HC Deb 11 April 1946 vol 421 cc2115-204

Question again proposed, That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance."— [Mr. Dalton.]

3.58 p.m.

Mr. Assheton (City of London)

The right hon. Gentleman the Chancellor of the Exchequer has received so many congratulations on the clarity with which he presented his Budget on Tuesday that I will not weary the Committee or embarrass him by adding to them. The picture which the right hon. Gentleman presented to the country was, to my mind, however, a much more rosy one than the facts of the case justify. There has been a considerable diversity of opinion in the Press. The "Daily Herald" called it "a proud Budget." The" Daily Mail "called it a" no incentive Budget," and described it as "niggardly in conception and partisan in its aims." The "Financial Times" headline was "Soaking the Rich Again."

The figures which the Chancellor presented were based, no doubt, on the best estimates which he could obtain. Knowing the skill of his advisers, I have some confidence in them, but we all know that statistics can be used to prove almost anything and, on this occasion, the Chancellor has, used the figures with which he has been provided, to try to convince the country that the general picture, at any rate so far as home finance is concerned, is remarkably satisfactory. Truth, we are told, is a jewel which has many facets and, if I may be allowed to do so, I should like to present to the Committee the truth as I see it emerging from the Chancellor's figures. Mine is certainly a different view from his. What do his figures show? They show, to begin with, that the huge estimate of expenditure made by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) last year has almost been reached, and this in spite of the fact that this expenditure was planned to cover a full year of war whereas, in fact, a very great part of the year was a year of peace or, at any rate, of transition. To my mind this shows a deplorable lack of control of expenditure, and I would remind the Committee, if I may, that in his two hours' speech the Chancellor said not one word about the need for economy nor the need to curb extravagant expenditure.

Let us now look at the proposals made for the forthcoming year. There was a point in his speech at which the right hon. Gentleman turned to his supporters behind him and said: So much for the past; now let us face the future. "— [OFFICIAL REPORT, 9th April, 1946; Vol. 421, C. 1810.] —almost waving in his hand the Labour Party's election programme. My complaint is that he did not face the future at all. He left it as all Socialists must —in the lap of the devil. The Chancellor gave the impression that he had very nearly balanced. his Budget. What in fact do the figures show? The deficit for the year, as shown on page 27 of the White Paper, is £725 million. Were it not for the receipt of £50 million from the sale of surplus war stores, that figure would have been £875 million. Although the Chancellor's estimates of revenue included such terminal receipts as this, they excluded such terminal payments as war damage compensation, Excess Profits Tax refunds, repayment of postwar credits and any expenditure which has to be financed from the Civil Contingencies Fund. All these items are items which have got to be found, and they were estimated in "The Times" newspaper yesterday as between £400 million and £600 million during the current year. I am bound to say that I think that estimate is rather high, but, even on the assumption that they amount to only £300 million, which I guess is nearer the mark, this figure brings the true cash deficit for the year well above £1,000 million. This makes rather a different picture from that which the Chancellor painted, particularly in the concluding part of his speech when he said that on a certain basis the deficit was reduced to only £300 million.

However, let us look at the bright picture which the Chancellor himself painted and allow him for one moment all the indulgence we can. He claims that he has nearly balanced the Budget this year or that, at any rate, he will balance it next year if he wants to. He admits that the. cost of the social services will rise by £200 million during the next two years, and he hoped for some reduction in defence expenditure to offset that. He envisages, therefore, that he will be in a position to balance his Budget next year.But what a balance! He will be balancing himself on the top of a very high ladder which is not very firmly wedged at the bottom. In fact, it will not be wedged at all—it will be supported by the almost broken back of the poor British taxpayer. The truth is that he is only hoping to be able to balance his Budget by maintaining taxation at the present appalling wartime level. This means that we shall be faced, as far ahead as we can see, with a penal rate of Income Tax and Surtax, with beer taxed at 7½d. a pint, with cigarettes taxed at is. 9d. for 20, and with a Purchase Tax, about which the Chancellor gaily told us on Tuesday, that not only does he intend it to stay, but that it must yield an increasing revenue over the next few years.

What a precarious position the Chancellor will be in at the top of his ladder. He can only manage to screw this vast sum of money out of the unfortunate taxpayer by maintaining current taxation and if the current level of income is maintained. Does he really count on this? It will be interesting to hear from him in his reply, what he thinks the current level of income will be for the next few years. Does he not know that already, in some cases, profits are falling? Does he know that in many industries which have turned over from war to peace no profits are yet being earned? Has he noticed, for example, the startling fall in the railway traffics which are a good indication of the trade of the country? Has he observed that the earnings of workers have been much reduced by less overtime? Does he know that the vastly increased cost of building is having its effect on the costs of maintenance of property and works, thus reducing the net income?

Is it not plain to all that the current level of income is not likely to be maintained indefinitely? Although, as after he last war, the revenue, which is always a reflection of the trade of a year or two ago, is likely to remain buoyant for the time being, it will, sooner or later, suffer a heavy fall. What will the Chancellor do then? The poor, sweating taxpayer will collapse at the bottom of the ladder which he can no longer support, and the Chancellor will come tumbling down, and all the king's horses and all the king's men will not be able to put H.D. together again. Perhaps at this point it may be reasonable to suggest what we on this side of the House would do if we were now in charge of affairs. First, we would attack the vital question of reducing expenditure.

The Chancellor of the Exchequer (Mr. Dalton)

Will the right hon. Gentleman tell us to what expenditure he refers?

Mr. Assheton

I will. I had not omitted to notice the speech of the Financial Secretary last night when he put that very question and I have been thinking about it during the night. Before the war, our national expenditure was running at about £1,000 million per annum and the Chancellor has now budgeted for an expenditure of £4,000 million. It is perfectly true that since the end of hostilities there has been a decline in expenditure, but it is still running at a level far above that which is either necessary or can be tolerated. I have been examining the figures of expenditure after the last war and I find that, then, expenditure fell far more rapidly than it has fallen this time. In 1919 the figure was £2,579 million; in 1920 it had fallen to £1,660 million, and by 1921 to £1,100 million. It is clear that we have been much slower on this occasion in trying to cut our coat according to our cloth and in trying to beat swords into ploughshares, and I hope that the process will be speeded up, because it is far more necessary this time than it was then.

There are vast new commitments of all sorts upon which we have entered. Social services of the sort concerned in these new commitments, as "The Times" has pointed out, have two qualities. On the one hand they have to be paid for by a transfer of money from contributors and taxpayers to beneficiaries; these services are not free, as some people think they are, any more than one is travelling free if one has a season ticket on the railway. On the other hand the goods and services must be forthcoming if the beneficiaries are to benefit. They are no good at all if these are not forthcoming.

The people have certainly voted for these reforms. Now comes the question: Can we earn them? If we cannot earn them, the people will have been cheated. The people will also have been cheated if they find that the benefits they are receiving are in a currency which is vastly depreciated. There is no advantage in doubling the old age pension, if everything the old age pensioner buys costs twice as much as it did before. The need, therefore, to eliminate all extravagance is greater than it has ever been. We on this side of the Committee do not believe the Government are doing all they should in that direction. We were grieved that the Chancellor of the Exchequer gave no word in his speech about economy. He gave no hint that he was watching out for extravagance, except in the one case of the extraordinary item of £80 million spent for the benefit of the German people. I hope he will get after that item very quickly. In fact, the Chancellor seemed to pride himself on the large sums of money he is going to spend. He had a song in his heart, although it was not a song of sixpence but a song of millions.

Mr. Harold Davies (Leek)

For the depressed areas.

Mr. Assheton

The Government are taking a vast part of the people's income, and a lot of it is being wasted. [HON. MEMBERS: "Where? "] I am going to tell the Committee. It is salutary to remember that the State has no money of its own, and that every penny comes out of the pocket of the people. That is a platitude, but it cannot be repeated too often. The people, therefore, have the greatest interest in eliminating waste, and the Chancellor of the Exchequer must never forget that he is their principal agent for this purpose. There is no limiting the expenditure of departments, except by the strictest possible control. Here, of course, we in Parliament are responsible, for most of the vast items of expenditure are the result of Parliamentary Votes. We must not get into the habit of thinking that we get results merely by voting money for this and for that. What we have to ask ourselves is: are the goods and services available to make that money good? The pace of Government expenditure is alarming. In January this year there were 937,000 men and women in national Government service—more than there were in the whole building and civil engineering industries. On the same date, there were 854,000 employed in local government service, which is more than those engaged in the whole of agriculture.

According to a table in HANSARD of 15th March, 35 per cent. of the occupied population is still employed in the Armed Forces, as non-industrial civil servants, as employees of local authorities and in the manufacture and equipment of supplies for the Forces. That is a figure at which the Chancellor should look. It is shocking that at this time more than 1,500,000 are still employed on orders for the Supply Departments. These figures can be seen in this excellent Monthly Digest of Statistics with which the Government are good enough to provide us, and the latest figure given is 1,562,000 of insurable age, and there is another unstated figure for those over insurable age. I cannot state what the total figure is, but it must be above 1,562,000. I suggest that that constitutes an incredible waste of labour and materials, and it is something about which I would like the Chancellor to tell us this evening.

It is unnecessary to give many details of Government extravagance. Everyone is familiar with some which come within his own experience, but I was particularly horrified at the figure of over £13 million for stationery and printing which appears in the Estimates. I know how difficult it is for the Treasury to control the Service Departments; it is very difficult indeed, and I have every sympathy with the Chancellor of the Exchequer, but I hope he is aware of the extravagance that is going on all over the world. It is a frame of mind which is inevitable in wartime, but we must now get rid of it. There was a time when we were the richest nation in the world. That was a long time ago, and we can no longer afford to behave like millionaires. It is particularly galling to see extravagance at a time when the Government are continually telling us to save and to be austere. We want a little of our money to spend on ourselves. We know the Chancellor of the Exchequer needs a great deal of it, but it makes us mad when we see him spending money that we can so hardly spare. Let the Government practise some of the austerity which they preach.

I liked something which Mr. William Barkley wrote in an article in the "Daily Express" the day before yesterday: One tires of the line of talk which seems to suggest that the whole purpose of life is to apply our noses to larger, rougher and more numerous grindstones. The first thing, therefore, the Chancellor should do is to curb extravagance, and I suggest the Service Departments and the Ministry of Works are a couple of good places in which to start. The next important thing is to take measures—

Mr. Austin (Stretford)

The right hon. Gentleman referred to economy in the Service Departments. Does he mean, therefore, that we ought to have a revision of our foreign policy?

Mr. Assheton

Not at all. I was hoping that the Services might be able to conduct their affairs on more economical lines than at present. I am certain the Chancellor would be the first to agree that there is always room for economy in the Service Departments—not economy necessarily in the total amount of work done, but economy in the actual expenditure and in the control of it.

It has been admitted on both sides of the Committee that the present level of taxation is intolerable, even when account is taken of the concessions which the Chancellor has made in his two Budgets. No one disputes the inevitability of high taxation for the time being, but it really is ridiculous to suggest that the burden does not lie very heavily on the backs of the people. They dislike very much seeing so much of their income going into the pockets of the Chancellor. It is vitally necessary that our fiscal policy should be designed in such a way as to enable the necessary revenue to be raised with the least disturbance of trade and industry. The Chancellor has acknowledged the need to adjust taxation so as to give the greatest incentive to the greatest number of people. He has told us that that is his object, but he has not lived up to his ambitions in this respect. The present rate of Income Tax is universally regarded as an intolerable burden, and the attitude of mind implicit in that belief is, itself, a fairly strong argument in favour of a further substantial reduction in the standard rate of tax. A high rate of tax, of course, imposes a definite brake upon work and enterprise, whether personal or corporate, and it tends to reduce the national income and certainly to operate unfavourably upon our competitive power as a nation. "The Times" said in a leading article on Tuesday: The notion that the deterrent effect of taxation was a myth or excuse of the rich has suffered a change. Nowadays it is a familiar truth among the poor. The eyes of the manual worker have been opened to the true burden of Income Tax by watching the workings of P.A.Y.E. However much the blunt instrument of P.A.Y.E. is sharpened or refined by gradations, it will never be possible to conceal the fact—nor would it be a good thing to do so—that an increase of earnings is accompanied by an ever-increasing steepening of taxation. Wage earners are not the only section of the community who have shown some resentment at tax deductions from their pay packets made in various ways. Other sections of the community are also human. I hope the right hon. Gentleman will constantly bear that in mind. The effect of a high rate of tax on the willingness of professional men to render services is clearly observable. Even among that large number of professional men whose prime motive is not necessarily money gain, there is the obvious inclination to procure for themselves more leisure, and, therefore, to render less service than they would do if taxation of all sorts were lower, and they were able to expect that more of their earnings could be set aside to be available for their old age or for building up something for their children. The hon. Member for Reading (Mr. Mikardo) suggested yesterday that we were slandering or libelling some classes of the community in suggesting that these deterrents did not operate. I suggest to him that the temptation to secure for oneself a little more leisure is a very real one.

Then comes the large number of persons or firms engaged in trade or business. A high rate of Income Tax is bound to influence their Headiness to embark on new ventures and developments, especially ventures which bear considerable risk. Also, it has a hampering effect on their ability to get capital. It is often that particular kind of enterprise which is most desirable in the interests of progress and material welfare. Some people will be debarred or deterred altogether from going into business as entrepreneurs. It is not easy to assess the loss to the community through these causes, but there is no doubt that it is appreciable. It is not very tempting to anyone to be venturesome, if the Chancellor of the Exchequer is a large partner in all one's successes, but does not participate in one's failures. Heavy taxation makes it difficult to build up those reserves which are so necessary to the growth of any kind of progressive concern. Enterprise is also checked because companies are always more ready to undertake risks when they are in a strong financial position.

Another point I would like to stress is this. High taxation has the effect of inducing business concerns to take up a domicile outside the United Kingdom. In recent months there have been announcements in the Press from which 1 have drawn the conclusion that certain concerns which operate overseas—not in this country—have transferred their head offices from the United Kingdom to some other part of the world, where taxation is not quite so oppressive.

Mr. Wacker (Rossendale)

That is very patriotic.

Mr. Assheton

I am only telling my right hon. Friend the Chancellor what I read in the newspapers, which may well be true. They may not even be concerns owned entirely by English people. They have been tempted, because of the high rate of taxation in this country, to move overseas. I am just telling the Committee the facts and asking the Committee to address itself to them. With regard to the high rate of taxation in this country, there is also the consideration—and the hon. Member opposite will not be able to shout ' patriotism "over this—which affects the decision of those who were outside the United Kingdom, whether they should come into this country or establish undertakings abroad. That is another point to be borne in mind. The arguments in favour of a graded scale of taxation are obvious and well known. It is very easy to see the plain justice in the contention that taxation should fall most heavily on those shoulders which can bear it best. However, the argument in favour of a graded scale of taxation can, I suggest, he pressed too far. The number of the most highly salaried professional men, scientists and business executives, may be comparatively small, but their importance cannot be over-estimated, particularly in an age like this, when science plays so great a part, and where the best brains are so essential for the development of commerce.

I was particularly sorry that in restoring part of the earned income allowance, the Chancellor saw fit to restrict the full benefit to those who were earning £1,200 a year or less. My right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) put the case with regard to that very fully, and I will not add to it now. I would say, however, that the section of the community immediately above that level is as valuable an element in the community as any other, and is badly in need of encouragement. We should do something to lift the burden from the shoulders of the middle classes. I am particularly sorry also that the Chancellor has not seen his way to make any concessions to the Surtax payers, for on the activity and enterprise of many of them depends the country's success in trade and commerce. There is no doubt about that. I cannot really believe—and I ask the Chancellor of the Exchequer to think very seriously about this—that it is a sensible plan to tax any part of a man's income in peacetime at 19s. 6d. in the £. I do not think any Member of this Committee can but doubt that that must have some restriction on effort. I do not think any hon. Member opposite can believe a tax of 19s. 6d. in the£on part of a man's income can fail to have a restrictive effect on his effort. I should have thought that a tax of, say, 15s. in the£ was about as high as could be imposed without serious loss to the community. I hope the Chancellor will consider this matter before the next Budget, and not approach the task from too doctrinaire a point of view with a mere desire to soak the rich. Perhaps I may remind the Chancellor of some words of Abraham Lincoln: That some should be rich shows that others may become rich, and hence is worthy encouragement to industry and enterprise…Let not him who is homeless pull down the house of another, but let him labour diligently to build one for himself, thus, by example, assuring. that his own shall be safe from violence…It is best for all to leave each man free to acquire property…Some will get wealthy. I don't believe in a law to prevent a man from getting rich. It would do more harm than good Quite sensible advice that, from a great man. Talking of soaking the rich, there is also the further increase in Death Duties which we on this side of the Committee deplore. Apparently, from the way in which the Chancellor has adjusted the Death Duties, it is quite permissible and respectable to follow the profit motive, provided one is not too successful at it. Very few Tables in the White Paper on National Income and Expenditure are more instructive than Tables 12 and 13, which show the distribution of private incomes by ranges of income. They show clearly that a silent revolution has been going on at a pace which, of course, is only fully realised by those who have suffered most from it. There are now, as can be seen from Table 13, less than 1,000 individuals left whose income after tax amounts to £4,000 a year, whereas, before the war there were 19,000 of them. For good or for evil, I suggest to the Committee that that is a very substantial, though silent, revolution.

One of the great difficulties of this sudden, vast transition has been that many of those wealthy people who had large incomes have not been able to reduce their commitments to match their loss of income. In consequence, many others besides themselves have had to suffer. A large income generally involves heavy responsibilities, and these responsibilities are not so easy to dispose of. There are many misconceptions about the income of the people which need to be cleared up. There was an article in "Tribune" on 8th February which suggested that the vast army of wage earners only got as much every year as a small clique of property owners. It was pointed out, in a very interesting letter, by a Mr. Miller, who is the General Secretary of the National Council of Labour Colleges, on 1st March, that that statement appears to be made on the assumption that the man who, theoretically, receives £50,000 in a year in fact gets that income, whereas, of course, we all know from studying the Chancellor's White Paper that, in fact, he receives less than £5,000. Therefore, the basis of that article on 8th February was quite a false one, and I am glad Mr. Miller was good enough to correct it. In any case, the "small clique of property owners "is not a small clique at all. It comprises all those who draw any rent, interest, or dividends, and forms a very large proportion of the population including workers by hand and by brain.

We are still being faced continually with attacks on profit, and a lot of abusive references, such as that made by the Minister of Fuel and Power on Saturday last about a "rake off" by private owners, though I am happy to say that other right hon. Gentlemen on the Front Bench opposite try to take pains to inform the people of the truth of these matters. The right hon. Gentleman, the Chancellor of the Exchequer is certainly not too proud to take his share of the profits where they are earned. Profits are, of course, the wages of capital and enterprise, just as a weekly pay envelope is the wages of labour.

