HC Deb 25 October 1945 vol 414 cc2213-307

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."—[Mr. Dalton.]

3.25 p.m.

Mr. Boothby (Aberdeen and Kincardine, Eastern)

It is always a difficult matter to begin a speech when the House is on the move. It is an anxious moment, because you never know how many hon. Members are going to pause at the doorway and come back, or how many more will walk out. In days long past now, when I was regarded as a promising young man, I nursed a secret ambition to become one day Chancellor of the Exchequer. How good I should have been no one will now ever know. But one thing I am quite certain about. My Budgets would have been original and surprising; and nobody on the Press would ever have been able to anticipate what was going to be in them.

I have been a little astonished, in the course of this Debate, to find that almost every speaker seems to consider it necessary to preface his observations with the remark that the Budget, as a whole, is admirable; an excellent piece of work. Nobody could complain of the compliments that have been paid to the Chancellor for the manner in which he presented it. All of us who have been in this House for some considerable time with him, knew that it would be of the first order; and we were not surprised. However, I do not think it is essential that every time an hon. Member of the Opposition speaks on the Budget he should think it necessary to say that, as a Budget, it is first rate, before making the one or two minor criticisms he has to make. I always assume that it is the duty of His Majesty's Opposition to criticise the proposals of His Majesty's Government. My mind goes back to the 1929–31 Parliament, when we, on this side of the House, had no hesitation whatsoever in describing the late Lord Snowden's Budgets—as what in fact they were—execrable. Nobody would suggest for a moment that the Budget of my right hon. Friend is execrable; but I do not think it is either original or surprising. On the contrary, practically every proposal that he put forward was not only anticipated but discussed at considerable length in almost every paper in the land.

The Chancellor of the Exchequer (Mr. Dalton)

Not the Surtax proposal?

Mr. Boothby

That is a comparatively minor matter, which does not affect me. The restoration of the allowances, the reduction in the standard rate of Income Tax, the change in the motor vehicle duty, the lowering of E.P.T., even the removal of the Purchase Tax from stoves, grates, wash boilers and refrigerators, were discussed in the Press. Although, personally, I welcome every one of these proposals, yet, with the best will in the world, it is impossible to apply any adjective to this particular Budget, other than pedestrian. I know it is only a preliminary survey of the ground; it is not the real Budget of the year. But the need of increased productivity in this country is not only great; it is also urgent. In the circumstances, I must confess I hoped for somewhat better things.

The Chancellor has applied to this Budget much ingenuity; but not, I submit, a very great deal of imagination. He made only one point which gave me, personally, great encouragement, and that was when he said that there is no special sanctity in the period in which the earth revolves round the sun. If the doctrine that the Budget should be balanced, not necessarily each year, but over a period of years, has at long last been accepted by the Treasury, then that does provide at least one gleam of hope. In my experience the Treasury is normally anything from 20 to 25 years behind contemporary economic thought; but they manage to get there in the end. They have come round on the subject of public expenditure; and now, it seems to me, they have come round on the subject of balancing the Budget. That, at any rate, is welcomed by all of us who like to think we take a progressive economic view.

It is impossible, at this time, and that makes this discussion a difficult one, to make any general assessment of the financial and economic position of this country until we can see the picture as a whole; and that picture we have not yet got. The Chancellor did not pretend that he was able to give us it in his Budget statement; and he was, of course, right. Until the Washington negotiations have ended one way or the other, we cannot be in possession of all the facts about our present situation and future prospects. About those negotiations I would say only one thing: If the price demanded by the Americans for a loan to this country now is the economic dismemberment of the Empire, and the abolition of the sterling area, then I think that price is quite definitely too high and that we ought not to pay it. Having returned from a second visit this year to the United States, I would like to say this one other thing to the Committee. I think that the uncertainties of the present situation are too great to make the negotiation of any long-term agreements possible; and I doubt, indeed, if they are desirable.

Of this much I am certain. The present mood of public opinion in the United States, and in the Congress, is not propitious for the negotiation of a long-term agreement with this country; and it would be much, better to suspend negotiations and resume them at a later and more favourable time than to sign an agreement which was definitely unfavourable to this country, and which might hang like a millstone round our necks in the years to come. It may be necessary, I suggest, for all of us to tighten our belts in the next 12 or even 18 months, to tighten them quite a lot; but that we can get through in any circumstances I have no doubt; and surely it would be worth it if, in the long run we can get, as I believe, a much better agreement, not only with the United States but with other countries as well. We made a great mistake after the last war in attempting to negotiate in too much of a hurry too many long-term agreements which did not turn out very well in the end. The American Debt Settlement is only one example. The world is now in a condition of complete and absolute chaos. Nobody can judge what the conditions of trade are going to be two or three years hence. I beg the Government to be very cautious before they commit this country to any long-term agreement—I am not talking about a short-term or interim agreement—which might seriously jeopardise our interests in the years ahead.

There were one or two rather startling omissions from the speech of the right hon. Gentleman. He made no reference, for example, to what I think is probably the most formidable problem confronting us at the moment, and that is the problem of the sterling balances in London. I do not complain of that, but I think he might have made some reference to this subject, because naturally it is one of much concern to all of us. He also said nothing about the activities of the various agencies set up by the late Government in co-operation with the Bank of England, for stimulating small private industries, and agriculture; and if he could find time to say a word or two this evening about their activities that would be useful. Further, he gave no indication of the intentions of the Government with regard to the proposed National Investment Board, which is, I imagine, designated to succeed the present Capital Issues Committee. Many of us on this side of the Committee have thought that the Capital Issues Committee exercised, even before the war, an unnecessarily restrictive influence upon business; and we are very anxious that this National Investment Board shall exercise, if anything, an expansionist influence. Lastly, he made no specific reference to the policy of the Government for rebuilding our export trade. He said, as everybody says, that it is frightfully important to do so—we all know that—but some of us want to know very badly what practical steps the Government propose to take in this direction. I venture to suggest that the reconstruction and extension of the sterling area, the economical revival of Western Europe by means of reciprocal payments and trade agreements, and intensive Colonial development, are by far the most hopeful present lines of advance for this country. Whatever may happen as regards negotiations abroad no harm can come to us if we press on with these things.

But, picture or no picture, one fact stares us in the face. Whatever happens in any negotiations, the fate of this country depends and must depend largely on the extent to which we are able to achieve an all-over increase of production during the next few critical months and years. To my mind the single question any Chancellor of the Exchequer in this country should ask himself ceaselessly day and night, and particularly in framing a Budget is, Will this increase the productivity of industry in this country? And judged by this standard I submit, with all humility, that the present Budget does not come up to reasonable expectations. If the Chancellor intends to do his utmost to prevent inordinate rises in costs of production, including wages, then there is no objection to his pegging the cost of living for the time being; but the two things do hang together, as I am sure he will admit. While he spoke forcibly about pegging the cost of living, he made no reference at all, I think, to the essential corollary—unless he is to get into a hopeless mess—which is to do everything to prevent inordinate—and I use that word deliberately—rises in the costs of production. If the Government are pledged to a fixed point as regards the cost of living, and there are terrific and disproportionate rises in the costs, including wages, of industry, there are no limits to the financial morass in which the right hon. Gentleman may find himself in a year or two's time.

A cheap money policy is, of course, essential—we are all agreed about that—but here I would suggest to my right hon. Friend that he might be well advised to make his intentions regarding medium and long-term rates of interest a little plainer than he did in his Budget statement. His announcement of a vague intention, somehow and some time, to reduce these interest rates in the future may stimulate the forthcoming Savings Campaign. But there is another side to this question. It may also induce intending borrowers, including local authorities, to hold off for the time being in the hope of better things, and, with the housing situation in the condition it is, I am sure that is the last thing that His Majesty's Government want. Therefore, while I am all for cheap money and low interest rates, I do not think the Chancellor can indefinitely hold a sword, so far as long- term interest rates are concerned, over the heads of our people, thus inducing them to hold back in the hopes of being able later to borrow cheaper. He will have to define his intentions in this respect a little more clearly.,

So far as existing taxes are concerned, I have long taken the view that in this country a disproportionate burden is borne by those who are unfortunate enough to smoke and to drink; and I am sorry that no relief of any kind, and not even a gleam of hope, was held out to these unfortunates by my right hon. Friend. As for the tax on beer, there might be some justification for it if, as a result, we got beer to drink. But the tax on whisky is savage and unconscionable, and a gross injury to the people of Scotland. I propose to move a reduction of the whisky duty during the Committee stage of the Finance Bill, and I rely confidently on the support of the majority of Members of all parties to remedy this great injustice.

I personally make no complaint about the Surtax increase. It does not bear heavily upon me. It amounts, of course, to a capital levy upon the very rich. As such I think it does have some justification at the present time; and it certainly has a great popular appeal. That was clear when the Chancellor came to make that statement, and I have no doubt that good use will be made of it on platforms in the country. But there are very few really rich people left. We are all agreed on that point. Not only is the field well scrubbed, as the Leader of the Opposition said, but it is also very small. The yield of £7,000,000 from this impost, by comparison with the total size of the Budget, is negiligible. In fact, the egalitarian society, which has for so long been the goal of hon. Members opposite has been very largely achieved. My only hope is that it will not also lead, to too great an extent, to a standardised society. I like to think that there will be some variety of choice, some method by which each and all of us may express our individuality and personality, even though it be only through the medium of wash boilers and refrigerators. I am afraid we may now be in real danger in this country—and it has already happened to some extent in the United States of America—of going too fast towards a completely standardised society, which allows no room for any kind of individuality or personal expression of any kind.

The main complaint I make is that the aggregate burden imposed upon industry as a whole during this vital period of reconversion is still too high. I think the principal reason for this is that the Government appear to contemplate a rate of current expenditure for some years to come far in excess of what is either necessary or desirable. The Chancellor referred to increased expenditure on social services, notably on family allowances, old age pensions, housing and education; and also in the field of Colonial development. We are all committed to those things. But he made no balancing reference, and that disturbed many of us on this side, to any cuts in expenditure on other services, and most notably the Defence Services. I wish I could be quite happy about the present rate of expenditure on the Defence Services. I wish I could be sure that the Admiralty were doing the right thing about battleships. I wish I could be sure that the War Office were doing the right thing about cutting down the production of tanks, which I am quite sure the hon. Member for Ipswich (Mr. Stokes) would still say were obsolete. Whether obsolete or not, I cannot feel that they are urgently required at the present time. Practically every Government Department has contracted the habit during the last five years of spending almost ad lib. It will require a violent effort to put a stop to this; and there is, at present, no sign of such an effort being made. I venture to assert categorically that no economic system on earth can stand up indefinitely to an Income Tax of 9s. in the £,least of all one in which industry requires to be reconverted, reconstructed and modernised from top to bottom. That opinion is common among all the parties in the House. Never was there a moment in the history of this country when industry so much required what Alexander Hamilton described as, "The incitement and patronage of Government." I emphasise the word "incitement."

The test of all State intervention and action must be whether it stimulates activity or curbs it; whether it increases output per man hour, and therefore efficiency, or not. I want to say with all sincerity that I do not think this Budget meets that test. We all appreciate the necessity of avoiding inflation; the Chancellor does not have to emphasise that. The best way to do it is to produce more goods, and the only way to produce more goods is to create the conditions under which they can be produced. We appreciate, too, the necessity for ploughing profits back into industry; and the best way of doing that might be to have a differential rate of tax, designed to secure not only the modernisation but the expansion of industrial plant. This is a real point, and I beg the right hon. Gentleman to give it serious consideration. It is much better than a mere limitation of dividends. Under the present remissions which were introduced by the late Chancellor, industries have considerable facilities for replacing existing obsolete plant; but there is practically no provision made for expansion and extension, for erecting new factories and getting into new markets. I ask the right hon. Gentleman seriously to consider the possibility of having a differential rate of income-tax that will apply on the one hand to dividends, and on the other to profits used for the expansion of existing plant. So far as modernisation of plant is concerned the remission of £30,000,000 Excess Profits Tax is about as much good as spitting in the sea. I only hope that the right hon. Gentleman will not make it an excuse to impose additional and vexatious controls upon industry.

I think that the Chancellor, even this Chancellor, who was brought up with the right ideas about economics, and has for long been far ahead of the Department over which he now presides, still underestimates the increased revenue he would derive from a 100 per cent. industrial activity, coupled with full employment. Our 3,000,000 unemployed in 1932 alone cost us in production of real wealth nearly £1,000,000,000. If we add up the amount lost in this way during all the years between the two world wars, the total is staggering. The Chancellor will find that, with full employment, the national income will rise to a point at which a programme of indefinite expansion can be financed without great difficulty. He must keep his eye, as any Chancellor must, firmly fixed on the national income, which in the final analysis is the barometer of our economic strength and well-being.

I come to my last point. I am astonished that the right hon. Gentleman has not differentiated more sharply between earned and unearned income, particularly in the higher ranges, or restored the earned income allowance. There is a letter, which no doubt the right hon. Gentleman has seen, about earned income allowances in "The Times" this morning. And the White Paper shows that, so far as the higher ranges are concerned, there is practically no difference between the tax burden imposed upon earned and unearned incomes. I never heard of any Socialist principle which lays it down that the rentier should be rewarded as well as, or better than, the entrepreneur; but it is a principle to which the right hon. Gentleman seems to have lent himself in this Budget. It is astonishing to think that the right hon. Gentleman imposes practically the same rate of taxation upon those who have inherited their money from people who, in happier and pre-Socialist times, were able to accumulate it, as upon those who by the sweat of their brows are now doing their best to put aside a little cash.

There is at present no incentive to professional men to earn the rewards to which exceptional skill or ability entitles them; or to save. Yet upon the skill and ability of such men our economic well-being must in the long run largely depend. Take, for example, the case of a surgeon who necessarily enjoys only a limited period in which he can make full use of the fruits of his capacity and experience. There are a lot of such men who, during the years in which they can make use of their exceptional ability and skill, cannot make enough money to save sufficient to keep them and their families in comparative comfort in their old age. It is impossible to do that under our present taxation. I defy anyone to challenge that statement. It is very different in Russia; and it is all wrong. It puts a premium on speculation, which is now the only way of making money to save.

To sum up, I do not think it is adequately realised by the right hon. Gentleman or by the Government or by the public how poor, as a country, we are at the moment. We still go on thinking in terms of being a rich country, with a vast store of wealth somewhere, on which we can draw. On the contrary, our per capita debt is to-day greater than that of any other country. Our industries have been literally turned upside-down during the war. Our plant is largely obsolete. A terrific effort is now required if we are to get through. I have just come back from the United States and Canada. The rate of industrial conversion, of production, and of expansion in these two countries has to be seen to be believed. Budgets have recently been introduced in both countries which pro- vide for substantial remissions of direct taxation, particularly of taxation upon industry. The United States in particular is a country with which we shall inevitably be in competition in the near future. I can detect no comparable drive or sense of urgency in this country.

Perhaps I might give, as a symbolical example, a personal experience. I went over and returned in the "Queen Mary." On arrival in New York, we were cleared in the most efficient manner within an hour-and-half of docking, and we found ourselves engulfed in that whirling vortex in a very short space of time. I was completely exhausted by the pace in two hours. On our return to Southampton, we docked at 11.30 in the morning, and by 6 o'clock at night most of the passengers were still hanging about on the pier. Those who had not gone to sleep had gone away, and that included the Customs officials.

Mr. John Lewis (Bolton)

The hon. Gentleman did not allow himself to remain anonymous?

Mr. Boothby

No, I created an uproar at the time, but it did not do any good. It was not until 6.30 that we were permitted to begin that long saunter on the Southern line to Waterloo station, which we finally reached in pitch dark and where we could find no porters and no taxis. We understand that, of course, but I cannot help taking this as somewhat symbolic of the different attitude and attack upon life which prevails on each side of the Atlantic. The contrast is striking when one leaves what one can only describe as an inferno of activity, and comes to something which, I am afraid, is very sleepy and very tired. We must snap out of that condition if we are to get ahead. For us there is only one way out—increased production of real wealth. Maximum output must be the supreme objective. To achieve this no means should be neglected. By comparison, nothing else matters.

What instruments are the Government proposing to use to achieve this maximum output? We do not know yet with any certainty. All we know is that the coalmining industry is to be nationalised; that was decided at the General Election; but it would seem that, in any event, a large part of the field, particularly in the export trades, is to be left to private enterprise. If anything is certain in an uncertain world, it is that private enterprise cannot function under conditions of uncertainty and lack of confidence. It is the business and duty of the Government to create the conditions under which private enterprise can function, if they are going to rely, as the Chancellor hinted they would, upon private enterprise to sustain our exports. If the Government will tell the country candidly what has to be done, the magnitude of the task, and how they propose to get it done; if they will remove oppressive tax burdens and hampering controls upon industry; and if they will provide the necessary man-power as quickly as possible, then once again this country can and will rise to the occasion. But if they keep the whole industrial and business world in a continuing state of uncertainty, the outlook may be very dark for us for some years to come. My hon. Friend the Member for Bury (Mr. W. Fletcher), in his brilliant maiden speech yesterday, said that this Budget was the amber light. I think that that is true, and I beg the right hon. Gentleman to make sure, when he brings his next proposals before us, that the light does not turn to red but turns to green.

3.56 p.m.

Mr. Alfred Edwards (Middlesbrough, East)

I agree with the hon. Member for East Aberdeen (Mr. Boothby) on perhaps the most important point he made, that is, about the importance of encouraging those people who want to trade with us. Like him, I have travelled a good deal between America and this country, and I can assure the Committee that the difference between arriving in America and arriving in this country was not exaggerated by the hon. Gentleman. I have tried to introduce to our trade Departments people who wanted to trade with us. Whatever port they arrive at in this country, they are faced with conditions which are as bad as if it were written up, "Abandon hope, all ye who enter here." It is rather like saying to people, "We do not want to trade with you." My right hon. Friend who is tackling these problems, and who has just outlined his Budget, had a pretty bad inheritance. These conditions have grown up over a good many years. I was impressed by what was said by the hon. Member for East Aberdeen about 1932, when we had 3,000,000 people unemployed at a cost, he said, of £1,000,000,000 a year. That followed upon the economic policy of hon. Gentlemen opposite. It was described by his leader as the economic blizzard, and he was honest enough to say that it did not originate in this country. It was a world blizzard, but most hon. Gentlemen opposite attributed it to the failure of the Labour Government. The National Government which has only just ended this year was responsible for all those economies which resulted in wasting £1,000,000,000 of our assets—on the authority of the hon. Member for East Aberdeen—every year. It was a dreadful waste, and nobody has been able to estimate its final evil results.

I want to concentrate on one subject because I find that if one touches on two or three subjects in a speech, the Minister who replies dodges the most important and deals with the easy ones. This Budget is the opposite of that which was forecast by the Leader of the Opposition, when he said that with the first Budget produced by a Socialist Government everybody's savings would shrivel up. Has the Stock Exchange this morning shrivelled up? Of course it has not. The hon. Gentleman opposite at least paid a rather flattering tribute to the Treasury. The Treasury is, undoubtedly, a long way behind the times, but the hon. Gentleman cut down the lag to 25 years. They were more than that behind the times in 1931, when they advised the then Government to adopt those terrible and cruel economies which resulted in the waste of £1,000,000,000 a year.

Mr. Boothby

I said they were always 25 years behind the times.

Mr. Edwards

As I said, I think the hon. Gentleman is flattering them; I think they are 50 years behind. When we were losing all our shipping, when the position was so tragic, we had a scheme before the Treasury to save 50 per cent. of all our tankers from being used—and what a grand thing that would have been—and they deliberately held up inquiry into it for three months, asking questions they had no right to ask. If the activities of the Treasury during this war were investigated there would be a terrible tale to tell of the wastage of the time of Government Departments, especially during the days that nearly lost us the war.

