FINANCE (NO. 2) BILL

HC Deb 16 May 1946 vol 422 cc2069-257

Order for Second Reading read.

4 50 p.m.

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

I beg to move, "That the Bill be now read a Second time."

This Measure gives effect, where legislation is necessary, to the proposals in the Budget speech. It also covers certain administrative changes found to be desirable and for which legislative action is required. Before, however, I deal with the contents of the Bill itself, I should like, shortly, to remind the House of the circumstances in which the Bill is introduced. Twelve months have passed since V.E. day and eight since V. J. day. After the first early rapture of release from the dangers and anxieties of war, the Government and people have settled down to the business of converting this country from and arsenal and base of wide military operations into a peaceable community determined to restore and enhance its prewar standard of living as soon as possible. The processes of transferring millions of men and women from the Forces into civil occupations, and of converting industry and trade from military to civil production, are proceeding apace. But, inevitably, these processes are not free from considerable difficulties; inevitably, they take time to complete.

So we are still in a state in which many features of wartime economics persist. Expenditure, though reduced, is still extremely high, and must unfortunately remain so until commitments associated with the winding-up of the war have been met. We realise that this means that we must work harder and produce more than ever before. We expected—and now we know beyond any doubt—that this conversion would not be an easy task. The country is still called on to display many of those same qualities, among them a willingness to bear high taxation, patience with shortages, the continuance of controls, restraint in personal expenditure, which helped us to make such a remarkable and sustained contribution to victory. These hard facts underlay most of the Budget speech of my right hon. Friend. The risks of inflation are still with us, and we shall not be out of danger until the production of goods—both for current consumption and for capital purposes—has matched the incomes which are waiting to be spent on them. The only—I repeat only—counter to the risk of inflation is to produce more goods. That is today's clarion call to everyone in productive industry—workers and employers alike.

Hardly less important, while we are working to increase production, is the need to save. In this connection, I have noticed with regret the extent to which savings certificates have recently been cashed. It is essential that this tendency should be checked.

Earl Winterton (Horsham)

Has the hon. Gentleman the figures?

Mr. Glenvil Hall

I have not the figures, but we can get them later. Every pound of past savings withdrawn now for spending not merely aggravates the demand for the already inadequate supply of goods but cancels the good effect of another £1 saved by someone else. The National Savings movement is playing a notable part in the work of bringing home the grave dangers of extensive spending yet awhile. I am positive that Members in all quarters of the House will be willing during the coming months to do everything they can to assist it in its efforts to persuade people that it is overwhelmingly important, for the present, not only to hold tight to our past savings, but to add to them by new out of current income.

It is against this background that the contents of this Bill must be judged. In framing the Budget proposals upon which it is based, my right hon. Friend had to walk delicately. On the one hand, he was obliged to find money to meet the very heavy commitments I have indicated, whilst on the other, the community was not unnaturally expecting that the return of peace would be signalised by some reduction of the prodigious burden of taxation it had borne during the war. His problem has been to reconcile these two demands, and I think it can truly be said that the broad lines on which the Chancellor has proceeded have been generally acclaimed as eminently right. Since he took office he has reduced taxation by some £500 million. That is a large figure; but whatever the inflationary risk the release of so much purchasing power may involve in present circumstances, this has in my view been tempered by the way in which he has distributed it. He has aimed, as he said last October, to give the greatest incentive 10 the greatest number—in order to speed up that increase in production both for home consumption and export which offers the main solution of our present problems. It now remains for the country to show that these incentives are justified.

No doubt there are some who believe that these incentives should have been increased. There was, I remember, a good deal of criticism last autumn of my right hon. Friend's decision not to improve the earned income allowance. This year he has gone part way at least to meet the views then expressed. It is now proposed to increase the earned income allowance from one-tenth to one-eighth, with a maximum allowance of £150, and to make a corresponding increase in what is called "age allowance" under which individuals over 65 with incomes of less than £500 are given the equivalent of the earned income allowance on their investment income The increased reliefs apply for the whole of the year 1946–47, but they will not be brought into operation until October. This increase in the earned income allowance, which will, as the House knows, cost the Exchequer £33 million in a full year, will relieve a further 350,000 people from all liability to Income Tax.

In the case of the wage earners, effect will be given to this increased allowance in new tax tables which will be issued to employers in time for October. In these new tables, the tax for week 27—the first week of the second half of the current year—will be computed on the basis of allowing earned income relief at one-eighth on the whole of the pay to date, so that in week 27 credit is given not only for the increase in the earned income relief on the pay of that week but also on the pay of the full preceding 26 weeks. For the majority of wage earners, practically for all whose earnings are less than £10 a week, the effect will be that the relief given in week 27 will not only wipe out the tax for that week but will result in a refund of tax. They will enjoy not only a tax holiday but a bonus and it is to be hoped that with this windfall increase in the wage packet in the 27th week the National Savings movement can look forward to a bumper harvest in the 28th week.

The same Clause—I think it is Clause 21—also provides for the special concession to married women in industry, namely, the increase from £80 to £110 additional allowance in respect of a wife's earned income. This increase, the change in the earned income relief, together with the exemption of National Insurance contributions, also proposed to take effect next year, would bring the number exempted altogether from Income Tax since the present Government took office to over 2,500,000. This last relief will extend to all contributors, so that it will cover contributions paid by self employed persons, or by householders employing domestic servants or gardeners. As a necessary counterpart, tax will be charged on all benefits, other than the lump sum maternity benefits and death grants, but I take this opportunity of repeating that the benefits themselves will not, as a result of this, be reduced. The only effect is that P.A.Y.E. repayments which fall to be made if earnings cease, will be a bit smaller than they otherwise would be.

About a month ago, my right hon. Friend the Prime Minister announced from this Box a scheme to permit those in the Services to volunteer for a further period. Provision is now made in the Bill to exempt from Income Tax the initial bounty and the terminal gratuity which are to be paid to other ranks in the Forces who volunteer for a further period of service in this way. The decision to start liquidating the nation's obligations to pay Income Tax Postwar Credits has, I think, been well received by all sections of the community. Those who are to receive them are, naturally, delighted, and those younger feel that if now the turn of winter has come, "Can Spring be far behind?" As the House knows, repayment of these credits for the years 1941–42, 1942–43, and 1943–44, are to be made to men over 65 and women over 60, and it is expected that payment will commence in the autumn of this year. The title to payment of the credit depends on the age of the person to whom it is payable, and the Bill provides that those who have not yet reached the prescribed age will be entitled to payment as and when they do. That means that if a man does not reach the age of 65 until December he will not get it in September, as those now 65 will, but will get it three months later.

Mr. Osbert Peake (Leeds, North)

What happens when he is dead?

Mr. Glenvil Hall

When the taxpayer is dead, and his credits have been assigned to a beneficiary of his estate, repayment will depend on the age of the beneficiary. Forms of applications will be available in post offices in a few weeks' time, but the repayments will not start until after 1st August.

Mr. Sidney Shephard (Newark)

Is it not a fact that a beneficiary cannot draw the money until he himself has reached the age of 65?

Mr. Glenvil Hall

It depends on the age of the person to whom the money is paid. Provided he is over the prescribed age, it will be paid if it is due to him on his own behalf, or on behalf of another.

Part II of the Bill, together with its three Schedules, which deal with Purchase Tax changes, will, doubtless, if our Debates of last October are any guide, attract debate, particularly when we reach the Committee stage. The announcement that a further range of articles is to be exempt from tax, or will bear a reduced rate of tax, has been well received by the public. It is estimated that the change will add £12 million this year to the purchasing power of the community, as well as relieve the price of many articles in common use or used in connection with the erection of houses. On that score alone, the changes are desirable and, I think, have met with general approval. But my right hon. Friend undertook—and I now renew this undertaking—to make some further reductions in the tax during the progress of this Bill, although we made it clear that the total loss of revenue must be limited. He will not finally make up his mind on the direction of such further reductions as may perhaps be possible until he has considered the views of Members as to what are the most urgent claims for relief. I must, however, add that the limits he might have set himself must now be drawn even more strictly, in view of the loss of revenue from another source, namely, the Excise Duty on beer.

Recently, as the House is aware, the Government were forced, in the light of the world food shortages, particularly cereals, to impose a reduction of 15 per cent., upon the output of beer. This reduction will involve a corresponding decrease in the yield of the Beer Duty, equal, for the current financial year, to a loss of revenue of about £48 million. This is a formidable sum. Incidentally, in itself it is more than three times the sum raised from Excise Duties a century ago, and only £7 million or £8 million less than was raised in taxation over the whole field at the same time. I think the House will agree that had times been more normal this loss, during the passage of a Finance Bill through the House, would have warranted some considerable changes in the taxation which any Chancellor had announced that he intended to impose for the following year. Nevertheless, my right hon. Friend has decided that large though this contemplated loss is, he does not intend to make any changes, upwards, at any rate, in the taxation which he announced when he opened his Budget.