Mr. Alfred Edwards (Middlesbrough, East)

To keep the picture in perspective, could the right hon. Gentleman give some idea of the kind of capital increment on which they pay no tax, in reference to this small clique of people?

Mr. Assheton

I am afraid I have not those figures at hand. The hon. Member can give them to us when he speaks.

Mr. Edwards

Perhaps it is very many times the amount of tax that they pay.

Mr. Assheton

In the White Paper on National Income and Expenditure of the United Kingdom there are no figures of that sort. I am fully aware that' capital resources have also to be considered and taken into account. The Committee should not forget that it is income which is primarily to be considered. The capital values of investment vary from day to day; some days they go up and some days they go down.

Mr. James Callaghan (Cardiff, South)

Not under this Government. Under this Government they go up.

Mr. Assheton

It may well be that the increasing prices on the Stock Exchange yesterday offset the total amount which the right hon. Gentleman seeks to obtain in Estate Duties. Tomorrow it may be going down again, when the public has had an opportunity of examining those figures and the Budget more closely; they may take a less ebullient view of it. I hope that hon. Members, particularly hon. Members on the other side of the Committee, are studying carefully the White Paper on Income and Expenditure. It is a most interesting document, and I congratulate the Chancellor of the Exchequer and the Treasury on the latest edition of it, though I hope hon. Members who have not studied it before will bear in mind that a great deal of it is necessarily guesswork. It does not profess to be anything else, as one can see if one reads the document carefully. Estimating is always a difficult task, and one ought not to base oneself too firmly on figures which are merely estimates, or one will fall into the same mistakes which have been the undoing of those responsible for the food arrangements of the world. The important economic problem of today, of course, is whether or not we can avoid a further measure of inflation. By inflation I mean a rise in prices and a fall in the purchasing power of money.

The answer depends on two things. It depends on whether the wage level continues to rise disproportionately to output, and whether borrowing can be kept within bounds set by current savings. It appears to me that some further measure of inflation is inevitable. I largely agree with my hon. Friend the Member for Chippenham (Mr. David Eccles) who spoke last night. In any case the present cost-of-living index is no true guide to the real situation now. The cost-of-living index stands at 31 per cent. above the prewar figure and is kept artificially low by subsidies on many of its constituent elements, and some of its constituent elements are such things as woollen stockings for women, which they are not wearing very much nowadays—

Major Bruce (Portsmouth, North)

Does the right hon. Gentleman disagree with these subsidies in any way?

Mr. Assheton

I will come to that later. What I was saying was that the cost-of-living index was not really a very realistic figure at the present time. I suggest to the Committee that the true position is reflected more accurately either in the weekly wage rates, which are 58 per cent. above prewar figures—not earnings, which are considerably higher—and wholesale prices, which are 75 per cent. above prewar figures. Somewhere between these two figures is a much truer measure in my opinion of the real purchasing power of the pound sterling. In answer to my hon. and gallant Friend the Member for North Portsmouth (Major Bruce) who has just made an interruption, I would say that this is a very grave question for the Chancellor of the Exchequer to determine: how long will he be justified in striving to maintain the cost-of-living figure at the cost of such very heavy subsidies, which must inevitably result in enormously heavy taxation? It is a question of balancing advantage against disadvantage, but, as the Chancellor of the Exchequer himself has said, it is a question giving him, quite understandably, very grave anxiety.

But the way to limit inflationary tendencies is clear. There are two weapons in the hands of the Chancellor of the Exchequer. One of them is to increase the production of goods and services as quickly as may be; the other is to cut down ruthlessly all extravagance. The more goods and services there are to buy with the money available, the less we are likely to see the danger of too much money running after too few goods. It is essential, therefore, that the Chancellor of the Exchequer should, through a wise taxation policy, give every incentive to increase production and, as my right hon. Friend the Member for the Scottish Universities said, to increasing productive efficiency. I hope I have shown that the Chancellor of the Exchequer has not yet done so, and I trust he will consider the matter further.

I agree with my hon. Friend the Member for Hornsey (Mr. Gammans) that the overseas deficit is probably the most serious of all our financial anxieties, but I refrain deliberately from commenting upon it today because I do not think this is the most suitable time to develop one's views on the overseas borrowing position. I would only observe that the ability of the Chancellor of the Exchequer to finance the Budget without further large borrowing from the City of London, is due to the fact that he anticipates borrowing very large sums of money overseas, and that if this had to be shown in his domestic Budget it would have presented a less agreeable picture.

Perhaps I may conclude my observations with a reference to the peroration of the Chancellor of the Exchequer—

Mr. Kirkwood (Dumbarton Burghs)

It was a good peroration.

Mr. Assheton

I was about to commend something which the right hon. Gentleman said in his peroration. I have often thought it a pity that the Treasury have not taken advantage of Section 56 of the Finance Act of 1910, and I am glad that instructions have been given to the Board of Inland Revenue to keep a constant watch on suitable instances in which they can accept land in payment of death duties. I doubt whether very much will come of it, because once the Government have discovered how heavy is the burden of the ownership of agricultural land, they will seldom find suitable instances of which to take advantage. But I commend to the right hon. Gentleman to watch that particular instruction very carefully or he may find a little bit of quite proper resistance from his officials. I doubt whether much will come of it. However, I welcome the instruction, but I must say I do not approve the Chancellor's setting up a State fund. These funds really mean nothing. We have heard of them before. They are merely book entries. The £50 million put into the fund is not really set aside at all. It is merely written in a book, and that money will have to be borrowed when the time comes for the money to be spent. It is, I think, just a little bit of bluff. But it is a matter for the right hon. Gentleman and not for me to decide.

The Chancellor of the Exchequer referred in his peroration to the wonderful beauties still to be found in this country. I should like to say to him that where this beauty has not been marred by ugly development, the result has been achieved by the wisdom and self sacrifice of many landowners who have preferred to safeguard the amenities and beauty of the countryside rather than take advantage of circumstances to enrich themselves to the detriment of the public good. There are in this country many good owners of property as well as bad, many good owners who have kept their property well equipped and in good order in spite of great difficulties. I should like to think that this is recognised by hon. Members in all parts of the House. In spite of its subject, however, the peroration of the Chancellor of the Exchequer did not seem to me to be altogether a fitting one for a Budget speech.

Mr. Kirkwood

It was much too human for the right hon. Gentleman.

Mr. Assheton

I have been pressing the Chancellor of the Exchequer to be human all the time. I was reminded of one of Dr. Johnson's remarks to Mrs. Thrale: Nay, Madam, when you are declaiming, declaim, and when you are calculating, calculate. In this Debate we are calculating, and so I shall make no attempt at a peroration.

4.43 P.m.

Mr. James Callaghan (Cardiff, South)

I should like to start by touching on something said by the right hon. Gentleman the Member for the City of London (Mr. Assheton) about Surtax payers. I am always interested in that class of the community. I want to deal not only with what he said, but also with what the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) said yesterday, and to some extent what the hon. Member for Scarborough (Mr. Spearman) said. The right hon. Gentleman the Member for the Scottish Universities said that these very rich people were diminishing in numbers and that the reduction in the number of rich people was alarming, and he went on to quote from Table 13 of Command Paper 6784 to show how the incomes of those people liable to Surtax was decreasing, and that the numbers had diminished. That is putting an entirely false gloss on the position. What is all-important in deciding whether the number of Surtax payers is diminishing, is not the amount of income they have left after they have paid tax, but what their income is before they pay tax, and how many there are in that field before they pay that tax. That, I suggest, is the fair comparison. On that basis of comparison there is no doubt that, so far from this class of taxpayer being a diminishing number or a class of people who have to be "coaxed and cosseted "—I think that was the phrase he used—they are a sturdy, ebullient, growing and fast-developing race. That may be a criticism of the Chancellor of the Exchequer. I might have to say to him that he is not doing enough in that direction.

Let us look at the figures. I refer hon. Members interested to Table 12 of the Command Paper and also to the Eighty-eighth Report of the Commissioners of Inland Revenue, and to put those two together. Table 12 shows that in 1944–45—there were 125,000 Surtax payers, approximately. The Report of the Commissioners of Inland Revenue for the year 1938–39 reveals that the number of people who paid Surtax in that year was 104,000. During the war—and I suggest that this is incontrovertible—the number of people who have crept into the over £2,000 a year class has increased by over 20 per cent., from 104,000 to 125,000. In addition, the amount of their gross income has increased. The comparison of these two statements will show that it has increased from £513 million in 1938 to £570 million in 1945. That, surely, I suggest to the Committee, is the real basis of comparison; not how much income these people have left after this House has deducted tax from them, but how many people there are in that field before tax is deducted. Is that number growing? The answer is "Yes, on every count." I suggest that this is the test we should apply. A statement of the right hon. Gentleman of that sort does create a wrong impression. It may be that my humble words can correct it, and that would be desirable, although they do not carry the same weight as his. But I think we ought to be careful in comparing like with like.

Mr. Spearman (Scarborough and Whitby)

Why is that the test that matters? I should have thought that it was the test of the effect of spending power that matters. I was quite wrong in my calculation yesterday.

Mr. Callaghan

That is true within limits, but the point I am trying to make is that the real test is one of incentive. Is there a desire to get within this field or not? The answer is that there is and that there are people wanting to get there and that they are getting there. Take the example of the family man who is married with two children, and has —2,000 a year. His tax is of the order of £680 a year. It is a heavy sum, but it still leaves him 13s. in every pound.

I leave that point. I come to the question of P.A.Y.E. I want to suggest to the Financial Secretary to the Treasury, even though he is not here now, that he was quite wrong in saying that all the speeches yesterday cancelled themselves out. I do not think they did anything of the sort, apart from that of the hon. Member for Harwich (Sir Stanley Holmes) who wanted to throw the baby away with the bath water. I thought that the proposition was this: that we think this present scheme is better than that of the old system, but wonder, has the time arrived when, because of its effect on incentive, upon employers and upon the workers generally, we ought to consider variations? This was an experimental scheme. It has been running only two years. It was introduced in a comparative hurry without a great deal of consultation, although all the relevant interests were considered.

I suggest that the time has arrived when we ought to look at the whole question again. I am not going all the way with the hon. Member for Chippenham (Mr. D. Eccles), who, in a rather gay and debonair air of someone who has not thought very much about the matter, propounded a solution to the Committee last night, which seemed to me a trifle insouciant.I have heard of at least six variations to the existing scheme, two of which have been propounded by Members of this Committee, one by the hon. Member for North Battersea (Mr. Douglas) and one by the hon. Member for Chippenham. These schemes have their advantages and disadvantages, but, for myself, I should not care to come down on one side or the other, on any of them. I suggest, however, that the Chancellor of the Exchequer should follow up the suggestion made from all sides of the Committee, and appoint a body to review the working of the P.A.Y.E., and to consider whether an alternative system would not be better. We all know that the real trouble about P.A.Y.E. is the level of tax, but there are ways of lessening its effects. I have no desire, as I am sure no other hon. Member has, of an unnecessary mortification of the flesh in paving our tax, if the same results can be attained by an adjustment in one way or another

I consider that it is the job of this Committee to investigate those parts of the system that are undesirable in the interests of the workpeople and of the employers. I would remind the Chancellor that, from 31st December next, the employers will not be able to pay the wages of their accounting clerks out of E.P.T. as they have done in the past, and that the murmurs we have been hearing about the number of people being employed will probably grow to a louder crescendo. The Chancellor of the Exchequer is hearing murmurs from the Inland Revenue staff, who have borne a very heavy burden. The Chancellor of the Exchequer and the House have made heavy inroads on their loyalty and spirit of initiative during the last few years, and it does them no good to hear comments like those which the hon. Member for Hallam (Mr. Jennings) made last night. These people are fighting under a terrible load at the present time, and I suggest, in their interests, apart from anything else, that we ought to consider this matter once more. I wish to make one further plea to the Financial Secretary, who I understand is to broadcast tonight. I hope that I may see him before he makes his broadcast, because I have had an urgent representation from the staff of Inland Revenue, that already offices are receiving applications for postwar credits from the older people, including some married women. Would he kindly tell the Press and the public, that they will not get their postwar credits vet, but that the forms will be made available later? If he would do that on the wireless tonight, he would save the staff an enormous amount of trouble. The staff of one office, two miles away from here, is trying at this moment to interview callers in a rabbit hutch 36 square ft. Nearly 200 people pass through this rabbit hutch each day to discuss their affairs, and the office also has to be used as a public thoroughfare for the staff to pass to and fro with their papers. Anything we can do to cut down unnecessary callers would be desirable, and if the Financial Secretary would utter this plea, it would be a token of his regard and affection for the staff.

I pass to one or two points regarding the Budget generally. I congratulate the Chancellor most sincerely—and this is not being merely conventional—on the two Budgets he has introduced. They must be taken together, because, on the one hand, there is the incentive given to the employee last Autumn, which will make a difference as from next Friday, whereby, for instance, the family man receiving £7 per week will be taking home another 7s. 6d. in his pocket, and, on the other hand, there is this Budget in which the Chancellor has got rid of E.P.T. to the jubilation of hon. Members opposite. In this connection, I notice that the hon. and gallant Member for Holderness (Lieut.-Commander Gurney Braithwaite) has turned out in his swallow-tailed coat.

Lieut.-Commander Gurney Braithwaite (Holderness)

If the hon. Member only knew the reason.

Mr. Callaghan

In view of the jobbers' profits on the Stock Exchange, no doubt we shall be seeing a second top hat—such is the incentive which has been provided. I think that the Chancellor was right to utter a warning about a possible dividend tax. Perhaps I might recall to the memory of the Committee, although I do not suppose the Stock Exchange will read any words of mine, that, in 1920, a Chancellor of the Exchequer introduced a Corporation Profits Tax a year after the abolition of the Excess Profits Duty to make up for the generosity of that abolition. I do not think that we can regard what the Chancellor of the Exchequer has said as unnecessary bluff. The two Budgets, taken together are good Budgets. The Government have done their job, and have provided the necessary incentives, but, as hon. Members on both sides of the Committee have said, we have to produce the goods; that is the only real test, and no one on this side of the Committee has been backward in propounding that. Production must increase. I do not tie up the argument of the right hon. Gentleman the Member for City of London (Mr. Assheton) with some of the arguments used by his colleagues. He said that the level of income was bound to fall, whereas his colleagues have been talking about the dangers of inflation in the next few months. If the one takes place, the other is not likely to happen. For myself, I stand by his colleagues. I consider the greater possibility is that the level of income will remain where it is, but we simply must go ahead with producing the goods to meet the increased purchasing power when it comes along.

I do not share the views expressed about the terrible dangers of a Budget of the size we expect in two or three years' time. The tax taken out of people's hands between 1914 and 1919 increased by something like eight times, whereas between 1919 and 1934 the increase was only doubled. I do not flinch from facing a permanent Budget of the order of £2,500 million if we are to redistribute the national income and increase our social services; the key is production, and that is what we have to get down to. I see no reason, as production increases, why the 9s. rate of Income Tax should be maintained. The product of a penny on the rate is something in the order of £10 million and, as a rough arithmetical calculation, —120 million per year can save 1s. on the rate. That is a very rough and ready calculation, and there is bound to be a little jiggery-pokery. Therefore, I see no reason why we should have to maintain the rate at 9s. in the £. I conclude by cordially congratulating the Chancellor of the Exchequer on his Budget. We shall have things to say to him on the Finance Bill, but, on the whole, the Government have taken a bold lead in their two Budgets, and it is now up to the country to follow that lead, and to produce the goods which are needed.

5.0 p.m.

Mr. Clement Davies (Montgomery)

The speech of the right hon. Gentleman the Member for the City of London (Mr. Assheton) followed, and I think rightly followed, tradition. It has been some years longer than I care to remember since we had a Tory Opposition in full cry on Budget day and in the Debates which follow it. However long it may be, the tradition has remained, more or less the same. The first attack, as it used to be in former days, must be upon expenditure. Expenditure is much too great, too wasteful, and so on. Then inevitably comes the question, such as the Chancellor put today to the right hon. Gentleman: "Would you mind telling us what you would cut? "It is a question which has never won a satisfactory reply. There has never been any suggestion today that there was too much expenditure on the Defence Services. Then we come to the home services. Would hon. Members cut education? If they want a cut in education let them say so. Would they cut the social services? If they desire to cut them, let them say so. There was another very pertinent question put to the right hon. Gentleman, about the sum which has to be expended in maintaining the cost of living, which is now at a very high figure. Again, when the question was put, "Would you cut on that?" there was silence. It has all been in accordance with tradition.

I feel that it is rather difficult for the right hon. Gentleman to come here today to criticise this Budget. We are very glad to see that his colleague from the City of London is also here. Yesterday's headlines in all the newspapers were "Boom in the City." I think that all the prophecies prior to the General Election were of not "a boom" but "a gloom" in the City. The right hon. Gentleman's criticism rather took the line of the shareholder who, when you are rather rejoicing about the profits of the day, and are about to declare quite a good dividend, gets up and says, "I would like, Mr. Chairman, to call attention to the amount we are spending on safety pins and blotting paper." That is much too small, when you are considering much bigger matters such as we have to consider here.

The other day, I paid a well deserved tribute to the officers of the right hon. Gentleman at the Treasury and at the Board of Inland Revenue. May I extend that tribute. I wish the right hon. Gentleman himself would say a word or two on this: I want to express our appreciation of the work done by the Inland Revenue officials throughout the country. During the war, they have been understaffed, they have worked in uncomfortable offices and for very long hours, and they have come through one of the most difficult periods of all; and I think that the country should express its gratitude to them. Recently, I spoke about the resilience of this old country and its people, which has enabled the Chancellor of the Exchequer to meet the expenditure of the year by revenue which comes within nine-tenths of the expenditure. As I have often said before, the Chancellor of the Exchequer today is much more concerned with the welfare of the country, the standard of living, the state of employment, and the production of wealth, than were any of his predecessors of old. His predecessors were concerned almost entirely with finding, with the least possible difficulty, the amount required to meet the expenditure about to be incurred by the Government Departments. They thought of little else. Today, if the Chancellor of the Exchequer intends to carry out his full functions properly, the finding of the money is only one item, although a very important one, which he must take into consideration. He is now more than a guardian and a watchdog over expenditure, and a collector of Revenue, he is the trustee for public welfare.

The great need of the moment, as the hon. Member for Cardiff South (Mr. J. Callaghan) has said, in one of his very able contributions is production. The demand for goods is colossal, not only in this country, but in every other country of the world. That is natural, because of the limitation which has been put upon the production of consumption articles in most of the countries of the world during the past six years. In the meantime, two other things have happened: Machinery has become out of date or outworn or both; and, secondly, men and women are undoubtedly tired. Time and again, attention is called to our failure today to produce as much as we used to produce per man hour. On the other hand, taking all these things into consideration—the long years of war, the terrible anxieties, the losses families have suffered, the dangers through which they have gone, the narrowness of the food rations and the sameness of the food—I am amazed that they are producing today as much as they are producing. It is through production that we shall reach salvation. We all dread inflation, and the answer to high prices is abundance of goods. The need for more food, the payment for that food, the payment for the transport to this country of that food, can only be met by increased production in this country. The need, again, for raw materials, the payment for those raw materials, the payment for the transport to bring them here can only be met by increased production here. Therefore, there must be a premium upon production.