To come to the point on which I wish to concentrate, namely the Excess Profits Tax, hon. Members will remember that we adopted the Excess Profits Tax so as to take the profit out of war. We repealed an Act providing for the limitation of dividends and adopted the Excess Profits Tax of 100 per cent., very largely on, the pressure of my party. I was all for it, but when it had run a year I realised that we had made a tragic mistake. Its inequality is worse than that of any other kind of tax we have ever had, as the right hon. Gentleman admitted yesterday. What astonished me was his reason for not abolishing the tax now. He did, however, say that he would study the matter further, and I propose to suggest to him an alternative. He stated that the reason why he did not abolish it now was that a substitute tax would fall very heavily on businesses not now subject to E.P.T. Of course it would, but consider who these people are. Many of them had a high standard in 1936 or 1937 because they were trading with our enemies. This tax was intended to catch the big armament manufacturers who made big profits out of the last war; it was never intended to attack the small manufacturer. But it caught them in the neck, although it was not those people that we were after. We were after the big people, the very people whom the Chancellor, if he does not change the statement he has made, is again protecting. It cannot be advisable that that should continue.

If you analyse the situation, you will find that these people have a great deal to gain. The big firms have been guaranteed a certain profit, the average for 1935–6–7, and on all above that, they have to pay E.P.T. If they go slow now, they will get very considerable refunds even of the small proportion they have paid. But consider the small man who was just beginning in that period in a legitimate business that had nothing to do with the war, and who, if he was unfortunate, had no standard. Because of that he has worked throughout the war for no profit, even in some cases making a loss. Hon. Members know perfectly well that we could produce dozens of balance sheet's showing a loss over those years. Whatever justification there was for that during the war, there is absolutely none now. Yet the Chancellor is saying that he will not abolish the tax now because some of the people who have been fortunate enough to retain all their profits during these years may have to make a contribution if he relieves all the people who have been paying E.P.T. and getting no profit at all for many years. This seems to me to be very unreasonable of him. I should have thought he would have said to the big firms, "You people have enjoyed prosperity all through these years, but the small men who have earned nothing now have to build up their businesses and deserve relief; you have had a jolly good time, and now these smaller men must have their turn and must retain what they can make on their merits in fair competition with the others." The Chancellor in fact said to them that they not only have had bad luck but must continue to subsidise the big manufacturers.

The Chancellor states that the reduction to 60 per cent. will cost £30,000,000 a year. Do I understand by that, that £120,000,000 a year will enable him to abolish the tax altogether? If so, surely that is not a very big sum to add to the cost of the war. In refusing to do it he is saying to the small business men that they have to find another £120,000,000 to give to the big people so that they will not have to pay any extra tax. It is rather like a lottery. Suppose that in 1935–6–7 there had been a lottery; the people who were lucky then have continued to be lucky, but the poor losers who have been paying the money into the lottery are told that they must continue paying the fortunate ones for years to come. It is exactly like a lottery; the standard period chosen was 1935–6–7, and we had to take some period in endeavouring to find a fair standard, but it is entirely inequitable. The Chancellor himself well said in his speech that the further you get away from that period, the more unequal and unfair it becomes. I should like him to look at it again. Would he receive a deputation from these people who are subsidising the big manufacturers? If so, I could bring him some very hard cases.

I have here a balance sheet of one company which last year had more to pay in Excess Profits Tax than the actual ascertained profits, for the simple reason that many items were not allowed which were absolutely essential—wardamage payments, for instance. Such payments had to be met but were disallowed for purposes of tax. Such business men are expected to find the money from outside sources. Most of them have not been able to find it, but they get very nasty letters from the Treasury, and it makes it pretty hard to continue. Therefore, I do think the Chancellor would do well to take another look at this matter, and see whether he is really being fair to the small people. The big people can afford it. For the little people it is a matter of life or death.

The alternative to E.P.T. is the limitation of dividends. It has always been said by hon. Members on this side of the Committee that it is the distribution of dividends which is the greatest evil of the capitalist system. The hon. Gentleman, who has just spoken referred to the encouragement given to speculators, but would have been more logical had he concluded that the way to prevent this search for capital profit was to tax it and thereby eliminate the temptation. If the Chancellor would re-examine the suggested limitation of dividends I think he would see that it would be the fairest of all. It is not the making of profits, but the distribution of those profits to people who have not earned them, that is the evil of the capitalist system. If that is to be continued for some time, as perhaps it will, I think we ought to make it fairer. If a man knows that, when he has made a big profit, he will have to pay Excess Profits Tax on what is left after providing for reserves, depreciation, and a reasonable dividend, it will not make him inefficient, it will make him efficient. If he knows that he cannot have more than a certain profit he will reduce his prices and the consumer will get the benefit. The limitation of dividends therefore eliminates the tendency to wasteful and uneconomic methods. But I beg the Chancellor to realise that what he is doing in regard to the present Excess Profits Tax amounts to the death sentence on a good many businesses.

Mr. Dalton

Does the hon. Member mean the reduction of the tax?

Mr. Edwards

No, I mean not abolishing it altogether. I am not saying that the reduction of 20 per cent. is not an advantage. Of course it is. But it will lead to unfair competition on the part of the big people who have paid comparatively less, and will be able to cut the other man's prices every time. In short, the small man is providing the money for the big man to compete with him and put him out of business. Why should not everybody pay on the same basis and have the same chance? Let me quote an instance. I know two firms, both of which have exactly the same capital and the same turnover. One is as efficient as the other and they are as like as two peas. Each made £12,000 profit—I am quoting the figures for three years ago—but one paid £10,000 in Excess Profits Tax and the other £2,000. I do beg the Chancellor to give further consideration to this matter. I could bring to the House a body of people who would confirm exactly what I have said to-day. I wish he would receive them and hear from them, at first hand, the position they are in; if he did, I feel sure that he would see the reason of their case and take some action.

4.15 p.m.

Sir Peter Bennett (Birmingham, Edgbaston)

I will follow the example of the hon. Member for East Middlesbrough (Mr. A. Edwards) and deal with one or two points only and not roam over the whole field of the Budget. As we were reminded by the Financial Secretary to the Treasury, this is an interim Budget, and we have not heard the last word of the Chancellor in regard to the assistance to be given to industry to get on to its feet. We have been given an instalment. I am very sympathetic to the views that have been put forward by the hon. Member for East Middlesbrough. He has been a voice in the wilderness on his own side, speaking against the 100 per cent. Excess Profits Tax for the last five years, so that he was quite consistent in his remarks this afternoon. I come from the city of a thousand trades, a city which is full of small undertakings, and I should be delighted if the Chancellor could do anything to assist the smaller manufacturers. I cannot quite see the argument of the hon. Member for East Middlesbrough that the small man is being mulcted for the benefit of the large manufacturer, because the amount involved in the Excess Profits Tax concession that has been given by the Chancellor is £30,000,000. That is only a small figure compared with the amount that British industry needs to spend on itself at the present time.

Mr. A. Edwards

If the £30,000,000 represents a 20 per cent. reduction, there is an amount of £120,000,000 which the other people are retaining. The small man is having to continue to pay the 60 per cent. to people who do not pay any Excess Profits Tax.

Sir P. Bennett

Let me say that I am in agreement with the argument that the Excess Profits Tax should be wholly abolished at the earliest possible moment. I am, however, worried about a class of people in my own neighbourhood who have been very badly hit; I am referring to those people whose businesses were closed down in the national interest. Not only have they no Excess Profits Tax and drawbacks, but they have not the wherewithal to rebuild their businesses. I want to see Excess Profits Tax abolished as soon as possible. The Chancellor has given us an indication that he will get rid of it. He has reduced it. We live in hopes that by next April he will be able to make a further reduction at any rate, even if he cannot get rid of it entirely. The help he has given to the whole of industry amounts to only £30,000,000. This will be very accept able, but industry needs more.

Moreover, the right hon. Gentleman has given us a promise that we can now begin to get our fingers on to the refunds, which represent a considerable amount. There is an amount of £450,000,000, which is subject to Income Tax, so that we can put the figure at £250,000,000 by the time it is turned into ready money. That amount is urgently needed. Any restrictions which the Chancellor can put down in black and white to prevent the money from being used for purposes of dividend distribution will be very welcome, but I hope the right hon. Gentleman will not tie up the money so tightly that industry will not be able to use it at all. He spoke about using the money for rehabilitation. That is quite all right. A year ago the former Chancellor agreed that if industry started to use the money for replacing plant that would be allowed when the time came, but I do not know whether the right hon. Gentleman realises that industry will be short not only of up-to-date plant but of working capital. I do not want the money to be tied up so that firms will not be able to use it for the purpose of stocking up. Recently, I was going into the question of what would happen when we had realised our war stocks, turned them into peace time stocks and were running on a more or less pre-war level, and my people pointed out to me that we would have to estimate something like 60 per cent. more on the cost of replacing stocks and bringing them to their 1939 level, and something like 50 per cent. to 60 per cent. more to put the working capital on to a level for doing the same business as in 1938. I hope the Chancellor will not make such restrictions in regard to these credits that people will not have the wherewithal to finance their businesses.

Mr. John Lewis

Does the hon. Gentleman suggest that the Chancellor might be able to tie up this money?

Sir P. Bennett

The Chancellor indicated that he intended to make rules and regulations to that end. I hope he will be able to reassure us that he understands the position, so that industry need not look upon him as a bogy man now any more than it did when he was at the Board of Trade. The right hon. Gentleman also referred to deficiency payments. I quite agree that he is taking a legitimate point of view when he says that after 1946 he does not intend the position to remain as it now is. At the end of the last war, when people made trading losses they said, "We can make it up out of the Excess Profits Duty." One person said to me, "After all, King George can pay." I do not think we can quarrel with the Chancellor's point of view that people should not be allowed to make a trading loss and make it up out of the Excess Profits Tax; but we had a definite assurance from the former Chancellor that terminal losses would be dealt with when the time came. We shall not be able to clear them off by 1946. I take it that the promise that was given still stands, namely, that if terminal losses could not be estimated by a certain date, they would be considered when they could be estimated. At the present time, I know of companies which are at work on research and development for the Government, urgent work that will be valuable for the future. They will be unable to clear that off and get the whole of the expenses of reinstatement through by the end of next year, if they carry out the programme which has been given them. It is that sort of thing that was referred to when the promise was made that terminal losses would be allowed at the date when they could be definitely settled. While I quite agree with the Chancellor with regard to deficiency payments on trading account, I hope he will make it clear that the promise made in the other direction will be carried out.

I was very glad to hear from the Chancellor that he has settled the appointed day as 6th April. This will enable us to take advantage of the concessions that were made in the last Budget in regard to depreciation, wear and tear, new buildings, and industrial research. There is another point to which I want to refer. In 1940, when the Excess Profits Tax was increased from 60 per cent. to 100 per cent., the method by which assessments were made was that 60 per cent. was applied to a certain period and the balance was taken at 100 per cent. I take it that when the Chancellor reverses the process he will put the same scheme into reverse, and that a certain amount will be at 100 per cent. and the balance at 60 per cent.

I come now to a matter on which the right hon. Gentleman asked for information, that is, motor taxation. The right hon. Gentleman, after dealing with the matter very thoroughly, has come to the same conclusion as that arrived at by the former Chancellor. I rather expected that. I have heard these arguments for a great many years, and I cannot quarrel with the right hon. Gentleman's decision. His decision, while it will irritate some motorists, will give satisfaction to a very large number of people—those who have commercial vehicles, and vehicles engaged in the public service, commercial travellers, and people with big mileages, who depend upon the use of their vehicles. I put such people before the people who use cars for other purposes—I will not say for pleasure, but for general utility. For instance, I am referring to that class which includes the large number of vehicles in Palace Yard at the moment, vehicles which I am sure are not there for pleasure purposes. I know, that the makers with whom I am in touch will be willing to accept what has been decided.

The point on which the right hon. Gentleman asked for information was with regard to the steps, and I urge him to make the steps as short as possible. The purpose of changing the tax is to free the designers from the old arbitrary method of having a very narrow bore and a long stroke. The change will enable designers to work on cubic capacity. As the change has been made for the purpose of freeing the designers, it seems to me that it would be taking back with one hand what has been given with the other if the right hon. Gentleman made the formula a means of trying to force people to do something else. I say that, having given the motor designers freedom, let them have the maximum freedom and design as they think fit, which can be done by making the steps as reasonably short as possible. The point I want to make is that none of these schemes will produce larger cars, because in this country we have decided as a matter of national policy to make the motor vehicle carry heavy taxation. It is not done in other countries, but it is done in this country. The Chancellor has decided that the present time is not the time to reduce taxation, but as he has made that decision I ask him not to blame the people if they buy small cars because they are trying to motor as economically as possible. He cannot have it both ways. If he is going to make motoring expensive, the majority of people will buy small cars, and if people want small cars, he must not blame the manufacturers and call them anti-social if they make what people want. I have tried this out with my own people. I have said, "There is a Chevrolet car, which in money value costs the same amount in America as a 10 horse-power in this country. There are the two, which will you have?" They have looked at them and by a large majority have said, "We will have the small car. We can afford to run that and could not afford to run the big one."

That is the position, and as long as you have the present taxation, you will get that position. It is the Government's decision. They made up their mind to continue to use the motor vehicle for the purposes of taxation. You have to put up with that fact and, therefore, you have small cars. People say, "Why not make a special model for export?" We make only fr6m 400,000 to 500,000 cars a year and the Americans make 4,000,000 cars. We must base our export car upon the car that we make for the home market. It is hard enough to compete on that basis with people who, make 4,000,000 cars. We must have a car to export based upon our home production and, therefore, for that reason it is rather worrying to the industry to know that the Purchase Tax remains. We must have a home industry, and that is another matter which the Chancellor will look at again in due course. We appreciate his reasons now. I hope that when the Purchase Tax comes to be revised in a general sense, he will bear in mind that the motor industry is expected to make a large contribution to employment. It can do so but only if there is a big output, and it can only have a big output if there is a big demand from the public on this side so that it can work upwards from that to an export market.

Before the war father paid the rent; that is to say, we could only afford to export from 15 per cent. to 20 per cent. of output because overhead charges were largely carried on the home market. Therefore, every car that went abroad was affected by the volume put on the road in this country. We must get home production in quantity if we are to export the increased quantities needed. The only alternative would be to shift the charges from the home market on to the export market. That puts prices up and you start to defeat your own ends.

I would like to congratulate the Chancellor on the start he has made. We are looking for more. He has worked with industry in the Board of Trade and knows what they are and I believe that he knows that they will work with him. There is one thing I would like to say to him. We shall only achieve prosperity in this country by working together and it means working hard. At the present time—and I emphasise what was said by my hon. Friend the Member for East Aberdeen (Mr. Boothby)—wehave a tired, weary and restless people. I hope that he will join his colleagues in reminding the nation that we can only have these good things if we get our pre-war tempo again, and at the present time we are not working at the pace we worked before the war. We are tired. Let us hope that the rest which the people are having now that the black-out is over will help us to get back to pre-war levels. I would warn the Chancellor that we have to work hard, and that goes for all of us right down from the top to the bottom and means that we have to get the pre-war tempo back again if we are to achieve the desired results.

4.34 p.m.

Mr. Harold Davies (Leek)

I am grateful to you, Mr. Beaumont, for this opportunity to address the Committee for the first time and I hope that, after waiting two days, I shall receive the indulgence from the Members of this House which is customary. I will keep my eye on the clock and I hope to finish the few general points I wish to make within 12 minutes. First, one little point of detail that I would like to bring out is that the building fraternity in my own Division of Leek are very grateful to the Chancellor of the Exchequer for the reduction in the Purchase Tax. As has already been published in the "Manchester Guardian" this morning, this reduction means that we now have a drop from £90 per house to £74, which is a considerable amount to the person who will have to rent such a house. Secondly, I would like to refer to a small item which is not of fundamental importance to the economics of the Budget, but is of importance to the sporting fraternity throughout Britain. Many of us have already been approached on this subject by Football Association representatives and in my own Division football clubs have approached me. We are grateful for the statement of the Financial Secretary to the Treasury that some review may be made of the position with regard to the taxation of football associations. Simple as it may seem, it is of some importance as far as bringing business into cities and towns at the week-ends is concerned.

I hope it will not be considered presumptuous on the part of a speaker making his maiden speech in this House but may I crave the indulgence of this Committee in looking at some of the implications of this policy. As a money Budget—and I hope the Chancellor will not consider this presumption—the right hon. Gentleman's scheme, is a brilliant effort. But I would like to ask this question, What is the purpose of industry? Does it exist to find work or to keep people out of mischief; to give dividends to investors or to meet the needs of the consumer and society? I believe that the fundamental proposition before us to-day is how can we increase the real income of society? Half of our National income previous to this was devoted to the purposes of war, and, as was pointed out by an hon. Member yesterday, we have the fantastic situation of the standards of life and nutrition of the lower classes and of the poorer people increasing in war-time, and, despite rationing. Those very people live at a standard of life such as they have never reached before, and yet we waste practically half the National income. I come to the philosophical argument. The right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) made a brilliant and scientific argument about the fact that in science, you never get activity and motion unless you get inequalities. I do not believe that logically one could use these analogies. If I dealt with the Budget of the country in terms of money, I could use an analogy which would make the economic system of England look absolutely ridiculous. May I illustrate this. In 1938 a child was born and before it had drawn its first little breath it was £188 in debt. In 1944 a child was born £400 in debt, and we seem to be proceeding in indebtedness per head in geometrical progression. In another generation we shall apparently reach a per capita debt on the new-born of £1,600, and in another generation it will be £52,000, and ultimately, if we went on, we should get a magnificent example of a millionaire born backwards.

I want to put this question to the right hon. Gentleman the Member for the Scottish Universities. One cannot use analogies like this when discussing this economic system of ours. Our difficulty seems to be that unless we can increase the industrial efficiency of this country we shall have a grave economic situation facing us. Many of us on this side of the Committee who have tried very humbly to understand these matters during past years have come to realise that it is time we had a double system of budgeting—a money Budget, and a budget system which shows the real income of the country. Many of the speeches in this Chamber have been mournful and depressing. A great nation like ours, which has come through such great trials, with its great inheritance of technical and engineering skill and steadiness of output, I believe, can pull through irrespective of high finance. We who sit on these benches are not all dreamy and woolly individuals. We do not say that pounds, shillings and pence are mere meaningless symbols. [Laughter.] Hon. Members opposite laugh too soon. We say that we are not prepared to allow either the banking fraternity or the capitalist system to anchor the souls of the masses to those symbols. I hope that we shall have a policy which will be based—side by side with our Budget—on a national wage policy that will show what we want, for example, in the mining industry and the housing industry. Hon. Gentlemen opposite yesterday were speaking about hazards of investment. Have hon. Gentlemen realised that never in the history of the wage system have they yet evolved a basis that gives to the worker the increment in accordance with the hazards of his industry? Has the collier ever had an increment in regard to his wages in accordance with the hazards of his industry? No. The time has come when we who represent the people must, if we have a national wage policy, be prepared to say, "Here is an industry where you hew coal and do other things and we are prepared to pay an increment, just as the investor has been demanding in the past, in ratio to the hazardness of the industry." We could get the coal on that basis.

Latin and French tags have been quoted and I dare not quote a Welsh one, but I will paraphrase one of the writings of that grand old writer, Leo Tolstoy, before I sit down. I hope that this Budget really means that we are to begin to break down the fences and unleash the real activity of mankind? Words to this effect were said by Leo Tolstoy in his book on poverty and riches. He said that he saw mankind as a herd of cattle within a fenced enclosure. Outside the pastures were green and verdant; within, they were sparse. The cattle were goring each other to death in their struggle for existence. The master of the herd called all his friends together and they built a beautiful caw house for the old cows to live in, and a beautiful house for the old bulls. He gave the little calves a pint of fresh milk every morning so that they would not suffer from malnutrition. He called this charity. He even put corks on the horns of the cattle so that they did not gore themselves to death in their struggles for existence. But, when a spectator said to the master of the herd "Why not do the obvious thing and break down the fence and let the cattle out?" he said "Oh, Sir, if I did that, I would not be able to milk them." I believe that the budgeting system that we must discover through the help of our advisers and economists is one which will really balance the income of society, side by side with the monetary income, because that is really the thing that matters to our people.