Mr. Marples (Wallasey)

Can the hon. Gentleman tell us the sum involved in the loss?

Mr. Glenvil Hall

I have just said that it will be £48 million during the current year.

I turn now to the Excess Profits Tax which, as the House knows, is to come to an end on 31st December next. Part IV of the Bill provides for this, and gives legislative sanction to various royalties connected with terminal losses and expenses, deferred repairs, renewals and rehabilitation costs, and provides for the relating back to the Excess Profits Tax period to these kinds of expenditure incurred in 1947.

If the taxpayer shows that work on these items could not be carried out before the end of 1947, the relating back can be extended so as to cover expenditure incurred before the end of the following year, that is, December, 1948. In addition, I would remind the House that losses due to falls in stock values during the two-year period to 31st December, 1948, on sales of trading stock held at 31st December this year are likewise provided for in the Bill with which we are now dealing. Hon. Members may remember that there was a similar provision, known as the White Paper scheme, which was brought into operation at the end of the last war, when the old Excess Profits Duty was repealed. This scheme more or less follows what was done then. Another provision in this part of the Bill is Clause 36, which changes the name of the National Defence Contribution to Profits Tax. It is a rare event in our taxation law to rename a tax, and I commend the new name to the House in the hope that a rose by any other name will smell as sweet.

Sir Frank Sanderson (Ealing, East)

Is there any significance in the change, which many of us think conveys much more than appears on the surface?

Mr. Glenvil Hall

I think there is no significance, beyond the view of my right hon. Friend, and I think the House generally, that it is a more apt description of the tax to which it refers. It is no longer a duty imposed in order to help national defence; it is a tax on profits.

Sir F. Sanderson

Is it a case of coming events casting their shadows before them?

Mr. Glenvil Hall

That may very well be; I cannot possibly say. I can only remind the hon. Member for East Ealing (Sir F. Sanderson) that the Chancellor refused to be drawn on this matter during the Budget Debates, but he did indicate that he would have to keep his mind open on the question whether a tax to take the place of the Excess Profits Tax might not have to be imposed in the Budget next year, provided this Government is still in office.

Clause 38 and the Ninth Schedule implement the changes, foreshadowed by the Chancellor of the Exchequer, in the scale of Estate Duty. I do not think I need recapitulate the new scales now, but it will have been noticed by those who have read the Bill that the increase in the scale is not to apply to the agricultural value of agricultural land, which will continue to be charged, as it has been since 1925, at the 1919 rates of duty. On the other hand, agricultural land will get the benefit of the exemption from duty on estates below £2,000 and the reduction in duty on estates up to ણ7,500. This particular class of land, therefore, appears to make, what does not often happen in this world, I am afraid, the best of both worlds.

On the Report stage of the Resolution dealing with gifts made inter vivos, it was suggested that general gifts made more than three years before the Budget and charitable gifts made more than one year, should be protected from the extension of these periods proposed by my right hon. Friend. I think the point was raised by the right hon. Member for North Leeds (Mr. Peake). I am delighted to think that what he then said so impressed the Chancellor that, without waiting for the Bill to reach the Committee, he has agreed to the suggestion then made. The Chancellor is ready to accept the suggestion, and accordingly, the Bill provides for the extension of the period within which these gifts are liable to Estate Duty from three years to five years before the death, except in the case of gifts for public or charitable purposes, for which there will be an extension from one year to two years, on the same lines as were followed in the 1909–1910 Act.

I am sure the House will not expect me to deal with all the provisions contained in the Bill, and in view of the lateness with which we have come to this discussion, and the desire of many hon. Members in all parts of the House to speak, I have no intention of attempting to do so. I wish, however, to make reference to the provision relating to the Entertainments Duty which, as the House knows, extends to certain indoor and out-door games and sports the benefit of the reduced scale which, at the present time, applies only to theatre and similar entertainments. I understand that cricket and most sporting clubs concerned intend to pass on at least part of the concession to the general public. Whether professional football clubs will also do so is as yet uncertain and the final decision on the point must, I understand, await the consideration of the annual general meeting of the Football League which will not take place until some time in June. It is only fair to the clubs concerned that I should take this opportunity to make it clear that my right hon. Friend will await the result of that meeting with some interest, and intends, as he announced in the House in reply to a Question last week, to consider in the light of what takes place on that occasion whether any modification of the provision in the Bill will be desirable. It was definitely understood that if this concession were made, it should be shared with the spectators.

Part VI of the Bill—that is, Clauses 40 to 43—implement the proposals of the Chancellor of the Exchequer for a National Land Fund, so far as it is possible to do so in a Bill of this kind. I should particularly like to draw attention to the wording used in Subsection (3) of Clause 42 to describe the types of organisations to which the Treasury is to be empowered to transfer the property received in this way. In his Budget speech, my right hon. Friend had in mind societies whose purpose is not to make profit, but to open the country to the people and to facilitate recreation, open-air sport and physical fitness. We think that the words in the Bill, which hon. Members may like to examine for themselves to see whether their view coincides with ours, should meet such purposes. It is our hope that all organisations of the type we have in mind are covered, or can bring themselves within the Bill by a change in their constitution. It is certainly the desire of my right hon. Friend that these provisions should be drafted in terms wide enough to include all organisations who can assist the purpose he has in view.

I now conclude. The proposals in the Bill must, as I indicated when I began, be judged in the light of the obligations to be met and the paramount needs of the immediate future. Expenditure during the current year is estimated at £3,887 million. Revenue, it is expected, in spite of the loss of £48 million from the Beer Duty, will exceed £3,110 million, leaving a gross deficit of about £775 million. If, however, the terminal items on both sides of the account, consequent upon the rounding up of the war, are included, as they should be, the estimated net deficit will be in the neighbourhood of ણ380 million. On this basis, as my right hon. Friend said in the course of his Budget statement, we shall be raising from Revenue no less than 18s. 2d. in every £1 we spend this coming year. This, I am convinced the House will agree, is a splendid achievement and evidence of the ruthless will of the British people to face reality, however bitter the cost.

I am sure that the public know that it is the continuing aim of the Chancellor to see that all wasteful expenditure is avoided. [HON. MEMBERS: "Hear, hear."] I knew that that remark would get a cheer from the other side of the House. It cannot be stated too often that the Government intend, and that my right hon. Friend certainly intends, that all wasteful expenditure of public funds shall be avoided, and that the burden of taxation shall be reduced as soon as may be. Side by side with that, the national income will be used to raise the standard of life of the common people so as to enable the country to stake Its share in the work of forging that new world which we all desire, a world dedicated to the establishment of peace, plenty and security for all mankind.

5.21 p.m.

Mr. Osbert Peake (Leeds, North)

The hon. Gentleman has explained the Bill, and drawn a picture of the background behind it, with his usual clarity and courtesy. In particular, I would congratulate him on his peroration, which will cost the country much less than did the peroration which the Chancellor gave us at the end of his Budget Statement. There is one matter which the hon. Gentleman mentioned on which I hope, before it passes from my mind, we may have more particulars at a later stage of the Debate. He referred to the encashment in the recent past of savings certificates, and the extent to which encashment was increasing. I hope that the Chancellor may be able to give us more particulars on that matter when he comes to wind up the Debate. I must make it clear at the outset that we can be no parties to a Measure which maintains taxation at a level wholly unnecessary, if any regard to economy had been paid, and which gives no indication of any concerted plan for the best use of our national resources in the years of transition. I hope to justify that statement before I sit down.

First, I should like to recapitulate the Budget figures as I see them. Leaving out the £50 million allocated to the Land Fund, expenditure for the current year is estimated at £3,837 million, made up of £1,667 million for Defence and Supply purposes, an almost similar sum for Civil Estimates, and £518 million for interest on the National Debt. Of the huge amount of £1,652, million for Civil Estimates, comparison with last year shows an increase of £145 million on those items which were not previously financed by a Vote of Credit. The bulk of this increase is due to commitments on social services, some of them inherited from the Coalition Government, and others due to promises given by Government supporters at the General Election. The larger economies which might be made lie mainly in the figure of £1,667 million for Defence and Supply Services In speaking during the Budget Debates the hon. Gentleman said that economy was all right in general but he would like to see specific economies proposed in particular.

