressed disappointment that the Chancellor of the Exchequer had not done anything about Death Duties. The day is young yet, and there are other Budgets to follow. I, for one, have not the slightest doubt that some changes in the Death Duties, one way or the other, may be made by the Chancellor, possibly, when he opens his Budget in April.

The hon. Gentleman the Member for Scarborough and Whitby (Mr. Spearman), who always contributes to these Debates something which is worth hearing, referred us to the White Paper on the sources of war finance. I would tell him that there is no foundation for the suggestion he made that the Chancellor is taking a narrow view of expenditure. On the contrary, he has got this matter very much in mind, and has proposed to Departments that economies must be enforced. I think the hon. Gentleman can take it from me that the views and the fears he expressed have no foundation in fact. The Chancellor is well aware of the situation, and is as desirous as any of us that we should secure the utmost economy. It is, however, impossible to follow out the hon. Member's suggestion at the present juncture, and make an estimate of what the total national income is, for the very simple reason that, as he knows only too well, the situation is in a state of flux. But, as soon as conditions make it possible, the Chancellor will be only too willing to give the House all the information he can.

I am sorry to see the Leader of the Liberal Party is not in his place. He welcomed the Budget, but he queried whether praise from the right hon. Gentleman the ex-Chancellor of the Exchequer would not be an embarrassment to the Chancellor, rather than a help. It may be that praise, either from a Conservative or a Liberal, might, in certain circumstances, not be of much use to a Socialist Chancellor of the Exchequer. He had some very strong things to say about the Excess Profits Tax, with all of which every one of us would agree. As has been said by the Chancellor himself, it is an excellent tax for a short war, but a bad tax for normal times. There is general agreement everywhere that none of us likes this tax; all of us would like to see it go as soon as that is possible.

He made a suggestion—which I am sorry I cannot follow up—that there should be, in its place, a tax on excess dividends. I can only assure him that the Chancellor will look at the idea—perhaps he has already considered it—and will see just what there is in it. He also—I think I am correct in my recollection—stressed the importance of expenditure after six years of war on capital investment. He divided expendi- ture into three categories—Government expenditure, expenditure on personal consumption, and expenditure on capital investment. I can only say to him that all these things are in the mind of the Chancellor and will be matters for consideration and discussion when a proper yearly Budget is opened rather than at a time like the present when the Chancellor can do little more than clear up what has been left over from the Budget of the last Parliament.

The hon. Member for Blackley (Mr. Diamond) made a very witty maiden speech. The chief burden of his remarks was that he wanted to see E.P.T. abolished and also would like to see the pre-1940–41 earned income allowances restored. I hope that I have already dealt with both those points in sufficient detail to satisfy him for the present. It is possible that the Chancellor himself may deal with the matter when he winds up the Debate to-morrow night. There is, of course, a good deal to be said for raising the earned income allowance to the previous level. I hope the Committee will realise that the Chancellor cannot do everything, particularly in an interim Budget of this kind, and that he has made a beginning which I hope will be taken by the Committee as an earnest of his desire to help all sections in this matter. We realise that taxation is exceedingly heavy both for the small man as well as for the man in business. There is everything to be said for lessening taxation at the earliest possible moment. It is essential, though, at the same time, to keep one's feet on the ground and for the Chancellor to realise, as he does, that there are enormous demands yet to be met. He has also and above all to keep in check the inflationary tendency which, as has been said, is always just round the corner.

The hon. Member for Dover (Mr. J. R. Thomas), in another excellent maiden speech, asked what benefit this Budget brings to the lower paid workers, and I think that one has only to ask the question to realise what the answer is. At least 2,000,000 of the lower paid workers are going to go out of the Income Tax-paying class altogether and no one can dispute the benefit of this to them.

Mr. J. R. Thomas

Is it not a fact that although 2,000,000 people are being ex- cused the payment of Income Tax, the monetary value to them is no more than 1s. or 2s. per week?

Mr. Glenvil Hall

I think it all depends on the person. It may very well be that with some of them so far as these allowances are concerned, it would be no more than 1s.a week, but I believe I would be correct in saying that, for the great majority of them, it is something more than that. All of us are familiar with constituents who come to us and tell us that they have 4s., 5s., or 6s. Income Tax stopped out of their pay and who want to know if they cannot do something to avoid this charge. Under the present rate of allowances, they cannot; the money is due from them and they have to pay it. I think it would be untrue to say that it means no more than 1s. a week to most workers, but, even if it does, 1s. a week is worth having in the kind of home which my hon. Friend has in mind. I would also remind him that the help which this Budget gives to the lower-paid worker does not stop there. As the Chancellor said yesterday, he intends, whatever the cost, to peg the cost of living roughly at its present level and, that, in itself, must be of great assistance to the lower-paid worker. For instance, it means 4d. on every 4lb. loaf they buy. It is plain, therefore, that this Budget does much—and I am very glad that it does—for the lower-paid worker.

The hon. and gallant Member for Holderness (Lieut.-Commander Gurney Braithwaite), in his humorous and light-hearted speech, had a good deal to say about the dangers of inflation. I am sure we all realise these dangers, and we are united in our anxiety that they should be avoided. Neither the worker who takes home his pay packet at the end of the week nor the employer who has to find the wages wants to see prices running away with them. The end of that road it is impossible to see, and, if we can avoid it, I can assure the Committee that we are going to avoid it. The hon. and gallant Member also raised a point on the Capital Issues Committee and when the old procedure of dealing in capital issues was to be restarted. I think he must have overlooked the fact—he has probably forgotten it—that there is a White Paper available at the Vote Office which will give him the information he wants on the point he mentions.