4.46 p.m.

Sir Waldron Smithers (Orpington)

It is my duty and great privilege to be allowed to congratulate the hon. Member for Leek (Mr. H. Davies), who has just resumed his seat, on a brilliant speech. In the short time he has been here, he seems to have caught the atmosphere of the House, and, if I may say so, he delivered a speech in the best traditions of this House. I congratulate him on his wonderful gift of expressing himself so fluently, and I hope we shall have the privilege of hearing him again on many occasions.

This Budget is another milestone, as all Budgets are, in the glorious history of Britain. In framing the Budget, the Chancellor of the Exchequer, this Committee and the public look back along the road we have travelled; now we have also to look forward on the road ahead—at this moment, a very rough and difficult road. A Budget means budgeting for the future, and, as something has been said about the Treasury this afternoon though I have not heard this particular point mentioned during these Debates I want to pay my humble tribute to the permanent officials of the Treasury for the advice and experience they have given. The country owes them a debt of gratitude.

The situation in Britain and in the world is perilous and so fraught with danger. Never has mankind been faced with problems so vast. In broad principle, to my mind, there is only one solution. We have to return as soon as possible to those principles of government, economics and finance which made us great in the past and which made Britain, and, later on, the Empire, the greatest influence for good the world has ever seen. Our policy must be a maximum of free enterprise and a minimum of State control as soon as possible. I see in this morning's newspapers, that the T.U.C. is asking for the removal of certain controls under certain conditions. That is a healthy sign, and I hope that other big organisations will follow their example. When, during the war, for 15 months, we stood alone under the inspiring and outstanding leadership of my right hon. Friend the Member for Woodford (Mr. Churchill), Britain saved civilisation for the world. I say most emphatically and with all humility that Britain must again lead the world and must lead the world alone again if need be. An old Arab was once reported to have said that, "If Britain disappeared under the sea, hope would disappear under the world."

May I look back, on the past and present an all-round picture of the last 30 years, because, on that, we have to face this Budget. I have done my best to get figures, and I hope the Chancellor, when he replies, will tell me if my figures are wrong. It is very difficult to get accurate figures. Taking the last 30 years, that is from before the 1914–18 war, up to the latest available date, my figures show, roughly, that the expenditure of this country on social services was then £63,000,000. It is now—I can only estimate it—about £1,200,000,000. The National Debt was then £661,000,000. It is now in the neighbourhood of £24,000,000,000. In 1913, our balance of trade, I was told in answer to a question yesterday, was a favourable balance of £194,000,000, and, in 1938, the latest available date for which I have figures, it was an adverse balance of £55,000,000, owing to the dislocation of the war. I tremble to think what the adverse balance of trade really is to-day.

I have mentioned the cost of social services as about £1,200,000,000, and I should like to be told if I am correct in assuming that this figure does not include pensions for this war, the expenses of the Army of Occupation or the long-term and short-term housing policy. I would be grateful if, in his reply, the Chancellor could make the figures which I have given a little more clear and more exact. There is a good deal of talk about social services and security, but, as Hecate said in "Macbeth": Security is mortals' chiefest enemy. The first job this country has to do, and that quickly, is to secure next week's bread and butter. I appeal to hon. Members in all parts of the Committee, in all their economic and financial thinking, to bear in mind this one outstanding fact. This is not party politics; it is a fact which has to be faced with courage by hon. Members of all parties. This fact is that Great Britain is the one great country in the world which is not, and cannot become, self-supporting. We have to import, in order to eat and live, from one-third to one-half of our food and raw materials. Other countries, at a pinch and in normal times, might be self-supporting. We cannot be. I can best sum up the argument which I want to put before the Committee by quoting a remarkable statement issued by the Fabian Society and called "A Word on the Future to British Socialists." It says: After the war, Bulgaria, Norway and even France might live largely on their own productions, eked out by a modest proportion of international trade. They would live poorly, but just alive. We, on the other hand, under such conditions, could not live at all.…It is a mere mirage to suppose that we could exist on our own foodstuffs and our own domestic produce and our own domestically-produced raw materials. In the past, we have paid for these and other imports with our exports. But, even before the present war, we were no longer doing this on a sufficient scale. We were living on capital. If there had been no war, we could not have gone on in that way indefinitely, and the very possibility of our continuing to live in that way has disappeared. That is a remarkable statement coming from the Fabian Society.

May I again look forward, and, here again, I stress the point that I cannot guarantee the accuracy of these figures. I have done my best by asking Questions, but no one, not even the Treasury, can really know what the future holds in store. As I see it, this country is faced with a deficit of imports next year of about £750,000,000. It is a big job to recover that bad position. Shall we rise to the occasion? We have lost a large percentage of our oversea investments in the cause of freedom. Lend-lease, and the princely gifts from Canada, are coming to an end. The right hon. Gentleman the Foreign Secretary, when he was Minister of Labour, said, on 11th February, 1944: We have lost our oversea investments, pawned them, sold them and depreciated them, and, after the war, we shall have to live on our annual production year by year. In my view, the end of Lend-Lease was most salutary. It compels the Government and the people of this country to face facts, and it should shake us out of the fools' paradise in which we have been living for too long. In spite of all the theories, slogans, and election promises of all parties, the natural law will continue to operate, and any Government which transgresses that law has no moral claim on the obedience of its citizens.

The war against Japan and Germany is over, but is the victory won? The "Daily Sketch" to-day has, as usual, a remarkable article entitled "Has the War Made Us Completely Selfish?" I commend that article to the attention of hon. Members. I ask hon. Members of the Committee to look round the country to-day. What do we see? Unofficial strikes—and I read worse news about them on the tape this afternoon—and frustration and delay in industry and demobilisation, because of the continuance of bureaucratic control and an attempt to run our private lives and our businesses from Whitehall. A working man on the railway said the other day, "What is wrong is that there is a lack of discipline in the country." I would say that this discipline cannot be imposed by the Government. It must be self-discipline, self-imposed by free men. Already, the Government, now that they have the responsibility of office, have found that it is not possible to put into operation a full-blooded Socialistic programme, because they know that it would ruin the country. For six years, we fought, not for any material gain, but for the sacred cause of liberty and freedom. We fought to remove the shackles, from other countries, and a full Socialist programme means that the Government will be busy fastening the same kind of shackles on the people of Britain and with the same inevitable result.

We can only build material prosperity on spiritually reinforced foundations. That is to say, prosperity and progress for all our people depend upon the maintenance of those things for which no figures could be found in the Budget, namely, confidence and stability. A repetition of the 1931 crisis, whatever the causes, now, with our worsening position, would mean the end of Britain. It might, if confidence were destroyed, create such a state of things that it would be impossible to recover. Workers in many industries are demanding a 40-hour, five-day week, holidays with pay, and no reduction in earnings. I would ask responsible trade union leaders to say to their members, "What is the economic basis for that demand?" The fact is that everyone of us in the country has to work just as hard as is necessary to export goods and services at world competitive prices or starve, and I ask the Government to remember that their mandate only goes as far as the coasts of Britain. Whether they like it or not, they have to take into account the conditions in other countries and the policies of other Governments.

In spite of all the abuse that is often poured on the City of London—it is called a capitalist show—its banks, its insurance companies, its exchanges and commodity markets were the biggest asset this country possessed before the war, mainly because of the integrity of the men who ran those businesses and the confidence they inspired all over the world. I want to give one typical example—it could be extended—of the services rendered and the profits won for this country by our shipping companies, our insurance companies, and the others I have mentioned. Before the last war, I am told, the City of London negotiated annually £3,000,000,000 of foreign bills a year. The commission on that, and on the other services rendered by the City, gave us the right and title to command the surplus products of other nations without having to export physical goods against them. They were our invisible exports and were the main reason for getting this country the highest standard of living in Europe. If may say so, with respect, to the Committee, there is too much talk to-day about politics and not enough about policy. I beg the Government to do nothing to destroy the confidence not only at home but, what is more important, abroad in the institutions of this country. If that confidence is destroyed we are ruined, with all that means to the civilised world.

The Chancellor of the Exchequer and hon. Members have been talking for two days about hundreds and millions of pounds. But what sort of pounds? It is very important to think of what is the purchasing power of a pound note. I asked a Question yesterday about it and the answer given me was this. If one takes the purchasing power of the £1 sterling in 1900 as 100 for the whole range of personal expenditure, in September, 1945, it is only 40, that is to say, 8s. The Chancellor of the Exchequer, rightly, fears inflation, but let him remember that he has the finest people in the world to deal with. Can he stop that inflation? Inflation can be stopped only if the people of this country are free to produce adequate goods and services at the right price. Recently I asked the Minister of Labour if he would point out a few economic facts to those who were on strike and "go slow." He did not seem to think an economic lecture would do much good but, unless the Government face facts and tell the workers the truth about the seriousness of our situation, Britain is faced with disaster. Unless we get adequate production at the right price behind our paper money, the purchasing power of the pound will continue to fall until the time arrives—carried to its ultimate conclusion—when the Government will have nothing to give the people except pieces of paper, ever depreciating in value, which they can neither eat nor wear; the queues outside the shops will get longer and the supplies inside the shops will get shorter.

I want to quote what was said by the Foreign Secretary in a London speech when he was Minister of Labour—I wish other trade union leaders would follow his example: I, as an old trade union official, do not want £10 a week if I can buy only £2. of stuff with it. I would rather have £5, with which I could buy £5 of stuff. I had a remarkable lecture on inflation in about two minutes from an old man of about 80 at the end of Portland Bill. I asked him what his job in life was. He said, "I have worked in the Portland stone quarries all my life, and I am proud of it. I have always voted Conservative because I have found that when a Conservative Government was in power, there was more demand for Portland stone." He then said, "I remember the time when you could have a wonderful evening in the 'local' for 1s.—four pints at twopence, threepence for your tobacco, a penny for a box of matches, and they gave you a pipe. I have worked it out and the same thing to-day would cost 7s. or 8s."Unless we produce goods and services at the right price that inflationary process will go on.

The taxpayer is being asked to provide between £250,000,000 and £300,000,000 to stabilise the cost of living. May I point out that that sum, all Government expenditure, all increase in wages, all family allowances, all social insurance benefits however desirable, have to come out of industry? They must increase our cost of production and, to that extent, impede or destroy our ability to compete in the markets of the world. I beg the Government to remove controls as soon as possible. I want to quote a short sentence which the late Sir Kingsley Wood uttered in this House on 14th April, 1942. He said: If there is still in any quarter a belief that the solution of these problems lies in the further taxation of the incomes of the rich, I would invite a study of the Table printed as Table F in the Preamble to the Statistical White Paper…Theface is that to-day personal incomes below£500 represent nearly 85 per cent. of all personal incomes after payment of Income Tax and Surtax."—[OFFICIAL REPORT, April 14th, 1942; Vol. 379, cols. 133 and 134.] May I, in my own words, remind the Committee, that the State is you and me, and is not a fairy godmother with a bottomless purse. Mankind is at the crossroads. Civilisation, if we are not careful, is in process of collapse, and civilisation has one foot over the precipice.—[Laughter.] I can assure hon. Members that there is nothing to laugh at in that; it is absolutely true. When the freedom of the borough of Chiswick was conferred on Field Marshal Sir Bernard Montgomery the other day, he used these wonderful words which deserve to be permanently recorded: As a result of this war, much of Europe has been destroyed. We have lost much that was good and much that was beautiful, and the whole economic framework of Europe lies in ruins. We have to rebuild that frame-work in England, in Europe, in the world, and this can only be done by toil, sweat and much hard work. There is no short cut back to prosperity. I am a soldier, and these are matters for the statesmen, but I believe that three things would help. I will only read the first: First. The foundation on which we build our post-war civilisation must contain a good leavening of spiritual matter. If we build only material matter, we shall fail. For a better world in which there is to be no war, we require better men and women. Air Chief Marshal Sir Arthur Harris, in his first interview for three and a half years, said this on 27th August: Wars will continue till there is a change in the human heart, and I see no sign of it. When we had the crisis of Dunkirk the people of this country rallied. Their spirit was high and we pulled through. I beg of the Government to put the facts and the truth about the situation before our people. We are commanded: …seek ye first the kingdom of God…and all these things shall be added unto you. That is to say, seek first the things that matter. Successive Governments have always put the cart before the horse. They offer material benefits and the mass bribery of the electorate—

Mr. Montague (Islington, West)

What about the City of London?

Sir W. Smithers

That is the old jibe. I am sure of this, that the assertion of people's rights will never provide that people with bread. The performance of their duties alone can do that. Only a free people who are willing and able freely to shoulder, each one individually, their responsibiliites and use to the full their God-given talents can save the situation. The collapse of Germany was the inevitable result of National Socialism. It is Germany whose fate we are in danger of repeating, for what shall it profit any one of us, if he gains the whole world and Germanises his soul?

5.15 p.m.

Mr. S. N. Evans (Wednesbury)

They tell me that the Palace of Westminster once housed King Canute, and it would seem that we are honoured by one of his spiritual descendants. My contribution to this discussion will be based on a recognition of the need for exports, and of the competitive force which will have to be brought to bear if the object of a 50 per cent. increase over our pre-war figures is to be realised. We recognise on this side of the Committee that because we neither feed nor clothe ourselves, and do not possess the necessary raw materials with which to furnish our industries, we have to import. We know that in 1938, the last pre-war year, we had to import to the extent of £900,000,000. Of that, roughly £600,000,000 was found by tangible, or visible, exports and £300,00,000 by income from investments, shipping, banking, marketing and other services. Bereft of our income from foreign investments, and threatened by subsidised competition at sea, it becomes quite evident that tangible, or visible, exports will be more important than ever before.

Of course, there will be a short-term honeymoon. We all know that six years of war have created a pent-up demand, the satisfaction of which will mean a sellers' paradise in which a deaf and dumb man could sell ice-cream to Esquimaux. This will go on for two years, but the duty of this House is not to think in terms of the next two years, or even of the next General Election; it is to think in terms of the next generation. That is the justification for what I have to say to-day. The question of exports, as has been rightly said, will turn on the competitive forces that we are able to bring to bear once this pent-up demand has been satisfied. It behoves us, therefore, to examine the prospects. The form of industry, like the form of horses, is in the form book, so let us take a look at it. In any plans for export the motor industry must inevitably loom very large. It is an essential instrument for securing a good deal of the currency that we need to meet the cost of imports, but when we examine this industry what do we find? We find that, despite the advantage of technicians equal to any in the world, the most willing, skilled and amenable labour force in the world, and a protection of 43⅓ per cent. tariff, this industry has not yet produced a car able to command a world market. This is a very serious condition of things. When the motor magnates are challenged they have what they claim is a perfect answer. They say, "The reason why we are not able to compete is because of the exorbitant charges made to us for essential raw materials and components, as compared with the prices charged to our American competitors."

They quote figures. For instance, they say that in January, 1939, whereas our American competitors were able to buy cold rolled steel sheets for motor-car bodies at £14 per ton, at Detroit, we were having to pay £21 5s. They say—and this is very disturbing—that the position has deteriorated 25 per cent. during the war. Other figures they quote are very significant and disturbing. They say that as regards U.S. cold drawn one per cent. nickel chrome bars America was willing to put them on the London docks for £21 5s., whereas the British manufacturer wanted £33 11s. They say that U.S. cold drawn five per cent. case hardened nickel bars were put on the London docks, carriage, insurance, and freight paid, at £28 8s. a ton, whereas the British manufacturer wanted £45 6s. per ton. Further, U.S. hot rolled one per cent. low nickel chrome bars were £17 7s. 6d., London docks, carriage paid, while the home manufacturer wanted £24 12s. For U.S. hot rolled five per cent. case hardening nickel bars the price at London docks was £25 per ton, and our price was £34 7s. I have heard my hon. Friend the Member for Ipswich (Mr. Stokes) say that this House does not like figures. He must have been thinking of the last Parliament. This is a matter of life and death to a vital industry, and I make no apology for quoting figures.

A serious indictment has been made of the steel industry. We are entitled to recall that after the last war, when that industry asked for tariffs, they said that centralisation of control in a few hands—in other words, monopoly—would enable them to modernise their plant and give us steel at lower prices. It now becomes apparent that what that industry did was to sit back and collect the profits which the tariffs made possible. We hear a lot of talk in this House about the virtues of free enterprise. In the steel industry there has been no freedom and no enterprise for a good many years, and the country has been the worse for it. If there had been any free enterprise Richard Thomas would not have bought out Baldwins; they would have knocked them out, as they were capable of doing. There is no tin-plate manufacturer in the world with so much redundant plant as Baldwins. I am told that the first £3,000,000 of Richard Thomas's profit has to go into the steel pool, to make dividends possible for redundant concerns that ought to have been out of action years ago. If anyone will contradict that I shall be glad to hear it. If this £3,000,000 were not used in this manner, it could go towards a reduction of the price of cold rolled sheets, to manufacturers, to help them to compete in the world's markets. There are other trade associations whose activities want very careful scrutiny. Generally speaking, the activities of these associations are anti-social. They are born with a Magi not mentality; they tend to cut up, among their members, existing markets, thus discouraging the energy and initiative of people who might otherwise-go out to search for markets. These gentlemen must be reminded that 47,000,000 people in this country cannot maintain their standard of life by industrialists taking in each other's washing. Somebody must get to work.

Now I want to say something about another important industry—the chemical industry. We all know the privileged position held in British industry by Imperial Chemical Industries. They have either knocked out or bought out every potential competitor, and are now in a position to charge what prices they like. It would appear that they are making hay while the sun shines. I want to give some percentage increases which British manufacturers are having to pay to this combine, as compared to their American competitors. For acetic anhydride British manufacturers are having to pay 51 per cent. more; for acetone 67 per cent. more; for alcohol butyl 82 per cent. more; for benzine, 172 per cent. more; for calcium carbide 44 per cent. more; for soda ash, 49 per cent. more; for sulphur 106 per cent. more, and for sulphuric acid 108 per cent. more. I want to know how we can increase our exports by 50 per cent. over the pre-war figure, if our manufacturers are to be penalised from the start by having to pay more than their competitors for the raw materials they require?

This is a problem which those who have influence and authority on the other side of the Committee might well consider. Take the Nut and Bolt Manufacturers' Association. I am told that there are 37 members of the Association and that all inquiries go to headquarters, where the orders are apportioned so that no competition whatever takes place among them. Is this the free enterprise we hear so much about? The most unfortunate thing about this set-up is that some of the units making nuts and bolts have to buy their essential raw material, wire, from Guest Keen, who stand at the head of the combine. No matter how inefficient Guest Keen's production methods might be they can always charge enough for the raw material to enable them to quote a figure comparable to those with whom they should normally be competing. That is a most unholy condition of affairs. These price controls, this cutting up of markets, exists among a very much wider section of industry than many people realise. It is having a stagnating, deadening effect. There are firms within the association who would like to "have a go," but they cannot. Serious pressure can always be brought to bear against recalcitrants.

I remember an occasion when a director of the British Thomson Houston Company went to a works, and saw them using Crompton Parkinson lamps, which were "non-ring" lamps. He said, "Why are you using these lamps?" and he was told, "They are very good lamps, and are a reasonable price." But he said, "They are not in the ring. If you do not take these down there will be no more orders from us." They were taken down. Very serious pressure can be exerted by these trade associations. I will quote one more, and it is the strongest of all. The Rolled Brass and Copper Association. This industry includes among its principal members James Booth, Delta Metal and I.C.I. This association recently increased prices for basic strip from 11d. to 11¼d. per lb.—only a farthing, but we are dealing in pounds not tons. In conversation, subsequently, with the leading member of the association, he told me that their firm would have been very pleased, not to have put a farthing on, but to have taken a farthing off. It is within my knowledge that one member of this association is selling at 9¾d., as compared with associated prices of 11¼d. per lb.