The hon. Gentleman has repeated today the performance of the Chancellor of the Exchequer—with a good deal of what was described in the "Economist" as "accountancy juggling." The right hon. Gentleman contended in his Budget Statement that he was raising in taxation during the current financial year 18s. 2d. out of every £ of projected expenditure, leaving out of account the so-called terminal charges. The true figure is, I believe, somewhere between 14s. and 15s., since the Chancellor brings in as revenue for the purposes of his calculation considerable sums from the sale of war stores and Government trading surpluses, and he omits from his expenditure the figure of something between £300 million and £350 million for the E.P.T. refunds and for War Damage payments. The figures which he gave at the time of the Budget are already very much vitiated by the fall in the yield of the beer duty to which the hon. Gentleman has referred, and by something to which I shall have to refer later on, the undoubted increase in the cost of the subsidies on cost-of-living items which I think—indeed, I am sure—will prove to be too small. In 1944–45, the last full year of war, the figure raised in taxation was 10s. 8d. out of every £. That rose in 1945–46 to 12s. in the £, or 60 per cent., and this year, on my computation, it will be 14s. to 15s., or between 70 and 75 per cent.

I do not quarrel with that ratio for a transitional year; but it is really questionable, despite the Chancellor's optimistic assurances that our choice of having a balanced Budget would be in our Own hands in 1947–48, whether that will be an effective choice, even if present taxation levels are maintained and much larger sums are realised from the disposal of war stores. There will be a heavy increase in the social services next year, and further postwar credit and E.P.T. refunds to be made. There will be a still higher figure for cost-of-living subsidies. Assuming a ratio of about 75 per cent. to be correct for a transitional year, we say that, had there been any real attempt at economy, substantial remissions of taxation could have been made, and that £100 million of saving of expenditure could have been reflected in taxation remissions of £75 million, without affecting the ratio of taxation to expenditure, that is to say, maintaining the 75 per cent. ratio all through.

It is for the Chancellor, with the whole machinery of Treasury control at his command, to find what economies can be effected. Back Bench Members and Members of the Opposition can only tentatively suggest them. It was most noticeable during the whole course of the Budget Debate that practically no mention was made by the Chancellor of the paramount necessity of economy in every sphere of Government activity. In fact, at one point in his speech he spoke of spending money "with a song in his heart."

The Chancellor of the Exchequer (Mr. Dalton)

On what?

Mr. Peake

On the development areas. Chancellors of the Exchequer should beware of songs in their hearts when they sit in the Treasury. They remind me rather of the Member of the Labour Government in 1931 who told one of his colleagues that his heart bled for the unemployed. His colleague, Mr. J. H. Thomas, replied that he did not want so much his bleeding heart: he wanted more of his brains.

Mr. Dalton

"Blood-stained" head

Mr. Peake

Yes, more of his bloodstained brains. The Chancellor must be wary of allowing his heart to rule his head in these matters of high finance. There are too many signs that the Government are pursuing, and misapplying, theories, now generally accepted, evolved by the late Lord Keynes during 1931. It is a perfectly sound theory that stable employment in normal times depends upon the maintenance of effective demand, but this theory, admirable in times of plenty, is wholly inapplicable today. It is twisted by the ignorant into a theory that prosperity can be achieved and maintained by the mere spending of public money at all times, in all directions, and under any conditions. In 1931 goods and foodstuffs were plentiful, prices were falling, and labour was underemployed. Today the position is reversed. Deflation was the trouble then; inflation is the trouble now. If we then had poverty in the midst of plenty we now have paper wealth in the midst of scarcity. A rapid increase of production of goods, as the hon. Gentleman has just said, is essential to prevent disaster. If it is true as a Minister of the Crown recently stated—I think it was the Under-Secretary to the Board of Trade—that only a trickle of consumption goods is going for export, then production must be lagging badly.

What are the results of shortage of consumption goods combined with high taxation? Everybody must be aware of the great growth in black markets. They are to be found in food, in clothing, in petrol, and in labour. There is widespread evasion of P.A.Y.E. by means of double employment and other methods at the present time. The danger is not only economic and financial; it threatens the moral fibre of our people, which has withstood six years of war, but is not proof against another five years of organised scarcity.

Many elementary household goods and fittings are still quite unobtainable. The Minister of Fuel and Power exhorts us, and indeed compels us, to save fuel, and advises us to instal fuel saving appliances and things of that character, but in practice, when one inquires for them, one finds that they are not to be bought. It is not surprising that there is a general sense of frustration and that the law is in many cases now being treated with contempt. The only remedy lies in more goods in the shops.

There is one major economy which the Government might have made, and which indeed they might still make, an economy which would not only enable taxation to be reduced but would free more workers for useful production of the goods which we so sorely need. It is really an appalling thing that there are still today 1,100,000 persons employed on making supplies and equipment for the Armed Forces. A statement issued yesterday by the Minister of Labour takes credit for the fact that this number is a little smaller than the number correspondingly employed at the height of the rearmament programme three months before the outbreak of war. The weekly wages bill of these 1,100,000 workers must be £7 million or £8 million, that is £350 million or £400 million per annum. Goodness knows what are the sums which the Ministry of Supply and the Service Departments are paying for the products of their labour.

The figures I have given are those of persons directly employed; that is quite clear from the White Paper on Defence Policy, issued, I believe, in February. They make no allowance whatever for those persons who must be indirectly employed as the result of the primary employment of these 1,100,000 persons. It really is staggering that a year after the war is over we still have as many workers employed on munitions as we had on the eve of its outbreak in 1939. Why is this problem not tackled? We ended the war with huge supplies of military, naval, and Air Force stores of all kinds. Why have we continued to pile them up ever since? What an immense saving to the Exchequer on the one hand, and increase in our supplies of useful commodities on the other, would result if a large proportion of these workers was turned over speedily to peacetime production. That the work they are doing is wholly unnecessary is shown by the fact that the Government themselves intend to reduce the number of these workers to 500,000 by the end of the year. That means that 600,000 of them are now doing work which, even at the end of this year, will be considered wholly unnecessary. The Government are going far too slow in this matter. The Ministry of Supply and the Service Departments are continuing to buy at enormous cost armaments of all kinds which will be of little value to the community.

On the other side of the balance sheet there is another source from which the Chancellor might have received large sums to enable taxation to be reduced. It is the disposal of war stores. Only £150 million is included in this year's Budget as receipts from the disposal of war stores. Let hon. Members compare that figure with the sort of figures which were reached after the war of 1914–18. Apparently the policy of orderly disposal means that stocks of useful commodities are to be held indefinitely, in order to maintain prices and avoid some temporary dislocation and inconvenience in their continued manufacture. Meanwhile, these vast quantities of commodities, many of which would be of use in agriculture or in other forms of industry, are deteriorating in Government dumps I have not the slightest doubt that the Chancellor could have obtained during the coming year a much larger sum from the disposal of war stores had he been minded to do so, and that he could have reduced taxation accordingly.

I have been challenged on this question of economy. I will give quite briefly two or three other items where I think the Chancellor might make savings. There is the proposed expenditure contained in the Estimates, and described in a statement by the Minister of Transport the other day, on the road programme. New commitments during the coming year on the part of the central Government total £26 million. Surely both theory and experience teach us that road prograrnmes should be held back until a time of oncoming slump. It is one of the few classes of public works contracting which can be rapidly undertaken in the face of a slackening of other trades. Then there is quite a small item, but the Chancellor cannot afford to disregard small items if he is going to pursue economy. I understand that the British Council is spending money at the rate of about £3,500,000 a year.

Mr. Dalton

Less.

Mr. Peake

Very well, a little less, some £3,250,000 where it used to be £250,000 before the war, so that it has grown during the war by something like 20 times. They are now contemplating, if I understand their annual report aright, a programme of showing the British way of life to the people of the British Dominions, of all places. I should have thought that after six years of fighting side by side with us the Dominions would have a pretty good appreciation of the British way of life, and that they might indeed resent this form of publicity. I do hope the Chancellor will look into that matter. There is also, I believe, much money wasted on the unnecessary transport of Service personnel inside this country from one station to another. The Chancellor might do well just to ask how many trains weekly are employed on the transport of Service personnel.

I have given the Chancellor a few ideas——

Mr. Dalton

Three.

Mr. Peake

Five, I think.

Mr. Dalton

I have counted three.

Mr. Peake

I will hand them to the Chancellor again, privately, and he can check the number. Our first complaint with the Chancellor's proposals is that there has been no attempt, or no real attempt, at economy. Our second complaint is that there is no evidence of a comprehensive financial and economic plan. The cost-of-living subsidies are, perhaps, the best example.

Mr. Alfred Edwards (Middlesbrough, East)

Did I understand the right hon. Gentleman to say that most of the money spent by the British Council was spent within the British Empire?

Mr. Peake

No. I said there was a contemplated programme of expenditure within the British Dominions. The remainder of the money is spent mainly abroad and partly in the British Colonies.