Some time ago, in a very interesting article, Professor Carr of "The Times" made a searching analysis into the truth of the problem, "What is the incentive to work? "His answer was that for centuries men worked because they were compelled to work by legislation—slavery, serfdom, the old Statute of Labourers. Then that period changed and a new theory came in, which was even more cruel than the other. The new theory was "You will either work or you will starve." And that was the theory that remained until the beginning of this century. In this century we came to the conclusion that it is not right that anybody should starve, and certainly his family should not suffer. A man should not even have any anxiety with regard to his old age; we should provide him with an old age pension. Even if he is out of work, he and his family must be maintained. We must provide him with proper social services, whether he is working or not working. So we come to the period of the war, to the time when this article to which I have referred was written by Professor Carr, in which he said: Undoubtedly, the incentive to work comes from public opinion and from the natural patriotism of every man and every woman. The war has finished. What is now to be the incentive to work? Professor Carr, having stated the problem, having analysed the position down to date, almost like Pontius Pilate of old—having put the question, "What is truth? "—stayed not for an answer. It seems to me that the only answer we can make is to put a premium upon work and to give people that incentive. I realise the Chancellor's anxiety not to loose too much money among people at the present time, lest they should use it to buy articles which are in short supply and so send up prices, but he could, as we have done up to the present, guard against that by controlling prices. Therefore, I do not think there is very much danger of inflation on that ground, and certainly not as much danger as some suggest that there might be—as long as prices are controlled.

The deficit between the expected revenue and the expected expenditure is far less, as the Chancellor very rightly pointed out, than anything which the economists, the financiers, or anybody else prophesied. As the right hon. Gentleman rightly said, we all expected a deficit of over £1,000 million, whereas the deficit, even allowing for the terminal payments, is only £694 million. I have long protested against the old idea that it was absolutely necessary and essential to balance the Budget year by year. Of course, a balanced economy is always essential, but a balanced yearly Budget is not essential. The Chancellor should take a much broader and wider view and aim at balancing over a period. There is no virtue in 12 months. The period should be one which the Chancellor's advisers estimate will be such as will enable the country to overcome the difficulties in any particular year and reach a period when he can foresee that the country will be on such a firm productive field that it can repay past deficits and so gain on the balance between income and expenditure. The Budget this year is not, and cannot be, balanced. There is this deficit of £694 million.

The Chancellor, throughout his speech, as many of his supporters and many Members from every part of the Committee have emphasised, stressed the need for increasing production. The right hon. Gentleman is abolishing the Excess Profits Tax, and I think he is right in doing so, although I do not think that the Excess Profits Tax had a limiting effect upon production directly. No manufacturer in his senses stopped producing or stopped his turnover merely because he thought that he would have to pay Excess Profits Tax. It did affect production indirectly in that the Chancellor took from the manufacturer, or the firm or company, money which otherwise they might have ploughed back into the business for increased production. In any case, Excess Profits Tax is being abolished.

I think that Income fax upon wages not only has an indirect effect upon production, but has a direct effect upon it. Income Tax was paid last year to the amount of £241 million by wages as compared with a payment of £2 million only in 1938. The Chancellor has already made certain concessions to the wage earners. I wonder whether he realises the electric effect this is already having. I am sure that well before this week is out, it will even show its effect in production. I suggest to the Chancellor that he has been a little too orthodox and too pedestrian. I could have imagined this Budget almost being introduced by an ex-chairman of the Board of Inland Revenue, the right hon. Member for the Scottish Universities (Sir J. Anderson), balancing everything rather nicely, being able to prophesy what the effect would be if one did this and what the effect would be if one did that, but taking no undue risks. I regard the right hon. Member for the Scottish Universities as a sort of archpriest of orthodoxy, but I thought that the Chancellor of the Exchequer had long left the orthodox church and was more of a nonconformist.

In order to get increased production, I would have given more priority to the worker. I would have given him a better incentive to work. With controlled prices, this would riot have led to any inflation, but would have led to more savings, a matter to which the Chancellor referred. What I would have liked him to have done would have been to give more thought to the workers of the world, to have encouraged us all to sweat, and I would have liked him to have done away with all direct taxation upon wages. It would have cost this year from the Revenue £241 million. Let us do a sum. The deficit between revenue and expenditure this year is £694 million. If the Chancellor had abolished the £241 million on wages, this would have brought the deficit up to £935 million—still well below what we all prophesied would be the difference between revenue and expenditure Even my Celtic imagination cannot reach to the heights of what the production might have been if that incentive had been given to labour. We are still in die transitional stage, and we can afford to take the usual risks. This thing is not experimental. After all, the tax on wages did not begin, or did not affect very many people, before 1938. Let the Chancellor consider very carefully, as the need for production is so very great, whether he cannot do away with this, and resort to borrowing this year.

May I come to another point closely allied to it, and that is the differentiation between earned and unearned income. The Chancellor has again made certain concessions to those earning income, but what puzzles me is why he should be so half hearted about it. Stimulus has to be given to the workers, and we need not be so lenient with non-workers. Talent and skill have got to be encouraged, and I want to give all the incentive that I can to the producer, the man who works with his brains, to skill, to talent, to experience and to ability wherever they may be found. This will not only add to the wealth of the individual man, but it will increase the wealth of the whole community. The Chancellor has a double policy. First, he wants to reduce the interest and, secondly, he wants to ensure full employment. That means he wants to ensure a full income for the whole nation, full profits and full capital values. If full income and full profits are maintained, there is secured a capital appreciation for the whole country. So there is no reason to be sorry for the non-working man and the dividend earner. He is being helped by the Chancellor's policy, and he has been helped all along by the country's production and by the worker. My reason for saying this is that not only have we had taxation direct and indirect on incomes for a very long period, but we have had a capital tax since 1894 when Sir William Harcourt introduced the Death Duties. Nevertheless in spite of taxation and capital taxation the value of the wealth of the entrepreneur has not only been maintained, but has increased, and goes on increasing.

The national income has grown, and one of the most interesting things in the White Paper is that, according to Table 20, the national income has all but doubled during the period from 1938 up to now. Mr. Asquith was the first Chancellor to distinguish between earned and unearned income and to give encouragement to the working producer. I had hoped that the right hon. Gentleman, who referred to this yesterday, would have paid a tribute to the Chancellor who started not a great revolution but probably a greater revolutionary idea than any Chancellor who followed him. I wish the Chancellor had followed those lines much more completely than has been the case in the past. The income of the non-worker is only met and is only secured by the activity of actual earned income. Therefore, all the time, even after taxation takes away from his income, the non-worker each year makes up on the swings what he loses on the roundabouts, because his capital values are capable of rising as the country's production keeps rising.

Mr. Oliver Stanley (Bristol, West)

Nominal values?

Mr. C. Davies

I am amazed at the right hon. Gentleman. These values keep on rising the whole time as the status and conditions of the worker are improved, and as production improves. There is no fear of inflation as long as the Chancellor keeps price control, but what I do want is to give incentive to the man who improves production, whether with his brains or his hands.

We were all rather amazed at the figure which the Chancellor gave us of our debit balance on international payments of £750 million. What puzzles me is how the Chancellor arrives at that figure. If I did not place such confidence in the accuracy of his advisers, I would be rather inclined to doubt it. Might I tell the Chancellor why? For months now exports have been rising and over 1,000,000 of our people have been engaged working upon goods which are to be sent for export. My own estimate, which is a very modest one, is that by the month of August something like £100 million worth of goods will be exported, which is £1,200 million a year. I should have thought that the gap between the cost of what we are importing, and the amount that we are exporting, would now be closing rapidly, and I am really surprised that it still is measured in the big figure of £750 million. During the war we stopped publishing the figures of exports and imports. The war is now over. Is there any reason why we should not get a complete balance sheet, which will give these figures completely, so that we can see where we are and make our own comparisons? The Chancellor realises that these are not matters merely for the Government, but matters which will guide the country as to what they are doing and what they should be producing.

Finally, we were surprised at the figure of £80 million that the Chancellor gave with regard to reparations in Germany. There is not one of us who desires to do other than our duty towards the German people who are suffering today. By all means, let us help them to get food and clothing as best we can, but that is no reason why we should be charitable. This is not merely a question of comment; it is a question of principle. Why should they not work and produce the articles which we can then take and sell to pay for the food they want? It must be an extraordinary state of things that the policy which is now being pursued is such that we who suffered, who did not want to go into the war, who stood alone for civilisation and who in the end defeated the enemy are now paying out of the little we have left, in order to maintain those people. It is a policy leading to their own destruction, for the man who lives on charity, instead of living upon his own worth, is ruining not only his body but his soul. It is about time that this policy was changed. These are the criticisms that I have to make upon this Budget, upon which I have already congratulated the Chancellor. I put it to him again that he should help the worker and help the producer whether they are producing by their brains, or by their hands.

5.29 p.m.

Mr. Douglas (Battersea, North)

My right hon. Friend must feel very happy at the reception which has been given to his Budget. He has managed in a most successful fashion to give a certain degree of relief from taxation to a very large number of individuals, and he has done it after allowing for the readjustment of Estate Duty at the very small cost for the present year of £32 million or about 1 per cent. of the expected revenue. Measured in those terms the relief is not so great, but it is a move in a direction which most taxpayers have been hoping for, and they will welcome this indication of the Chancellor's intention to reduce taxation.

We are faced with the prospect for the future of a level of national expenditure far larger than that which prevailed before the war. There are two reasons for this. One is because it is accepted—with different degrees of emphasis, it is true—by all parties in the State that the Government must incur additional expenditure on many things which they have never undertaken before, or on things which they must carry on upon a far more extensive scale. There is no difference in principle between the Opposition and the Government on social insurance, national health services, and other matters, although there may be differences as regards the amount. Not only is there this large extension of the field of public expenditure, there is also the fact that it has to be carried on at a price level which must inevitably he very much higher than that which prevailed before the war. The note circulation is now some three times greater than it was before the outbreak of war, and the deposits of the clearing banks, which correspond with it, have also increased very largely. This process of inflation—it is nothing else—is not reversible. There will never be a reversion to the price level which prevailed in 1939 unless it should happen—as it certainly will not so long as my right hon. Friend is Chancellor of the Exchequer—that inflation were allowed to run away to the point at which the currency became completely devalued and had to be replaced by a new currency. That is the only circumstance under which inflation is ever completely reversed.

We have to recognise that the price level will inevitably be very much higher than it was in 1939. That fact has to a certain extent been concealed from the attention of the public because of the very large measure of subsidisation which has been given to the price of food for reasons of public policy which I am not questioning in the least. This has taken away the instance in which a rise in the price level comes most sharply and potently to the attention of the people. Since we are confronted with this very high level of public expenditure in the future it is indeed relevant to ask, as hon. Members on both sides of the Committee have asked, whether a high level of taxation will destroy incentive to work and to produce, and, on the other hand, whether steps are being taken to secure economy in the carrying out of public services. By this I mean not a curtailing of the purposes of those services, but securing that they are provided at the minimum possible cost. That has and always must be an overriding consideration in public policy to which not only the Treasury but every Department of State must pay attention. It is one of those things which are extremely difficult for this House of Commons to control. When they arrive here the Estimates contain an enormous mass of detail of all kinds which it is extremely difficult for hon. Members to master and analyse or to control collectively.

The effective control of public expenditure, in order to see that value is received for the money expended, has to rest upon the Departments of State which are effecting that expenditure and which are preparing the Estimates. It is an individual responsibility which has to rest upon every one of them, and it is the duty of Ministers,and of the chief permanent officials to see that that canon of public conduct is observed. That, however, is a subject which I do not wish to pursue at the present moment. I wish to refer to one or two topics which have emerged from the Budget Statement and which, I think, have not received a great deal of attention during the discussion so far.

I was somewhat surprised—I would almost say shocked—to hear my right hon. Friend propounding the view that the Purchase Tax was a form of taxation which might or, indeed, ought to become permanent in this country. This tax was introduced during the period of the Coalition expressly and only for the reason that it was said to be a means of preventing inflation by—to use the phrase which the Chancellor quoted—" mopping up purchasing power." That was the argument for it as a temporary measure to meet a wartime danger, and it was upon that ground that members of my party, for the most part with considerable reluctance, accepted it at that time. I do not consider that it is a suitable permanent means of taxation. It has, of course, one great merit which all indirect taxation has. It tends to be concealed from the notice of the taxpayer so that he does not realise how much he is paying. In that respect it conforms with the maxim of Louis XIV's Finance Minister that "The art of public finance is to pluck the goose with the least amount of squawking." I think, however, that there are other canons of public finance which are more important and which override that. If they are to raise really appreciable amounts of public revenue all taxes of this nature have to be imposed upon articles of widespread consumption. They have, in fact, to be imposed upon articles which are necessaries of life. I do not mean necessaries from the point of view of moralists and abstract thinkers, but from the practical point of view that people want them sufficiently to go on buying them in spite of the increase in price which is caused by such taxation. If that was not the case, if they ceased to buy them because of the increase in price, those taxes would yield no revenue, and would be entirely ineffective from the fiscal point of view. So, Purchase Tax, or any similar device, if it is to be the means of raising a considerable bulk of revenue, must fall on articles of widespread consumption.

Mr. Blackburn (Birmingham, King's Norton)

My hon Friend has mentioned the importance of incentive. If adequate incentives are provided, surely, there will be enough money in the pockets of the people to buy large quantities of luxury goods, from which the Purchase Tax would yield a very substantial revenue to the Exchequer.

Mr. Douglas

I am well aware that it has long been the theory that such taxes are defensible because they are levied on luxuries, and that they take out of the pockets of rich people and idlers money which they spend on frivolous purchases. But the whole experience of this matter during history has shown that that argument is not true. One of the greatest illustrations of that was in the reform of our fiscal system which took place during the first half of the last century when hundreds—and I think I could say, thousands—of taxes were repealed and abolished, having been imposed on this, that or the other article, upon the plea that they were taxes upon luxuries. When this House, through a Select Committee, examined this question they found that in a great many cases these taxes were hardly paying for the cost of collection, and that as a fiscal instrument they were entirely worthless. It was upon that practical and pragmatic ground that the House repealed an enormous number of taxes which had been defended by the kind of argument which my hon. Friend has indicated.

More than that, we have to consider this, as I said before, not from the point of view of how to extract a large amount of money from the taxpayer without his squealing, but from the point of view of the economic and moral principles which ought to govern the matter. All taxation which is levied on commodities, unless it is levied on commodities of widespread consumption, is in itself necessarily discriminative and arbitrary. Let me give an illustration: If I buy a play by Mr. Bernard Shaw, in the form of a book, I pay no Purchase Tax. But if I see that play performed at the theatre I have to pay for my entertainment according to one rate of taxation, and if I see it performed on the screen, in the cinema, I have to pay at another rate. There is nothing more meritorious in one case than in the other. There is no reason why, when I get entertainment from reading a book, I should get it free of tax, and that when I get my entertainment from going to a theatre I should pay tax.

If I purchase the score of a piece of music by one of our great composers I pay no Purchase Tax or other tax upon it. But if I buy a gramophone record, on which this piece of music has been recorded for my enjoyment, I am subjected to Purchase Tax. I say that these discriminations, which are inherent in the nature of the tax, can never be given any economical or moral justification. What happens in the end is that the Chancellor is very largely guided in his decision on this question by the amount of resistance which the public offers to taxation of some particular article, and the amount of revenue which he gets out of it. So, the principle of equality of contribution to the public revenue and all other fundamental canons of taxation are thrown to the winds. I therefore regret that the Chancellor hinted, in his Budget speech, that the Purchase Tax ought to be a permanent part of our fiscal system. I do not accept that view.

Another matter to which I would like to refer is the question of accepting payment of Death Duties upon landed estates by a transfer of the estate, in kind, to the public. With this the Chancellor coupled the provision of a fund of £50 million, to be used for the purpose of acquiring land which it is desirable, for one reason or another, should be publicly owned. On the second point, I think it may well be that there are instances in which it is highly desirable, for the purpose of preserving amenities, and having opportunities for public recreation and so on, and where it is beyond the means or resources of the local authorities concerned to undertake it, that there should be power in the hands of the Government to safeguard, for the common enjoyment, such tracts of land. But on the fiscal aspects, to accept payment of Death Duties by receiving land is not something which can be carried out to any great extent. If, during the course of a year, the Chancellor were to accept payment in kind of £50 million due for Death Duties he would be short of £50 million of current revenue which he required to meet current expenditure. To get that £50 million he would have to raise some other taxation if he wished to keep the land, and not sell it All the land would yield would be its revenue for one year, five per cent., or whatever it might be. Clearly, therefore, there is a limit to the extent to which that kind of thing can be done without raising taxation correspondingly, so that as a fiscal device it does not present any great advantages.

The last matter to which I would like to refer is the relationship between national and local Government finance. The White Paper issued in connection with my right hon. Friend's Budget Statement has a Table in it which shows that the central Government is now contributing £290 million towards local expenditure. My right hon. Friend indicated, and so has the Minister of Health, that in due course there must be readjustments of the block grant when the responsibility for public health services is transferred from local authorities to the State. That. of course, I accept as an inevitable corollary.

Local rates are going up, very substantially. We have seen day after day in the papers announcements of places where the rates have gone up by one, two or even three shillings in the£already. That is by no means the limit of this process. Again, it is an inevitable one, because of the higher price level with which we are now confronted, and which will raise the cost of carrying on all local services and will involve the local authorities in a higher rate of expenditure. On the other hand, we all know, from experience of what happened after 1918, that movements of rateable value take place with the most extreme slowness. I suppose I should be about right in saying, that even in the 20 years between the two wars the average increase in rateable values due to revaluation was not more than about 3o per cent., although the price level then, as compared with 1914, was very much higher. Therefore, it is inevitable that there will be very heavy increases in the rate in the £ levied by local authorities during the next few years.

That will have the effect of accentuating all the evils and injustices which arise out of our system of local rating. In particular it will mean that every house which is built to meet the frightful shortage of housing accommodation with which we are confronted will have to bear an extremely heavy burden of rates. Its rent will be increased by, in many cases, 75 per cent. or 100 per cent., by reason of the rates which are imposed upon it. When we are talking about incentive and about encouraging production, surely, here is something which cries out for remedy. It is just as wrong to impose local rates upon houses as it is to impose a Purchase Tax upon other essentials of life.