It must be understood by hon. Members that when these price associations are formed, the price tends to be fixed by the competitive force of the most ineffective producer. You get the lowest common denominator, and so those organisations within the associations which have modern mechanised machinery can, of course, paralyse those at the bottom in terms of cost. They are not allowed to exercise that competitive force on behalf of the nation as a whole. If these restrictive practices which now obtain over a very wide section of British industry are allowed to continue, all hopes of a flourishing export trade will be doomed to frustration. I say to the Government that a fact-finding commission should be set up, and quickly, and that they should not consist of representatives drawn from industries that are under investigation. After all we do not get burglars to plan our strong rooms. There has been too much of this in the past—members of industry have been their own judge and jury. I would ask the Government to consider setting up fact-finding committees with full access to all books and documents possessed by these trade associations. It may be necessary to consider the question of tariffs on those industries which are not making available to our own manufacturers the necessary raw materials at competitive prices.

It has not been an agreeable task to say all these things, but they have to be said, because this is a matter of economic life or death. I speak after 25 years' industrial experience. Ever since the advent of the internal combustion engine, and the harnessing of electricity presented a challenge to steam, a section of British industry has been thrown on the rocks. British industries have been working on out-of-date text books for 30 years, and new text books have to be written. I believe that it is part of the task of this House to give guidance in the writing of these text books.

5.35 p.m.

Mr. Lipson (Cheltenham)

I am glad to have the privilege of congratulating the hon. Member for Wednesbury (Mr. S. Evans) on an excellent maiden speech. He was happy in the importance of the subject to which he brought the Committee's attention. The export trade is vital. It is a matter of economic life or death for us. His speech was practical and well-informed. In speaking of price rings, cartels and monopolies, he has drawn attention to a matter which has caused great concern to hon. Members in every quarter of the House. I am quite sure the Government will be taking steps in the near future to see that these rings and cartels are not allowed to hamper our industrialists unfairly in their competition with the industrialists of other countries, in their efforts to secure increased export trade. I am sure I am expressing the view of the Committee when I say, in congratulating the hon. Member on his speech, that we hope that on other occasions he will make equally valuable contributions.

I think that the Chancellor of the Exchequer has every reason to be very well satisfied with the reception which his Budget has had both in the House and outside. It gives me personally very great pleasure to be able to congratulate him, because my mind goes back 40 years when he and I were fellow undergraduates at Cambridge. Since then I have mellowed a little, perhaps, and, after hearing his Budget speech, I have come to the conclusion that he has too. Had you asked me 40 years ago if I thought that when my right hon. Friend was Chancellor of the Exchequer in the first Labour Government with a majority in this House—and his friends expected, in those days, a very great future for him—his first Budget would cause a boom on the Stock Exchange and would be described by the hon. Member for Aberdeen East (Mr. Boothby) as pedestrian when he really meant orthodox, I am not so sure that I should have said "Yes." I would not describe the Budget as "pedestrian." I would prefer to describe it as a "tonic" Budget, and as the reliefs which he has given are increasingly appreciated and felt, I think that will be more and more true.

Certainly my right hon. Friend has given the country more reliefs than I think were generally expected. The "Right," in the examination of the Budget, have found no cause for tears or fears, and my right hon. Friend has been fortunate with the "Left" because they have found in it much to cheer. I want to thank my right hon. Friend for his policy of preventing a rise in the cost of living. I think that decision was both wise and timely, because large numbers of people in this country, since the war, have found that their actual earnings have been reduced. During the war, many of them were earning a great deal by way of overtime, which, for one reason or another, they are no longer earning. I think it would be very unfortunate if, when incomes are falling, there should be any increase in the cost of living. I do not regard this Budget as purely a rentiers' budget A great many rentiers too do not derive their incomes from inheritances, as has been suggested, but are living on pensions of one kind and another—on fixed incomes. I am very well aware of that, because in the constituency I have the honour to represent, there is a very large proportion of them. Many of them were able, during the war, to supplement their incomes, because there was a demand for their services, in spite of their age. Now they are the first to be declared redundant. I know, too, that an increase in the cost of living would fall very hardly on the families of serving men, and for those reasons I am glad that my right hon. Friend has decided, and I think wisely, to prevent any increase in the cost of living.

I was sorry that the Chancellor was not able to make any recommendation with regard to some increase to old-age pensioners this winter, until the contemplated new social insurance scheme comes into being. I had hoped that a Labour Chancellor of the Exchequer would not have turned deaf ears to an appeal of that kind. I hope, even now, that my right hon. Friend may be able to do something in that direction, because increases in the cost of living have fallen very hardly on them. I welcome what my right hon. Friend was able to do by way of further remission of Purchase Tax on household appliances. I hope that, at the earliest possible date, the Purchase Tax will go, so far as all essential articles are concerned. I have always been opposed to this tax. I recognised that during the war it may have been necessary, but, to my mind, it presses extremely hard on the family man. I hope that it will go, and be replaced by a luxury tax, as steep as you like, on articles not essential, so that valuable labour and material can be used for essential supplies. My right hon. Friend in his speech did not mention—I think I am right—the word "economy" in the whole of his speech. I do not understand by economy, cheese-paring meanness but wise spending. I am appalled by the fact that the Chancellor of the Exchequer has contemplated the continuance to the end of the financial year of Government expenditure, practically at the same rate as if the Japanese war were still on. What is the Chancellor proposing to do to see that the country gets value for the money it is spending?

During the war, I think, a very useful service was performed in this connection by the Select Committee on National Expenditure. I was very sorry to hear the Government's decision not to re-appoint that Committee. I would ask my right hon. Friend whether that decision cannot be reconsidered. The Select Committee on National Expenditure was able to function during the war, and if it was necessary then it is equally necessary during the peace. It should be set up immediately, because it would be able to save the country a good deal of money between now and the end of the present financial year next April. As almost one of the original members of that Committee, which was representative of the three major parties—I think I was the only Member of the Committee who was not a Member of any party—I can say that never in any of our investigations or Reports were Members of the Committee influenced by party bias or party prejudice of any kind. They were able to make valuable contributions towards economy, interpreted not as cheeseparing economy but as efficiency. That is a service which they can continue to render.

The Committee on National Expenditure as it functioned, and as I would envisage it in the future, has nothing in common with the Geddes "Axe" or the late May Committee. It might be one factor which would prevent the rise of a demand for the appointment of another Geddes Committee or another May Committee. One of its sub-committees was called the Special Inquiries Sub-Committee. Hon. Members know that from time to time their attention is drawn to waste here and unnecessary expenditure there. All kinds of rumours fly about. During the war those rumours, or the information about them, was brought to the Select Committee on National Expenditure, and the Special Inquiries Sub-Committee was able to investigate those matters on the spot and find out if there was any truth in them or not. I believe also that the Departments which were investigated by the Select Committee on National Expenditure found it helpful. Not only was useful work done by the reports presented and recommendations made, but during the course of the investigation of witnesses suggestions were made and were actually carried out before the reports were produced. I know that the Government have expressed their intention to appoint instead an Estimates Committee. I would submit that that is not a sufficient substitute. The Chancellor knows very well that the experiment of an Estimates Committee has been tried in the past and was not a success. It may be that the new Estimates Committee will be given more powers and may function differently, but I believe it is inevitable that it should be much more restricted than the Select Committee on National Expenditure. It is important, when so much money is being spent and there are so many demands for expendi- ture on social services, defence, and other vital needs, that there should be no waste or any excuse for waste.

A request has been made, quite properly, to the Government that they should announce their wages policy. It has been suggested, I think quite rightly, that it is a necessary corollary to stabilising the cost of living that they should declare their policy in regard to wages. I hope they will. I am much more concerned with what the worker produces than the actual money wages paid. We were told by the hon. Member for East Aberdeen that it was part of the duty of the Government to create the conditions under which the most ample production should become possible. I quite agree, but I do not believe low wages to be one of those conditions. Personally, I believe that if the workers are paid adequately they will respond. A proper wages standard is necessary for the policy of full employment, as is perfectly clear from the White Paper. It also raises the dignity and status of the worker, and in return there will be obtained from him much better work than if too much emphasis is placed on actual money wages as the great factor in production.

Some of the speeches in the course of the Budget Debate have implied that the nation is tired. My own correspondence does not bear that out. It brings home to me that the men in the Services or engaged in war work are longing to get back to civil life and production. I do not say with one hon. Member that we should go back to the pre-war tempo. I believe that the war tempo of our people is the standard to which we should continue to aim. This nation, which has acquitted itself so well in war, will acquit itself well in peace. The war has created hopes and ambitions. I believe it to be the earnest intention of the Government to try and see that those ambitions are realised. I can assure them that to the extent they try to do this they will have my full support.

5.53 p.m.

Mrs. Jean Mann (Coatbridge)

I feel grateful, Mr. Beaumont, at having caught your eye, particularly at a time when the Committee is relatively empty, because it is rather a major operation to address this House for the first time, however one may have been accustomed to public speaking. I believe it is customary to crave the indulgence of the House, and I feel that I for one should not anticipate any difficulty in that respect. The House has been very indulgent indeed to me of late, and I wish to take the opportunity of thanking all the hon. Members on all benches for the great sympathy they have had with me in my rather trying ordeal. It has also been said that in a first speech one should use a quotation. I do not think there is anything worse than the mere introduction of a quotation that has no aptness or relevancy to what one is saying, but one quotation does spring to my mind very much. It has done every day since I have been under an office of profit under the Crown disqualification, and since I have had to pass the famous tablet of Warren Hastings day alter day, I have looked at the tablet, and with perhaps special reference to my own name, I have felt: Man is born unto trouble, as the sparks fly upward. It is rather early even to speak to-day, because it was only yesterday that I really became a recognised Member of this House, but I felt impelled to make a contribution to-day because the opportunity might have gone for ever if I had not seized it. One does not often get the opportunity of making some point when the Chancellor of the Exchequer is in his seat. In point of fact the Front Bench rather reminds one of The borealis race, They flit, are you can point the place. I am happy, therefore, to make my point under these circumstances.

Firstly, this Budget reminds me of the story told about the Polish officer. A West End hostess invited him to dinner, but was very careful to explain that there was rationing in this country, that one could not have two courses together, and so on. At the end of the dinner the Polish soldier said, "Thank you, Madam, it was very good indeed, such as it was." Then, sensing he had made a mistake, he said, "Well, what there was of it." That is exactly how I feel about the Budget, with particular reference to the exemption limit. It is to be raised from £110 to £120. If there is one section of the population of whom I wish to speak, perhaps that is because I am the mother of sons, I feel for the young man who is earning, let us say, up to £4 per week. I notice that the Chancellor is doing something to alleviate the situation for him, but I feel it is not enough.

I am thinking of the artisan in the shipyard or on the railway or the corporation worker or the worker in the distributive trades, the young man who is thinking of getting married. Here is his position. If he has £4 per week, he actually takes home in his wage packet £3 5s. 2d. following deductions of 13s. for Income Tax and 1s. 10d. national health and unemployment insurance contributions. Let us assume that he pays 35s. for his board; that is not an unreasonable figure. He is therefore left with 30s. 2d., without making any allowance for travelling to work, for canteen meals or anything else. He is a very fortunate young man if he does not have to travel. Let us say that he spends five shillings a week on transport and 12s. a week in the canteen, taking into account the workers' breaks for tea, morning and afternoon. That, if he were a Member of Parliament, would be exempt from Income Tax, but he is a creator of wealth, a creator of, let us say, our export wealth, and he has to pay Income Tax on that. He is left with 13s. 2d., and he has socks to buy, clothing, under-clothing, boots, shoes, heavy boots, perhaps, for his work. Moreover, he may actually have his eye on a girl, or probably, as so often happens, she will have her eye on him.

Man is the hunted, woman is the huntress, and out of 13s. 2d. he has to provide cigarettes now for both of them, an evening at the cinema and all the other little enjoyments they can get; but when she has got him that length, her designs go farther. At this juncture in our national history, her designs coincide with the best interests of the nation, namely, that they should have a home and that they should have a family. Now, how is it to be done—entertainments, courtship, suits, clothing, and save up for a home—on 13s. 2d. a week? I wonder whether hon. Gentlemen realise how much these lads are feeling it. They are, and they are talking about it a great deal. They want to set up in a home, and this nation wants children, but we say, "Only when you have had the second child will we give you a family allowance." I appeal to my right hon. Friend. He looks like an uncle. I can imagine, from his broad, generous nature, him arriving in a home, surrounded by Christmas parcels and distributing them to the potential parents of the next generation. I do hope that he will seriously consider extending the exemption limit, so that these young lads may have an opportunity to save for their home and their marriage.

There is one other point, and it is totally different, but I feel it affects some young couples and a great many other couples besides. I have been perturbed to hear my right hon. Friend the Chancellor of the Exchequer say that he does not intend to assist housing by way of reduced interest but rather by way of subsidy. Now the Municipal Loans Bill was introduced by the Coalition Government, and in his speech the Financial Secretary to the Treasury announced the loans under the Bill as at 2 per cent. for five years, 2¼ per cent. for 10 years, 2¼ percent. for 15 years, 3 per cent. for 20 years and 3⅛ per cent. for over 20 years. On municipal housing, 3⅛ per cent. means £37 10s. on a house costing £1,200. The first charge on the rent of every house to be erected is £37 10s. Someone has said, "Oh, no, we are going to demand them interest free, no interest at all." I do not know that I altogether subscribe to anything being given free of charge. I am a Scot, and as a Scotswoman I, like all Scots, like to pay my way, but 2 per cent. would be paying our way. It would be £24 on the £1,200 house. It would be paying our way, and no tipping, but £37 10s. represents not only tipping, but treating, the Chancellor of the Exchequer. It represents a difference of £13 10s.

Hon. Members will recall that the Act of the late right hon. John Wheatley laid down a subsidy of £9 nationally and £4 10s. locally, £13 10s. Is our right hon. Friend going to take that £13 10s. out of us in interest, and then come along later and say, "Look what a wonderful uncle I am. I am going to give you a subsidy of £13 10s."? I hope that we will do some honest accountancy in connection with our housing accounts. In these days, interest rates are toppling down. The Chancellor of the Exchequer himself announced the rate on Treasury Bills being reduced from 1 per cent. to ½per cent., the joint stock banks are going to offer ½ per cent. on Treasury Deposit Receipts and the market seems to be fluctuating and changing. I ask my right hon. Friend to enable a young couple to set up in a municipal house at a rent they can pay, by giving them interest at reasonable rates.

I have one other appeal to make to my hon. Friends on these benches about this topic of housing accountancy. We have been twitted time and again, year in and year out, that private enterprise was capable of building houses as good as local authorities, and without subsidy. If one examines this position one finds that private enterprise can wait until prices and interest rates have fallen. For example, local authorities were compelled under Statute, after the last war, to provide for the needs of their people, irrespective of prices, and the prices were as now, about £1,200, and the interest was 6 per cent. That meant £72 as the first charge on every house. Private enterprise could please itself whether it built or not and it pleased itself to build in 1933. when the £1,200 was £400 or £450, and interest was 2 per cent., which meant a charge of £9, instead of £72. So private enterprise could put up a show of building houses, a very limited number in England and hardly any in Scotland, to show that it could compete with local authorities. We do not wish to be taunted that we are getting a huge subsidy when, in fact, we are only getting the over-charge of interest on our housing accounts handed back to as.

There is just one thing more I want to say, ere the opportunity is lost. I want now to enlist the sympathy of hon. Members on behalf of young mothers. Hon. Members on these benches have been hearing a great many statements on housing, but the time has gone when we ought to occupy our time telling, in competition with each other, more and more dreadful tales. That takes us nowhere. We have reached a position when we all agree that the position is as bad as it possibly can be. From there we ought to start our emergency measures. Anybody who has any idea of emergency measures surely ought to tell us what those ideas are. The Minister of Health has talked of setting up Emergency Committees attached to local authorities. Well, he will possibly need some money, and that is why I want here and now to appeal to my right hon. Friend the Chancellor of the Exchequer. One of the saddest features of our housing conditions to-day is that which arises when a young mother is about to be confined. I know doctors and students who have told me, and have talked to others, about the awful conditions they sometimes find when they go into these houses. One of the worst features is the children who are sitting up on that bed whilst the doctor is performing that operation. My own sons have told me of it, and of children rubbing their eyes in the middle of the night on the same bed and looking on. Babies do have a habit of coming at very awkward hours in the middle of the night, and often you find the other little ones out on the stair head with their father, waiting on the event being over until they can get in again.

During the war we had an emergency service whereby little children were taken into the nurseries whilst their mothers were on war work. I believe the grant came direct from the Chancellor of the Exchequer to local authorities, and met the entire cost of that service. If it was a fine thing to take in youngsters while the mother was out on war work or while she was on the night shift, surely we can extend that service—I do not mean through the war-time nurseries but perhaps under the Bevan scheme—so that the children are properly cared for while the mother is incapable of looking after them. I am sure it would help her recovery ever so much if she knew that the children were being looked after. I do not think that I have made my appeal in vain. As I said at the beginning, I like this Budget, such as it is and what there is of it; I believe there is more to follow when we get settled down and have a look round and when things become easier.

6.16 p.m.

Sir Wavell Wakefield (Marylebone)

It is a special privilege to me to-night to congratulate the hon. Member for Coat-bridge (Mrs. Mann) on her maiden speech. We have deeply sympathised with her in the exceptional position in which she has been placed since the General Election, because she has been of us but not with us. We are delighted to see her in her place, and I am quite sure that all present here have had very great pleasure at hearing her speech, so witty, so informative and so full of fact. We look forward to hearing her on many future occasions. I think it is particularly appropriate that the hon. Lady should have intervened in this Budget Debate because here this evening we are considering the revenue of the country, and the women of this country have, during the war, done a great work in production and increasing the wealth of the country. It is, after all, the women of the country who spend much of what is earned, by themselves or by their husbands, and so it is of particular interest to them to see what is in the Budget and I think that what the hon. Lady has said will be read by her constituents and by many others with great interest.

When the Financial Secretary to the Treasury replied to the Debate last night he said he would give sympathetic consideration to the representations made by the hon. Member for Harwich (Sir J. Stanley Holmes) and the hon. Member for Huddersfield (Mr. Mallalieu) on the question of remitting some of the taxation under the Entertainments Duty which now bears so hardly on playing clubs of all kinds. Reference was made to swimming, boxing and association football. I would like to bring my pressure to bear for another section of sport—Rugby football. I have had many representations made to me by clubs which are very severely hit by this tax. We do want to give every possible encouragement to amateur sport and if only the Chancellor can bring the sympathetic consideration expressed by the Financial Secretary last night into practical effect, it will be deeply appreciated throughout the country.

Reference was made by the Financial Secretary to points made yesterday about the fact that the earned income allowance had not been restored. In his reply the Financial Secretary said that, 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 the post-war credits were instituted. I think that conveys a false impression of the situation because in actual fact people now are worse off than they were before this interim Budget was introduced—or rather they will be worse off when its implications are felt. Perhaps I may refer to a letter in the "Daily Telegraph" to-day which, I think, sets out the position very clearly. It points out that with the earned income relief, and with no more post-war credits, the married man with one child earning £300 a year will be worse off by some £3 3s. 6d. Other examples are given of a man with £700 a year who would be made £1 2s. 6d. worse off, while many others who might have expected some relief are not getting any. I do hope that the Chancellor of the Exchequer will reconsider this position. In the latter portion of his speech the right hon. Gentleman referred to the importance of incentive and I do agree with what he said on that subject. This earned income relief will, I hope, bring that extra effort we must have for our export trade and for greater efficiency of production and I do hope the right hon. Gentleman will review that situation in that respect.