I take the cost-of-living subsidies as an example of the complete lack of any comprehensive financial and economic plan. In his last two Budgets, the previous Chancellor, the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson), warned the country that these subsidies could be maintained only if there was no general pressure to increase wages. In contrast with his warnings, the present Chancellor gave an unqualified pledge in his October Budget to increase the subsidies, or to maintain them. Since that speech was made, and no doubt partly in consequence of it, the Ministry of Labour figures show that wage increases of well over £1,000,000 weekly have been made over a wide variety of trades. The Chancellor describes a stable cost of living as a sheet anchor, but it is not clear to me what the sheet anchor is for. Does the Chancellor still subscribe to the statement in the White Paper on Employment Policy, of which he was one of the principal authors, that increases in the general level of wage rates must be related to increased productivity owing to increased efficiency and effort? I should like the Chancellor to deal with that question when he replies.

With wage increases over a wide area, it is not surprising that agriculture is following suit. The Chancellor's estimate of £335 million as the cost of these subsidies during the current year is already wide of the mark. The projected increase in agricultural wages will add at least £20 million to the cost of the subsidies, because it is clear that the wage increase must be met by increased prices to the farmer. The Wages Board have made it clear that they recommend tile increase, not on the ground of increased productive efficiency, but entirely on the ground that they want to bring agricultural wages more into line with the general wages level. The increase, therefore, must add substantially £20 million to the cost-of-living subsidies, and that is not going to be the end of the matter, because the agricultural workers have made it plain that they are going to seek a further rise before the end of the year. It is perfectly clear to me that in this matter of the stability of the cost of living, and the stability of the general level of wages, there is no sort of plan in the mind of the Chancellor of the Exchequer. It is surprising, as the "Economist" says, that it is the professed planners who are apparently so planless. Yet we are told in "Let Us Face The Future," that famous booklet which the Chancellor brandishes in this House from time to time, that "Labour will plan from the ground up." I should have thought that the wages level of the agricultural workers and the cost-of-living subsidies were matters very near the ground, at which the right hon. Gentleman's planning ought to begin.

An economic and financial plan for the next four years is an urgent necessity. Industry is crying out for capital for re-equipment. Meanwhile, the Government spend freely in all directions and borrow to meet the deficit, while money urgently required for industrial re-equipment is withheld by the clogged machinery of the Capital Issues Committee. The only plan, the only goal and the only objective discernible in the financial policy of the Chancellor is a rigid enforced equality of income. The Chancellor alone, however, fails to recognise the inflationary effects of his efforts to achieve it, which on the one hand encourage spending, speculation and gambling—witness the Stock Exchange—and, on the other hand, discourage hard work, enterprise and initiative on which national recovery ultimately depends.

How much might have been done to restore incentive, both to managements and workers, if there had been substantial economies and substantial tax remissions. The earned income allowance, which is being only partly restored and which peters out at the income level of £1,200, might have been restored in full. Other concessions might have been given to all classes of taxpayers. The National Defence Contribution—in future to be known apparently as the "Profits Tax" —might have been abolished, and the burden on productive industry of Income Tax and N.D.C. combined been reduced below the appalling level of 10s. in the £ at which it still remains. I have always felt quite certain that no proper incentive could be given to industry if the State takes half of any profits made, leaving those who take the risks to bear the losses. I am convinced that for the proper functioning of industry under peace conditions the highest rate at which taxation can be contemplated is one that leaves £2 in the hands of industry for every £1 taken in taxation. So much for the proposals in the Finance Bill.

"We are," said the Lord President in a recent speech, "being bold, clear cut and sensible. We are the Government, and what is more important, we look like a Government." There is room for more than one opinion about each of the several propositions advanced by the Lord President of the Council in that speech. I will only observe this, that the Government will be judged when the time comes, not on its looks, however promising, but upon its performance. For our part, we regard the Government as timorous, vague and irresponsible, and of that timidity and irresponsibility, the financial proposals for the coming year are an outstanding example. We shall therefore go into the Lobby against them.

5.49 p.m.

Mr. Reeves (Greenwich)

I crave the indulgence of the House on the occasion of my first speech. I am particularly disappointed that on this occasion I feel it necessary to criticise the Chancellor. I know that he has brought forward a very popular Budget and, generally speaking, its proposals are acceptable not only to those on this side, but in the main to those on the other side of the House, but this is a popular Budget which has been marred by one or two blemishes. My hon. and learned Friend the Attorney-General, when speaking to the House last week, said he spoke with a humble and contrite heart. I speak with a very sad heart, because I do hate criticising the Chancellor, knowing his kindly disposition towards good causes. I am amazed that he has overlooked a piece of financial meanness. I refer to the Purchase Tax on what are broadly termed visual aids to education. I cannot believe that he intends to persist in imposing this tax. He has made, I suppose, what he considers to be a very liberal reduction. The tax is to be reduced from too per cent. to 33⅓ per cent., but I am sure that the Chancellor did not fully realise the implications of this tax in so far as these very desirable pieces of educational equipment are concerned. I appeal to him to be liberal and magnanimous in the interests of education because, after all, the amount of the income that this is likely to realise is indeed negligible. When it was first imposed it was thought that this type of equipment which is used for educational purposes was in the nature of amateur equipment, and during the war the tax might have been justified, but we are now in peace time and there is to be a great advance on the educational side. We feel, therefore, that every piece of equipment which can be advantageously used for educational purposes should be absolutely free of taxation.

There are two main pieces of equipment to which I refer: the film strip projector and the sub-standard film projector. These projectors have been used during the war to very great advantage in all the Services to aid in rapid training, and it is recorded on very high authority that as much as between 30 and 40 per cent. better results have been obtained in training methods as the result of using this type of equipment. Then again they are instruments of visual aid to education in the classroom and I am sure that the right hon. Lady the Minister of Education must view with alarm the continued imposition of this tax on such essential educational equipment. In this country it is an established tradition that books, periodicals, and newspapers are free of tax, and if the commercial cinema projector had been taxed, the act would not have been so invidious, but as the commercial projector has been allowed to be free, it seems that this is nothing less than a tax on knowledge. Parliament has been against the taxation of the written word tor nearly too years and yet we are still imposing, and propose to continue to impose, taxation on what we can justifiably term the visual word. In 1938 the Board of Education, in their pamphlet on optical aids, stated in the preface: In view of the rapidly increasing use of optical aids in schools, the Board thinks that the present time is opportune for the publication of a pamphlet dealing with those aids.

Throughout its pages testimony was given to the value of this type of education. Since then, on numerous occasions, the old Board and the new Ministry of Education have identified themselves with this idea. Perhaps I may go into a little further detail, because I am sure that the trouble has arisen because there is not sufficient knowledge of the purposes to which this equipment is put. May I detail the various instruments? First of all there is the 16 millimetre silent and sound projector, which is the agreed international standard tor educational work with which this country has identified itself. As I have said, taxation on it has been reduced from 100 per cent. to 33⅓ per cent. Then there is the film strip projector, which projects still pictures and allows the teacher to elaborate the picture thrown on to the screen. This has been reduced from 100 per cent. to 33⅓ per cent. There is the episcope, which has never been taxed, probably because it is becoming more and more obsolete. There is the diascope, a projector which throws a picture on to the screen by means of slides. This also has been reduced from too per cent. to 33⅓ per cent. Finally, there is the epidiascope, which is a combination of both, and projects both slides and objects on to the screen. This last instrument, the most cumbersome and the most little used of all, has been reduced from 100 per cent. to nil and I feel sure that hon. Members will agree that this is a very unfair discrimination. Visual aids to education should be entirely free from Purchase Tax. With the raising of the school leaving age to 15 and the lack of qualified teachers—it is understood that over 70,000 teachers are required—we shall need all the visual aids to education that are available. Then, again, we shall be needing over 60,000 new schools, and it is essential that they should be equipped with adequate machinery to carry on the work of education.

Now actually to meet the emergency we are training teachers in a period of one year instead of three years. These visual aids would help in this intensive work of education, this great task of preparing so many teachers for the big job ahead. Then again, as we know now, as a result of our experience, the modern child is visually minded and takes ideas expressed in this way much quicker than in any other way. I feel that I have only to appeal to the Chancellor for him readily to see how vital it is.

The Ministry stated in a pamphlet issued quite recently: The old fashioned Diascope, being heavy, costly with breakable glass slides, is now replaced for almost all purposes by the economical and inexpensive film strip projector. So popular has this medium of education become that during the war over 5,000 were used in the Services.

Not only do we tax the instruments themselves but the film base of these instruments is also taxed, and there has been no reduction in this respect. Taxation is still 100 per cent. for 16 millimetre film stock and also for completed films in the 35 millimetre still film strip, which makes it almost impossible for education authorities to use this medium at this time. The result is that the use of visual aids is hanging fire, in spite of the fact that they know these would be most useful in their work. We want exemption of these modern aids to education to be complete, both the machines and the film stock in connection with them, and we feel sure that if the Chancellor will do this, he will be aiding education in this country very materially. The 16 millimetre sound and silent film takes the work of the film strip a step further into the more exciting sphere of visual action and gives life and reality to the lesson. Because of these things we want to see the growing use of this type of equipment in the schools, and we want encouragement from the Chancellor in this direction.