I hope that the Chancellor of the Exchequer, in conjunction with my right hon. Friend the Minister of Health, will give most serious consideration to this question of local rating with the object of carrying out what has been approved by a very large number, hundreds, of local authorities in this country, the rating of site values—a reform of which there has been 30, 40 or 50 years' experience in some of the British Dominions overseas. I beg of my right hon. Friend to look at this question, which has a most important bearing upon the financial stability of our local authorities and upon the progress of the house-building programme of this country If hon Members on the other side of the Chamber are anxious to see the private building of housing encouraged at rents or prices which people can afford to pay, they also ought to take an interest in this question. To penalise the building of houses, as does our local rating system at the present moment, is certainly doing no public service and is making a solution of present problems far more difficult than otherwise would be the case.

These are a few suggestions which I offer to the Chancellor of the Exchequer. I hope that his next Budget will show further progress along the lines which he has already indicated of relief of taxation and encouragement of production, and I hope that it will show a complete balance.

5.55 p.m.

Sir Frank Sanderson (Ealing, East)

The shortness of the time which I have at my disposal will cause me materially to reduce the number of subjects which I should like to have raised. I propose therefore, to direct the attention of the Committee to one matter only which has not been referred to so far as I am aware by any other hon. Member. I am very concerned about the manner in which the Accounts and the Financial Statements are presented to the Committee. When heard the Chancellor refer in his opening speech to setting aside £50 million from the sale of war stores to develop and purchase land, I appreciated that he was, from my point of view and possibly from the point of view of other hon. Members, confusing capital assets with national expenditure.

I suggest that the time has arrived when we should have two entirely separate sets of figures, one to show the national income and the national expenditure and the other to show the money expended upon capital assets and the income derived therefrom. It may be that a national balance sheet cannot be suitably applied to national economy but I would like to see a financial statement drawn up under two distinct headings. I would like to see a statement of our national income and expenditure classified under their respective headings: Expenditure on important capital assets; how they are expended; and how they are ultimately disposed of.

During the war, the Government have spent money on a large scale, not merely for war purposes but upon capital assets. Today the Committee has no information, nor have hon. Members been given any statement to show what those assets com prise. The Government have built Royal Ordnance factories and factories rented by the Ministry of Supply, they own a large amount of merchant shipping and they have purchased vast quantities of all sorts and kinds of raw materials, not yet put into consumption.

The Government purchased the whole of the wool stocks from Australia and New Zealand; not merely the stocks which were on hand, but the whole of the wool clip for the duration of the war and for one year afterwards. My right hon. Friend is aware that the Government also entered into an agreement with Egypt, whereby they purchased the whole of their stock of cotton and cotton-seed at the outbreak of war. The Committee is given no information in regard to the volume and value of these stocks, or how the Government propose to liquidate them. The Government also hold vast stocks of raw materials of all descriptions. They hold great stocks of raw materials, including food, and a variety of other capital assets too numerous to mention. What I am asking my right hon. Friend to consider is—are we to be given no information in regard to their character, their quantity or the value of the money they represent.

Are these stocks to be liquidated and the money derived therefrom to be regarded as a part of the national income? If that be so, I say, quite frankly, that it is wrong. It is bad bookkeeping. They are capital assets, and should be treated as such. The Committee is entitled to ask for some comprehensive statement of the Government's capital assets, and to ask how these capital assets are to be utilised. Capital is being expended today in large quantities in housing. The Government is going to develop industry in what is known as the depressed areas. They will spend a considerable amount of money. How is this money to be presented to the House. I have in mind a company in which I am personally interested. The Government are to expend some £200,000 in putting up a factory in a depressed area. I see no reason why I should not make reference to this; I do not propose to give detailed information. The company in which I am interested will then put into this building some 250,000 value of machinery. This company will employ something like a thousand hands in this depressed area

I want to know how the money which the Government expend on this sort of development is to be dealt with in the national balance sheet. Money expended in that direction cannot be regarded as ordinary expenditure. It is a capital asset and I would ask my right hon. Friend to consider whether the time has not now arrived when there should be a complete readjustment of the manner in which the accounts and financial statement are presented to the House. The Government should present a statement showing the capital assets which the country owns, the value of which must certainly run into hundreds, and, I should imagine, over a thousand million pounds. It is ludicrous to say that we are expending x millions of pounds a year when, in fact, a portion of that money—and a substantial portion—not only today, but all through the war years, has been expended On capital assets.

My last point is to ask my right hon. Friend to consider issuing in a White Paper a statement, not only now, but every year when the Budget is presented, which will clearly show the physical assets which the Government own and the value of those assets. Particularly would I ask the right hon. Gentleman not to permit capital assets to be sold, as they are being sold today, and the money derived from them regarded as a part of the income of the country, which should be appropriated to the reduction of the National Debt.

6.7 p.m.

Mr. Guy (Poplar, South)

I am very pleased to have the opportunity of joining in the chorus of approval of the proposals which the Chancellor has placed before the Committee. No doubt they have been very warmly received by those who will benefit. The removal of the Purchase Tax on those household goods which are so very important and necessary to the comfort and well being of our homes will give immense satisfaction to so many who are desirous of obtaining those goods, but, after listening to the conversation of a few of my women constituents yesterday, it seems to me there is a fear that will beset them. They are afraid that when they come to purchase those goods, now that the tax is removed, they will find that the goods, too, have been removed and have disappeared under the counter, only to be sold to special customers at a very special price.

I want to draw the attention of the Chancellor to three particular matters, and, in particular, to the absence of two of them from his Budget statement. The raising of the Excess Profits Tax has been well received by the Opposition and the Press generally, and there is no doubt that that was done to stimulate both industrialists and depressed industry in order to increase production to the fullest extent. In order to make this secure and to keep a proper balance between production and the worker, the overtime earnings of the worker should be excluded from taxation. This has been a very sore point and I am sure is well known.

Mr. Assheton

Does the hon. Gentleman mean only manual workers or all workers?

Mr. Guy

I said workers, whether by hand or by brain. Anyone who has had experience of having to work overtime every night in the week, every Saturday and every Sunday, knows only too well the heavy extra expense which has to be incurred; extra meals and extra necessities, each according to his taste—some like beer and some like other things—certainly cigarettes and minerals, and this is all expenditure which would not be incurred in the course of the week if one had not to work overtime. That leads workers generally to the conclusion that it is really not worth while working overtime at all and, having had that experience, I entirely agree with them.

My right hon. Friend has very generously and, I think, rightly, agreed to pay postwar credits to the old age pensioners, and I am sure that none of us in the Committee will disagree with that. But what about the other workers, many of them in the late 50s and in the early 60s who have become incapacitated through the very heavy burden of extra work imposed upon them during the six years of war, very many of them now down to a bare living week's wage, finding it very difficult to manage, and very many of them thrown on to the employment exchange. They feel, as I do, that they are justly entitled to some consideration of having their postwar credits paid to them.

Before I leave this question, I want to make an important point in connection with the payment of postwar credits to old age pensioners. It has been recognised that many of these elderly people answered the call and returned to industry to help in the war effort, and in so doing their pensions, on which they were drawing, were included in their weekly wage amounts for taxation purposes. I would utter this warning to my right hon. Friends on the Front Bench and to my colleagues on this side of the Committee: if there is any attempt by the pensions officers to include this money, which will be paid back to these people, and count it as income, so reducing their pensions during the time they receive this payment, there will be a first-class row in this House. I trust that particular notice will be taken of that warning.

Finally, there is the very important question, which affects so many families and households of this country today, of the payment of balances due under the War Damage Act, 1941, Part II, Private Chattels, to those people who were bombed out and who lost their homes. The Chancellor made no mention of this in his proposals. I sometimes wonder whether it is realised what this means to many families who had the misfortune to lose their homes by enemy action in this war. Many of them are living in cramped conditions with their families. Those who are fortunate enough to have sufficient accommodation have not enough furniture or household goods to fill even one room, and are waiting for the opportunity to get a home together again. Added to this is the worry of the returning members of the home from the Forces. My right hon. Friend should realise what it would mean to these people to have their money returned to them at the earliest opportunity. The longer there has been delay in making payments to these people, the higher have risen the prices, not only of furniture, but of many other household goods. When it is remembered that the assessments of the homes lost or destroyed were made in 1940 and 1941, the price of goods today, and the fact that the balances have only accrued at the rate of 2½per cent., the Committee will realise the position and how important it is that this money should be paid to them. I trust the Chancellor will give an answer to the points I have made and, having made them, I desire to express my warm approval of his otherwise very excellent Budget.

6.20 p.m.

Major Sir Jocelyn Lucas (Portsmouth, South)

I want to raise a point which I do not think has been mentioned before, and which may not be of great public interest, but does affect quite a number of people. That is the question of tenants for life who receive the income from some entailed sum of money or property. The object of the entailment is to enable the head of a family to go into public life, or serve his country as a soldier or in some other way or to live on and manage his estate instead of having to go into trade, and to put him in a position free from worry while he does his duty. It is also to prevent some spendthrift son or heir in the days to come from squandering the family inheritance.

The position has entirely altered since the days when entails were made, say, up to the 1914–18 war and when Death Duties were comparatively small. Now Death Duties go up to 70 per cent. plus Inheritance Duties and this means, with the very high Surtax, that the heir to a big estate in money or land who is only entitled to the income, and cannot touch the capital, cannot provide for his family. He is unable to sell anything, either for the benefit of his widow, or to give his children a start in life. Whether inheriting property is right or not does not come into this question, but the point is that the heir to such a man should not be in a worse position than the man who does not bother about what happens to his money after he has gone, and leaves it for his heir to do what he likes with. I do not think that the thrift and foresight of some forefather who tries to ensure that his capital should carry on from generation to generation should be penalised and that he should be put in a worse position than the ordinary man who possibly has no sense of responsibility.

There are two or three suggestions I would make as to the way in which that difficulty should be got over. One is that a tenant for life, if he is willing to give up a proportion of his money to the next heir, should be allowed to realise an equal or fair proportion, either to go into business himself or to endow his family and give them a chance. Again with the present heavy taxation a tenant for life with no money of his own who tries to save something for his family finds it very difficult to do so. Supposing he saves £5,000, £ro,000 or £20,000, that is lumped into Death Duties with the whole of the main estate. That means, supposing it is at 70 per cent., that on £20,000 his heirs might only get £5,000 or so out of it.

More consideration and humanity might be shown in some cases by the Commissioners of Inland Revenue when dealing with these cases. For example, in one case a tenant for life who married again late in life tried to leave his widow the residue of his estate which came to about£1,000, and a lump sum of£5,000. As he knew she was not very good with money he said that it was to be released at a rate not exceeding £500 a year. After a time, the trustees found that the Income Tax authorities were charging Income Tax on the capital released. The trustees thought that under the circumstances the only thing to do was to realise the whole sum. They appealed to the Chancellor at that time who turned it down but said that they could make a further appeal to the Commissioners, but that is expensive, and nothing was done. The money had been left in that way in order to protect the widow against herself and so that she should have something to go on with for as long as possible. I maintain that this tax claim was wrong, and should never have been made.

On the general terms of the Budget, I congratulate the Chancellor on his abolition of tax on kettles and such articles about which I am sure he has had representations from all sides of the Committee. With regard to P.A.Y.E. I would like to make the point that if a secretary or typist or any casual employee applying for a job is asked what he or she wants, the reply is that "it costs so much to live and so much in tax." They add the two together with the result that the employer pays the tax, with the result that it is one of the greatest inflationary Acts ever passed.

I very much welcome the Chancellor's statement that he will accept land in payment of Death Duties. I think one of the bad examples of private enterprise is the speculative buying up of an estate which has been in good hands for generations and is forced into the market by Death Duties, and is then split up and sold and resold irrespective of the interest of the tenants and cottagers. It is far better that the State should become the landlord in such a case. The State is not always a good landlord, certainly not so good as the old-fashioned landlords of the better type, who in bad years would always forgo part of the rent. It is hardly likely that the Government or the Crown authorities would be in a position to do that without all sorts of appeals and questions in the House.

Finally, I would beg the Chancellor to remember in future that if he wants to keep the best brains in the country it is no use taxing a man out of existence or he will go elsewhere. We can all learn from other countries and only the other day we find that in Russia where capital is now allowed the manager of a State farm which had evolved a new breed of cattle—Swiss and Russian cross—was given 150,000 roubles as a bonus for his good work. That is supposed to be equivalent to about£15,000. We don't even give our war leaders that. In Russia, I understand, contrary to the assumption of hon. Members opposite, people are allowed to pass money on to their sons and heirs. I would like to know what are the rates of Death Duties on that money, if any. Perhaps the Chancellor will tell us. I would appeal to him not to penalise thrift and initiative, but to encourage our best brains by every means in his power.

6.20 p.m.

Mr. J. L. Williams (Glasgow, Kelvin grove)

In welcoming generally the proposals of this Budget, I would at the outset say that intimations of views of my constituents in the last six months on taxation have been confined mainly to three phases: Income Tax allowances, Purchase Tax, and Entertainments Duty. So much has been said, and said very well, upon the first two items that, although I hold pretty strong views about the need for widening the gap between earned and unearned income, and about the need, when a greater volume of consumer goods is on the market, to put a wider range of articles outside the Purchase Tax, I propose to devote the few minutes I have at my disposal to dealing with the third item, Entertainments Duty.

We all welcome the proposal to make a concession in regard to outdoor sports. That would seem to receive common approval. At the same time I find that one recreation, which is very popular, has been given no concession, that is, the cinema. Three years ago, when the late Sir Kingsley Wood put up the rate of tax for the cinema, as for other recreations, he said that the increased tax was to be borne by those who, at any rate, had some money to spare for expenditure of this kind. The position today is that that money is not there in the same volume. First, some of the money spent in those years upon cinema attendance was spent by people who were keen supporters of other forms of recreation, but who, because there was such a restriction upon football, cricket and outdoor sports generally, went to the cinema instead. Also, there was a great deal of overtime payment then which is not now enjoyed by the same people. Cinema attendances were also swollen in those years by Servicemen from other parts of the Empire and the world, people who are not now here to spend their money.

I am concerned about this problem chiefly because it has a close relationship to the housing conditions of the people. A great many people in my constituency go to the cinema because their homes do not give them the opportunity afforded to people in better houses. Overcrowding and slum conditions are such that it is a great relief for many people to spend an evening at the pictures. There are so many phases of this housing problem that I do not think even the widest housing Debates in this House have ever covered them, and this is one of them.

I find that this tax bears more heavily upon cinemas in the poorer than in the well-to-do districts. Last year there was collected in cinema duty an amount between three and a half and four times greater than that collected in 1929. The position in a representative cinema in my constituency, which is not exactly in the poorest district but in a mainly industrial area, is that the tax borne is put at between five-and-a-half and six times the amount carried by that concern in 1939. That will give some indication of the position. Sir Kingsley Wood said, in 1942, that expensive seats provided very little money, and that has been the position ever since. The cinema tax is, in the main, borne by the people who go to the low-priced seats. Having said that, I would add that I believe the opinion of the people in my constituency will be that the Chancellor has done very well, but that in some respects, as in regard to this form of Entertainments Duty, he can do a little better before this Budget becomes law.

6.35 p.m.

Sir Patrick Hannon (Birmingham, Moseley)

It is a little difficult, at this stage of the Debate, to say something that is not a repetition of what has already been so well said I am glad to have this opportunity to speak, however, because I think the principal points which were submitted by my right hon. Friend the Member for the City of London (Mr. Assheton), in his interesting speech this afternoon, ought to be emphasised again. It is all very well for Ministers to say, when we suggest economy, "Tell us how we ought to carry out these economies." It is not the function of the Opposition to provide the means for His Majesty's Administration to deal with the question of economy; it is the Government's function and responsibility. No one in this country who is familiar with the course of our public life and the working of our affairs can close his eyes to the fact that there is an immense amount of waste in progress in one direction or another.

After the last war we had the Geddes "Axe." I do not for a moment suggest that we ought to introduce a Geddes "Axe" again, but it is, and ought to be, the function of the Government to determine where a reduction in public expenditure can be effected. Then we had the May Committee. Lord May rendered signal service to the country at the time—[Interruption.] I do not expect hon. Members opposite to agree with that, but this side of the Committee, where common sense prevails, does agree.

Mr. Alpass (Thornbury)

What was the effect of that Committee?

Sir P. Hannon

The effect was very salutary and that was one good thing. The Committee has had an interesting series of speeches. This is my 27th Budget, and I have rarely heard so many interesting speeches as have been made during the course of this Debate. In particular, I would like to commend two speeches, because each embodied such practical suggestions and so much political wisdom, and I hope that the Solicitor-General, who I see is in charge of the Treasury Bench at the moment, will convey my observation to the Chancellor of the Exchequer. These two speeches were delivered by the hon. Member for Chesterfield (Mr. Benson) and my hon. Friend the Member for Edgbaston (Sir P. Bennett). All of us on this side of the Committee were, I thought, particularly impressed by the wise suggestions and the practical exposition of sound policy of the hon. Member for Chesterfield. It was a remarkable speech in a Debate in which we are confronted with so many million pounds of expenditure. I would emphasise some of the things which have been said by Members of both sides of the Committee in regard to the Purchase Tax. It is a serious decision on the part of the Chancellor that this tax is to become a permanent feature of our public finance.

I would like to say to the Chancellor of the Exchequer—I am sorry he is not present—that he has been a friend of mine for a long time, and I have watched his development with great interest and sympathy for many years. I have seen him in storm and sunshine. I was present on many occasions in the old Chamber, when we had thundering rebuffs from the right hon. Gentleman which shivered and shook those of us on the other side. Now he has mellowed and become an object of benevolent maturity. He is taking a much more generous view of life. At the same time he has cultivated the faculty of framing a Budget which is not wholly unfriendly to the prospects of the party on the other side.

On page 16 of the White Paper it is emphasised, again and again, that the level of taxation is too high. If production in this country is to be increased, every means should be brought into play to lessen the cost of production. The heaviest burden upon production in this country today is taxation. The level of taxation is far above what the commitments of the country and public finance are able to meet. I think the Chancellor of the Exchequer seems to take the commitments very lightly. As was emphasised by the hon. and learned Member for Montgomery (Mr. C. Davies), unless we can foot the bill, to use a vulgar expression, this country will find itself in a very precarious financial condition in the course of the next couple of years. Then we shall see the value of the statements of which we have had examples from time to time, and of the promises so indiscriminately made during the course of the last election—[An HON. MEMBER: By whom? "] By hon. Gentlemen opposite. There was a sort of friendly rivalry among hon. Gentlemen opposite in the making of promises. It will be another story when it comes to the question of the realisation of promises.