There was one omission from the Chancellor's speech to which I would like to draw his attention as I am sure he does not want to mislead the Committee. In the earlier part of his speech he was pointing out that in the years between the wars there was a deficiency of purchasing power and that that led to deficiency of production and hence ever-increasing poverty and unemployment. The omission surely is, "during the time the Labour Party was in office," because during the last decade, for example before the war, on the figures of the T.U.C. the standard of living of the people rose by about 10 per cent. Those are facts, and it is not really true to say that there was ever-increasing poverty. That is not in accordance with the facts and figures of unemployment during that period. When the Conservative Government were in power from 1924 to 1929, unemployment steadily fell until in 1929, when the Conservative Government went out of office, unemployment was at its lowest. Then we all know what happened. Again there were very high figures of unemployment. It is not in accordance with the facts for the Chancellor to say that there was ever-increasing poverty and unemployment. I do hope he will correct that, as I am sure he does not want to spoil a really splendid Budget statement by that inaccuracy.

I turn for a moment to E.P.T. Deficiency payments are stopping, as I understand, on 1st December, 1946. Does that mean that E.P.T. is going to stop then? Because it is not fair that deficiency payments should stop and E.P.T. continue, even at a lower percentage. I would like to suggest to the right hon. Gentleman that there should be some coincidence between the two. When E.P.T. payments stop deficiency payments should continue for another year. I would also like to support what the hon. Member for Edgbaston (Sir P. Bennett) said, that since E.P.T. was increased, there should be a proportionate decrease. I think that suggestion was sound. In asking support for further consideration of the date on which deficiency payments are to stop, I would point out to the right hon. Gentleman that many industries will be turning over from war production to peace production right on to next year. Terminal payments cover cessation of contracts, but before profits can be earned, jigging and tooling is taking place and there will really be genuine decrease of profits. I think there is going to be a lot of genuine hardship during this turnover from war to peace. I hope the right hon. Gentleman will look at the situation again and see if something cannot be done to meet those manufacturers whose war production will be going on for some time, and who will be for quite a considerable period, not making profits, or only small profits.

I wonder if the Chancellor of the Exchequer would consider helping the export trade. I make this suggestion: If a firm, for example, has a 30 per cent. turnover devoted to export trade, could that percentage be excluded from E.P.T.? It may not be possible for that precise percentage to be allowed; I only indicate the way in which the Chancellor could help the export trade. There is another way in which I suggest he may give some real help. That is in the case of businesses and partnerships very hardly hit by Surtax. Could he not put them in the same position as companies? I agree with what he said about the importance of "ploughing back" profits, but there are many businesses and partnerships which have had all their profits taken away and have nothing to plough back. These small firms and partnerships will be needed to re-establish our export trade and bring that post-war prosperity which must come if we are to have full employment and to improve our standards of living.

I give an example of one firm I know which is typical of many others. It spent tens of thousands before the war in developing a new project which was just beginning to make a profit when the war came. This invention happened to be of extreme value during the war. All their profits have gone in E.P.T.; they just managed to pay off their losses, and now are about to start up on peace production but have no capital. One of the partners said, "I am fed up with this. I could not engage the hundreds of people I had during the war, I am only going to employ a few, because what is the good if it all goes in E.P.T.?" That is not going to help the common man. We want all the technical ability of leaders in small businesses which may be built up to large businesses, in order that the fullest possible opportunity may be given for the employment of a greater number of people. I hope the Chancellor will look at that class of Surtax payer to see if something cannot be done to help them. I know that there are difficulties, but I hope he will find some way to overcome them.

There is another position which I would like him to examine. Many small firms at the outbreak of war had had losses and had just established themselves. The partners may have gone on service, or the business may have been of a peace time nature and not suitable to war-time production. They just managed to carry on, making no great profits, or perhaps they were closed down. Will the right hon. Gentleman consider taking a kind of interregnum during the war period for carrying forward losses? Losses can be carried forward six years, and I suggest that the period of the war should be considered as a neutral time and that pre war losses should be carried forward for an appropriate period after the war. That would be helpful in establishing quite a number of small businesses and enable them to have further funds at their disposal for development. I hope, too, that the right hon. Gentleman will take a liberal view of post-war credits. The hon. Member for Edgbaston put the point clearly when he said that all firms would have greatly increased working costs. There is an increase of 60 per cent. in costs of material, labour and stock, and I hope that the Chancellor will take a liberal view of the use of post-war credits so that the extra working capital which will be required can be obtained.

The hon. Member for Chesterfield (Mr. Benson) asked for the extension of utility products, his point being that it would mean cheaper production because of mass production. I take a different view. I hope that the Chancellor will not consider extending utility production, because, if we are to maintain our export trade, we can only do it by speciality of design. We cannot hope to beat America in mass production. It is by our ingenuity, by the quality of our workmanship, and by the variety of specialised designs that we can increase our export trade and supply the needs of the world. If we regiment production in a certain few selected utility ranges we shall handicap design and inventive genius and, in the long run, do harm to our export trade. That trade is bound up in many ways with the home trade.

We all want to encourage savings at this period, but, as other hon. Members have said, if people are to be encouraged to save they must have a feeling that the Government themselves are closely looking at their expenditure. Savings are wanted for productive industry. Savings that come for Government use are productive only if they are used for wise purposes, such as research, education, and so on. But the kind of expenditure where there is a frittering away in unwise spending does not create confidence. It retards recovery and is the path to inflation, which we all want to see avoided. We want the creation of confidence. I think that this Budget has created confidence, and we can look forward to an expansion of our export trade and steadily to meeting the needs of the home market, but confidence can only be maintained if the people as a whole feel that there is the strictest examination of all avenues of expenditure and that there is not a frittering away of their hard-earned savings.

6.35 p.m.

Mr. Perrins (Birmingham, Yardley)

In intervening in the Debate for the first time, I do as custom ordains and ask the indulgence of hon. Members. I represent in this House the division of Yardley. I am aware that one must not in maiden speeches introduce matters of controversy. The hon. Member for Oxford (Mr. Hogg), the hon. Member for East Coventry (Mr. Crossman) and the hon. Member for West Coventry (Mr. Edelman) are not in their places, but I feel certain they will not mind my saying that in Birmingham, at any rate, we do produce the world's most dependable car. In my constituency, therefore, there will be some thousands of people directly affected by this Budget. They are engaged in a very important industry, and, like. Luton and Coventry, Birmingham is very dependent on it. If we take the industry itself and the ancillary industries such as rubber, electrical appliances and the like, we find that in peace time something like 1,380,000 people are engaged. The motor car industry more than any other was responsible during the war for the production of aeroplanes which stood comparison with any produced anywhere else. Now it is placed in a position of having a redundancy of labour, and it feels that it should now get reasonable consideration so that the people in these industries can get back to re-employment in the car industry.

I think that the industry as a whole will be satisfied with the Chancellor's Budget statement. His decision to maintain the vehicle tax instead of a fuel tax is sound because it will give the greatest benefit to people who have to use the road for business purposes. I want to commend the Chancellor for his change from cylinder power taxation to cubic capacity taxation. I know something of the engineering side, and I know that the change will mean that we shall now be able to produce a shorter engine, with a consequent saving of much material. It will make for smoother running, there will be greater efficiency, and it will add considerable prestige to the high prestige which British cars already hold in the world markets. That change will be a valuable aid to the British car industry. With regard to the Purchase Tax, there may have been a little disappointment to many people who were hoping that after this Budget they would be able to get a car free of that tax. Most of us are running cars many years old and would like to get new ones. Nevertheless, I think the fact that the Chancellor has made it clear that he intends to keep the Purchase Tax on will mean that people with permits to purchase new cars, who have delayed buying because they did not want to wake up after this Budget and find they had lost the value of this tax, will now buy. This will be helpful to the home trade. Therefore, I think the Chancellor has done a very good thing.

The hon. Member for Edgbaston (Sir P. Bennett), who is a well-informed man on these matters, put forward a suggestion that steps in taxation in short stages might be the right thing. Just as the decision on the Purchase Tax will be valuable to the industry, so a quick decision on the question whether we shall have short or wide steps in taxation is important. While not claiming to be an authority, I am in favour of wide steps, because I think that in this country we have too many models. I can well understand the attitude of the motor manufacturer who has spent thousands of pounds advertising his nine or seven horse-power car, and can appreciate that he does not want to lose the advantage of many years' advertising. If, however, we reduced our cars to, say, eight, 12, 16 and 20 horsepower, it would cheapen production, cheapen cars and give us a much better opportunity in foreign markets. I know that the Chancellor is ready to consider advice from the experts, and I would ask him to consider this question with all the interests concerned, particularly the employers and the J.P.C., and come to a quick decision. At the moment we are back on the production of 1938 models, but we are not going to capture the foreign markets in 1946 with 1938 models. We have to face that position, and the quicker a decision can be made so that manufacturers can get on with the making of new jigs and so on, the better.

I wonder if I could remind the Chancellor that wishful thinking does not get us anywhere. I am anxious for this country to get foreign markets, but I realise that there are other people after those markets with goods at competitive prices, and that we shall only get them in so far as we can offer better value. While I support the Chancellor in his decision with regard to the Purchase Tax in the home market, may I ask him to consider this point? If, when we get into foreign markets, we reach saturation point, or if we do not get in to the extent he hoped, will he consider easing the Purchase Tax in the home market in order that the wheels of this industry do not slow down and full employment will be maintained?

I understand that the most effective maiden speeches are those that are brief. I think that I have possibly said enough for a maiden speech, and I will close on this note. I think that the best interests of this country and our policy of full employment will best be served, if we examine those proposals which will tend to give continuous and full employment. There are many people in this Committee who are interested, exactly as I am and for the same reasons, in this industry, and I hope that when the opportunity arrives those Members will be able to get together to make appropriate representations, because I feel that on this point we are at one in wishing to get the British car market on a sound footing.

6.46 p.m.

Mr. Walker (Rossendale)

Yesterday, as I listened to the Debate on this interim Budget, an hon. Member sitting below the Gangway on the other side cited the case of a man with an income of £70,000 per year, and went on to state that this poor fellow was so assailed by taxation that he was left with the beggarly pittance of £5,000 per year. I was very much astonished to hear such a story. In fact, I felt very sorry for that particular poor rich man, and I shall make a sporting offer. If any of my hon. Friends opposite know a few of those chaps who have been so afflicted, who have to pay so much that they are living in a state of colossal misery, and who would like to change their position with some of us chaps on this side of the Committee, we would be quite prepared to consider the proposition.

This is my first speech in this honourable House and my mind goes back to my younger days when a Budget representing an expenditure of £300,000,000 a year was regarded as an epoch-making event. When I come to look at the amount of expenditure we have to meet to-day, namely, £5,560,000,000, it appears to me, as one who only a few days ago was a man in the street and now happens to find himself a Member of Parliament, to be a tremendous sum of money. Therefore, because we are dealing with these big figures, we must have big things to help us along. One of the things I had hoped for, and which I am very glad to find has been incorporated in the Chancellor's proposals, was an increase in the personal allowances to taxpayers. They may not count so much in the opinion of some of our opponents sitting on the opposite Benches, but I have been brought up in trade union work, I am a trade unionist, and, therefore, have always had to work for a weekly wage. My idea of income has not been in thousands or even hundreds of pounds, but in shillings per week. I started my working life at 26s. per week and gradually, through collective bargaining and the help of the trade union, my wage went up to somewhere in the neighbourhood of £5.

Let us see what these proposals mean to a man earning £200 a year. I am quoting the figures given in the Financial Statement, and I find that a single man earning £200 a year gets a relief of taxation from £3210s. to £13 10s. That is somewhere in the neighbourhood of 7s. 4d. per week, whereas a married man gets £13 reduction in his Income Tax, equal to about 5s. per week. These amounts may appear to be very small indeed, but I have recollections, as a member of a trade union executive, of spending many hours at one side of a table with the employers on the other side trying to get an increase of a few shillings on our weekly wages. Therefore to me the benefits that have been conferred are substantial and really very helpful, and I am quite certain that this Budget will produce on the minds of the working people a very happy effect indeed. The impression will cercertainly be created that in its first Budget the Labour Government is travelling on right lines. A short time ago an hon. Member on the opposite side said that this Budget was a tonic. So it is, but there is something behind all this. It is only the first dose of some of the great tonics that will be produced, and we believe that before this Labour Government has finished we shall be able to produce Budgets, conditions and legislation which will simply revolutionise the ordinary every-day life of the working class community.

I rose to speak with the idea in mind of mentioning one particular phase of Income Tax. A few years ago I made application for my old age pension, for which I have paid so much every week, and when I came to make out my Income Tax return the following year—I do not want the Committee to run away with the idea that I have £5,000 a year coming in, or anything of that sort, but I have sufficient to be obliged to make out Income Tax returns—I got the surprise of my life. I had my tax return sent back to me with a note saying that I had to put down the old age pension. Evidently the old age pension was taxed. What does that mean so far as I am concerned? It means that to me, and to any other pensioner whose old age pension is taxed, the 10s. pension is only worth 6s. 9d. Now suppose—and I am bound to take it as being correct, because it comes from the other side—that the value of the £ is only 8s. 4d. My 10s. pension is therefore only worth 4s. 2d. When the whole thing is worked out, therefore, instead of coming out of the post office with a ten bob note, I come out with 2S. 9d., and that is the fate of a good many old age pensioners to-day. I want the Chancellor of the Exchequer to take particular note of this one fact, and I ask him whether he cannot make the old age pension tax free, in a future Budget at any rate.

Along with everybody else I congratulate the Chancellor upon introducing this splendid Budget. It is a people's Budget, it will be appreciated and accepted to the full, and the people who will benefit by it will be very glad indeed to be relieved of some of the burdens that they have had to bear for a few years past Not only that, but I can conceive that it will be of benefit to the employers as well, for they will have a bit less work to do. I wish the Chancellor success in the great work to which he has put his hand; this is an initial Budget, we look upon it as a great Budget, and it will make this country feel that when on 6th July they voted overwhelmingly for a Labour Government they did the right thing. If we carry on on these lines I can see that in the years before us, there will be a huge majority here of those who are prepared to accept and carry out the ideas of the people in making life the thing that we all want it tobe—something that is worth while, something that is noble and something that people will enjoy.

6.56 p.m.

Mr. Marlowe (Brighton)

It falls to me to have the pleasure of congratulating the hon. Gentleman who has just spoken and the hon. Gentleman who preceded him. So far as the hon. Member for Yardley (Mr. Perrins) is concerned, the House is always pleased to hear some one who knows the topic about which he is speaking, and I am sure we shall look forward to hearing him speak in this Chamber again. I would like to join in these congratulations the hon. Member for Rossendale (Mr. Walker) and say that we noted his forceful audibility, which is a very good quality in this Chamber. We shall also look forward to hearing him again.

The Chancellor has been congratulated on his Budget, and it would be churlish not to admit that the eloquence and lucidity of his presentation of it were remarkable. The hon. Member for East Aberdeen (Mr. Boothby) opened his speech to-day by saying that he could think of only one adjective to describe this Budget, and that was "pedestrian." That is not the way I would describe it. I would say that the proper adjective is "political." It is nothing more or less than a political statement, and the whole framework of this Budget is directed towards political purposes. No one of course can complain if a Government introduces a Budget in accordance with its political faith, but the foremost duty of a Government is to budget for the interests of the community as a whole, and not merely for certain sections of it. I want to justify myself in describing this as a political Budget. Let us take three points which illustrate what I have in mind. The first is Surtax. The Chancellor has told us what his proposals as to Surtax are, and let no one think that I have any objection to his increasing the Surtax if it is necessary for revenue purposes. It is, however, quite clear that in the step he took on that tax the Chancellor had no question of revenue in mind. He is hoping to raise by this change what is, by modern standards, the trifling sum of £7,000,000 a year. Of course he knows perfectly well that there are a thousand and one ways in which he could raise that sum. The Chancellor's dealings with Surtax were, of course, for no other reason than satisfying hon. Gentlemen behind him that he was carrying out their policy of soaking the rich. There was no other object in it at all, and it was not worth doing except for that purpose.

The second point is the relief of burdens in the lower income levels. No one is more pleased than I that the lower income levels should have some relief, but what the Chancellor has done, if you take the case of the average family man, has been to remove from the field oil Income Tax millions of people who were formerly within the range. I say it is a bad thing that people earning, it may be, up to £10 a week should be taken out of the Income Tax field altogether. What the Chancellor has done by this manoeuvre has been to perpetuate the idea, which we had hoped might have been abolished, that there is a world of what the present President of the Board of Trade once called the "we" and the "they." The Chancellor is perpetuating also the idea that there is somewhere in Whitehall a hoard of gold into which people can dip for all they want without ever putting anything into the pool. The whole idea is the very negation of the principle of the Beveridge Scheme, which is that for the benefit they expect to receive all should contribute. I deplore the removal of large sections of the community from the Income Tax range. I am only too glad that they should pay very little, but I think it is a good thing for people to realise that, living in a State which gives them many benefits, they should subscribe towards those benefits.

The third point I wish to make is that the Chancellor, having removed from the Income Tax field this vast number of people, is not concerned any further with the earned income rebate. He is doing something to which I object; he is relieving the lower income levels and retaining the burden on the unhappy middle class. I am not defending the rich, who, I have no doubt, are well able to look after themselves. I do not want to add to the burdens of the poor. I am here to speak on behalf of the hard-working, much wearied middle class. They are the people who have the hardest struggle in life. They are the people who have the day-to-day fear of insecurity haunting them, the fear of losing their jobs—

Mr. Gallacher (Fife, West)

Can the hon. and learned Gentleman produce any member of this hard-pressed middle class, who get the worst of it, who is prepared to change places with a miner?

Mr. Marlowe

Unfortunately, we live in a world in which people have different income levels, and I am merely representing to-night the interests of that particular section of the community which does not get all the free benefits which are available to people in the lower income levels nor has the wealth available to those in the higher income levels.

Mrs. Nichol (Bradford, North)

Will the hon. and learned Member define more closely what he means by the middle classes? The term is such a nebulous one.

Mr. Marlowe

I should have thought it was a well-recognised term, but as we are talking on financial matters, I should say those who have between £800 and £1,500 a year. Those are the people who carry a very heavy burden. There is no State aid for them when they lose their job, no free medical attention when they are ill. They are the people who go to work day after day in terror of losing their jobs and with a sense of the insecurity for their families. They are the black-coated workers who, I believe, are the backbone of the country, and they are receiving virtually no benefit at all from this Budget compared with what is being received by those in the lower income levels. That is why I do not join in the general chorus of approval that has greeted the Budget. I listened to the Chancellor as, I thought with a smile of false geniality, he told us what he proposed to do, and I wondered when he was going to hold out some hope of relief for these unhappy people. He rather gave me the impression of a door-to-door traveller who is ingratiatingly endeavouring to satisfy the customer that he is getting value for money. I say, on behalf of the great middle class, that they are getting very little out of this Budget and I hope the Chancellor will, before long, give some relief to these people who bear heavy burdens so patiently and so uncomplainingly.

7.5 p.m.

Major Cecil Poole (Lichfield)

It is so long since I spoke in the House or in Committee that I almost feel tempted again to crave the indulgence of the hon. Members in an ordeal which is nearly as bad as that of making a maiden speech. I am, however, comforted in the knowledge that in these two days of Debate there have been so many speeches, both from new Members and old Members, that most of the points on which I might have spoken have already been covered, and therefore, it is not necessary for me to take up much of the Committee's time.

I think the concern of the hon. and learned Member for Brighton (Mr. Marlowe) about the Budget is not due to anything contained in the Budget or not contained in it. The statements he made proved abundantly that he has not read the Budget statement or consulted the financial tables that have been issued; if he had, he would have found that the very class for whom he was pleading are receiving very substantial benefits in the reduction of taxation. I am afraid his resentment at the Budget was simply caused by its having been so abundantly popular, not only on all sides of the Committee, but throughout the country. I think that is the reason he is so sorry about it.