6.00 p.m.

Sir Alan Herbert (Oxford University)

It is some time since I had the honour of congratulating a maiden speaker or, indeed, any other speaker. I am most genuinely delighted to congratulate the hon. Member for Greenwich (Mr. Reeves) on his first venture into these dangerous waters. It is very appropriate that the hon. Member for Greenwich, the great home of telescopes, should speak with such fire in the defence of "visual equipment." I think Sydney Smith said something about being disrespectful to the Equator, and I am now delighted to be complimentary to the Prime Meridian. In the General Election I was invited by friends of the gallant sailor whom the hon. Member defeated to go up and down the river on the eve of the poll in a tug, and through a "loud-hailer" address the unfortunate citizens of Greenwich, which I thought would be very hard on the people of the river. Since I heard the hon. Member's maiden speech, I am delighted that I refused, and I am sure that we shall hear him with the same pleasure many times again.

I do not perceive that the Government are shaking or crumbling in any way, but I have on the Order Paper a Motion to reject the Finance (No. 2) Bill, 1946. By the way, I do not say this in any quarrelsome spirit, but I should think that, as a matter of form and Order, it ought to have been printed on page 4358, and not on page 4359, because it is no longer a Notice of Motion, but a Motion, which is part of the Orders of the Day. However, do not let us have any unnecessary quarrels about that.

On 23rd October, 1945, the Chancellor of the Exchequer used these burning and admirable words: It is…essential that all expenditure which has no national or social justification should be stubbornly forced down; and also that saving out of income…"— These are words which might well have come from the eloquent right hon. Gentleman the Member for Woodford (Mr. Churchill) should flow on in full tide of unabated endeavour."—[OFFICIAL REPORT, 23rd October, 1943; Vol 414, C. 1902.]

As I have indicated in the Motion on the Paper, I suggest that this Bill and the last Finance Act, indeed all previous Finance Acts—and I am not attacking the right hon. Gentleman and his Party because this is a thing for which all Governments for many years have been equally blameworthy—do not live up to those high and noble words. By this Bill we are imposing or maintaining heavy burdens on every form of creative and productive activity, every form of intellectual effort, every form of work, and almost every form of pleasure, even on such forms of pleasure as have very high and strong social and national justifications. For example, there is the Purchase Tax on sailing boats, which is a tax on the spirit of Drake and the spirit of Dunkirk and the very people we were glad to use at Dunkirk—and may, God knows, wish to use again. On the other hand, there is the tax on stage plays—I must not mention any plays by hon. Members on this side of the House—but plays, for example, by the hon. Member for Eton and Slough (Mr. Benn Levy) which we all know must be wholly educative and inspiring and illuminative works. Anyone who pays for a 2s. 10d. ticket for any of the hon. Member's plays will have to pay a tax of 1s. 2d.—a 40 per cent. tax. But no-one can say that that is an expenditure which has no national and social justification.

All the earnings of judges, scholars, professors and scientists are subject to these very heavy burdens. No professional man can really save anything for his old age or for his children. That situation is largely unavoidable, and I am not throwing particular stones at the right hon. Gentleman. But, when we come to that form of expenditure which has the least possible "national and social justification," betting and gambling, what a different picture. I should like to hear the right hon. Gentleman tell us later, what steps he has taken—I am trying hard to avoid a split infinitive, though it does not matter very much—stubbornly to force down that particular form of expenditure. I have not noticed any particular effort on the part of the Government. The General Post Office still does all it can to assist the pools. There are representatives of the Post Office in the football pools offices, I believe. The General Post Office provides the bookmakers—I am not against bookmakers, they are as honest citizens, I believe, most of them, as I am—with telephones and gives them an almost free public advertisement. Almost the only place where one is not badgered by Government posters or Government speakers, about saving, is the racecourse, where all the people who have the money, apparently, are present, There is no tax on stakes or winnings. I do not see any particular efforts being made by the right hon. Gentleman or his Government, stubbornly to force down this particular form of undesirable, unjustifiable—nationally and socially?expenditure. Or, if he has made any such efforts which have missed me, they do not seem to have had any great success so far.

I asked the right hon. Gentleman some weeks ago to give the figures of expenditure on betting over a year. Not to my surprise, he said that the figures were not available. I should have been a little more encouraged if he had said that he would attempt to find out the figures, because some of them could be ascertained. If one takes the general estimates given by such bodies as the Church Anti-Gambling Society some figures are available. The figures in regard to the London dog races totalisator takings are astonishing. In 1938, they were £16 million; in 1944, £25 million, and in 1945, £54 million. In other words, on the London dog "totes" alone, the figures trebled between 1938 and 1945, and doubled between 1944 and 1945. That is just a small corner of this thing, but it will show the kind of increase which is going on. The general figure given by these societies for horse racing before the war was £300 million. That again has probably gone up, and will go up. Taking what is called a conservative estimate—I do not know what that means precisely—I should put the total betting bill at between £400 million and £500 million a year. [Interruption.] I have not mentioned the Stock Exchange at all. But the figure for football pools, horse racing, dog racing, and so on, is £400 million to £500 million, about half a prewar Budget. It means that in two or three years we could pay off the American Loan by the sum we are risking in gambling in one year, and on which there is no tax, whether one wins or loses.

The Finance Bill is not merely a machine for raising revenue. It has always been used, sometimes perhaps excessively, as an engine of social correction. I have often thought that we have gone too far in that way. I certainly think that in such matters as the whisky tax, for example, the social conscience of the Exchequer was developed perhaps to an unreasonable extent. But, quite apart from the technical aspect of raising, revenue on the one hand, and saving money on the other, we in this House will have to consider, sooner or later, not so much in this Bill, because I know that the Chancellor cannot do much in this Bill, but in future Bills, this social and moral problem. I do not and cannot take too high a moral line about betting—forI bet now and then, myself. I am going to the White City on Saturday to lose a few more pounds. I bet occasionally, but always unsuccessfully. It has been my boast for many years that I can stop the finest horse in the country, by putting half a crown on it.

Mr. Beverley Baxter (Wood Green)

I might go to the White City on Saturday also. Supposing my hon. Friend loses £5, and I win £5, will he tell me where the community has undergone any great loss in that transaction, and how it can possibly be taxed?

Mr. Piratin (Mile End)

Surely the hon. Member for Wood Green (Mr. Baxter) is rather conceited to think that he and the hon. Member for Oxford University (Sir A. Herbert) make up the community?

Sir A. Herbert

I must ask to be allowed to continue my personal anecdotes about my betting career. Hon. Members may remember a sad Derby race when a suffragette stood in front of a horse and was killed. I have always regarded myself as virtually guilty of manslaughter, because my money was on that unfortunate horse. Therefore, I am not taking any high moral line; but I do say that we have to realise that here we have a national cancer, which is eating into the national character in every walk and branch of life. I do not think there is a Member here who, going about his constituency, is not conscious of that. It is something which we have to face sooner or later.

I have always said that betting ought to be treated as we treat drink—as an indulgence which is, perhaps, not pleasing to the Churches or many other people, but which will never be stopped in this country. Therefore, it ought to be treated as we treat drink—licensed, controlled and taxed. In answer to my hon. Friend the Member for Wood Green (Mr. Baxter), the point is that whether he wins or I win, that money passes, just as money passes when he pays to go into a theatre. In the latter case, every time money passes, a tribute is paid to the State. I do not care whether my hon. Friend wins or loses, but I say that every time betting money passes, some contribution should 'be made to the State, because it is an indulgence. After all, in Australia, when I was there, there was a tax of 10 per cent. on stakes and 14 per cent. on winnings—I forget the details.

Morally, there is no one here who can really counter my argument. The only argument is that practically the experiment of 1926 was not very successful. That was done by my right hon. Friend the Member for Woodford, and if I may say so, with respect to him, it was not one of the things which was done by him quite so successfully as he has done a good many others. I could give examples. In Australia if someone put 10s. on "Love Lies Bleeding," there was a 2s. Government stamp on his ticket, and both he and the bookmaker know that the tax has been paid. But when the experiment was tried here—I suppose that the arrangements were made by civil servants who possibly had not had the disgraceful acquaintance with the racecourse that I have had—they made the most astonishing arrangements. One first got one's ticket from the bookmaker, who then had to fill up a tax form and counterfoil, a most cogent invitation to evasion, and obviously a great inconvenience to everybody on the racecourse. I know the difficulties, but I am entitled to say that the Government really must face this matter, because in 1938 I introduced a long Bill about it and made a dreary speech of about 50 minutes' duration to a very small and not entirely attentive House. I am sure that before this Parliament ends the right hon. Gentleman opposite and his friends will have to face this national cancer, whether from a moral or financial point of view, or from another point of view to which I, will refer, and deal with it.