I do not want to add any more to this Debate. The whole Budget has been analysed. It has been torn to pieces on this side of the House, of course, with a certain amount of friendy feeling, and on the other side of the House it has been received with plaudits of acceptance. It is, on the whole, a better Budget than I expected. In many respects it is a good Budget. It presented difficulties with regard to the provision of money by taxation. I say that because I always like to be generous to my colleagues. Of all people, I would like to have a kindly word to say of the Chancellor. I hope that when the Finance Bill comes before the House of Commons, account will be taken of it by the Chancellor of the Exchequer.

6.42 p.m.

Mr. Donovan (Leicester, East)

The hon. Member for Chippenham (Mr. Eccles) made two observations yesterday in winding up for the Opposition, which prompt me to a short intervention in this Debate. He said, first, that this Budget does nothing whatever for the capital requirements of industry. I remind him that only last Saturday this Government brought into operation an Act whereby large reliefs are being given to industry in the direction which he indicated. Capital expenditure on buildings, plant, machinery and on patents and other matters, is all to be allowed as expenses in computing the profits to industry for Income Tax purposes, spread over a number of years. When that unprecedented relief was given only last Saturday, I submit it is not really reasonable to ask the Chancellor of the Exchequer to begin again on the Tuesday. The second observation which he made was that we ought to be ashamed of "incomprehensible" taxation. I fully agree, but the complexities of the subject are such that I do not think we shall ever get a sort of Dobson and Young technique in the matter of explaining the Income Tax Acts.

Nevertheless, I ask the Chancellor of the Exchequer to reconstitute the Simplification Committee which was set up in 1927, and which reported in 1936. That Committee produced an excellent Bill embodying a form of simplified Income Tax. What has happened to that Bill nobody knows. The task of bringing it up to date would not be superhuman. Although one cannot expect legislation for this or the next Session, or perhaps even until near the end of this Parliament, a committee could be set to work at once on the subject. In view of his interest in the subject I would like to nominate the hon. Member for Chippenham as one of the members of such a Committee.

The hon. Member for East Aberdeen (Mr. Boothby) referred to the question of children's allowances and regretted that they were not being raised. I share his regrets. In terms of taxation, we gain £22 10s. for a child. When that is added to family allowances it is not sufficient stimulus for the sort of people whom we want to have more children than they are having at the moment, particularly if family allowances are to be taxed. The reply of the Chancellor of the Exchequer tonight will be, "I am very sorry but I cannot spare any more money." May I suggest to him a way in which he could help in this direction without spending a penny more? He has£30 million in his pocket which he is going to give away to taxpayers in the shape of restoration, or partial restoration, of the earned income allowances. Could he not distribute that in such a way as to differentiate between the family man and the man without a family? There is no question here of asking the Chancellor to take something away from people who have got it already and give it to somebody else. There is no question of asking him to find the money. Here is a unique opportunity. He is to give £30 million away in any case. There is no administrative difficulty about doing it. I ask him then to discriminate between those with families and those without. It is not a difficult thing to do and might be productive of much social good. There are many other things I would like to add, but they have all been said much better than I could say them, and I, therefore, content myself with those brief observations.

6.47 p.m.

Lieut.-Commander Gurney Braithwaite (Holderness)

At this stage of the Debate, when on every occasion an hon. Member resumes his seat, there is enacted a scene reminiscent of the playing of the National Anthem, I am fully conscious that he who has the good fortune to catch your eye, Major Milner, earns the virulent dislike, if not the positive hatred, of hon. Members in all parts of the Com mittee who had hoped to have that good fortune. I am going to try to respond by making my remarks almost telegraphic in order to leave time for others to participate. When the Chancellor was delivering his eloquent speech on Tuesday I could not escape the impression that he was addressing himself to the American Congress rather than to the British House of Commons, so ostentatiously did he soft pedal Socialist policy. Whether unwittingly or not, the first 48 hours certainly have produced results, which I shall hope to indicate in a minute or two beneficial to the get-rich-quick type of capitalist dear to the heart of Wall Street. However, before coming to the controversial remarks which I have to offer, it would be churlish not to thank the Chancellor most cordially for the concession he has made in the matter of Entertainments Duty on sport, if only because I took up the time of the Committee for some 40 minutes last October in placing certain data before him. If my remarks were tedious on that occasion they have at least reaped some reward because I am hopeful that some of the facts I placed before him then may have played a modest part in the concession we have received.

Coming to the broad causes of alarm and disquiet which this Budget causes in my mind, I will enumerate them as follow: Are the Government reconciled to high taxation for ever? It looks as though approximately the present levels are to continue indefinitely to finance peacetime projects of one kind or another. Only the other day, in reply to a question, the right hon. Gentleman stated—I think I have got the figures correct—that the figure for taxation of all kinds, which was £3 per head in 1914, is now £67 per head. That is a solemn and staggering reflection. I regret that nothing has been done in this Budget for those stalwart supporters of the Revenue, the consumers of tea, sugar, beer and tobacco. I think that reasonable relief could have been afforded in all those cases. We are confronted with this simple fact—that the Socialist Party, having almost completed the process of soaking the rich, are now starting on their next objective of soaking the masses. That will become more and more apparent as the days go by.

An economist almost as distinguished as the Chancellor of the Exchequer, Professor Pegou, professor of Cambridge University, and not a Tory by any means —I believe he shares, broadly speaking, the views of hon. Members opposite, but it may be that he is a Liberal of the Gladstonian rather than Montgomerian type—in one of his works, says that mankind is always economically striving after three goals: high wages, full employment and a stable currency. The distinguished professor went on to add that one could always have any two of these three objectives, but that it was impossible, economically, to achieve all of them. I gather, from the Government's policy, that they are striving for the last two—full employment and a stable currency. Certainly, and I do not think this will be denied in any quarter of the Committee, the present taxation level bears with undue harshness upon real wages, and that brings me to the topic raised with great force by the hon. Member for North Battersea (Mr. Douglas), with whom I find myself in full agreement in what he said about the Purchase Tax.

I do regret that this tax, imposed in 1940, as a matter of fact, by Lord Simon when he was Chancellor of the Exchequer, and specifically declared to the Committee of that day to be a war tax, should be retained. It was introduced to produce revenue and reduce popular spending, but I heard the right hon. Gentleman say on Tuesday that it is to go forward in perpetuity. It is an unfair tax upon males, and it is a grossly unfair tax upon the fair sex, who might look forward, as austerity is relieved, to blossoming forth in those changes of apparel so dear to their hearts. They will find that this tax presses harshly on many of the things they would like to have. Let no one imagine that the ladies of this country are going to content themselves with utility clothing for a moment longer than is necessary.

Looking forward—and here I found the Chancellor rather disappointing in the prophetic part of his speech—I think he failed to take into account one factor which will press upon us more severely as time goes on; that is, that the population of this country is a rapidly ageing one. The fall in the birth rate between the two wars is now beginning to make itself felt, quite apart from the grievous casualties sustained in the second war. and the young men now returning from the Forces, who will be reaching middle age between 1960 and 1965, will take upon their shoulders the main weight of the social proposals we are now putting through. I Lope it will not prove to be the case, but it may be that the National Insurance plan which was welcomed in all parts of this House and in the last Parliament, where it was first adumbrated, may press so hardly upon the shoulders of that generation in their middle age that, so far from being a life-buoy, it will prove to be a millstone round their necks. That is a sombre possibility, unless we are able to reestablish our financial equilibrium.

Now a few words on the cost-of-living subsidies, which have reached the figure of £335 million. I am not one of those people who oppose that policy, but I feel that it is very necessary for every hon. Member, of whatever party, to explain to the people in the plainest possible language that this is, in fact, camouflaged inflation—well camouflaged, but camouflaged for all that. Agriculture is thus in an extremely precarious situation. The price levels, fought for so long, are now established on a basis of unreality. The time may come when the taxpayers in the urban areas will tire of this huge figure, because, while it is used to keep down the price of food, it is paid for in other directions, in indirect taxation and the like, and it may well be that some harassed Chancellor in the future, finding an unbalanced Budget, may seize upon these subsidies to the primary products of agriculture as a possible way of escape. I think that that should be made perfectly clear. I hope that hon. Members who represent urban constituencies—this is not a party point—and who are anxious to see the full development of the soil of Britain and agriculture maintained on a prosperous basis, will not cease to preach to their constituencies this economic fact arising out of the food subsidy position.

In his Budget speech, the right hon. Gentleman said this: There are two substantial items of non-tax Revenue which I shall get this year as legacies of the war I can only estimate them in round figures; but I count on getting£150 million from the sale of surplus war stores,£50 million as surplus receipts from the trading activities of various Government Departments,…—[OFFICIAL REPORT, 9th April, 1946: Vol. 421, c 1816.] I think it is a little odd that, when looking five years ahead, the Chancellor had nothing to say about another source of revenue which I thought he would have advertised in the plainest manner, and particularly to hon. Members opposite. What about trading profits from the nationalised industries? We have been told that private enterprise is inefficient, and so it is being superseded, and everything is going to be streamlined. Are there going to be any profits from the nationalised industries, or are there to he losses? It used to be a Socialist doctrine, and I was always able to follow it, economically— [Laughter.]—I am not trying to be humorous at the expense of hon. Members opposite. I often used to listen to Socialist speakers when I was young, and that is why I joined the Tory Party. One of their economic arguments was that it might be good policy for this country to run the coal mines at a loss in order to supply industry with coal and have other profitable industries making up the loss. If that is still Socialist policy, let them say so. Is the Chancellor budgeting for profits from his nationalised industries? We ought to be told. I cannot imagine the perfect equilibrium of running on a non-loss or non-profit basis. If we are to have nationalised industry, how much is likely to go into the taxpayers' pockets for the next five years? The Government must have some idea, and perhaps the hon. and learned Solicitor-General will obtain the information from the Chancellor and ask him to deal with it. Or is the promised land entirely devoid of milk and honey? Ought we not to be told?

The cost of food, again, may rise sharply during the next two or three years. I am told that, through this vast bulk purchase system, wherever Britain is known to be in the market, the result will be that prices will be hoisted against us. If that is not the case, and the Government will do well out of the bulk purchase system and will make profits, I think we also ought to be told. The Chancellor should let us know one way or the other. I am bound to say that the Chancellor of the Exchequer and the President of the Board of Trade would do well to spend some time in commodity markets. They could be financed, I am sure, by the Cooperative Wholesale Society. Then three successive unprofiable years of operation by those right hon. Gentlemen should exclude them from office under the black-ball system. Let them at least study these matters rather more closely.

My last point is that of savings. The savings of the people last year reached the wonderful figure of£658 million;£520 million are estimated for the current year and have already been written into the Budget. They are to be used for current expenditure. Do the Government reiterate—because I think this should be done every year by the Chancellor of the day—that these savings are to be paid back in paper money of, approximately, the same purchasing value as at the time they are lent? We should be told at frequent intervals how we stand in this matter. It would indeed be melancholy if those who have invested in British Bonds and Savings Certificates were to suffer the fate of the Japanese bondholders and be told with a shrug of right hon. shoulders that they have backed the wrong horse. The present tendency is inflationary. I agree with the hon. Member for Chippenham (Mr. Eccles) when he says we are in the "phoney" period of the war against inflation. The question is not whether inflation can be avoided, but to what extent it can be kept in check. The hon. Member for South Cardiff (Mr. Callaghan) referred this afternoon to the Stock Exchange; he referred also to my sartorial appearance, which has no financial significance. I would say to him that the stock markets have hoisted a storm cone in the last two days. There is a definite inflationary tendency in those prices. That is what I meant when I began my speech. While the impact of the Socialist Election poster, "Enter Labour, Exit Want," on the housewives' larder has been discouraging, it has been carried into glorious fulfilment in the case of the shareholders of the Greyhound Racing Association. It must also be some comfort to hon Members opposite that the stalwart shoulders of the Socialist Chancellor of the Exchequer have hoisted Mr. Butlin above the poverty line.

In his peroration—and I have now reached my own—the Chancellor referred to the late Earl Lloyd-George and his land policy. I thought he was somewhat infected by the eloquence of the late statesman, because "The sun rising over the mountains of Wales," and all the rest of it, was very much the sort of thing we got. In fact, the Chancellor gave the assembled brothers an unduly generous allocation of "wind on the heath" in his peroration. I am bound to say that the Chancellor has not always been happy in his prognostications. I well remember the grim winter of 1940–41 when, as Minister of Economic Warfare, he broadcast to us on the subject of German oil. To listen to him did much to maintain my morale at the time. One could imagine that he was in command of the magnificent Air Force. He was selecting targets: the great red weals were spreading over Germany, and, by 1941, the German oil supplies would be crippled It was not the fault of the Royal Air Force; they were not to blame. But the right hon. Gentleman did not understand the magnitude of that problem and neither does he understand the magnitude of the problem with which he is now confronted. I would say of the Chancellor that he was wrong then and is wrong now, and that his prophetic perorations fall far below his retrospective rhetoric. He has taken on a task which requires second sight. If only the right hon. Gentleman's foresight were equal to his hindsight, the nation would be better off by a long sight.

7.5 P.m.

Major Bruce (Portsmouth, North)

I thought that the right hon. Member for the City of London (Mr. Assheton) was a little uneasy when he led off for the Opposition this afternoon, and I think the reason for that is perfectly clear. In their heart of hearts, the Opposition believe that the Budget is a good one. The City of London is convinced that the Budget is a good one and the country, by and large, knows that the Budget is a good one. The criticisms which we have had from the Opposition, so far, have crystallised, broadly speaking, under two heads. There has been a little special pleading on behalf of those whose incomes slightly exceed£1,200 per annum. That argument was satisfactorily dealt with by my hon. Friend the Member for South Cardiff (Mr. Callaghan), and the remainder of the Opposition argument has boiled down into vague allegations of extravagance on the part of the Government and dark hints that, unless rigorous economies are enforced in the future, the nation is in for a bad time.

But the Opposition cannot have it both ways. All the way through this Session since the King's Speech, we have been introducing Measures of social reform into this House and on practically every occasion hon. Members opposite have congratulated the Government and expressed regret that it was not their Government who were introducing them. Indeed, on occasions when the Service Estimates have been presented, hon. Members on the Opposition benches have urged even more reforms at even more monetary cost. When the right hon. Member for the City of London was speaking this afternoon, he was questioned as to the manner in which various economies could be enforced. I thought he paused for an unduly long period of time, but, eventually, he said, somewhat lamely I thought, that there were always the Services. I looked along the Front Bench opposite and I saw the right hon. Member for Aldershot (Mr. Lyttelton). I thought his face blanched a little, but my view of the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) was obscured, so I did not see what his face was like. I remember that when he came to my constituency three Inc nths ago he complained that the new rises in naval pay were niggardly.

Hon. Members opposite cannot have it both ways in this matter. Is it suggested that the economies should be effected by cutting down in all the social services? If so, will the Opposition please specify which social services are to be cut down? Is it to be at the expense of the Armed Services, as suggested by the right hon. Member for the City of London? If so, I suggest that by far the best way of doing that would be to raise the matter specifically on the Army, Navy or other appropriate Estimates and, if necessary, to carry those views to the Division Lobby in exactly the same way that the Labour Party did before the war when it disapproved of an Estimate. The country would not misunderstand the Opposition in this matter; it would not make the allegation which is very often made on the Opposition Benches, that we were voting against the Army, Navy or Air Force. If the right hon. Gentleman feels very strongly about this, I suggest that he should carry it to the Division Lobby.

Mr. Assheton

I would like to explain that the principal criticism I made was that the number of men and women still employed in making munitions for the Services was over 1,500,000. The other criticism was directed against extravagant administration—nothing else.

Major Bruce

The only example that my right hon. Friend was good enough to give to the Committee was some expenditure on stationery to the tune of£13 million. I am pleased that the Chancellor decided to maintain the food subsidies which have been brought into existence during the war. Some of us remember what happened immediately after the last great war. I have not a very long memory and I was not sufficiently old at the time, but I know a number of people who were alive during that period, and, of course, there are plenty of books on the subject. I find that on 1st October, 1918, the price of potatoes had doubled itself in two years, the price of sugar had gone up by 73 per cent. by July, 1920, the price of tea was up by 34 per cent. by 1919, and butter was up 33⅓ per cent. in two years. These points ought to be borne in mind when allegations of extravagant expenditure are made.

I now pass to the subject of Purchase Tax, which was touched upon by the Chancellor in his speech, in which he said: My view is that the Purchase Tax has got to stay, and must yield an increasing revenue over the next few years to help pay the bill for social betterment. Its yield will rise as the production of taxable goods increases." FOFFICIAL REPORT, 9th April, 1946; Vol. 421, c. 1826.] I think the Purchase Tax will have to stay so long as a period of stringency in commodities continues to exist, but I also agree to a large extent with what has been said on the Opposition benches on this question, in that I do not think it should be a permanent feature of our financial existence. I was particularly stirred by something which was said by the hon. Member for Smethwick (Mr. Gordon-Walker). It is only fair to the Chancellor to say that he did not by any means imply these views, but the hon. Member for Smethwick said: I suggest to the Chancellor that he should consider the idea of progressive indirect taxes; a higher percentage tax upon higher price goods."— and then he went on to say: One should have progression in indirect taxes in the same way as we have it in our direct taxes."—[OFFICIAL REPORT, 10th April, 1946; Vol. 421, C. 1972.] I really must dissent from that point of view, because there are two kinds of expensive articles There is the kind of article which is expensive because it is rare, or eccentric, or because, for some perfectly good social reason, the Government do not desire to encourage the consumption of that particular kind of commodity. It may well be during a period of stringency that some Purchase Tax or prohibitive tax should be imposed on such a commodity. But there is the other kind of article which is expensive because it represents a large amount of valuable human endeavour. There are works of art and other articles of an expensive nature, which working people desire to purchase, and it would be monstrous if the Purchase Tax were to be graded highly upon higher priced commodities of this particular kind. It would mean that the ordinary working man would have to save far more for an expensive article than he would otherwise have to do. In the long run the Purchase Tax question will largely be solved by that which has been touched upon in all quarters of the Committee. I refer to the question of increased production. There is no doubt that, progressively, as production increases prices will fall, and also to a large extent the necessity for taxation will fall We must remember that a good portion of the expenditure which is budgeted for in this Budget is spent not only on personnel, on wages, but on materiel, and also on goods. Progressively as production increases, the prices of these goods for which we have to budget will fall also; therefore, the necessity for taxation will fall and the necessity for Purchase Tax will fall likewise.