The hon. Member for Orpington (Sir W. Smithers) said that the Budget marks a milestone. At the time he said that, the right hon. Member for Woodford (Mr. Churchill) was sitting on the Front Opposition Bench, and I thought the hon. Member for Orpington had made a mistake and had really meant to say, not a milestone, but a millstone, because that was exactly what the right hon. Member for Woodford warned the country the first Labour Budget would be. Consequently, it must be a great disillusionment to hon. Members opposite to find that the first Budget of the Chancellor in the first Labour majority Government has proved so popular.

I do not want to say anything further by way of extolling the Budget. What I have to say is perhaps in the nature of criticism. We have been told that this is a Budget for the common man, and undoubtedly it is directed principally to the small man; but there is in this Budget something for everybody, the small man, the middle man, and industry. But I do want to say that relieving the small man of some liability is not the only way of helping him. I believe the best contribution we can make to the welfare of the common man is to guarantee for him continuity of employment at the best possible rates and conditions, and I feel, with many other hon. Members who have spoken from both sides of the Committee, that one of the most certain ways of guaranteeing to the common man continuity of employment in good conditions is to be found in speedily tackling the problem of an extension of our export trade. It is to that aspect of the Budget proposals that I want to turn my attention to-night.

An hon. Member below the Gangway spoke this afternoon of narrowing the gap between our expenditure and our income, and said that as far as he was concerned he would keep the gap open and would make no attempt to close it. All of us know that the gap cannot be closed for a few years, but I want to see the gap considerably narrowed. The only way we can narrow that gap is by our export trade and by capturing and holding export markets. Everyone in this country wants to see returning to our shops that wider range of articles and that greater supply of small things that we must import, but which may help to make our life a little more pleasant. The bringing in of these things from countries overseas to make the difference between the gloomy utility life of war-time and the something a little better which we associate with peace is bound up with our ability to export. Here we come up against the problem of saving. The greatest contribution the people of this country can make during the next two or three years is to limit their spending, so that there can be the largest possible proportion of our productive capacity available for the export market.

I want to ask the Chancellor if he is satisfied that he is doing all that he might do to encourage the export trade. In particular, I am concerned with the small manufacturer. This is not something which can wait until the next Budget in April next or until 12 months next April, but something in which speed is the essence of the contract, and unless we can act quickly, we shall not be successful. I again ask the Chancellor if he is satisfied that everything is being done. I know that a contribution has been made, but many small men who have a contribution to make to our export trade are finding considerable difficulty. They are in difficulties for want of capital. I ask the Chancellor if he is satisfied that the fullest possible facilities exist for the small man to obtain the capital he needs to re-equip himself. There is the question of where he shall work and of factory space, which is extremely difficult. The Chancellor, if he wants to do something for the export trade, should talk to his colleague at the Board of Trade and tell him frankly that the answer to all the questions on factories for export trade are not to be found in telling people to go to the development areas. With all due respect to the Distribution of Industry Act, which I supported, and still support, it is not the answer to all our problems and it is not politics to direct all industry into the development areas.

Many industries are desirous of exporting to the devastated Continent of Europe as soon as possible. They cannot be told, when they must be in production at the earliest possible moment, that they must go to an area where there is no technical advice and no skilled labour, and where they must start from rock bottom and train their own people, because there is not the time in which to do it. These people must be in production within the next few months. Therefore, the Chancellor, in consultation with the President of the Board of Trade, ought to tackle this question in order that, in areas outside the City of London, steps could be taken to make available factories to people who lost their factories during the blitz and who desire to do something to capture export trade. Let him turn his eyes towards land along the Barnet by-pass, most of which is in the ownership of one man, who has cornered the market there and bought agricultural land at £200 an acre, for which, if you should want a little on which to put a factory, you may be asked to pay £4,000 per acre. The Chancellor, therefore, might consider the taxation of land values.

I will now turn to one point of criticism which I have to make, not perhaps so much of the Chancellor's Budget statement, as of what I fear the Chancellor is going to bring upon us in later days. I do not want to anticipate any legislation which there will be further opportunities of debating, but it is not inopportune to call attention to the very desirable action which the Chancellor took in reducing bank interest. I have always felt that it was wrong that a man who had amassed consider able wealth in industry should then resort merely to the processes of the usurer by again placing his money here or there or somewhere else and expect to continue to gain a second or a third reward without making any further contribution. I agree with the reduction in bank interest, but I want to know on what advice—

Sir Patrick Hannon (Birmingham, Moseley)

On what grounds does the hon. and gallant Member suggest that the man who has made money in the way he is presenting to the Committee resorts to usury? What does he mean by resorting to usury?

Major Poole

I should have thought the hon. Gentleman would have known what I meant, when I said a man was resorting to usury, was the placing of one's money so that a second interest was obtained.

Colonel Oliver Stanley (Bristol, West)

Like War Savings?

Major Poole

Not necessarily War Savings, which are a primary investment. In any case, it does not alter my argument a bit. The point I was seeking to make was to draw a parallel between this action of the Chancellor of the Exchequer, and his proposed action in the Bank of England Bill. It is not my intention tonight to discuss the Bank of England Bill, but it seems to be out of harmony that the Chancellor of the Exchequer should, with one hand, do this, and with the other hand give to the people who have successfully held to ransom the people of this country and have for 20 years been able to draw 12 per cent., sufficient stock at 4 per cent. to enable them to continue in perpetuity to draw this 12 per cent. they have drawn for so long. The only way I can illustrate it is by saying that it is as if one has had a succession of burglaries in one's house and has found almost every week some valuable piece stolen from one's silver cabinet. This goes on for a period of time and one day you catch the thief and get hold of him by the scruff of the neck, and say to him, "I have you now and I propose to deal with you. You must not do this any more. I am going to make it so that there will be no need to do it any more, because I shall put all the silver each night on the stair and you can continue to come and take exactly what you have been taking in the weeks gone by." That is what the Chancellor is doing. I want to warn the Chancellor that he is going to be in for stormy weather if he pursues this line, because it is one to which I am afraid many of us will not be able to subscribe.

May I make a final appeal to the Chancellor? I appeal to him to give us one extension of his remission of Purchase Tax. He has gone so far as to give us stoves, cookers and refrigerators, and this will be a great boon to many people as well as a great saving in the capital cost of housing. I ask him to go a little step further and remove the Purchase Tax from towels and curtains—simple things, but they mean so much to the women who, for six years, have been dyeing the old curtains that are falling to bits. After all, most women are house-proud, and, after six years of blackout and of struggling along and making do, a little remission on these things, towels, curtains and such other household commodities as are in common use day by day, would mean very much to the women of this country. I ask the Chancellor if it is not possible for him to meet us in this way.

It is a good Budget. On these Benches, we are very well pleased with it, and we hope it is a foretaste of still more and better Budgets to come as the years go by, and this party continues to govern this country—not for five years only, because this is only the first five years of the plan. We look for Budgets that will continue offering help, greater freedom and a fuller life to the people of this country.

7.22 p.m.

Mr. Cuthbert (Rye)

In seeking the indulgence of the Committee for my first speech, I would say that I am going to be very brief, because I am quite sure that your patience, Major Milner, has been well tried this afternoon by one hon. Member after another, like myself, inflicting their maiden speeches on you. I am going to try to stick strictly to the Budget itself. The right hon. Gentleman who opened the Debate from this side of the Committee covered, I think, nearly every point in our minds. There is just one point which I would mention about this Budget, and that is that I will continue, from this side of the Committee, to praise the Budget which the Chancellor has produced. One realises that it is an interim Budget, and I disagree with the hon. Gentleman on the Front Bench yesterday who said that when praise was given from the Tory Benches there was something to be distrusted about it. I do not see why that remark should have been made, because I think a Tory, and any right-thinking man, will give praise where it is due. I think remarks like that only tend to increase the differences between one side of the House and the other.

I was returned with a mandate from my Division, and it is quite a big one: The people there wanted our great war leader, the right hon. Gentleman the Member for Woodford (Mr. Churchill), returned in a Coalition Government. I agree, and I think most of my constituents would agree with me, that this was no time for party politics. Things were much too serious, and it is a great pity, to me and to many of my constituents, that we have got party politics back in this House. However, we have got them back, but I do hope that, in future, into the discussions which will take place from one side of the House to the other will be instilled that spirit which achieved such wonderful things during the most critical time of our history. We still have a critical time in front of us. Let us, therefore, drive forward in that spirit and make a united effort. We may have our differences, but we can get down to a common feeling that what the Chancellor has done is to produce a very fine Budget for everyone.

With regard to the Budget itself, there are only two points which I wish to mention. The Chancellor told us about the cancellation of post-war credits after April next, and he also, rightly, stressed the danger of inflation. I would point out to him that, in the case of the smaller salaried people, as we have just heard from an hon. Member on the other side of the House, it will put their cash standing a little higher, I am not against that; nobody is, but I would draw the attention of the Chancellor to his own remarks on inflation, and suggest to him that the only way to cure it is to get the wheels of industry going again and production going strongly, so that, when the money is placed in their hands, the goods will be there on which they will be able to spend it. My second remark is that a very serious point was brought up by the ex-Chancellor when he said, and I entirely agree, that the worry, from our side, was not so much how the money was to be raised as the other side of the ledger. We have heard very little of the expenditure side, but we were very worried indeed to know that the expenditure, as budgeted for by the right hon. Gentleman last April, when he budgeted for war expenditure, is still going to be about the same. I do not understand that, and I think many hon. Members on my side of the House will not understand why that is so. I think it is most essential that the Chancellor should give us some hope that that expenditure can be cut down.

I think that, so far as myself and my constituents are concerned, those are the only two points which I wanted to raise on the Budget, and I hope a representative on the Front Bench will be able to give me a reply. There is, however, one point which I picked up yesterday in the speech of the Financial Secretary which has worried me and I think it will worry a good many people in the country. In speaking of the post-war credits, he said that there were people who believed they would never get them. I hope that is not going to be spread about. I will quote from Hansard what the Financial Secretary said: 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 I think can be taken as definite." [OFFICIAL REPORT, 24th October, 1945; Vol. 414, c. 2097.] I do not think we want any words like "I think" about it. It is a very definite thing, and our people are expecting it, and, indeed, have need of it. There are many people with small incomes who are waiting for the post-war credit, in order, perhaps, to redecorate their houses, re-clothe themselves or replace the worn-out utensils in their kitchens, so that it is very necessary that there should not be any doubt whatever in the minds of the public that that post-war credit shall be given to them in some form or another.

I would like to say that I have heard a lot from hon. Gentlemen on the other side of the Committee about a mandate from the people. I would ask them not to forget that we, on this side, also have a mandate. As one goes into the actual figures of the percentage of the population who voted, one finds that the party opposite received their mandate from 11,000,000 people—a very large number, undoubtedly—but we, on this side of the Committee, collectively had 13,000,000, so that we cannot see how they can say they have a mandate from the whole of the people of Britain. We have our mandate as well, and I hope that it will be in the spirit which I have already indicated to the Committee that we shall work together in unity to help, not just the people of the party on the other side or the people of parties on this side, but the great people of Britain, whom we all represent.

7.30 p.m.

Lieut.-Colonel Sir Walter Smiles (Down)

I think we all enjoyed listening to the previous speech, for it was masterly, eloquent, and expressed very forcibly sentiments with which I think everybody in the Committee agreed. I am sure all of us here are looking forward to hearing the hon. Member for Rye (Mr. Cuthbert) speak on many other subjects. I would like to pursue the remarks made by the hon. and learned Member for Brighton (Mr. Marlowe) who referred to the middle classes. The hon. Lady the Member for Coatbridge(Mrs. Mann) asked what he meant by "middle classes" as it was a very nebulous term. I should say that the term refers to those with incomes of about £500 or £600 a year. I am not thinking, of course, about the Surtax payer. It must be remembered, too, that there are many people on this side of the Committee who do not pay Surtax, and there are some on the other side who do, so I do not think one can divide the two sides of the Committee into those who are Surtax payers and those who are not.

I am thinking of the man with about £500 a year who has made great sacrifices all his life to educate his children. I know of one who was a foreman shipwright in a Glasgow shipyard. One of his sons is here now, and he has told me himself that it was due to the sacrifices made by his father and mother. It is a great thing for brains and ability and grit to have a chance to come up from the bottom. I can remember my own grandfather putting into my hands a book about the vicissitudes of noble families. I can remember reading in it that a descendant of "The Kingmaker"—the Earl of Warwick—was a saddler in Leicester, and another man descended from Royalty was driving a cab in London. I think it is good for a country when hard work is rewarded. And that is where I think the Chancellor has failed in this Budget. He has not made proper allowances for earned income, and I am very disappointed that we have not been able to return to the pre-war allowances on earned income.

Returning to this man earning £500 a year, I would say that he perhaps sends his two sons to the local grammar school and his daughter to the high school, having scrimped and saved to give them a chance, and now, after six years of waiting, he still feels that he is being unfairly penalised in tax. Perhaps his sons may have been 18 or 19 years old when the war broke out and they enlisted in the Royal Air Force and the Army and distinguished themselves, rose from the ranks, and became a Wing-Commander and a Major. Now they are 25 or 26 years old and they will be discharged with their war gratuity. Their capital consists of their brains, their courage, and their energy. What would you say to these people if they asked your advice, "What shall we do now?" I think the Chancellor may be a great Imperialist and wants to encourage emigration because there are far better chances in our Dominions and Colonies than there are in this country. For instance, in Southern Rhodesia and South Africa a bachelor does not pay income tax until he is drawing £500 a year. While I think these young men will have a better chance in our Dominions or Colonies than here, it would be a very dangerous thing if all those fine young fellows left us; admittedly they would still be in the British Empire but they could do useful work here.

In the "Daily Telegraph" to-day there are two letters, with tables showing how the new Budget presses hardly on the married man with from two to five children. He will actually have to pay more income tax next year than he will pay this year. That, of course, is due to their being no post-war credits. Some of those tables show that a man with £1,000 a year and two children had a post-war credit last year of £31 10s. This year he will save £28 7s. 6d. in Income Tax but he will actually have to pay out £3 2s. 6d. more. That is a point to which I think the Chancellor should address himself—to look after the married man with children whose income is all earned.

Another point that presses very hardly on people with smaller incomes is the cost of travel. We all want to see our people getting into the fresh air of the country, away from the slums and the crowded streets, with a chance to breathe some fresh air at night and at week-ends. There are some people working in London who live outside, but they are paying up to £30 a year m travelling to and from their work. I would suggest that in his next -Budget the Chancellor might consider giving those people a sum of not more than £30 a year for this purpose. I am sure it would be greatly appreciated, and it would encourage our people to live a healthier life.

Where can the Chancellor make his economies? I would suggest in the first place the temporary non-industrial civil servants. I put down a question to the Ministry of Aircraft Production about three weeks ago and the reply was that there were now over 16,000 temporary civil servants employed in his Ministry. I believe that we are not making one-tenth, or possibly even 100th, of the planes we made two years ago, and we do not want all these civil servants to look after the present small output. I was in the Civil Service myself for a bit, unpaid, and I learned something of what went on there. The great thing was to get as many clerks under you as possible and, when you had sufficient, your salary was raised and you were given a carpet in your room. I was informed this was the test of your ability and of your pay. The first thing that was done when people went into a room, I understand, was, to look to see whether there was a carpet down or not, so that they knew with what respect to treat the occupier. I believe people in Harrogate, where the Ministry of Aircraft Production has a big Department, are fighting to get out of the Civil Service into productive work and that every obstacle is being put in their way. I hope, therefore, that the Minister of Aircraft Production, if he reads this—or the Chancellor of the Exchequer might speak co him, to see if he can reduce the number of temporary civil servants in M.A.P.

Other hon. Members have spoken about the discrepancy between the amount we get by taxation and the amount we are spending. I think all of us, with perhaps one exception, have had Savings Weeks in our constituencies. I did the same as probably 99 per cent, of hon. Members on this side—I did my best to get as many savings given to the Chancellor as possible. I said this was not a party affair, it was a national affair, and it was up to us all, in this period between war and peace, to subscribe all we could to help the country. There is no doubt, however, that people are thinking, and if they see that our expenditure and our income do not balance, when the next Savings Week comes along, they will not be so ready to lend their money.

I am very glad indeed that the Excess Profits Tax has been reduced. Hon. Members on the other side of the Committee have spoken eloquently about the small manufacturer. I would point out to the Chancellor that in India the Excess Profits Tax has only been 66⅔ per cent. and in South Africa it has been 50 per cent.—not 100 per cent. Now if one takes two cotton mills or, say, textile mills, each with £100,000 capital, each earning exactly the same profits say, £18,000. Well, if they made £18,000 over that our people would have to pay it all to the Chancellor, whereas if that mill had been in India they would have had, after five years, £30,000 more with which to re-equip themselves with machinery. So, I hope the Chancellor will give every encouragement he canto our smaller manufacturers so that they can get their plant into good order again.

With regard to the Purchase Tax, I am glad that the Chancellor has reduced it on some articles and on others has abolished it altogether. I saw that it had been reduced to 30 per cent. on hand-woven rugs. I know of a case myself where a church in my constituency wished to acquire a bishop's crozier. By shilling, half-crown and five-shilling contributions they collected £140, but with the Purchase Tax at 100 per cent. it makes it difficult for them to buy the article they require. We are supposed to be a Christian country, and as a bishop's crozier is only sold at very rare intervals the Chancellor might excuse Purchase Tax on it. The Financial Secretary made the usual Government reply on this matter, saying "This is a matter for the Board of Trade." When I wrote to the Board of Trade they said, "This is not our affair at all; it is a matter for the Treasury." I hope now he will consider this case with sympathy. In conclusion, I hope that the Government will speedily reduce the swollen staffs in Government offices who were employed on war-work and allow them to get back to productive peace time work again, and that when considering his next Budget the Chancellor will give more relief to the earned income classes, who are the backbone of the country.

7.42 p.m.

Mr. Callaghan (Cardiff, South)

I listened with great interest to the speech which has just been made by the hon. and gallant Member for Down (Sir W Smiles), and also to some of the speakers from the opposite side of the Committee, and I have found myself in some difficulty. I think there is a certain amount of illogicality in what they were saying. On the one hand, they told us that they were extremely concerned about the desirability of our paying our way. They said that we must balance our Budget at the earliest possible moment. Yet at different points in their speeches we have had requests from them for concessions for one sort or another over and above what the Chancellor has recommended to the Committee. Everyone, almost without exception, has asked why we cannot have the difference in the earned income relief put back again. I should have thought that they had answered that question themselves. It is surely because the Chancellor knows that the cost of such a concession would be beyond the capacity of his Budget to bear at the present time.

We could all make cases for relief in one direction or another. Nobody likes Income Tax at 9s. in the £, but at this time we must moderate our requests. I do not understand the attempts to fasten on to the earned income relief, and claim its restoration at this moment as though it could be done by a snap of the fingers and as though it would cost the Chancellor nothing. The cost of restoring the difference between earned income relief of one-sixth and one-tenth on all salaries up to £1,500 would be considerable, and I say in all seriousness to Members opposite that they should temper their requests for restoration of the earned income relief by reference to that consideration. I think we must accept the fact that the Chancellor has considered this matter and has left it out of his Budget for that reason.

I would like to refer to the speeches made by the hon. Member for St. Marylebone (Sir W. Wakefield) and the hon. and learned Member for Brighton (Mr. Marlowe). The hon. Member for St. Marylebone told us that taxpayers would be worse off under this Budget. If that is so, then, to me, English has lost its meaning, because I invite him to turn to any part of the Supplementary Financial Statement which was issued yesterday and show me where that is so. I picked out two illustrations as he was speaking, but there are others. A single man who is earning £200 a year is having his Income Tax reduced from £32 10s. to £13 10s. He will take home an extra 7s. 3d. per week. How can he be worse off? It is nonsense to suggest it. A married couple with one child, whose income is £300 a year, pays 10s. a week at present: in future, they will pay approximately 2s. 3d. The man in this case will be taking home an extra 7s. 9d. a week. Is that a loss? I know what the hon. Member was trying to say. It was that if you add the post-war credit the man will get some time in the future then it is a loss to him in the long run. But I submit that 7s. 3d. in the pocket next April is worth 7s. 6d. in the pocket in perhaps four years' time. We must retain a sense of proportion in this matter. It should not go out from this Chamber that on the whole people will be worse off as the result of this Budget.