Let us for a moment contrast the treatment of this foolish indulgence with the treatment, for example, of the theatre. Here I must declare my interest. At the moment, I am happy to say, I am helping not merely as a playgoer but as a playwright, to pay Entertainments Duty. I have here a few figures from a well known theatrical firm—the figures have nothing to do with me—about certain plays in the provinces. Here is a play produced in Glasgow in December. I give the weekly figures. The public pays £2,063, of which £596 is taken in tax. and the producing manager, not the man who owns the bricks and mortar, but the man who has got the company together and taken the risk of production, has a loss of £34. To take another case, this time in Liverpool—total takings ણ3,698, tax ,1,044, loss to the producing manager, £408. I could go on for a long time. Here is another total —£3,956, tax £1,119, loss on the week for the producing manager, £366.

Mr. Benn Levy (Eton and Slough)

Is it not fair to say that the reason for the loss to the producing manager is not exclusively the fact that he is paying a great deal of taxation, but very largely the fact that the bricks and mortar man, having got a stranglehold on the theatre during the present theatre famine, is exacting more than the normal rent?

Sir A. Herbert

I hope we shall go into that aspect one day, but the fact remains that here is the man who is producing the show, the public are paying so much money and 40 per cent. of it is being taken by the Chancellor of the Exchequer. I was talking to a theatrical manager this morning. I said, "You are successful. How long will it be before you get your production account paid? How long will it be before you begin to have a chance of making a profit?" He said, "Well, six months would be optimistic." The hon. Member may be quite right. All I am doing at the moment is to contrast the treatment of this theatrical business, than which there is no greater gamble in the world—no man knows what is going to happen till the first night is over—with the treatment of the man who puts his £1,000 on some damned horse or silly dog. I do not think I need labour those points any more. I know the right hon. Gentleman cannot do anything about a Betting Tax in this Bill, but if one does not say these things now they will never be said. I am pretty sure they are in his mind. If I can help him, as a man who knows something about horse and dog racing, I will. Perhaps he will come to the White City with me on Saturday, where we might go into these matters.

I also hope that he will go into the Entertainments Duty business a bit. I worked very hard with Mr. William Mabane and other Members of Parliament to get a distinction made between the living theatre and the cinema. The whole idea of that distinction was that the theatre was a thing of the mind, and therefore though I am no enemy of the football world the right hon. Gentleman's concessions in this Bill have rather let down the principle. As the hon. Member for Greenwich said, we do not tax books; we do not tax newspapers. Why do we tax theatres and plays? They are not all good, I know, but they are all engines for the communication of thought and the distribution of ideas. The tax of 30 to 40 per cent. on everything the public pays to be amused or instructed is an awful, a barbarous, burden. Some hope to make a profit—I ashamedly confess it—but, on the whole, the object is to give light, illumination and instruction to the people. My main point is that nothing whatever is done about those who flout the savings campaigns and the inflation terror and who risk their money on the speed contests of horses and dogs which they have never seen and would not know anything about if they did.

6.23 p.m.

Mr. Clement Davies (Montgomery)

I am sure the House is very grateful to the hon. Gentleman the Junior Burgess for Oxford (Sir A Herbert) for again introducing a new interest into the House. The House certainly livened up as soon as he began to address us. Might I also confirm what he has been urging upon the Chancellor and the Financial Secretary in regard to the need for looking into these matters? He has long advocated these reforms about which he has spoken so eloquently this afternoon. I will take one sentence which he used. The Finance Bill is not merely a measure for the collection of the necessary money to meet the annual expenditure. It is, as he described it, a sort of social engine which affects the lives, livelihood, and conditions of all the people in the land, never more so than today. Sometimes the people themselves do not realise what effect it is likely to have upon them. Sometimes the effect is not realised until many years after the event. In illustration of that, I would refer to the Budget introduced by the right hon. Gentleman the Member for Woodford (Mr. Churchill) when he restored us to the Gold Standard. I am quite sure that the full effect was not foreseen or realised until long after the event. Something like four years elapsed before we realised the damage that had been done. Therefore, this is a matter which can and does affect the livelihod of every person and which also affects industry.

What is the main problem which confronts us today? We have not yet come through the war period to reach a normal situation. Surely the old idea that it was necessary to balance a Budget by raising the actual necessary revenue to meet the expenditure has gone. It has been blown sky high. It has become the doctrine of the Treasury, as well as of all the economists, to take a long view; not merely to provide the Government with the money they need to meet the expenditure, but to take a wide view of the whole national situation. We have to consider the national income and the national expenditure quite apart from mere Government expenditure. That was borne in mind by all the Chancellors during the war period. We realised that there was a limit to what could be raised out of revenue in a particular year. Therefore, we resorted then to borrowing. We borrowed very heavily during the war years.

What is the boast made by the Chancellor and the Financial Secretary today? It is that they are going back to the old methods and raising the money which is required to meet the expenditure by a taxation which amounts to 18s. 2d. in the pound, and that they are borrowing a net figure of something in the neighbourhood of £310 million. No one who looked at these figures before the introduction of the Budget failed rather to anticipate that the amount the Chancellor would have had to borrow was in the neighbourhood of £1,000 million. We thought that would not in any way affect the money market or the production of the country. We had forgotten—and I am not sure that the Chancellor had not forgotten—that there was a windfall coming in from the sale of supplies, and so on, which reduced the amount of deficit, between what he could raise by taxation and what he would have to expend, by a sum of something like £670 million. He then goes on keeping taxation at this very high level.

I want to put a deliberate question to the Government. Is it part of their policy to maintain taxation at a high level? What purpose do they expect to achieve, and for how long do they propose to do it? I heard the Financial Secretary end his speech with a peroration to which reference was made from this side of the House. It has become the habit of certain hon. Members on the opposite side of the House, certainly of the Chancellor of the Exchequer and the Financial Secretary, to try and imitate my old countryman, Mr. Lloyd George, in their peroration. It is no good trying to imitate him——

Mr. Glenvil Hall

It is impossible.

Mr. Davies

There is only one person who could have done that and he is no longer with us. The Financial Secretary suggested in his last few words that a time will come for a reduction in taxes. When do the Government foresee that that time will come? I suggest that the time has already arrived.

What the country needs above everything else at the moment is production, more production, and still more production. What is the incentive in order to get that production? During the Debate on the Budget, I suggested that one might take a tremendous step for this purpose. The amount that was raised from taxation on wages in 1938 was only about £2 million. The amount that appears as having been raised last year, and as likely to be raised this year, is the very big amount of £240 million. That arose under the P.A.Y.E. system. Will the Financial Secretary deny that that system does not have a psychological effect upon a man every week? He has worked hard, has worked out his pay, and, when he goes for it, he finds that it is reduced. We hear of all the effects which that is having upon him and that it is reducing his productive output each week. If that is so, we have to do something to restore productive output in this country. It is needed more than ever, and I make the suggestion to the Chancellor that, for this year, and, maybe, for next year, he should abolish this Income Tax upon the wages bill, and that there should be a far bigger allowance on earned income than is being made at the present moment. The harder the people work, the more they produce, the more is the capital value they put on their own class.

If that does not appeal to the Treasury and the Chancellor of the Exchequer, may I make another suggestion? It first occurred to the great Lord Keynes, whose death we all deplore, and who possessed one of the greatest minds this country has produced. Lord Keynes, early in 1940, made the suggestion, which was afterwards partly adopted in regard to excess profits, that the Government should take a compulsory loan, not a compulsory tax, and that they should repay that loan as the finances and income of the country improved and its capital value increased, as, indeed, it has. It has increased enormously—both the capital value and the income of the country—since 1938. It will increase enormously again when we increase production. What is more, there is all the time this talk about the danger of inflation. The Government might try all kinds of brakes upon inflation, but there is only one complete cure and that is increased production. You bring production up to meet the demand, and you have done away with inflation.

Might I make this suggestion to the Treasury? Reduce the Income Tax, and I feel that they can reduce it from the 9s. at which it stands at present to 6s. I believe that the product of a shilling tax—the Financial Secretary will correct me if I am wrong—is £120 million. Three times that is £360 million. Give the Income Tax payer the encouragement and incentive he needs this year by saying, "We are not taking all the 9s. away from you. We will give you a credit which will be repaid to you in three years, or, it may be, five years, but, certainly, it will he paid back." Let the Chancellor say that, in order to meet his expenditure this year, he will borrow £360 million in this way, and that amount, plus the £310 million, which is all he has to find, will still come well under. the £700 million. There is no great danger with regard to borrowing the money. It will be flowing in quite freely, and it will be used for purposes which undoubtedly will be productive. I wish that the Chancellor of the Exchequer and those who advise him would not be quite so pedestrian, all the time following along the old lines and in the old steps so well trodden, but that they would let their imagination have a little scope and would see what effect any reduction of this kind would have upon the country as a whole, upon industry, upon wage earners and salary earners and in bringing about a different view of life. I am perfectly sure that production would go up by leaps and bounds.