My next point is concerned with Table 14 in the Financial Statement. At present there is no way of determining from this Statement exactly how much expenditure of a capital nature will take place and how much ordinary expenditure which has no residual value at the end of the financial year will be incurred. Indeed, by ordinary orthodox canons of accountancy, Table 14 is certainly not a revenue and expenditure account at all. At best, it is a summary cash account—a receipts and payments account. I think the time is coming when our accounts, or our estimates for the year, will have to show approximate estimates of how much money is to he spent on capital account, and how much is to be spent on ordinary revenue account during the year. because the existing figure of excess of expenditure over revenue of approximately£725 million is not an excess of expenditure over revenue at all. It is an estimated excess of estimated payments over estimated receipts, and, moreover, the estimated payments contain, as they must, millions of pounds which will be spent during the current year on items which will have a residual value in 20, 30 or 40 years' time, and it is, therefore, entirely incorrect from the accountancy standpoint to include all this expenditure on the expenditure side. Also it suffers from the normal accounting deficiency in that it does not take into account opening liabilities or closing liabilities, or opening assets or closing assets. I agree with the hon. Member for East Ealing (Sir F. Sanderson), who said it is high time we had some alteration in the form of accountancy.

I was pleased that the Chancellor saw his way to grant to the working person exemption for tax purposes of his contributions to National Insurance. That raises the whole question of the amount of expense which an employee at the present time is entitled to charge under Schedule E as against the expenses which the employer of labour can charge under Schedule D. Under Rule 3 of Schedule D, which covers the majority of our enterprises in this country, theentrepreneur is allowed to charge for Schedule D purposes— any disbursements or expenses…wholly and exclusively laid out or expended for the purpose of the trade, profession, employment or vocation. These would undoubtedly include, from time to time, expenses for entertainment, and a whole number of expenses which are normally incurred in the course of business. In Schedule E, however, one finds that Rule 9 says: If the holder of an office or employment of profit is necessarily obliged to incur and defray out of the emoluments thereof the expenses of travelling in the performance of the duties of the office or employment, or of keeping and maintaining a house to enable him to perform the same, or otherwise to expend money wholly, exclusively, and necessarily in the performance of the said duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed. The operative word here is "obliged." An employee, to be able to obtain an allowance for tax purposes, has to prove that the expenditure he incurred was incurred in order to enable him to retain his job; in other words, that he was "obliged" to expend it if he wanted to keep his job. I do not think that is a very good way of encouraging the employees of the country at the present time. They ought to be brought more into line with Schedule D.

I conclude by saying that, as a whole, the Budget is a first-class Budget, and one which will show, not only the Opposition but also the country, that there is at the helm a Chancellor who knows exactly what he is doing, and where he is going in regard to these financial matters.

7.21 p.m.

Mr. Jennings (Sheffield, Hallam)

I do not propose to follow the hon. and gallant Member for North Portsmouth (Major Bruce) into the difficulties of Income Tax law. Having earned my living for some years, arguing the difficulties under Schedule E and expenses in Schedule D, I can tell him that it would take many days to explain some of the difficulties that exist in the various Schedules to which he has referred. However, I go with him in the suggestion that, if possible, a clearer statement ought to be given to the country and the Committee with regard to national income and expenditure. I know it is difficult, but I feel there is a good case to be made out for endeavouring to separate revenue items as distinct from capital items. The Chancellor said he has brought in certain terminal items in balancing his Budget, items such as war material. Some lines of thought may put those in the category of capital items being brought in with a view to balancing the Budget. The Chancellor called them "terminal items." I take it he means non-recurring items, items which once dealt with do not happen again. I hope the Chancellor will take the opportunity of bringing in the sale of war material and that sort of thing with a view to assisting him to balance the Budget.

How are we going to balance the Budget in three or four years' time if we have the appalling taxation that we have today? Today we are suffering under an appalling taxation burden, a war burden which, in my opinion, has no justification at all in peacetime. That is the Govern ment's responsibility. A great deal has been said about economy. I venture to suggest that it would not take a very clever man to take a toothcomb through expenditure without touching Service pay or allowances, as has been suggested from the other side of the Committee. Millions of pounds can be saved in Service expenditure today. If hon. Members go into the constituencies and listen to what people arc saying, every day they will hear instances of waste, instances of buildings unoccupied, of buildings being paid for with nobody there. No Government Department will take the risk in saying, "We do not want that any more." Yet people are bursting to get into those buildings to carry on productive employment. Surely to goodness it does not take a very clever man to save millions of pounds by that form of economy. Last night we were challenged by the hon. Gentleman the Financial Secretary. He said they were entitled to know how to get economics —" Tell us how to get it." There is a suggestion for him. Put a toothcomb through all the Service Departments and Civil Departments. There are people in Service Departments, in my opinion, doing very little for the money they draw, and they would be far better employed in active, productive industry.

I was very sorry to hear the Chancellor suggest that Purchase Tax might be a permanent tax. Purchase Tax was brought in for two purposes: to provide money for the carrying on of the war, and to stem the purchasing power of the people. It was a purely war tax; it was brought in as a war measure. This tax is finding itself in the same position as the Entertainments Duty. That duty was a temporary tax brought in during the last war in order to provide funds. I will tell the right hon. Gentleman why I think the Government are holding on to these taxes. All the administration, all the accountancy, and the collection almost, of this duty, has been shoved on to the shoulders of the employers. The employers have to do all the clerical work; they have to debit the tax, and they have to account for it. In other words, the Treasury and the Inland Revenue are being saved a great deal of work in the collection of these taxes. They are easily collected, ready taxes. If that is a justification, it is a quite unfair justification for maintaining a tax. In my opinion, there is no sound reason for the Purchase Tax being kept on as a permanent tax, if it is merely to save labour, to save Treasury clerks and so on.

I realise I have a limited time. In fairness to other hon. Members who want to speak I am going to be sharp and snappy. If I am a little too snappy I hope hon. Members will not mind. I want to make an appeal for the middle class people in this country. We have here a class of people which has borne this tax with great courage. They have spent almost everything they have of their incomes. They include hon. Members from the benches opposite. I know people who, with intelligence, initiative and brains, have risen to an executive position; they have to keep up a certain position in life in order to uphold that job; they have children, and they have had to pay this heavy tax and, in consequence, have had to draw on the savings they have been able to put away in order to live during the past few years. Those savings have now gone. I appeal to the Chancellor to make a greater difference between earned and unearned income, and not to break down these people This tax is bringing these people with brains down to the place from which they started, and all their initiative and enterprise will be worth nothing at all to them. I appeal on behalf of that section of the community, the middle class people.

The taxation system and the taxation burden in this country is causing a great deal of feeling, resulting in the view that it is not worth while. Members on all sides may not agree with me. The Minister of Fuel and Power has appointed a Coal Board; the Minister has given certain salaries—if I may say so, quite large salaries from a Socialist Government point of view. I venture to suggest that there is not one man who has been appointed to that Coal Board who is interested in the salary at all, because there will be very little left after they have got it. What have they gone on the Board for? They have gone out of a spirit of patriotism, in order to give the benefit of their executive experience. I say that the time has passed when we have to ask brains and enterprise to give their services for patriotic reasons. We ought to be able to pay them proper salaries.

I view with alarm the deficiency in our overseas payments. I urge the Chancellor to watch that very carefully, be cause that is a dangerous position having regard to the figure of the National Debt. I thought it was wry wrong of the Chancellor to say in his Budget Speech what he did say about private enterprise. All over the country lion. Members on the Front Bench opposite have been underrating private enterprise. I say this to them right now. It would have been "God help us" if it had nut been for private enterprise during the war. If we are asking for the cooperation of private enterprise for a production drive, let us hold out the hand of friendship to them; do not ram them down. as the Chancellor said. Although he did not use these exact words, he meant, "If they are not good boys I will put a tax on them. We will see how they go along."

I can give the Chancellor many instances of new companies, formed at the beginning of the war, with fixed standards for E.P.T. purposes, in which, with the incidence of E.P.T., there have been practically no dividends at all. Therefore, there are two sides to this picture. When the Chancellor decries private industry and says they are paying out dividends, let him give the other side of the picture at the same time. Dividends have been in short supply in many companies during the war, and I can give him many instances if he would like to have them.

Do not let us delude ourselves that inflation is not here. Let married Members on the other side of the Committee go home and ask their wives how much they will get for a pound. Inflation is with us. It has to be checked. As has been mentioned by the hon. Member for Chippenham (Mr. Eccles), do not let us be under the foolish misapprehension that it is not here, because it is. I beg of the Chancellor, in that respect, to watch the position with great alarm, because that, and that in itself, will cause untold trouble in the country, and untold anxiety to masses of the people. I thank the Chancellor for the crumbs from his table in the way of reliefs of Income Tax. From the Socialist point of view it was a good Socialist Budget; a Budget that will probably make fast the votes of the people who put the Government there. But in our finances we are past the stage when we can look upon a Budget for the purpose of vote catching. That applies to all parties. I appeal to the Chancellor to cut that out, and to let us have a standard of finance sound and proper, so that we can get back to a sound financial position.

7.33 P.m.

Mr. S. N. Evans (Wednesbury)

In the course of his masterly presentation of a splendid Budget the Chancellor used these words: A much more serious and more anxious problem is presented by…the deficit in our overseas balance of payments. For the calendar year 1946, I put this deficit at£750 million. It represents, of course, the excess of our overseas expenditure—mainly on essential imports."—[OFFICIAL REPORT, 9th April, 5946; Vol. 421, c. 1819.] I propose to devote the few minutes at my disposal to the problem of bridging that gap. There can be little doubt that the British genius for craftsmanship finds its best expression in the fabrication of metals. From blast furnaces we get ingots, billets and pigs, which, by a series of manipulations—for example, forgings, castings, drawings, stamping and machining—we proceed to fabricate into locomotives, automobiles, agricultural implements, electrical apparatus and all the products of our engineering initiative. With the most skilled and amenable labour force in the world, with technicians second to none, it might be thought that our industrial future is well assured, and that the problem of bridging the£750 million gap is not a difficult one. Not so. There is a serious fly in the ointment. It is the restrictionist practices engaged in by a section of British industry. In this connection may I take the Committee back to the words of the right hon. Member for the Scottish Universities (Sir J. Anderson)? He said: I warn the Committee that increased production is not the whole story. Increased productive efficiency is what is required, and that is rather a different matter. The increase of exports to which the Chancellor referred, is very gratifying. I agree that it has gone better than one would have expected, but those exports must be competitive."—[OFFICIAL REPORT, 10th April, 1946; Vol. 421, C. 1953.] I accept that no per cent. My remarks will be strictly relevant to that all-important problem, but I would ask the right hon. Member for the Scottish Universities to address his remarks to those whose political instrument the Conservative Party has always been. I refer to that State within the State, the British Iron and Steel Federation and its members. The pursuit of overseas markets, there can be little doubt, the expanding petroleum industry could and should provide a fruitful field for British-made petroleum mining equipment, which might thus help to bridge the gap. But, unhappily, the prospects here are not bright because in this field we fail to reveal any competitive force whatsoever. British production of petroleum mining equipment, castings, is wholly in the hands of one firm, Stewart and Lloyds, who, through their amalgamations, enjoy a monopoly. British petroleum producers, patriotically desiring to buy British, have to go to this firm, with what results I propose to recount.

Towards the end of 1945 the Trinidad Petroleum Development Co., Ltd., invited tenders for oilfield equipment required for development. Two tenders were received, one from Stewart & Lloyds, the other from the Pittsburg firm of Spang, Chalfont Inc. Here are some comparative figures. For 5½ inch by 17 lb. casing free on board per ton Stewart and Lloyds wanted£33 The American firm wanted£25 13s. 1d., a percentage difference of 29. For 9⅝inches, 40 lb. casing, Stewart & Lloyds' price was £33 175. 4d. and the United States' price was£27 8s. 10d., a difference of 23 per cent. In the matter of line pipe Stewart & Lloyds' price for 1 inch was£31 11s 4d. per ton free on board, the American price£24 10s. free on board, a difference of 28 per cent. For 2 inch our price was£36 14s. 3d., the American price was£25. 7s. 9d., a difference of 44 per cent. For 3 inch our price was£33 12s. 10d. and the American price was £23 12s. 8d., a difference of 42 per cent. For 4 inch Stewart & Lloyds' price was£32 17s. 1d., the Pittsburg firm£22 10s., a difference of 47 per cent. For oil well tubing the British firm quoted £46 13s: 4d., the American £33 10s. 6d., a difference of 39 per cent. But it is when we come to bolted tanks that the position is revealed as really alarming. Here a British price per roo barrel tanks free on board was £110 per ton whilst Oklahoma quoted£57 10s. per ton, a percentage difference of 91. For 250 barrel bolted tanks we wanted£221 per ton and they wanted£93 15s., a difference of 135 per cent.

It is often said, when complaints are made about the price of British steel, "Look at the price of coal." But here I am prepared to give them the coal and pay for the labour and then I will defy them to explain these discrepancies. Hon. Friends may well think that, in the light of these figures, the export-import gap will remain at a very large figure for a very long time if it is left to Stewart and Lloyds, and the Committee may well feel that the sooner the State takes over, the better for British revenue. I could give many instances of the serious disadvantages which British engineering industries have to endure because of the high prices they are charged for their raw material. Almost wholly this is due to the restrictionist practice of that relic of feudalism, the British Iron and Steel Federation. For that reason I should be lacking in political courage and honesty if I did not deplore present Governmental secrecy in the matter of steel policy. Steel is the basic raw material of our engineering. Unless it is going to be made available to industry at world competitive prices, we shall never bridge the gap to which the Chancellor of the Exchequer referred.

Two reports are in the hands of the Government, one instigated by the Coalition Government in 1944, and the other handed in by the Iron and Steel Federation in December last. The findings of the Reid Coal Commission and the Platt Cotton Commission were broadcast to the world. Why should not the steel recommendations be made available likewise? I ask this because it seems imperative to me that a policy brought to birth by a body which has consistently put the interests of its members before the interests of the nation should be given the widest possible publicity and the most profound consideration.

These must be my final words. I remember the Anglo-American monetary proposals when that which Congress took three months to decide this House was given 13 hours to debate. Of those 13 hours Front Bench speakers took seven. I trust there will be no repetition of that because that is really alien to our British Parliamentary democracy. Despite what I have said, I am not a defeatist in the matter of British industrial prospects. The problems confronting us are really infinitesimal compared with those which confronted our ancestors at the time when Tom—" Rights of Man "—Paine designed the 100 ft. cast iron bridge which spanned the Wear at Sunderland. What disciplined imagination conceives today can be made scientifically possible tomorrow, and to the end that this £750 million gap can be the more quickly closed I ask the Government to give every possible assistance to British engineering by providing cheap steel.

7.44 P.m.

Major Haughton (Antrim)

I expect the Chancellor of the Exchequer is getting a little weary, if not bored, by the compliments that have been paid to him, but as a new Member I should like to say how deeply impressed I was by the way in which he opened his Budget. Those two hours in which he made complicated figures seem almost simple, passed very swiftly, and this experience has whetted my appetite to see other Budgets, in which performance replaces prophecy and certainty replaces doubt; and from which threats are removed. I hope to live long enough to see them. The Chancellor has dealt such a shrewd blow, in the scale of the rates of Death Duties, that I think it is hardly worth while dying.

There are many things I should like to say about the Budget, but I confine myself to two short requests, to which I hope the Chancellor of the Exchequer will give heed. The first is for an easement of the zoo per cent. tax on silk. I am not going to say that silk is as beautiful or as useful as Irish linen, but it is a very beautiful and a very useful fabric, and this no per cent. tax is harsh in the extreme. I know one firm, which has establishments in both the North and South of Ireland, which is suffering gravely from it; a company which, like the whole of the silk industry, would like to provide some production for the Chancellor of the Exchequer. It is, however, severely handicapped, and I would remind the Chancellor that if an industry like that is overtaxed, then even the silk worm will turn. My second request is for an easement on linen furnishing fabrics. I should like the Chancellor of the Exchequer to take that into account as he does other furniture. I think he will agree that curtains and coverings for chairs are necessary parts of the equipment of the home. Those are the two requests I make, and I hope the Chancellor of the Exchequer will give them consideration.

7.47 p.m.

Mr. Walkden (Doncaster)

This is the seventh Budget speech to which I have listened since I became a Member of this House and I have always felt encouraged by the criticisms which have come from hon. Members no matter to what party they belong or in what part of the Committee they may sit. There have been many descriptions of the Budgets in the last six years. They have been described in sentimental terms, in popular terms and in abusive terms. I think this Budget will go down to history as a Budget which is a tonic for everybody in the country, and it seems regarded as such even by hon. Members on the other side—by some of our old friends who were with us in the last Parliament. They, too, recognise that this Budget is a tonic for everybody. I think it is our job, on whichever side we are, to be frank and honest and critical if we feel like it, so long as we are constructive.

Sometimes, I may, perhaps, have been unpopular for being a little too critical. I would suggest, in connection with this Budget, that some of the "back-room boys" of the Treasury made a mistake in advising the Chancellor of the Exchequer on the reliefs of the Purchase Tax. I know they have devoted a lot of attention to the kitchen sink. They have gone around the pots, pans and crockery, and so forth, but why, in heaven's name, have they left out those little things which make life comfortable for the housewife, such as an electric cleaner? Why should we continue to pay Purchase Tax on electric cleaners, when the Chancellor has exempted the old electric kettle and the other odds and ends which make life comfortable for the housewife? I hope that the Chancellor will consider exempting electric cleaners at a later stage. I was interested in what the Chancellor said about the anxiety he felt for offices and businesses in regard to typewriters. He is relieving businesses and firms of the obligation to pay Purchase Tax on these, but I wonder whether he knows that most of the typewriters which have been bought in recent years, have not cost businesses and firms a penny, because they have been charged to expenses, and in consequence the Treasury have provided them.

Mr. Jennings


Mr. Walkden

It is so in the case of most of these typewriters. I have discussed this with business friends, and they honestly admit that the money did not come out of their pockets. I am not an expert on E.P.T., but what I do know—because my business friends have made it clear to me—is that there are folks who adjust their accounts, and the Treasury allow for typewriters. The reason I emphasise this is because Members of Parliament, journalists and indeed people in nearly every homestead in the land require fountain pens. One might say that a fountain pen is a necessity to earn a living. Why has the Chancellor then insisted on retaining Purchase Tax on fountain pens? We cannot afford typewriters, but "John Citizen" needs a fountain pen. My pen is nearly seven years old, and I do not knout what it would cost to purchase a new one with Purchase Tax included.

My final point relates to watches and clocks. When my right hon. Friend was at the Board of Trade, he did his best to bring watches and clocks, particularly alarm clocks, into the country. The result is that today movements are being brought into the country, and we can no longer buy the 5s. watch. Recently, the Central Price Regulation Committee allowed something to be done, of which I do not think my right hon. Friend would approve. In prewar years, the most enterprising firms for cheap watches worked on a margin of profit of 22½ per cent., but now the Central Price Regulation Committee have agreed to a margin of 100 per cent. as between producer and consumer. In addition, there is the Purchase Tax at the wholesale stage. Before the war this country used to have 5,000,000 watches per year. Admittedly, the cheaper watches lasted only six months, but they only cost 5s. or 2s. 9d. —they were just the thing for a present for little "Johnnie." Due to the incidence of this new margin of profit, and due to the incidence of Purchase Tax, the 5s. watch will be the 15s. or 20s. watch, and ultimately, perhaps, the one guinea watch. I make this appeal to the Chancellor that help should be given to the watch and clock industry in South Wales, and in those other places to which he;s attracting new industries. In the case of rolled-gold and chromium-plated watches, it costs as much to produce a rolled-gold case as it does a chromium-plated case, and yet the Mir-chase Tax in the first instance is 33⅓ per cent., and in the second instance 100 per cent. Working folk like to have something which looks nice, even if it is not as good as it ought to be, and I ask the Chancellor of the Exchequer to look into this question, as well as the other little things which I have raised, affecting every homestead in the land and to give "John Citizen" a chance to enjoy these benefits.