The hon. Member for Bury (Mr. W. Fletcher) had a good deal to say about invisible exports, and, as the Committee knows, during the war, the hon. Member was one of our most valuable exports, though certainly not invisible. In China and other places he did most valuable underground work on behalf of the Government and the Allied cause. He began by saying that it was his maiden speech, and I would like to join in offering my congratulations upon it. He said that he probably would not say what he had intended to say, and that reminded me of an hon. Member, whom some of us knew on this side of the House, of whom it was said that he did not know what he was going to say before he got up, had not the faintest notion of what the was saying when he was speaking, and could not remember what he had said when he sat down. I do not think that would apply for a moment to the hon. Member for Bury. He spoke with the utmost assurance, what he said was full of common sense, and we all thoroughly enjoyed his speech.

He was very anxious to see Treasury control relaxed. I think he must be unique in saying that, because most speakers in this House ask for the exact opposite, but he felt that in some way the Treasury stultified all the forward-looking policies which committees—and he mentioned one or two, at which apparently hon. Members were allowed to smoke—formulated. I think he has forgotten that, although all that may have happened in days gone by, we have had a change of Government and we have a new Chancellor of the Exchequer at the Treasury. Although there is Treasury control, it is control with a difference, and I can assure him that any schemes for the betterment of the country or of its people which come to the Treasury and have anything in them, get the support of the Treasury.

The hon. and gallant Member for Chelmsford (Wing-Commander Millington), who is the one lone representative of his party in the House, said that what we really wanted in Budgets of this kind was a little more philosophy, and a little less accountancy. I must admit that I did not quite follow what he meant. I thought yesterday that the Chancellor's speech was a very nice balance between philo- sophy and accountancy and, for my part, I could find no fault with it. The hon. and gallant Member also complained that the Chancellor did not touch on the subject of Death Duties and that he should, in this interim Budget, have done something about that. I can only say to him that we have only just begun as a Government. We have, with any luck, another four years, and that means at least four more Budgets. There will be one in about six months' time, and I will pass on to the Chancellor of the Exchequer—who possibly has not thought of this before—the suggestion that Death Duties should be looked at. It may well be, therefore, that the hon. and gallant Member next April, instead of coming to curse will remain to bless, because he may find that his suggestion has been accepted and is being put into operation.

I would like but I have no time, to deal with my hon. Friend the Member for Chippenham (Mr. Eccles), who always on these occasions makes contributions of value to our Debates. I think he, too, is under a misapprehension. I share with him, as I know the Chancellor of the Exchequer does, all that he had to say on the great need for continuing the Savings Campaigns. It is quite true that there is in the country—it was implicit in what he was saying—a certain amount of slacking off in this direction; people are not so anxious now to save as they were when the war was on. It may well be that both sides of the House will have to pay more attention to this than has been paid in the last five or six months. It is essential that the people should save. It is essential that money should be found to fill the gap which, unfortunately, will continue to exist for a little while longer between expenditure and revenue. That gap can be considerably helped if people will continue to save. Therefore I thought that the views he expressed had a great deal in them, and I can promise him I will pass them on to my right hon. Friend the Chancellor of the Exchequer, who, I am sure, shares with him the desire that we should continue to make the Savings Campaigns the success they were during the war in order that they should play their part in finding money for housing and the other schemes with which the Government has to deal in the months and years ahead.

I am sure the Committee will be interested to know that thanks to the officials of the Inland Revenue Department we shall save, this time, a good deal of work on coding in connection with the new Income Tax changes which will take effect next April. As I indicated earlier, the preparation, printing and distribution of Tax Tables will occupy some three or four months, and one of the difficulties—and it is enormous for employers of labour everywhere—is first to get the information for themselves and then convey to their workpeople what their new code number will be. This matter has caused a good deal of thought in the Treasury, and I am glad to be able to tell the Committee that we think the difficulty has been overcome. Ordinarily, the code numbers for people who do not change their remuneration will remain as they are now. All that will happen is that after April these will be given a new value. Where, now, the single person is entitled to a personal allowance of £80 with, say, an additional £1 for insurance, his code number at the moment is 12. That is the code number applicable to the graduations between £81 and £85. A married person who is in receipt of a married allowance of £140 has at the moment a code number of 24. After April next the code numbers of these people will be as they are now, but those numbers will be given the new value which will be placed upon them as a result of the changes in the personal allowance and the exemption limit which come into operation as the result of this Budget. I thought the Committee would like to know that, because it is likely that many Members will get letters complaining that their code numbers have not changed as the result of the changes in taxation, and asking why. The short answer is that all matters relevant to the changes will be taken into account in the new Table. The only thing that will be changed is the value of the code number, which will correspond, completely and accurately, to the tax changes which, as my right hon. Friend indicated yesterday, would come into operation as from 6th April, 1946.


"That the Chairman do report Progress, and ask leave to sit again."—[Mr. Mathers.]

Committee report Progress; to sit again To-morrow.