May I also make reference to one or two other matters? How often have I, in addressing the House on these occasions, said that I always felt that the one and only tax that was fair in all circumstances was the Income Tax? I am never going quite so far as the hon. Member for Ipswich (Mr. Stokes), but I thought the Income Tax was a fair one, as the burden fell upon different shoulders with a proper weight so that each taxpayer could bear his own share. I am afraid I have been wrong. It has a psychological effect upon the taxpayer which undoubtedly affects his work and his productive capacity, and I am now turning round and saying that, in order to encourage the worker, I think it would be best to put it, not upon income, but upon expenditure. That is why I was glad to hear the Chancellor say that the Purchase Tax is meant to be permanent, though one has got to watch that with care. There are certain items which are essential and which ought to be free from that tax. It is perfectly obvious that the Chancellor cannot confine taxation to that; otherwise, we should get men in the Alpine regions of income whose wealth would accumulate so much that the whole country would soon be belonging to them. In the old days, when I was advocating that the only fair tax was the Income Tax, I was wrong, and the time has now come to review that and to see whether more could not be put upon expenditure, and, in that way, encourage greater production.

The time has also come for the review of Income Tax law and methods, which are complicated and, in many ways, almost impossible to understand. There are too many forms, deductions of all kinds to be thought out, very often cases of people paying more than they need because they did not know how to make the deductions or what deductions they should be making, unless they hand their cases over to an expert to guide them. Might I also say that these allowances are rather absurd now? The whole machinery of Government has become too complicated. One Department is making allowances, while another is paying out family allowances and things of that kind. The whole matter needs complete review, and the sooner it is taken in hand the better.

One last word with regard to what the Chancellor is doing under the Section in Mr. Lloyd George's famous Budget in regard to the land. I am glad that he is now encouraging agricultural landowners to hand over their land, rather than mortgage it or hold it up for sale to tenants who do not want to buy, or who, if they did buy, would lower their standard of living, in many cases, because their houses and buildings have got into such a state, though they will go on living in them. They will not bring water pipes to their houses, and there are a lot of things which need to be done which will not be done, because it is difficult for a farmer, whose ancestors have been there for generations, to refuse to pay an inflated price rather than leave his old home, merely because the agricultural landowner, who has been good to him in the past, is now faced with a situation that he cannot raise the money he needs and therefore has to sell. I am glad that the Chancellor is encouraging these agricultural holders to hand over their land. May I suggest that, if they do, the Chancellor might consider inviting them to hand it over at the price at which they had offered it to the county councils, who have a very excellent record, and who would, in that way, bring about new houses and help these tenants who have done such excellent work? If the Chancellor did that, he would not only be helping people concerned with national parks, but he would also help the local authorities. I hope that suggestions made in this House to the Treasury Bench will be given consideration; I am perfectly sure that far better financial methods can be brought before the House than have been brought hitherto.

6.40 p.m.

Mr. Alfred Edwards (Middlesbrough, East)

I am sorry to find that the hon. and learned Member for Montgomery (Mr. C. Davies), who is usually considered to be a progressive, has arrived at the time of life when he begins to go backwards. I am astounded that he, of all people, should commend the Chancellor for saying that the Purchase Tax is to become permanent. Whatever there was to be said for that during the war, it is a retrograde step for any Chancellor to take to make that burden, which falls mainly on working class people, permanent. I shall have something further to say about that in a moment. Meanwhile, I will refer to what the Junior Burgess for Oxford University (Sir A. Herbert) said. He said two things; one I thought was good and the other bad. He should not go about this country, with all the weight that he carries, telling Americans that we can pay off their loan by gambling. They have plenty of foolish notions over there about the loan already without anybody in this House adding to them. The one way to pay off the loan is by selling them our goods; there has never been any other way.

Sir A. Herbert

I did not suggest what the hon. Gentleman thinks. I was only seeking to show, as a matter of comparison, how large the figure was.

Mr. Edwards

I do not think the hon. Gentleman meant anything serious, but if he knows anything of journalism on the other side of the Atlantic, he will realise how careful he should be, because no one in America reads anything under the headlines. One of our greatest difficulties in dealing with our friends in America is because they read the headlines and little else, and very misleading they can be. I am not concerned with what America thinks, but one thing which we have got to learn over here is to use a phrase which America gave to us—"to talk turkey." The hon. Gentleman also spoke about taxing gambling. I am all for putting a tax on "mugs"; I think it is a good thing. I am only sorry that one of the parties would have a chance of winning. The more people who lose at that game, the better. The wisest thing said about that matter was by a gentleman who gave a good deal of his time during the war to war savings. He told an audience that to put their money into war savings was to use common sense, good horse sense. When asked what he meant by "good horse sense," he said it was that sense which God gave the horses not to bet on man.

In a previous Debate, it was said that the Chancellor of the Exchequer was one of the greatest authorities on economics. I wonder why such a great authority allows some people to go on making vast profits without taking one penny piece from them. It is said that people in this country cannot now accumulate large fortunes honestly. That is almost true. We have gone a long way towards socialising our system in that respect, but the people who make far and away the biggest profits are those who get capital appreciation and pay no tax on it at all. When, in the past, I have raised the matter in this House, I have often been asked whether I would give them credit for their losses. I cannot see that that makes sense. Because a man has lost some capital, it is no reason why I should not pay on my profit. It is no help to him. If I make a capital appreciation through no effort of my own, I do not know what right I have to keep it all.

The hon. and learned Member for Montgomery said that high Income Tax worked against incentive. During recent years nothing has kept men from useful employment so much as looking around and using their ingenuity and skill finding investments where there would be a capital appreciation and no tax to pay. People who own property today are probably worth two or three times what they were at the beginning of the war, and there is going to be no tax on that extra money. All over the City and throughout the country people are looking round, and taking a lot of time in looking round, to find something into which to put their money where there will be a capital appreciation and no tax. For a Chancellor who, in the past, has preached in favour of a Capital Levy, I am surprised he leaves this unearned appreciation of capital untaxed. A Capital Levy does not work out as well as we used to think. A previous Chancellor of the Exchequer gave us some figures on it some years ago. No one has put up an argument against the taxation of unearned income in property values or in any other investments. I wish the Chancellor of the Exchequer would have another look into that matter. As one who has given a good part of my life to preaching the Socialist gospel—and there are many hon. Members on this side of the House who have given all their lives to it—I feel that, for the first time, our theories are now to be put on trial. I am prepared to stand or fall by the results. I only hope that we shall have a tithe of the opportunity which the other side have had to prove their theories.

Mr. Stokes (Ipswich)

To disprove them.

Mr. A. Edwards

No, to prove them. I always felt that what has come upon them would come about in due course. If we get one tithe of the time which they have had, that will be fair enough. Unless we can make our present industries, as we find them, work more efficiently than the party opposite have made them work, we shall fail. The only fair and reasonable test will be whether our system can run our industries more efficiently. If we do not prove that it can, we shall go down, but we must give the system a fair trial. It is important, therefore, that the Chancellor of the Exchequer should not make mistakes now which he cannot undo at a later stage.

How does he justify continuing, even for one more year, the Excess Profits Tax? That tax was brought into being because of the pressure exerted by the Opposition of that time. There was before that time limitation of dividends and I sometimes think that that would have worked out more fairly. Looking back, I am sure it would have worked more equitably and, probably, more profitably for the Chancellor. Whatever there was to be said for the Excess Profits Tax during the war, there is not a shred of justification for it now that the war is over and we have entered a period of reconstruction. We pressed for 100 per cent. Excess Profits Tax in place of the limitation of dividends and we had our way. There are people who worked and did great service for this country during the war who finished up insolvent at the end of it.