7.58 p.m.

Mr. Oliver Stanley (Bristol, West)

We are coming now towards the conclusion of what I consider has been a most interesting Debate. On all sides of the Committee we have heard speeches which display great knowledge, and although I disagree entirely with many of them, all of them, with one exception, to which I shall refer later, have been directed towards the realities of the case. The main exception I make to that rule is the speech by the hon. and learned Member for Montgomery (Mr. C. Davies), which appeared to me to have no contact at all with reality. His solutions for the financial difficulties of the country were very simple. They were, first of all, to maintain and if possible to increase expenditure, and then to reduce, or if necessary to abolish, taxation, and then everybody would be happy. I must confess in my innocence, owing to the fact that the hon. and learned Gentleman was connected with the executive direction of one of the large combines, that for many years I have been prepared to regard him as an economic authority, but after this afternoon I shall have to revise my view.

Whatever has been said from one side of the Committee or from the other about the matter of the Chancellor's speech, everyone has combined to throw him bouquets upon the manner in which he introduced the Budget. In fact, for two days he would have been covered with blushes. if he had not obviously lost that art many years ago. I should like to add my tribute, although I shall be critical of the matter, to the manner in which the speech was delivered. The right hon. Gentleman spoke for two hours, and during the whole of that time he held the Committee to a closely reasoned speech full of figures, which was no mean performance, for the listeners, unlike the speaker, did not have the advantage of being fortified at intervals by refreshment, which I regret to learn from the Press was, like the Chancellor himself, not as innocent as it appeared.

Of course, to some of the great predecessors in the office of the right hon. Gentleman this speech of two hours would have been nothing—a mere exercise canter; a few preliminary remarks thrown off as a prelude to a substantial contribution to the Debate at some later stage. But we must judge modern achievements by modern standards, however degenerate they are. By that standard, the right hon. Gentleman certainly gave a fine feat of exposition and endurance. During the course of his speech, he covered a great deal of ground. Of necessity, or perhaps of choice, he also had to leave a great deal of ground uncovered. It has been naturally the object of the Debate of the last two days to try to put to the Chancellor the points upon which the Committee still require to be satisfied.

Several speakers have pointed out that there is a considerable difference between the Budget discussions of today and the Budget discussions of, say, the last decade. In those days, both the Chancellor himself and the Committee who listened to him were thinking much more of the actual figures of the Budget. Sufficient for the year was the Budget thereof, and the main role of the Chancellor of the Exchequer was, having revealed the surplus or deficit, to explain how, with the least inconvenience or with the greatest advantage, he was going, either to fill one or distribute the other. He was, in fact. appearing before the Committee in the role of an accountant. Today, the Chancellor of the Exchequer has to appear also in the role of managing director. He has not only to deal with the actual out turn of the year and the surplus or deficit, as it may be, but he has also to explain to the Committee and to the country how he is laying the foundations for the economic future of the country in the years well beyond the actual Budget year. Therefore, any speech upon the proposals of the Chancellor of the Exchequer falls naturally into two parts. First, the discussion of the actual Budget proposals for this year, and, second, the foundations which are being laid now, for what may well be more important and more critical Budgets in the years 1947 and 1948.

I will deal, in the first place, with the proposals for 1946. I agree with hole. Members who have spoken that, in themselves, these proposals, with certain criticisms which I am going to make, are likely to prove popular in the country, in that they bring relief to a great many people, housewives and hairdressers, company directors and old age pensioners. All come up before the right hon. Gentleman for his benefits, and, in front of all, is the stalwart guard of honour drawn from enthusiastic but short sighted stockbrokers. I am not one who takes any pleasure in the rise of capital value referred to as a result of this Budget, because I feel that, to a great extent, these rises are inflationary in character and rises, therefore, which rather than welcome we ought to be afraid of.

These reliefs, of course, are small, but they are certainly widespread. The right hon. Gentleman referred, during the course of his speech, to the song in his heart. It is true that my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) has told him that the symptoms which the right hon. Gentleman observed came more from medical than musical reasons. But if, in fact, there is—I will not say in the Chancellor's heart but in the left side of his breast—a song, I have no doubt that the title of it would be "Pennies from Heaven," because it is true that seldom in budgetary history has one man given so little to so many. It is obviously impossible tonight to go over all the details of the Budget. We shall have ample opportunities to do that on the further stages which Parliamentary procedure allows. I want, therefore, to confine myself to a few main items only.

The reliefs which the Chancellor of the Exchequer offers, fall, first of all, into a group with which we on this side of the House are in wholehearted agreement. They include the earned income allowances, the repayment of postwar credits to aged persons and the reduction of Entertainment Duty on athletic sports, including, of course, chess All these alterations have one thing in common. All of them were most persuasively proposed in October by hon. Members on this side of the House, and all were then sternly rejected by the Chancellor of the Exchequer in his Budget and all were decisively defeated by hon. Gentlemen opposite in the Lobby. We realise, from the enthusiasm with which they agree with them now, how their consciences must have pricked them during those dreary walks into the Lobby last October. To us, on this side of the House, that is extremely encouraging. It does show that what the Opposition think today, the Chancellor of the Exchequer is likely to think next April, and, therefore, we shall persist and, during the course of this Debate, have many suggestions to make. We shall have no hope that they will be accepted now, but we shall look forward with every confidence that, after a suitable period of gestation, they will reappear next April as the Chancellor's own ideas.

The Budget contains certain alterations with which, in the main, we agree but on which we have some comments and criticism to make. I take, first, the abolition of the Excess Profits Tax. I entirely agree with the right hon. Gentleman's criticism of that tax today. All on this side of the House are delighted that it has now been removed, but why was it necessary for the right hon. Gentleman, having done that with the object, no doubt, of its incentive effect, to spoil the effect, to a large extent, by these vague comminations and threats with which he clothed the withdrawal of this tax? He must remember that industrialists are simple minded folk. They are not men of the world as the Financial Secretary to the Treasury claimed that all of us were, including himself. They are so simple minded that when the Chancellor of the Exchequer says a thing like that they really believe him. They have visualised the Chancellor since last October, day after day and night after night trying to work out some alternative to the Excess Profits Tax and, not having succeeded by 9th April, they fear that, some time before next April, he will spring out of his bath, with the shout "Eureka," and a new tax will be born. We men of the world in this House know that that is not the case at all. We know exactly why the Chancellor of the Exchequer put it in that way. It is, first of all, because of his own back benchers. When the right hon. Gentleman announced the abolition of the Excess Profits Tax, the natural gesture of most hon. Members behind him was to put their hand in their pocket and to pull out a well-thumbed copy of "Looking Ahead" — [Interruption.] — "Facing the Future "—

Major Bruce

The title is "Let us Face The Future."

Mr. Stanley

It probably reads the same under any name. Of course, the first thing hon. Members did was to open that book let and see whether this was in the mandate. Had they got a mandate to abolish Excess Profits Tax? No, it was not in the mandate, and the Chancellor had naturally to satisfy anxious purists with, at any rate, the vague hope that this departure from the rule of the mandate might not be permanent. The second reason, of course, was that strange dualism which characterises the whole of the Government's dealing with private enterprise. It was referred to by my right hon. Friend the Member for Warwick and Leamington (Mr. Eden) in a racing simile which, nevertheless, I understood. The Government know that, in fact, over these five years, they have to depend to a large extent on private industry; they have got to encourage private indusry, and they have got to help it; but yet they cannot ever do it wholeheartedly. They must always try somehow or other to damp down the encouragement and make the help of less value. Cannot the Chancellor set a precedent to his colleagues? Cannot he, for once, give this help and incentive to industry without having to try to spoil the effect of it afterwards by vague threats and comminations? I quite realise that the right hon. Gentleman must be concerned with the dividend policy. It is a matter of great interest, but it is a policy which, he will agree, has to depend on individual cases. No one will suggest that, if this is a bad tax, he is going to reimpose some alternative just because one or two industries have not carried out a dividend policy which he would like. If he wants an alternative, if he wants to punish them, let him give them a working party; that will teach them not to think about dividends, or, indeed, about profits.

The next thing is the reliefs given in the Purchase Tax. Again, we welcome such reliefs as the right hon. Gentleman has been able to give, but we regret that he felt it necessary to say that this Purchase Tax was to become a permanent part of the Budget of this country. I support the Purchase Tax now, because I think that during a period of inflationary danger it is one of the best anti-inflationary taxes one can have, but I can quite see circumstances in which that would be quite different. It is in any case a hard tax; it discriminates, as hon. Gentlemen opposite have pointed out, very unfairly sometimes between different forms of purchase. The Chancellor went to higher levels for his examples, by dealing with Bernard Shaw, either in book form or in the projects during a man's lifetime, cases in theatre. I have an example of a sort which a man hesitates to undertake some-which had to be issued by the Customs thing, the return from which can come and Excise Office as an amendment to another statement which had been issued that he may never enjoy it because of before, in order to convey to an anxious public the exact diffirence between blousettes and ladies' fronts or modesty vosts, the fact being that you had to pay more tax if you bought a blousette than you would have to pay if you were content with a modesty vest. It is quite clear that if conditions change, if we pass, as we may well do in the next few years, from a seller's market, such as we knew before, the very tax which is now good because harmful because of its restrictive character. Therefore, I hope the right hon. Gentleman will not be too dogmatic in this claim that, whatever happens, this tax has got to stay.

I want now to deal with the question of Death Duties. We welcome that part of the Death Duties proposal which results in remission, and we regret that part which results in additions. The Chancellor opened his depence of this particular proposal with a pathetic picture of the poor little rich boy deprived of all stimulus and all incentive, and thus driven to lead an idle, pointless life, wasting talents and energies which might be so well employed to the national advantage. Of course, nowadays that story has a happy ending, as all stories should have, a safe and secure resting place on the socialist Benches in another place. The Chanceller went on to use, in support of his argument one of the most common and obvious dialectic tricks. He cited one case. He cited the case of an estate of£2 million, unusually and abnormally liquid, where, after the death of the testator, the heir walked away with£500,000 in bank notes. Of course, in that particular case, however much we may sympathise with the troubles of the heir, all of us would be prepared to assume them.

But is that a typical case? Are there not, for a case of that kind, ten others of quite a diffirent character?—the sort of case to which my right hon. Friend the Member for the Scottish Universities referred, of the private company, of agricultural land, numerous cases where, in fact, very heavy Death Duties do, and must, have a deterrent effect upon development projects during a man's lifetime, cases in which a man hesitates to undertake something, the return from which can come only after a long time, because he knows that he may never enjoy it because of death, and because after his death the only man who will enjoy it will be the Chancellor? The Chancellor called attention to the case of forestry. Is not that one typical case? How can you expect a private owner to invest large capital in forestry operations which he cannot hope to see come to maturity in his lifetime, when he knows that after his death not even the members of his own family will get the benefit? We shall, however, have further opportunities of discussing this subject.

I conclude this part of my remarks with a general sentence;. I regard the budgetary proposals for the year as a gamble. It is a gamble with which I am inclined to agree. These reductions of taxation are based, not upon conditions as they are, but upon conditions as the right hon. Gentleman hopes they may become as a result of the reductions themselves. It is clear that this gamble can succeed only if, during the next few months, an ampler supply cf goods comes into the shops. The right hon. Gentleman's responsibility will be to ensure that that happens. If I may give him a word of advice it is this, "Get busy while the President of the Board of Trade is in India." I am terrified at what may happen when the right hon. Gentleman returns. After close contact with Mr. Gandhi for many weeks, heaven knows what new ideas on the subject of clothes rationing he may come back with.

In conclusion, I want to deal with the question of the foundation which has been laid this year either in the actual Budget proposals or in the sphere of the Chancellor's mind for the financial structure of the years to come. We have had many speeches in the Committee in the last few days, which have referred to the danger of inflation. Indeed that must be a danger ever present to any Government, and most of all to the Chancellor of the Exchequer, who has the greatest responsibility. I think, too, that, having that fear, it is only right that we should talk about it. I remember nearly four years ago when for a short time I was connected with the National Savings movement it was laid down that in no publicity going out from that movement was the word "inflation" ever to be mentioned, although, in fact, the main object of the National Savings movement was then and is now not to build tanks, but to prevent inflation. I thought at the time that it was a silly ruling. I think it is silly today. I am not saying it still goes, but I think it is silly today to preserve that kind of secrecy. After all, the battle against inflation is a battle in which everyone can join, and in whim everyone must join. It is the inevitable experience of this country that people join more readily in a battle of that kind when they are told the truth about it beforehand.

I plunge into these economic matters with a certain amount of fear, because the benches opposite, I know, are studded with economic pundits of varying degrees —professors, lecturers, graduates and students, all, I think, ultimately deriving their knowledge from that great Montessori of economic instruction, the Chancellor himself. I do not want to refer to the many points which have been raised about the economic inflationary danger. It is obviously impossible for me to traverse all that. I really want to refer to the point made so effectively last night by the hon. Member for Chippenham (Mr. Eccles) in his excellent speech on behalf of the Opposition. Incidentally, I might say how much we on this side of the Committee appreciate the very graceful tribute which was paid to the hon. Gentleman by the Financial Secretary to the Treasury. If he were here, I would assure the Financial Secretary that when we have to chastise him in future we will do it more in sorrow than in anger. The hon. Gentleman referred to the belief which is held by many people, including myself, that there is a definite connection between the ratio of taxation to national income and the maintenance of the price level, that over a certain period, if that ratio rises above a certain amount, which the hon. Gentleman put at 25 per cent., it leads inevitably to a rise which may become an uncontrolled rise in the price level.

I do not want in the time at my disposal to develop a theory which he put so well. I only want to make these two points. First, I should like to know whether that is the Chancellor's view and, second, as the whole of this sum under this theory available for expenditure depends upon national income, we should like to hear something from the Chancellor about what he believes are the prospects for the national income in this and future years.

I confess that I was very astonished at this very buoyant estimate of this year's revenue. I am not questioning the figures—I am one of those who have too much experience of the accuracy of the Chancellor's officials to do so—hut I certainly was astonished to find that not in one particular of taxation but over the whole field, an estimate was made of a very buoyant character. It would seem to point to the national income not falling, but increasing, whereas I and most others anticipated that at the end of the war there would be some fall in the national income. For instance, a vast number of people, particularly women, from patriotic motives, went out of their leisure into employment, and are now returning to their leisure, and a great deal of overtime has ended. The result of these and other happenings, we thought, would be a decline in the national income. Although it is very difficult for the Chancellor to give a definite estimate, we should like to hear what he has to say on this point. On this depends the belief that we on this side hold, that the crushing burden of expenditure which the country now has to bear—and the Chancellor has given little if any sign of being willing to relieve it—is bound to lead, perhaps before too long an interval, to a rise in price structure which may well become uncontrollable.

I would have liked to respond to the challenge made to Members on this side to indicate the particular lines on which we would like economy to be made. But I cannot do so now, as I promised to conclude within a certain time. I will say, however, that such a challenge is asking us to do the work of the Chancellor, for which he is drawing the pay, and that we hope to have an opportunity of developing this matter later. We are convinced that before long a stark choice will present itself to the Chancellor of the day. He will have to choose between a drastic reduction of expenditure—which, painful as it may be, is at least selective and allows the Government to choose the objects on which expenditure should be reduced—and a great increase in price level which, even if it can be controlled, will hurt and hit every one indiscriminately. I noticed that the "Daily Herald "yesterday had headlines describing the Chancellor's Budget. The epithets they used were "sound" and "far-seeing." Well, having given some attention to the subject, I can think of no two epithets which are less appropriate. Far from being sound and farseeing, I regard the Budget as speculative and short-sighted—speculative because it depends, quite frankly and admittedly, on conditions not as they are today but as the Chancellor hopes during the next few months they may become; and shortsighted because both in the Budget and in his exposition, the Chancellor merely postponed to future years the tackling of difficulties which will only become more formidable with delay, and which in the end may prove overwhelming.

8.30 p.m.

The Chancellor of the Exchequer (Mr. Dalton)

I have enjoyed exceedingly the speech of the right hon. Gentleman the Member for West Bristol (Mr. Stanley). It was a most attractive speech and combined charm, wit and penetration in a degree which, I am sure, delighted the whole Committee. It was a most admirable conclusion—apart from what I am seeking to say now by way of final observations—to a Debate which has run along most interesting lines and has been characterised by most excellent speeches, in manner and in matter, from all parts of the Committee. I should be the very last person of all to complain of the general reception which my proposals have had. They have not all been wholeheartedly applauded by all hon. Members of the Committee, but such things do not happen in real Parliamentary life. Nevertheless, they have been very kindly treated and at any rate some of them have experienced little opposition in any quarter of the Committee. The opportunities that will come in the future stages —in the Report stage of the Resolutions next week and in the various stages of the Finance Bill—will enable many arguments to be developed at greater length, and tonight I think it is only expected of me that I should reply provisionally, leaving over, as the right hon. Gentleman has rightly suggested, certain more detailed statistical and other explanations. I will pick up a number of points which have been raised and seek to comment upon some of the observations that have been made.

I should like to begin with that item in my Budget speech which came last, namely, my proposals to create what I called a National Land Fund. I was very pleased that the right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden) welcomed that—though, naturally, he wanted time to examine the detail of it—and that other speakers, including my hon. Friend the Member for North Battersea (Mr. Douglas) tonight, also spoke well of the proposal. I am glad that at any rate it is not likely, as I see it, to raise any essential controversy, but it will be important and interesting to examine its administrative apparatus.

With regard to other tax changes, a great many of the proposals I made are apparently almost universally agreed. It is true that hon. Gentlemen opposite claim a certain paternity for some of them. Well enough. In the discussions last October there were suggestions, which were made and supported bath from that side and from this, but which for the moment I did resist. It seemed then that the time was not ripe, and that it would have been even more speculative to accept them then than the right hon. Gentleman thinks it is to accept them now. With the passage of the months, the gradual improvement in the credit of the Government, and the increasing success of the release of great quantities of labour power from the Forces to industry, it has become possible to offer, with reasonable prudence, certain concessions, which last October it would have been very rash to make. I am quite prepared to justify accepting, now, many proposals which I did not feel it wise to accept then. I will not run over the list, but they are quite a substantial portion of the tax remissions which I now propose, and which are now universally accepted.