The hon. and learned Member for Brighton said that this was a political Budget. I suggest that it is not only a political Budget, but an economic Budget. It combines both aspects of our life in that respect. He said that the increase in Surtax was so petty that it ought not to operate, and that it was clearly a measure of class legislation. I can only assume that the hon. and gallant Gentleman did not hear or read the Chancellor's speech. When he introduced the Budget, the Chancellor made it clear that he is making this addition to the Surtax in order that the Surtax payer shall not have a proportionately bigger relief than the small Income Tax payer would get. We must get these facts right if we are to consider this matter dispassionately. That is the whole purpose of the increase in Surtax, and the Chancellor demonstrated the truth of that by increasing the Surtax by stages of 3d., 6d. and 9d. so that it operates in a progressive way right up the scale.

The hon. and learned Member also said that the middle class for whom he appealed were getting nothing out of this Budget. One of my hon. Friends asked him what he meant by the middle classes, and he said people with a top limit of about £1,500 a year. Can he have read the table which the Chancellor issued before making such a statement? If he takes the case of a married couple with two children, whose income is £1,500 a year, I observe that the husband is getting £71 out of this Budget. He says that the working-class are getting more than the middle-class. Let him look at the top of the table. A married man with two children, getting £350 a year, has been paying £24 in income tax, and now he will-be only paying £5; that is £19 in his pocket as against £71 in the case of the middle-class man. I suggest that hon. Members should make certain of their facts before they present them in the form in which some hon. Members have presented them to-night.

I would like to say a word on the subject of the staff of the Inland Revenue Department. I am the assistant secretary of the Inland Revenue Staff Federation. I am a paid employee of theirs, and I have their welfare very much at heart. I want to draw the attention of the Chancellor of the Exchequer and the Committee to something which I know the Chancellor is aware of already: the heavy overwork from which the staff of Inland Revenue are suffering and have suffered for some years. The hon. and gallant Member for Down asked us to get rid of temporary civil servants in one of the Ministries by the employment—

Sir W. Smiles

Not at all. I said I thought it would be an excellent thing if they transferred some of the civil servants from the Departments where there is not much work to do, now the war is over, to the Treasury, where, I believe, they are very overworked.

Mr. Callaghan

I hope that the Chancellor of the Exchequer will keep the hon. and gallant Member's suggestion in mind, because I am sure that the Inland Revenue will be delighted. He went on to say that he understood the way to get an increase in pay in the Civil Service was to get as many clerks under you as possible, and then the increase came along. He cannot have had money dealings with the right hon. and gallant Member for Gainsborough (Captain Crookshank), the former Financial Secretary, with whom we have had tussles on many occasions, in this respect. The Treasury keeps a very tight hand on all increases of staff and all increases in pay, as I, as a trade union official, know to my cost. This question of overwork in the Inland Revenue is becoming a most serious problem. They are suffering from the psychological effect of continuous arrear of post. They are labouring continually in an attempt to catch up with an impossible number of letters arriving from Income Tax payers every day. I think big measures will have to be taken if this jaded and tired staff is to cope with the burdens which will still have to fall on them during the years to come. There is a great shortage of experienced staff.

They are also suffering from poorness of accommodation and equipment. I urge on the Chancellor of the Exchequer the necessity of providing them with reasonable accommodation and equipment. I could give many illustrations. For instance, at the Harrow office in North London, there are six clerks reporting there for duty every day, who have work given to them, which they take home to do. That is not good administration, you cannot run an office efficiently on that basis, and I am quite sure that the War Office, for example, would not put up with it. If they were in that position, they would soon requisition a house, and then questions would be asked in this House as to why it could not be released. I think, an the question of priority of equipment and accommodation, that the Inland Revenue, which is a most important Department again, now that the war is over, must have better treatment than in the past few years.

It has been described as the "mining industry" of the Civil Service, not only because the Treasury digs deep into the taxpayers' pockets but also because of the feeling of frustration and tiredness, and the feeling that the staff have not had their merits recognised which has been characteristic of this Department for many years. Most Ministries have their own Ministers. We have the Chancellor of the Exchequer who is one stage removed from us for we have the Commissioners of Inland Revenue interposed between us and him. We would like to think that he is going to take a more fatherly interest in the Inland Revenue Department now that he has been appointed, than some Chancellors of the Exchequer have done hitherto, so that he may oversee and have detailed knowledge of it at work, and of the conditions under which his staff are having to do their jobs.

What of the immediate future? I congratulate the Chancellor of the Exchequer and the Commissioners on their adroitness and ingenuity in having discovered a method of coding, under which taxpayers will keep the same code numbers, but get a different coupon value attached to them. It is most ingenious, but only what one would expect from the Board of Inland Revenue. The Codification Committee's report of 1936 stated: It is not too much to say that were it not for the good sense and reasonableness shown by the Department in the practical application of our income tax system, and in devising expedients for making good its deficiency and omissions, it would at many points have proved unworkable. The Income Tax machine works not because of statute laws and the case law based on them, but in spite of them. It works because of administrative regulations and practices, and because of the good sense of its operators, that is the good sense of its staff, who have to exercise great powers of common sense in administrating this delicate Income Tax machine. I hope that the Chancellor of the Exchequer will keep that in mind in future months. Our work burden will only be lightened when we have reasonable conditions and a sufficient number of efficient staff, to be able to overtake arrears, and deal with P.A.Y.E. properly. The whole basis of this scheme is that changes should be dealt with as they occur, and not after a lapse of weeks. Where we have fallen down up to the present has been because of the shortage of staff, which has rendered the machine not flexible enough to undertake the changes as they became necessary, as for example, in the case of redundancy in a factory with the work resulting from the dismissal of 500 or 600 employees falling upon the offices in an uneven flow.

On the question of evasion and avoidance, I think the Committee must face up to the fact that there is considerable "avoidance"—I use the word deliberately—and considerable evasion going on at the present time. It occurs at both ends. The small manufacturer or the small business man, at any rate, is one who is responsible for much avoidance—and it can be described by the word evasion. He does not keep books; he does not have records. He returns a sum which is not certified and the result is that I believe this evasion has reached widespread proportions. As the arrears of work are overtaken, these people will find that the Inspectors of Taxes will become much more close in their scrutiny of the returns.

Sir P. Hannon

The hon. Member is making a sweeping attack on the small manufacturer and the small business man. Does he really suggest that he is not discharging his duty to the State by paying his taxes with all the rectitude possible?

Mr. Callaghan

I believe that, in many cases, he is discharging his responsibility. I am equally certain that there are a large number of other cases where avoidance is taking place, either by design or accident—in some cases accident due to ignorance, and in other cases by design.

Sir P. Hannon

I apologise for interrupting, but I must repudiate the charge against the small manufacturer and small business man of this country that he uses any means possible to try to avoid his obligations to pay taxes.

Mr. Callaghan

The hon. Member can, of course, repudiate the charge, but I would prefer to stand by the generalisation I make.

At the other end there is the big man who is living on his expenses sheet. I do not weep when I hear that the Surtax has gone up. The expenses sheet of the big business man covers a multitude of sins. There are people living on their expenses every week and every day. May I repeat that old chestnut of the three business men who were dining at an expensive West End restaurant? When the time came for paying the bill, the first man said, "Permit me. I am a Surtax payer, a heavy one, so three-quarters of the amount will be borne by the Chancellor anyway." The second said, "Oh, no, please allow me to pay the bill. My company is paying E.P.T., so the whole amount will be borne by the Chancellor through my expenses sheet." The third man said, "You must allow me to pay. I have cost-plus contracts, so I ought to make at least 25 per cent. on the transaction." It is an apocryphal story, I have no doubt, but it has more than a germ of truth behind it. It is something to which the Inland Revenue must pay considerable administrative attention.

Sir P. Hannon

I do not think that the Committee ought to be carried away by the suggestion which the hon. Member makes that there is some sort of organised effort by business men and manufacturers in this country, to get off paying Income Tax. The particular story he quotes to the Committee about the three gentlemen enjoying themselves at the expense of the Chancellor is without a shred of foundation.

Mr. Callaghan

I prefer to leave that to the judgment of the Committee. I only wish to say in conclusion that the Income Tax machine is old and needs overhauling. It is still based on an Act of 1842, which itself looked back to the Subsidy Acts, when limited companies were unknown, no Court of Law had tried to define "residence" and when nobody cared about what excess profits meant or whether they were made. I am not suggesting this as a task for the Chancellor during the next six months, but he can go down to history as a great Chancellor if he will undertake the task of reforming and codifying the Income Tax, so that it can be something which will be more flexible and will more adequately reflect the fiscal machine of this country.

8.3 p.m.

Captain Crookshank (Gainsborough)

After two and a half years at St. Martin's le Grand, when I became almost a Ministerial Trappist, I feel almost an intruder in the Budget arena to-night. But if my weapons are blunted from misuse it does not make much difference, because there is no great battle about the right hon. Gentleman's first Budget. I may well have forgotten some of the finer points of the financial background, but I think I remember enough of them, after my experience of them—a record experience, six consecutive Budgets—to give credit where credit is due. My first credit would be apportioned between the hon. Gentlemen and the hon. Lady who have made their maiden speeches in the course of the Debate, so many of them that it sounds like a geographical catalogue—including Dovet (Mr. J. R. Thomas), Bury (Mr. Fletcher), Balham and Tooting (Captain Adams), Neath (Mr. D. J. Williams), Wednesbury (Mr. S. N. Evans), Coatbridge (Mrs. Mann), Yardley (Mr. Perrins), Rossendale (Mr. Walker), and Rye (Mr. Cuthbert). All have made their particular contributions of value. I think that we shall not, and the Chancellor will not, early forget the "Amber Light" description of his Budget by my hon. Friend the Member for Bury. Those of us who were lucky enough to hear the hon. Lady the Member for Coatbridge will look forward to her wit again. In my recollection she is the first hon. Lady who has really started out on that sort of speech, and it was very good. Although I did not hear the end of the speech by the hon. Member for Rossendale I am told that he acclaimed the Budget as a real people's Budget. Looking back 20 or 30 years, I think it would have been revolutionary for someone to describe the Budget as a people's Budget when its chief point was the reduction of 1s. in the Income Tax. Times do indeed change.

Every credit is due to the Chancellor for a brilliant Parliamentary performance. I do not want to embarrass him by saying too much. Knowing that we can both wear the old Etonian tie and the Treasury tie, if there is such a thing, it would be too much an old school tie affair. But he has my congratulations on his Parliamentary effort, and not least on his Parliamentary skill in having omitted so many of the things about which we wanted to hear something. We had, indeed, hoped that in his first review of financial affairs he might have told us something about our general economic prospects, and have covered a somewhat wider field than he thought fit to do. If he replies that it is the talks at Washington which prevented him from dwelling too much on that subject, we accept that answer. Probably the same thing prevented him talking about sterling balances, but I would remind him that in due course we, on this side, will, at the appropriate time, require considerable information on both subjects.

We had hoped that he might have said something about out export trade prospects and certainly a good deal more than he did say about the present rate of public expenditure. My right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) yesterday touched upon the necessity for getting down as soon as possible from these high figures of expenditure of to-day. The right hon. Gentleman said that he would introduce the old system of real Treasury control. His predecessor capped that by saying that in point of fact the proper way to do it was that it should not operate on reluctant Ministers, but that there should be co-operation between the Chancellor and the Ministers of the spending Departments, the drive coming from the Treasury through the Chancellor. No one knows better than I and those two right hon. Gentlemen that that is easier said than achieved. Colleagues are not always quite so forthcoming to the blandishments of those who hold the Chancellor's office. It is because great expenditure is still continuing at war levels that I was rather sorry that the Chancellor gave quite such an explosive negative to a question asked yesterday about a possible Committee dealing with cutting down expenditure.

I was taught to be cautious, and it may be that the time will come when the right hon. Gentleman may have to look for some outside assistance in some spheres. I would only refer him to the many speeches made in the Demobilisation Debate on Monday, when officers, Members of this House, experienced in these matters, pointed out that it was almost impossible for the Services themselves to effect economies in H.Q. staffs and military establishments. Sometimes there may be need for outside help, particularly as the Lord President announced on Thursday last that the Government did not propose to set up again the Select Committee on National Expenditure.

The Chancellor of the Exchequer (Mr. Dalton)

There is to be a Committee on Estimates.

Captain Crookshank

I am coming to that. I do not think that a National Expenditure Committee is a suitable instrument now. It is only useful in a period of Vote of Credit expenditure. That we expect to end with this year. Therefore, there would only be a comparatively small period of time in which the Committee would function. If we had, in this House, all the same Members as belonged to it before the Election, there would be no difficulty in setting up that Select Committee, but some of its Members have fallen by the wayside, including its distinguished Chairman, Sir John Wardlaw-Milne. Some of them, as I am reminded as I look at the front bench, have been elevated. Thus the Committee would be a new body, and would take some time to get on its feet, and would only have a short time in which to work. On the whole, I think perhaps the Government are right. The Chancellor of the Exchequer, of course, will be saved the embarrassment of having them report outside their terms of reference, which did occur before now.

The result of all that is that more responsibility is thrown on the House of Commons to deal with public expenditure. There, rightly, the Government have decided to set up a Select Committee on Estimates, and it may very well be that some of its procedure and arrangements might be improved, but we will not dis- cuss that now. We know for a fact that it will be set up. It is of vital importance that this whole question of expenditure, not only from the general public point of view but in reference to the savings campaign, should be considered. We are all agreed that saving must continue on the highest possible level and I am sure that the right hon. Gentleman will be the first to acknowledge the assistance that he receives from all quarters of the House in that direction. My hon. Friend the Member for Eccles made a most interesting speech on this subject last night when he pointed out that there were two motives, the private motive and the public motive for saving. [An HON. MEMBER: "Not Eccles, Chippenham."] I am sorry to have wished my hon. Friend's speech on to another hon. Member, but if I were the hon. Member for Eccles (Mr. Proctor) I should be very glad to have had that speech ascribed to me. In this case it was my hon. Friend the Member for Chippenham (Mr. Eccles), who did make a most interesting speech, conjecturing what might be the motives for saving—personal and patriotic reasons. It is only by genuine savings, as has been rightly observed, that we can get the capital for reconstruction.

Just as there are two sides to every coin so I am sure there are two sides to saving, the positive and the negative sides. The negative, the abstention from expenditure and from buying in the shops goods which, in common jargon, are now called consumer goods, is for the purpose of avoiding inflation. There is the positive side, too, helping to build up, often out of our own capital, so that reconstruction can take place, and the nation can refurnish and rehabilitate the national home. Those are the two appeals which are made in the savings campaign. If people think that the rebuilding and the rehabilitation of the national home is being done in either an uneconomic or an uneconomical way, they will not have quite the same incentive as they would have if the Chancellor should come down here and say, "Every penny is, in fact, most carefully spent. No unnecessary pennies or wastage take place in connection with this matter." He has, by giving the assurance to every speaker on this subject that there is no national waste, very much strengthened his own chance of success through the savings campaign. That is why I say that the re-establishment of the Estimates Committee and the responsibility of every one of us in this House are important, because we are the representatives of the taxpayers. "No taxation without representation" is a very old cry. We have our part to play, but the Chancellor of the Exchequer has a major opportunity. So I hope that the disappearance of the Select Committee on National Expenditure will not, in the long run, do any harm. As it passes from the scene I think we ought to express our thanks to all the hon. Members who worked so hard on that Committee all through the war.

Now I would turn for a minute or two to the financial statement itself and to one or two points on which, on this side of the House, we would like to have replies from the right hon. Gentleman. In fact, there are two questions for the Chancellor and for us to solve. First there is the question whether there ought to have been a Budget at all now, and secondly, if there ought, whether this particular Budget was apt for that purpose. Ought there to have been one? I think, Mr. Beaumont, we would all say, "Yes." Just as as soon as was reasonably possible after the outbreak of war, Lord Simon introduced a Budget which did not bring the full taxation as we afterwards knew it, but showed people the way things were likely to go, so it seems that, as soon as reaonably possible after the outbreak of peace, the right hon. Gentleman was right to give us a foretaste of what was to come. In any case, a further Finance Bill was necessary, because there are various machinery Clauses which had been promised and accepted in the last Parliament. I think the right hon. Gentleman realised that he had an obligation to fulfil.

Whether the Budget is entirely apt rather depends upon the kind of motive which the Chancellor had in mind when framing the Budget. I think at all times when dealing with this subject he would not be far wrong if he kept before him the famous concluding words of the Second Inaugural Address: With malice towards none, with charity to all, with firmness in the right, as God gives us to see the right, let us finish the work we are in to bind up the nation's wounds. If the right hon. Gentleman follows those words of Abraham Lincoln he will not go far wrong, and by those tests, one must admit, he comes out moderately well. One must stress the fact that, apart from the dropping of E.P.T. on 1st January, and the small change in the Purchase Tax, potentially useful, on goods which are not yet being turned out in sufficient quantities to make any difference, nothing happens as the result of this Budget till April. It is very much a delayed-action firework, however much we may talk about it. It is a foretaste. It is a prospect of a meal in six months' time in which we now know what some of the courses will be but not what some of the others may be. They may be better or worse.

So far as that goes, the first point on which my right hon. and hon. Friends would like to hear something from the Chancellor is that we are somewhat mystified why the earned income level is not restored to what it was before it was reduced in conjunction with the creation of post-war credits. One would have thought, this being, as the right hon. Gentleman said, an incentive Budget, that this particular incentive was the greatest of all that you could give to individuals for further production and work. The other changes, the personal allowances and the increased exemption limit, are really alleviations. They are not in themselves intended, as I understand it, as an incentive, unless the rather negative position of not having to pay Income Tax is an incentive.

Mr. Dalton

It is, in some cases.

Captain Crookshank

In some cases, certainly it may be, but to increase the allowance for earned income is definitely an incentive. I think on this point the Chancellor was slightly ingenuous, because he said that all these changes would mean a loss to the Revenue of £322,000,000, and then he set it off by the annual avoidance—he used the words—of Post War Credits of £225,000,000. I have never heard it said that post-war credits, whether they have good or bad points or are an economical and sound proposition, were, at one period of time, to be changed into post peace credits. I had always understood that they were to come to an end as soon as possible after the war was over. What happened when they were instituted was that certain allowances were lowered and a credit in respect of them was given to each Income Tax payer, and it is those which are known as the post-war credits. It may be that there is nothing which can be quoted in Hansard, but I am quite firm in my recollection, having been working with Sir Kingsley Wood all that time, that the intention certainly was that when the time came those particular allowances which were taken into account for post-war credits would be restored and the status quo brought back.

The idea was that what was taken away would be put back. That was the common sense of it. We still do not understand why that is not the case, because the Financial Secretary, when winding up last night, pointed out that the allowances which were now being put back totalled a greater amount than what had been taken away. If there was a greater amount to put back, then there was no reason at all, if the earned income allowance is really of value, why that should not have been put back, instead of making the other alterations first. We should be very grateful if the right hon. Gentleman could explain why this has happened, and why this apparent incentive does not figure in an incentive Budget.

I will not say anything about Surtax, because my hon. Friend made the point so well yesterday. While I used the modified phrase just now, that I am not sure that "malice towards none," which was Abraham Lincoln's first sentence, had really actuated the Chancellor, I would call attention—because it is an important point—to what was said by the hon. Gentleman the Member for Marylebone (Sir W. Wakefield) that the right hon. Gentleman might have a look and see how this affects partnerships. After all, it is not a question of dividend, income, or anything of that sort, but an important factor in some directions of productive energy. At the end of it is the £7,000,000 which the Chancellor hopes to gain, but which, at the present rate of expenditure, is only about the cost of 12 hours. We are spending at the rate of £13,000,000 or £14,000,000 a day at the present moment, so the right hon. Gentleman is not making much out of that. I will remind him about partnerships and would like to hear about the earned-income tax.