I am very glad that the right hon. Gentleman the Member for West Bristol and other speakers have emphasised that the danger of inflation is still exceedingly real and that it is not to be brushed aside as something that need no longer be feared. I think the danger is gradually receding as our productive machine gets under way, and, as I have said, I think—and the Committee has generally accepted this simple proportion—that the only real counter is increased production of goods, both for the home market and for the export trade. As we proceed along the path of increased production and absorption of growing labour forces in employment, the danger of inflation will gradually recede, and I hope that in a year or two at the most we shall be able to say, "Well, that danger is now behind us; we have surmounted it." So far as my contribution to these matters is concerned, I will seek so to guide the policy of the country that that shall be so. I can only make a partial contribution—success depends on many other elements. But so far as I can, I will do my best to assist, with any work which is necessary in the financial field, to carry us through this period of doubt into a world of security from inflationary danger. That means that there must be limits to the tax concessions now. That is one of the direct deductions from the proposition that the danger of inflation is still very real, that there must be limits to such concessions.

It is very easy for hon. Members in any part of the House, such as my hon. Friend the Member for Doncaster (Mr. Walkden) —he is out at the moment—to run, as he did, through a long list of articles which he would like me to add to the Purchase Tax remissions. Of course, anybody can perform that sort of exercise. When something is offered, one can always say, "Why not add something more?" So, one would be led on from point to point, until confronted by an altogether excessive scheme of tax reduction, which would increase the danger of inflation to a very serious degree. That is why, when we come to the Committee stage—when I shall be very glad to consider proposals put forward from various sections of the Committee—I shall not be able to undertake substantially to increase the total of tax concessions which I sketched in my Budget speech. Here and there a little may be added, if it does not cost too much.

If we are to safeguard ourselves against inflation we must hold this limit on tax concessions. There is the additional reason—this is putting the same thing in a different way—that we must continue to hold the position, which we have now reached, of being within striking distance of a balanced Budget next year. That is where we are, within striking distance of it. Whether we choose to strike or not when the time comes will depend upon our deliberate decision. We may decide, "Let us register a balanced Budget now," or alternatively, we may say, "No," having regard to the needs of trade and employment. In that case we shall postpone that particular achievement for a further year, keeping the deficit within due bounds. That decision must be taken in the light of the circumstances prevailing a year hence. I attach very great importance to this matter. I think there will be very general support in the Committee for the view that, having got within striking distance of that balanced Budget, we must not drift out of striking distance by excessive tax remissions now, and must keep the deficit well within control and within moderate bounds.

The right hon. Member for the Scottish Universities (Sir J. Anderson), who opened the discussion yesterday, and for whom I have the very greatest respect, in view of his long experience as Chancellor of the Exchequer, and, before that, as Chairman of the Board of Inland Revenue, spoke of what he called the paramount importance of economy. That is a good phrase, but it must, I think he would agree, be rounded out, in terms of any practical financial situation, into a programme of economies, in definite directions. It is no good speaking in quite general terms about economy. I could easily make a whole series of debating points now—but I will not attempt to do so, not now, at any rate—by selecting particular items of desirable expenditure, and asking hon. Gentlemen opposite whether they really desired to effect economies in those directions. I could ask them, for example, whether they wanted to go back upon the great decision of the Coalition Government to establish family allowances, and save£38 million this year by doing so. Nobody has proposed it, and nobody intends it. So one could go on, all through that list, in the Budget speech, of the civil expenditure this year. I could take the items one by one and ask, "Who is against it? "No voice would be raised in any part of the Committee, in practically every case.

If we are to speak of economy we must be clear what major economies are to be achieved. I am not thinking of the relatively small sums, which it is the traditional duty of the Treasury—performed with great assiduity which makes the Treasury unpopular in consequence— constantly to chase. They do it very well; but that is not the kind of thing which is in mind when people speak in very broad terms, in relation to national Budgets of this kind, of the need for economy. They must mean quite large reductions somewhere; and the question is, where is the somewhere? It is not fair, I think, to say, as was said by the right hon. Gentleman the Member for the City of London (Mr. Assheton), that I uttered no word in my Budget speech about economy. He said I never mentioned a word, but I did.

I regret to find that no fewer than two columns of HANSARD of my speech were devoted to just this topic. I will not weary the Committee by quoting it, but I did say, immediately after indicating the increase in the civil expenditure to which we are committed, and which I am prepared, item by item, to defend, that there would be set against this expenditure big economies in various directions; and I cited in particular the Defence and Supply Services. I went so far as to quote the figure of nearly£500 million used in the days of the Coalition Government as being the figure down to which we might be able to reduce the total of Defence and Supply expenditure in peacetime—the best estimate that could be made, by the Coalition Government, some two or three years ago in different conditions— and I pointed out that if we could achieve this, in addition to saving the terminal £576 million on the Defence and Supply expenditure this year, we should save thereby a further£600 million a year—three times the increase in the Civil Departments' expenditure over the next two years. That is a very substantial figure. And it is here that the big money lies—in the large Defence and Supply Estimates.

We must, of course, have regard always to the international situation, to the commitments we have undertaken in connection with the United Nations organisation, and to possible clouds on this or that part of the international horizon; and we must not be parties to forcing this expenditure down too fast or too far, until we see where the world is getting to. But, subject to that precautionary observation, it is in the Defence and Supply Services that the big money lies so far as economies are concerned—they are much smaller anywhere else—and that is the direction in which His Majesty's Government intend to pursue the path to economy, tempered by the qualifications I have just given.

I mentioned£80 million for the Control Office. Some may think I went too far in inviting the Opposition to suggest a Debate upon it later on. It will be very interesting, though I will not develop any considerations relating to this subject now; there will be a lot to be said about the conditions under which we are working in relation to the occupation of Germany—what we get and what other people get and all the rest of it. Most interesting, but that is not for tonight. But there is the offer of a field for debating an economy which I hope will be pursued. I need not go into further detail as to possible economies. Evidently there is a great variety of possible economies; but it is no good deluding ourselves into believing that we are going back completely on the policy the country voted for, and to which this majority is committed; nor is it any good thinking you can make the most tremendous saving by a lot of economies Which might conflict with the essential policy we are all pursuing, very largely in agreement, in legacies—I quoted family allowances—from the Coalition Government. The big money lies in the Defence and Supply Departments. We shall have many further opportunities of discussing economy: but it is not a topic which I neglected to mention, and it is not a topic which can usefully be dealt with except in relation to concrete propositions. As a mere abstract phrase "the paramount importance of economy" is almost a meaningless symbol of language. It hardly means a thing unless one clothes it with concrete propositions—not to save pounds in the abstract but to save pounds on this, that or any other line of expenditure.

With regard to the observations of the right hon. Member for the City of London, he made a very remarkable speech this afternoon; but he thought that I took too rosy a view of things, and several hon. Gentlemen and right hon. Gentlemen on the other side have wondered whether those who have advised me as to the prospects of revenue next year have not been unduly optimistic. All I can say is that I have not influenced them in any way on this matter; I have merely asked them, as is their routine duty each year, to indicate to me according to the best of their powers what they think the revenue will yield at given rates of taxation. It would be very improper—and I should not think of doing it—when they present me with an estimate, to say, "You had better do this sum again, and work it out to suit something I have in my own mind." I take their estimates, as my predecessors have done, as being the best that skilful men can do in a very difficult situation, and have done, with very great success in the great majority of instances in the past, as in the year which has just ended, this most difficult year, in which they have come astonishingly close to accuracy. Therefore, all I can say is that I naturally hope that my advisers have been as accurate as usual. I do not think there is any rational ground why the right hon. Gentleman or anybody else should think that they have been unduly optimistic.

Mr. Assheton

It was the more remote future to which I was referring. I specifically said that I accepted the estimates for the current year.

Mr. Dalton

Well, we must face the remote future when we get through the immediate future. We cannot, naturally, in a world full of uncertainties, be too sure; but we are doing our best now.

I thought that some of the right hon. Gentleman's observations showed that he was a little out of touch with his constituents in the City. I do not know whether he has been there in the last day or two: but last night I noted that on the tape was recorded: Budget and Stock Exchange reaction. Industrial shares boom and gilts spurt. That is the language they talk in the right hon. Gentleman's constituency. I also noticed in the City column of the admirable evening paper owned by Lord Beaverbrook, which I always read with great attention: BIG MARKET JUMP ON THE BUDGET. Liked by the City It was a foregone conclusion that the City would like the Budget. That is very admirable, slightly unexpected, not easily predicted before the General Election. I draw great moral reinforcement from the fact that the right hon. Gentleman's constituency seems to be solidly behind me in the proposals which I have made. If we had a by-election in the City now, I do not know what might happen. Well, there they are, a great community of financiers in the City of London; and they think that, on the whole, this is not a bad Budget. That encourages the Chancellor of the Exchequer. Moreover, one of the purposes, which I sought to set before the Committee, was that we should continue to pursue the cheaper money policy, and nobody in these Debates has dissented from that as being a suitable aim. In the sort of development that is taking place, it is possible, of course, to say," Oh, well, it is like this now; what will it be like a week or two hence?" We will wait and see; but so far it has been most encouraging to me and to my advisers as regards the prospects of a further improvement in the national credit, and the possibility of being able to borrow more cheaply than in the past. So much for that.

Reference has been made to the difficulty which it is thought we shall have in getting taxation down to what is called a tolerable or an endurable level. I think it is, therefore, permissible for me to offer to the Committee one or two figures. I will not offer many, for I offered, perhaps, too many in the main Budget speech. However, I would like to mention one or two figures, to show that, in the two Budgets for which I have so far been responsible—the one in the autumn and this one—both presented less than a year from this Government taking office, I have proposed to the Committee net tax reliefs totalling more than£500 million in a full year. I do not think that is a very bad beginning. The major part of that is in Income Tax; deliberately, I will briefly justify that preference. When I came to the Treasury, I formed the view that, of all the taxes which were causing irritation, were holding back production, and, in peace time, were increasingly difficult to justify, Income Tax, particularly on the smaller incomes, stood easily first. There is an old-fashioned saying that indirect taxation is worse than direct taxation. I have never believed it; I always thought it a slipshod way of talking and thinking. I used to tell Lord Snowden that I did not believe it. We have carried Income Tax down to very low levels. I am not complaining that what was done in the war was wrong as war finance, but the tax was, in fact, carried down to lower income levels than ever before, and brought in millions of people who had never paid before, who had very little taxable capa city, and who felt the burden acutely. There was a great agitation, which resulted in the P.A.Y.E. scheme. There is still an agitation, but it is not, in my view, to P.A.Y.E. that people object, but to P-A-Y-I-N-G. It would be the same under any system of collection.

That is why I have attempted, in these two Budgets, to put the Income Tax payer first when it is a question of reliefs. In the£500 million a year it will be found—if the figures of the major Income Tax concessions of the autumn Budget and the further concessions I propose now are added up—that between two-thirds and three quarters of the total relief is given to Income Tax payers. That has been quite deliberate. I have deliberately postponed large reductions in indirect taxes, until I have been able to lift the burden from the general body of Income Tax payers. I believe—and there is no commitment in what I am going to say, one must look at situations as they develop—but my inclination is to believe that, in the future, as regards any further reductions of taxation, we should continue to give a prominent place to reductions in the Income Tax. Through lifting the personal allowance and by increasing the earned income allowance, I am making a beginning. I would like to go further but I cannot, because I believe the inflationary risk is such that we must go slowly. But I think there is ground for going a lot further in substantial reliefs to the Income Tax payer, before we do much more in regard to taxes on commodities.

It was this belief which led me to make the observation, with which some of my hon. Friends on this side of the Committee did not agree, that I did not think the Purchase Tax should be regarded as a temporary tax—although to speak of it as permanent is an absurdity, as none can foresee the far distant future. But in the next few years, and I expect for considerably longer, it will, in my view, be advantageous to retain a tax on purchases—exempting wholly from the tax certain of the more necessary commodities, gradually extending the range of untaxed articles, and lowering the rate on a number of other articles, but still retaining a tax levied on purchases, not only for its great importance now as an anti-inflationary weapon, but also as a revenue-raiser to help to meet the large and desirable expenditure we are contemplating in future years.

If one says to a man," Would you rather be relieved entirely of your Income Tax or be relieved of a quarter or a half of it, or have Purchase Tax taken off a few things which your wife would like to buy, if you gave her the money? "I am quite sure the majority of sensible, practical people would rather have the Income Tax relief. [Interruption.] I said the majority of sensible people. That is my view. I would be prepared to have that voted upon in any assembly of average sensible people. I have tried to make a start in providing incentive through these tax reductions. The hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) was kind enough to say that he thought the concessions made last autumn were already having an electrical effect. In the last few days, I have seen many smiling faces of people who apprehended that at last these tax reliefs were operating, after a delay of six months. It is not exaggerating to say that, in these next few weeks and months, a large number of people will be greatly encouraged by finding that they are paying less Income Tax than before. The 2,000,000 who will not have to pay Income Tax any more will be greatly heartened, and the further 500,000 who will gradually be wholly relieved under this Budget will be stimulated to work harder by this remission.

There are one or two suggestions in this connection of which I should dispose. Proposals are made to exempt overtime earnings from Income Tax. I have never heard a proposition put forward which was more remote from any sense of administrative reality. It is a completely fantastic proposition. I think the right hon. Gentleman will agree that it would, of course, subsidise absenteeism. If one tells a man, "Come and do your ordinary work today and pay Income Tax, and then work overtime and you will not have to pay Income Tax," he will come on two days, work a lot of overtime and then take the rest of the week off; and there will be no tax paid for those days. It would be shocking, the right hon. Gentleman would agree; it would be the sort of thing that he and I would unite together to prevent. In addition, such an arrangement would tie the Income Tax machine to the terms and the vagaries of industrial agreements. One might find some trade in which it was agreed that there should be a standard working week of 20 hours, and that anything over that should be overtime. Then, where are you? The Revenue is had for a mug at once. The thing is completely impracticable. To give one more example of its absurdity, a large number of citizens who work hard and make a contribution to the national wealth do not happen to label as overtime any of their hours of work. It varies according to how one makes one's arrangements. I hope that that idea can be put to sleep.

There are many suggestions which arise because people want to get out of making these heavy payments. They try to invent all sorts of ingenious formulae which will get them out of making them, while not doing violence to the principles of the tax system. Having said that, I think that P.A.Y.E. might well be looked at again at this stage. I do not think it is a case for a full dress examination by a Royal Commission or anything of that kind. That is too elaborate and would take too long. What is required is a speedy examination, which I will undertake to set on foot. Although I do not want to set up any formal committee or anything of that kind, I shall welcome advice and suggestions from any quarter in this House or outside, to help me to see whether, between now and next year, we can make any useful simplifications which, while safeguarding the Revenue, and doing reasonable justice between one individual and another, will avoid some of the difficulties we are meeting. I am sure that P.A.Y.E. is much better than the old system. It would be a very great mistake to contemplate for a moment drifting back into the pre-P.A.Y.E. era. I have spoken at some little length on Income Tax because it is, in my view, the essential point on which we should concentrate our efforts to reduce taxation.

One of the few points on which there was some difference of view in the Committee was on Surtax. The Surtax payer also is better off this year than last. I must make that point, because the case is sometimes put as though these unfortunate men had been reduced to a lower standard of living than ever. That is not true. Everybody is better off than last year. We had these figures all put out in the White Paper last Autumn and debated; and it was, I think, made clear that even the richest people were better off. The increased Surtax rates, which were finally carried after vigorous debate, do not in fact begin to operate until next year. They are collected in arrear. Therefore, the Surtax payers really have no grievances this year. They get the full advantage of Income Tax reduction, and they are not yet called upon to pay the trivial and trumpery increase in Surtax which the House accepted last October. There is a close season so far as their complaints are concerned. With regard to Death Duties, we can discuss this question in detail later on; but I do not think it can be contended that it is an unreasonable rearrangement which I have suggested. I will not develop that point, for time is passing.

I have deliberately introduced a great deal of delayed action into these arrangements. This is not to be regarded as a speculation, but rather as an act of prudence and foresight. I have deliberately introduced this element of delayed action, in the hope that, by the time the relief, as it were, explodes, things will be better and, in particular, that we shall have more goods in the shops and more production flowing along. We ought to have a very fine autumn. We shall have the family allowances starting on 1st August. That means that every mother with five children of school age will get an extra pound a week. That is a Coalition Government proposal. I make no concealment about that—the proposal of a Coalition Government, stimulated by some of its more active elements. I must not say anything about songs in my heart, because that is thought to be financially unsound; but I am very glad to think I shall have the responsibility of finding the money for what I believe was a very desirable and fundamental proposal.

Mr. Churchill (Woodford)

The right hon. Gentleman has not found the money at all.

Mr. Dalton

That is what we are doing in this Budget.

Mr. Churchill

The money was found by the Coalition Government. The right hon. Gentleman is giving away very small portions of it, inch by inch.

Mr. Dalton

Money is still flowing in Taxes devised under the Coalition Government are yielding us splendid results in this Government. As a result of the care which we are taking of the people, the taxpayers, they are responding splendidly and the revenue is rising rapidly. In this Government, as compared with the Coalition Government, we are doing much better. What I was seeking to offer to my hon. Friends opposite was the assurance that I shall never deny that this great Measure was the joint product of all parties in coalition. I ant very proud to think that upon me rests the responsibility of continuing to collect money to order to pay for it. Then we shall also have in the autumn the increase in the old age pensions to the higher scales of 26s. and 42s., according to the great National Insurance Bill, which is now passing through the House. That is a slight improvement on what was recommended by the Coalition.

Also, the old people will be receiving in the autumn, for the first time. their share of the postwar credits Finally, at the same time, we shall have the effect of the increase in the earned income relief. I frankly wish it could be more; hut, if things go well, I hope to make it more later on. At any rate, it is a sign that the Government are anxious to assist earnings as against investment income. We are entitled to be reasonably confident about our future. I do not know any reason why we should not be. My hon. Friend the Member for Wednesbury (Mr. S. N. Evans) made an admirable speech tonight, full of confidence, and expressing the view, widely held in the country, that, if we could come through the war victoriously, we can come, also victoriously, through these dangers and perils of the peace. They are great perils, and we must analyse them clearly and face them with courage; and that we are seeking to do.

Last night, I was returning home after the very interesting Debate we had here, and at the bottom of Downing Street met a gentleman, whom I did not know, wearing a very honourable uniform. He apparently recognised me, because he said: "Labour gets things done; that is the watchword." Greatly encouraged by this incident, I went to bed and slept soundly.

Mr. Stanley

What was he—a policeman?

Question put, and agreed to.

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

Resolution to be reported Tomorrow; Committee to sit again Tomorrow.