The second point on which we would like the right hon. Gentleman to give us an explanation—I know there are other stages, if it does not suit him to-night—is about E.P.T. He will have noted many speeches, including 1he maiden speech by the hon. Gentleman the Member for Blackley (Mr. Diamond) suggesting its immediate abolition. Apparently, that is not taking place, but there are a good many points which I think might be cleared up. My right hon. Friends and I, of course, stand by the words of the Finance Act which the right hon. Gentleman quoted on 23rd October with regard to the section of the Act about preventing the distribution of benefits to shareholders, and the like. That is common ground, but we are not quite clear how far he means to go when he refers to the purposes equally entitled, namely, development and re-equipment of industry. We hope the Chancellor is not going to attach those credits as fixed assets, as plant or machinery. We think he may get into a difficulty if he ties the matter too tightly, because the whole object is to try to re-equip, and get industry going full blast. If he ties the conditions too tightly, he may not achieve that object.

The right hon. Gentleman must remember, of course, that the value of money has changed, and we would like to know whether these refunds would be, generally speaking, available for some of the things mentioned in the speeches of my hon. Friends—re-stocking, research and development, working capital, in some cases intensive advertisement campaigns, or the regaining of contacts for markets overseas, and so on. If he could amplify that a little further, we should be grateful. We should also like to know whether he agrees that E.P.T. should be a tax for the whole period when he is considering deficiencies whether collected at 60 or 100 per cent. The global time should be taken into account, as to when it started and when it ended, irrespective of the rates of tax in the interim period. It was suggested that the payments are to end in 1946. We remind him that there may be cases where that may work very unfairly, as there may be cases where it will run on beyond that period if there is a delay, for which firms may not be responsible, owing to the absence of labour or material to get on with their proper work. If the right hon. Gentleman could amplify that, it would be helpful. My last word on that is that I hope he will make quite clear to the public how these refunds come about.

I was rather shaken to see in the "Daily Herald" that, in spite of the new economic adviser attached to the Government, "in the next few years manufacturers will be given hundreds of millions of pounds." This is not a gift; this is merely a repayment, in the same sort of way as the post-war credits are personal repayments. That gives the impression that it is a dole from the Government. It is nothing of the sort. It is a repayment promised by agreement with Parliament over since this tax was introduced. That is all I can say about taxes. We think the right hon. Gentleman was a bit rash to be quite so positive in his statement the other day about stabilisation. We entirely agree with what my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson), and Sir Kingsley Wood before him, had so much to do with—the policy of it—but when the right hon. Gentleman says his intention is for the next year, at least, or until further notice, to seek to hold the index figure. I do not think his predecessors ever went further than saying that was their constant aim and endeavour. The world being what it is, it may turn out to be very rash to give so sweeping a statement for so long ahead. I hope it will not be, but it would be bad for everybody if it were. I think, perhaps, it might have been wiser to have left it on the lines where it previously stood.

As I said at the beginning, there was no great battle to-day. The right hon. Gentleman may judge for himself, knowing from past experience what a battle is. My right hon. Friend, the Leader of the Opposition, said about the Budget, that he did not think it would do any harm, even if it did no good. We feel that the right hon. Gentleman might, in fact, have gone a good deal farther towards directly helping industry because, if industry and production do not revive with all possible speed, the outlook for our country is not very grand It is up to him. The Chancellor of the Exchequer, when all is said and done, holds the master position on the whole front. He has in his possession, the pass key to the two gates, the one gate leading to the abyss of inflation, the other leading to the sunny garden of peace and prosperity, of national enrichment. It depends on how he uses that key. In my judgment, so far as this Budget is concerned, he has not tried to open either of the gates. He has not really moved at all, so far. Nothing happens at all until April. I reminded the right hon. Gentleman of that at the beginning. What he has done, in fact, has been to get into the car; he has put it into gear, but he has kept the brake on. But in April, as the result of these proposals, some things will begin to move. We all devoutly hope, not only for the right hon. Gentleman's sake—which, he will agree, is minor compared with the other—but for the sake of the nation, that they will move for the better, and it is with that hope that I conclude for the moment, gladly letting the right hon. Gentleman have his Resolution.

8.30 p.m.

The Chancellor of the Exchequer (Mr. Dalton)

We have, indeed, had, compared to some past occasions, a very quiet Budget Debate. There have been many rowdier days, and no doubt old Members of the Committee remember these and new Members will one day recreate scenes of some passion and emphasis. So far, this Budget has been received in the most kindly way in the Committee, in the Press and even on the Stock Exchange. Why, then, should I at this moment, feel other than hopeful and happy, at any rate, about the first impact of my proposals on the public mind? Many suggestions have been made from all parts of the Committee in these two days. I could not between now and nine o'clock deal with them all. Many of them I ought not to deal with summarily now, and I will carefully consider them. They are suggestive and interesting. It is only six months until the normal April Budget, and it may well be that I shall be able to embody a number of the suggestions that have been made. I will go into them with my advisers and see what we can do.

Before I deal with some of the matters dealt with by the right hon. and gallant Gentleman the Member for Gainsborough (Captain Crookshank), I should like to say a word of praise. So many good speeches have been made in these two days that it would be invidious perhaps to single out one more than another, but the last speech but one, made by my hon. Friend the Member for South Cardiff (Mr. Callaghan), greatly interested me and those who heard it, because he comes here with considerable expert knowledge of an important branch of the Revenue Service, namely the Inland Revenue. He not only appears, as he frankly told the Committee as the spokesman of some part of the staff, but he also comes with a considerable background of knowledge; and it will be very helpful if he takes part in our Debates from time to time as he has done tonight. One reason why I take up his speech is that he raised one point to which I am sympathetic and which is already being considered. That is with regard to the whole question of the Income Tax law, which has become cumbrous and elephantine. I think it is prima facie reasonable that we should soon have an effective inquiry with a view to simplification and clarification. I am considering that now, though I have not reached a point where I can make a positive announcement. This would be a good time in the passage of years when such an expert body should be set up. It would be a great thing if, within the life time of this Parliament, we could clarify, codify and clean up this, from the Revenue point of view productive, and from the point of view of trade and industry important, branch of the law.

The Washington talks and the sterling balances are matters which at a certain moment this House will want to discuss, and the Government will not wish it otherwise, but the moment has not yet come. Discussions are still going on, and when they have reached a definite point and His Majesty's Government have something to report, then will be the time when we should have an ample Debate. It will be the wish of the Government that views should be gathered from all parts of the House both on the immediate issue of the Washington talks and on the future problems arising from whatever situation results from the talks, and also on the sterling balances and kindred phenomena which have emerged from the war. Therefore, if I say no more about that now, it is not because I do not fully recognise the importance of the subject and the need to have it discussed, but because the time is not yet, and I think the right hon. and gallant Gentleman agrees.

Turning to expenditure, I am, of course, determined, as I hope all the Committee are, that waste shall be prevented. Nobody stands here in support of wasteful expenditure, but there may well be controversy as to where the limits of waste lie, as to what is and is not waste. On that there may well be Debates from time to time. But that wasteful expenditure should be eliminated as rapidly and as quickly as possible, we all agree. I can give an assurance that I as Chancellor of the Exchequer shall do my utmost, counting on the full co-operation of colleagues such as, for example, my right hon. Friend the Secretary of State for War, to help me, now that the war is over, to let that fact be duly reflected in his Estimates and in the general arrangements for defence. I do not, of course, expect the party opposite to wish to press us too-far in the reduction of defence establishments, for we must not repeat the errors made in past years. Subject to that obvious prudential consideration, we should go forward with vigour to reduce expenditure. As I said in my Budget speech: It is essential…that all expenditure which has no national or social justification"— that is as fair a definition of waste as one could have— should be stubbornly forced down."—[OFFICIAL REPORT, 23rd October 1945; Vol. 414, c. 1902.] We will do it to the utmost of our power. We need the support of the House, not merely in the general way in the course of Debates, but through some properly organised committee to assist us in this matter. I am glad that the right hon. and gallant Gentleman said he was in agreement with the decision announced by my right hon. Friend who leads the House some days ago, that, although we did not think that the Select Committee on National Expenditure could suitably now be re-appointed, yet, we did intend to appoint a Select Committee of the House comparable to the Select Committee on Estimates which we used to have before the war. I say comparable with it, but I hope it will be more effective than the old Estimates Committee ever was. As a relatively young Private Member, I sat on the Committee in the first Parliament in which I served, in 1924–29, and it was not as good then as some of us thought it might be made. It did not have, perhaps, the same degree of official assistance that the Public Accounts Committee gets through the Comptroller and Auditor-General. We must not merely appoint a Select Committee on Estimates as an exact copy of what we had before the war; we must see whether we cannot make it a more effective body drawn from Members on all sides of the House in proportion to the strength of parties, and make it a more effective instrument in order to keep a close watch upon the possibility of waste and undesirable and unnecessary expenditure in various directions.

That is a much better thing than the Geddes Committee, on which I had a strong and unfavourable opinion. That is why, when I was asked a Question by an hon. Member the other day whether we would consider re-appointing a body such as the Geddes Committee, I gave what the right hon. and gallant Gentleman called an explosive answer. I only said, "Certainly not," and I meant "Certainly not," because that Committee was composed of people who did not, I think, know their job at all. They destroyed all sorts of things that should have been preserved and nurtured. We do not want that sort of crowd dancing around again. It is a very different matter to draw from this very able House of Commons, an exceptionally able House with exceptional ability in all parts of it, a number of Members, mixing in a good proportion of new arrivals. It is a very different thing to get a body like that, working with such official assistance as we can furnish, and it would be exceedingly helpful and much better than the Geddes Committee.

Perhaps I may be excused from saying more on the subject of expenditure now. It is not possible at this stage to say more except by way of generalities, but in April we shall have a very much clearer picture, and it will then be my duty to give to the Committee a much more detailed review both of what has been accomplished in the remaining months of the financial year and of what is contemplated in the financial year which will then be beginning.

To turn to tax reliefs and how we have distributed them, my hon. Friend the Member for South Cardiff, of whom I have already spoken, demonstrated very clearly—it evidently needed to be demonstrated to some—that the effect of my Budget, broadly, is that as from next April nobody will be worse off, and everybody, in some degree or another, will be better off in terms of taxation, than they are now. The question of the earned in- come allowance has been raised by a number of speakers, first, I think, by my hon. Friend the Member for the Blackley Division of Manchester (Mr. Diamond) whom, amongst others, I should like to congratulate on a very interesting maiden speech. I will be perfectly frank, indeed, I had hoped that I had made it clear in my first statement that I wished to be perfectly frank; as to why, in this Budget, I did not propose to restore the earned income allowance. It would have been perfectly possible to do what has been suggested, on giving notice to terminate the post-war credits, namely, to reconstitute exactly, without any alteration, the status quo of 1941; and I considered that. I do not judge that there is any pledge to do precisely that, but there was a reasonable understanding in the House that when the post-war credits were brought to an end there should be some comparable lifting of the allowances—comparable, but not an exact reproduction of the status quo.

Not only in my view, but according to a statistical study which was made before I reached this decision, the community as a whole, and the lower income groups in particular, do better under the scheme which I am putting forward now, as from next April, than they would under an exact reconstitution of the 1941 situation. I have not only reconstituted the 1941 position with regard to the tax-free allowances for single and married persons; I have done better. I have put the single person into a slightly better position than he was in immediately pre-war years by increasing his tax-free allowance to £110, and with regard to married persons, I have put them, not back to 1941 when the allowance was £170, but to the pre-war position when it was £180. In the third place, I have instituted a graduation of the standard rate in a form which had no exact counterpart in 1941, but which does free the first £50 of taxable income, after allowances have been deducted from two-thirds of the prevailing rate—in this case 6s., charging it only at 3s. in the £.

The effect of these arrangements is that I have been able to clear at least 2,000,000 persons from Income Tax liability altogether. That may be popular or it may not; I am sorry that I was not able to be here when the hon. and learned Member for Brighton (Mr. Marlowe) spoke, but I am told by those who heard him that he thought it was a mistake. Some people may take that view, and if so it can be debated and discussed more fully on another occasion; but I emphatically say that I think the situation was such that in order to give a tonic and encouragement to great numbers of people who had been very much oppressed by war-time Income Tax the best thing I could do was to give as many as I reasonably could a complete lift out of Income Tax liability altogether. I have done that in respect of at least 2,000,000 persons, and I believe it was right. I am confident that if I had merely reconstituted the 1941 position, including the earned income allowance, I could not have cleared more than 1,600,000 persons from Income Tax altogether.

By my deviations from the 1941 position, however, leaving the earned income allowance for the moment as it is and giving these other additions, I have been able to clear a further 400,000 or so taxpayers from Income Tax liability. It was a deliberate decision and I believe it was right. Moreover, a great number of people on varying levels of income who are still liable to Income Tax will do better under my plan than they would have done under a mere reconstitution of 1941, including the earned income allowance. I will not weary the Committee with a great mass of arithmetic, but in the jargon of the Revenue Department we speak of "bands." Within certain bands of income, there are persons who, at the new standard rate, would have done better under the reconstitution of 1941, but there are other, and considerably wider, bands who do much better under my arrangements. It was after close study of how the different sections would be affected that I decided it would be better to leave the earned income allowance as it is for the moment, without, of course, any promise not to put it up again to one sixth later on. That is obviously one of the next possible steps which should be borne in mind. For the reasons I have been seeking to explain, however, I did better for the greatest number of those concerned in the lower income groups by the alternative arrangements which I have adopted.

The right hon. and gallant Gentleman asked also about E.P.T. On this subject the hon. Member for Edgbaston (Sir P. Bennett) made, as he always does, a very sensible, practical and well-informed speech. He and I worked together when I was at the Board of Trade, and I learned to regard him as one of the industrial leaders on whom I could most constantly rely for sensible and good advice, which I often, though, not always, took. I am more inclined to take his advice than that of almost anybody else in that line of business. I have a very high regard for the hon. Gentleman, one of the reasons being that he is one of the industrialists who established a branch factory in a depressed area without being pushed and prodded. He went down to South Wales and helped to provide employment; it was not wholly unprofitable, I am sure, but I respect him for it and wish others had done as much. He raised various points of interest about deficiency repayments and so on, to which I will not attempt a lengthy reply to-night; but I will go very carefully into all that. I am anxious of course that this reduction of E.P.T. should operate in such a way as to give the most powerful stimulus to the resumption of trade and to development of all kinds; when I say "development" I am using the word quite broadly, and restocking, which the hon. Gentleman mentioned, would obviously come within the field of what we had in mind. Of course the Regulations which we propose will need a little working out; we need not be in a great hurry about them, we can take our time, consult people and get a clear picture of what will work best. We do not want these regulations to be such as will hamper anything, except those things which are referred to in the quotation to which the right hon. Gentleman himself referred. We want to hamper the distribution of higher dividends by reason of this reduction, to hamper the issue of bonus shares, and to hamper kindred operations of that sort which do no lasting good to industry, but simply throw a bit of money into the pockets of people fortunate enough to hold shares in the concerns getting the reductions. Subject to that understanding, we are most anxious to consult fully with those who, like the hon. Gentleman, understand the matter and will be able to make suggestions to us. I hope that may be regarded for to-night, without my going into more detail now, as a sufficient and not wholly unreassuring reply.

Indirect taxation has been little mentioned by me and not much mentioned in the Debates; but one or two hon. Members have referred to it, and I wish to say a word or two about it. I have explained to the Committee, which, I am sure, has generally accepted my view, that we must go very slow in tax remissions in the mass, simply because, if we give a lot of tax remissions, we shall humbug and delude people. There will not be the goods for them to buy, and therefore, to give them extra money will plunge us into an inflationary situation. We must be resolute against inflation and take no step that will lead us into it, even though we must run some risks, measuring them as best we can, in the remission of any taxation at this time of shortage. Any tax remission of whatever kind in this period involves some inflationary risk. I have given the Committee my reason for running certain specified and denned risks; but I am not prepared at this moment to recommend the Committee to run any larger risks; and larger risks would be run if there were substantial reductions in indirect taxation at this time. The time for lightening the burden of indirect taxation has not yet come. I have no doubt that, in seeking to give incentives, as I have sought, people are much more stimulated by getting something off the Income Tax in prospect—on the lower level getting off it altogether, on the higher level enjoying a reduction in the standard rate, in addition to the allowances, and even on the highest level enjoying reliefs not wholly negligible—than they would be by my sacrificing an equal amount of revenue in making beer or tobacco a little cheaper at a time when beer is so weak and cigarettes so few. They would much rather wait until the beer on which the tax is reduced is more worth drinking. This is another aspect of overcoming shortage and being able to give a reduction which can be really enjoyed by those who receive it. Therefore, I reserve any proposals for a further reduction in indirect taxation until next April. I make no promise about what I will do next April, but I will go on thinking about indirect taxation between now and then.

With regard to the cost of living, I did intend to be flat-footed about that, for 12 months, because it is essential that industry and the trade unions should know just where they are in this matter for at any rate a defined period. During this very difficult period of transition, it is essential that there should not be any more variables than can be helped. If we can be sure that the cost of living is going to stay put, that at any rate is something on which calculations can be based, and at will tend to minimise disturbance and trouble of many kinds. I said "for the next year at least." I do not think, in view of the circumstances, that is too far ahead for me to be quite specific and unconditional.

I want now to say a word or two about assistance generally to industry. The right hon. Gentleman said that he thought I might have gone further in helping industry. I thought that on the whole there was a number of points which, aggregated together, amounted to fairly substantial help for industry. First, there is the cut in the standard rate; secondly, there is the cut in the Excess Profits Tax; thirdly, there is the Excess Profits Tax refunds; and fourthly, there is the fixing of the appointed day for the Income Tax allowances for research and so forth. I think that those four things, added together, represent a pretty good contribution towards assisting industry to get speedily into full production and thorough conversion. Private enterprise, of course, is on trial. We have got to see what it can do. Here are the chances. I have enumerated them.

We all desire that private enterprise should show itself capable over the great field that will be left to it, even after we have carried out the programme on which this Government and the Labour Party won the Election, which was a clearly defined programme. Over a certain part of the field we intend that private enterprise shall be superseded by public enterprise. That is clearly understood. We hope that over the rest of the field, which is very considerable, private enterprise will go forward, eagerly taking advantage of such assistance as I am giving in this Budget, and which I have just outlined. That will be one of the tests of the years that are coming. I have endeavoured, in the Budget, to make a contribution, which I believe is not negligible, towards assisting industry to get going again; and I honestly believe and hope that that contribution will be taken full advantage of.

Hon. Members will excuse me, in view of the time, if I do not take up the other points that have been raised; but I will deal with them in a suitable fashion at later stages. In conclusion, I want to emphasise once more that I am very conscious of the inflationary risks, and that is why there is nothing until next April. I do not make any apology for that; but since we had to have an Autumn Budget I thought it better, to borrow the right hon. Gentleman's analogy, to open a window in order that people might see through to what we are planning should happen, and that, even though now we cannot go more than a very little way in making immediate remission of taxation, we should get this inflationary risk well in hand. That is essential before we go any considerable distance along the road of tax reduction. I hope that, as the result of a swift change-over from war to peace conditions and as a result of energy and new ideas percolating everywhere, it may be possible, six months hence, to take a rather clearer and bolder view, and, having regard to the inflationary danger, to do then things which it would be very rash and unjustifiable to attempt to do now. I am very much gratified and obliged to hon. and right hon. Gentlemen who have treated my maiden Budget so kindly; and I shall go forward with the hope that next April they will be equally well disposed to what I shall then attempt todo.

Question put, and agreed to.

Resolved: 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.