I will give an example of a company which this week happens to be taking its case to appeal. The turnover has increased enormously, but it must be remembered that the company did a magnificent job during the war. If the Commissioners of Inland Revenue turn down its appeal this week, it will have an enormous sum to pay in respect of Excess Profits Tax, which it has not got. The company will be insolvent. I know that it is customary for the authorities to be tolerant and that over a period of time the company will probably pull through, but what justification is there in asking these people to work for another year under this great handicap? Some people who worked throughout the war have been keeping all they have made, because they were fortunate enough to be making profits in 1935, 1936, and 1937. We did not stop long enough to think about this matter at the very beginning, but, looking back, who can justify that state of affairs? Many people had their standards based upon their income for 1935–36–37 because they were trading with our enemies. Because of that we said, "Any profits you make during the war you may keep, and for a further year in this period of reconstruction those people who have been under such a handicap during the war shall contribute to your profits." I do not think the Chancellor has given adequate attention to this matter, and he is putting on those small people for another year an enormous burden which is not justified. If there is one thing for which we on this side of the House stand, it is equity. I hope the Chancellor will reconsider this matter because the case I have quoted is not an isolated instance. I can quote others, and, no doubt, so can other hon. Members.

The Financial Secretary said that in giving concessions in connection with Purchase Tax, he has given £12 million more purchasing power. That is a magnificent thing, for it is purchasing power which we on this side of the House have always preached. How can the Chancellor be justified in saying that he wants to make it a permanent tax? Who will deny that the working people pay most towards it? Has he worked out how much of that tax he himself pays? When Purchase Tax is paid on any capital goods, motor cars, for instance, the Chancellor pays every penny back to us. I would like to give another ilustration which indicates the sort of mentality which operates in the Treasury. There was a time when they insisted upon raising the price of coal and iron ore, and, consequently, of steel. I argued this with the Chancellor at that time, but no action was taken. I am only giving an illustration of what I think is simple economics, and which must be the foundation of the Government's policy. During the war we had ships crossing the sea with iron ore, the Government ships protecting them in convoys; the cost of running those ships was a war cost, but because there was a higher freight rate and higher insurance the trade had to pay it. I suggested it should all be absorbed as a war cost. Surely, that is as much a war cost as the other. It has become a principle in the Treasury that business must be self-supporting and must pay its own way. The shipbuilders were working on wages plus 20 per cent. and materials plus 10 per cent., and the result was that when steel plates were increased in price by 40s. we put 4s. a ton into the pockets of the shipbuilders who did not ask for it and have done nothing for it, and everybody who used steel received, without asking, 4s. per ton just because we had insisted on raising the price.

I am putting this forward because it may be a very good thing to subsidise certain industries. It might be a good thing if the coal industry were run at a loss, so long as the steel manufacturers could get cheap coal, because every time one puts is. on the ton of coal, one adds 3s. to the price of steel, and everybody who uses steel has to increase the price, with the result that wages have to follow and then the circle starts all over again. The Chancellor, who has insisted upon the stability of prices, has to begin somewhere by stabilising something. He has not done that yet. Not one thing has been stabilised. It may be that in order to achieve that, we may have to subsidise coal. I do not mind if the coal industry is run at a loss, so long as everybody else gets at least a stabilised price. I do not mind if we get telephones for nothing, and the Post Office is run at a loss, so long as everybody else gets better facilities in industry. The Chancellor ought to look at the matter again, because if he insists upon the continuance of the Purchase Tax the result will be inflation, if inflation has any meaning at all. It is a definite policy of inflation. Only one Chancellor has ever given away the policy of the Treasury. The last Chancellor of the Exchequer admitted that our currency was deliberately inflated. He said that if employees insisted upon higher wages he would have to consider increasing the cost of living—those words are in HANSARD—which means a deliberate policy to fix the value of money or, in other words, to inflate the currency. When I put this to the Treasury they just smiled and said, "Is it not a good thing if inflation is controlled?"

Mr. Glenvil Hall

Surely my hon. Friend means "prevent inflation," and not "deliberately to inflate"?

Mr. Edwards

No, it was an argument in favour of controlled inflation. That is a deliberate policy of the Treasury. What I am concerned about is to get a stable price structure throughout the entire community. If we do not do it, we shall get these cycles of depressions and booms. I think we can eliminate both.

There is one other thing I wish to say to the Chancellor. I think he missed an opportunity, which no previous Chancellor has ever had, to abolish one of the most foolish things that ever came into industry in this country. I refer to the handicapping of the design of our motor cars and motor car engines by the foolish system of taxation. He had an opportunity which no other Chancellor has had. In this period of reconstruction, when we are building all over again, he had an opportunity to abolish that once and for all, and to leave it to the genius of our engineers to develop motor car engines, free of any of these limitations. They are now limited for all time, and I do not see how, when they begin the industry again, they can fix their plans. He has done a great disservice to the industrial community by doing that.

The right hon. Gentleman the Member for North Leeds (Mr. Peake) spoke of the enormous number of people kept employment but not performing any useful service. I do not know the figures, but I do know the mentality of those who keep the Government Departments going, and I know how difficult it is to reduce staffs. It is important for hon. Members on this side to realise—as I firmly believe, and on this I risk whatever reputation I possess—that if our industrial system is to be even partly controlled by the Civil Service, we shall lose everything for which we have stood. I see no reason why it should be controlled by the Civil Service. In the Civil Aviation Bill, which we are now discussing in Committee, there are set up three companies. That is all right, but I should like to see those three companies develop themselves in their own way, get the best brains, and operate so that if those brains fail we can fire them, and put in better brains. If we are to continue the awful system that once a man is in a job he can never be fired, however inefficient, we are inviting disaster. We should do something about it. It is now the responsibility of those on this side of the House. The Civil Service bureaucracy was built up by hon. Members on the other side of the House. As it is found today it is not the work of this side of the House, it is the work of the Conservative Party.

Mr. Stanley Prescott (Darwen)

It was built up for a different purpose. It was not built up to do the job it is doing today.

Mr. Edwards

That is not because of the doings of hon. Members on this side, but because of what was done by hon. Members opposite. We have here a definite staff to be responsible for these three companies. I can understand that, and I can understand having a Minister responsible to Parliament, for which he must have a small staff. But already there are 500 people in this new Department. That cannot be justified. It will be 1,000 before the year is out. It is inviting disaster if the silly, nonsensical system of directing industry in that way is not stopped. During the war, when we had to put up with a lot of things, we saw temporary civil servants, drawing £600 a year, telling Rolls Royce how to improve their machines. That sort of thing is absolute nonsense A borough engineer, who probably draws up to £2,000 a year, may have some junior from Whitehall, drawing £500 or £600 a year, telling him "You cannot do this" or "You cannot do that." That just does not make sense. We might put up with that so far as local government is concerned, but, for goodness sake, when we are now beginning a new industry let us not fasten that system on to that industry. It is inviting disaster in connection with everything for which we on this side of the House have worked. Let me illustrate that by relating an experience. One of the biggest industrialists in this country was in charge of a Department——

Mr. Speaker

We are now dealing with the Second Reading of the Finance Bill. We are not discussing the way we should run our industries, or whether they are hampered by bureaucracy or not. That may come within the scope of a Budget Resolution but not on the Second Reading of the Finance Bill.

Mr. Edwards

The right hon. Gentleman the Member for North Leeds referred to the enormous number of people in Government employment who were producing nothing useful. I was trying to deal with that point. It is our responsibility to dispose of those people as quickly as possible. It is no use disposing of them from one place and building them up in another. I am illustrating how the Chancellor is not making the best of the Budget opportunities. Perhaps I might proceed with my illustration. One of the biggest industrialists in this country was in charge of a Department at the Ministry of Supply. We had some discussion in this House about the staffs that were growing and growing, and we insisted that they should be reduced. I happened to be on a Committee in that connection, so I had some authority for speaking on the subject. I went into the Department to which I have just referred and this industrialist said. to me, "You are just the man we want to see. I am glad you raised that subject in the House. We are going to make a clean sweep in this Department." I replied, "That is good. How many are you getting rid of?" He said, "I will give you 1, 000 before lunch." I remarked, "Good, we will have another 1,000 before dinner." A month later I went back to see how the clean sweep had progressed. Only one man had been thrown out, namely, the man who was going to start the clean sweep. That was Sir William Rootes, a man who meant what he said. The Civil Service would not allow a mentality like that to work in it.

Whatever has to be done in our Government Departments, do not let it hamper our industrial system or we will come to grief. It is not necessary. If I had been President of flap Board of Trade I would have taken a control such as was taken with regard to Imperial Airways. Once we had control of an industry in that way we could begin to improve it by improving the board of directors. I hope I have not transgressed too much. In this House there is a very small minority who do not transgress. Today I have spoken primarily for the benefit of my colleagues. We on this side of the House have everything at stake. We have come into power with promises. [Interruption.] Oh, yes, and we have come in with plans too. I cannot recall any plans ever having been published by those on the other side of the House, though I can recall certain promises. We seem to be criticised because we are carrying out our promises, not because we made them. Those of us with industrial experience can see that the great things for which we have stood, and for which many of us have sacrificed a great deal, can be carried through. However, they will not be carried through if, at the very beginning, we make the fundamental error of putting industry into the hands of the Civil Service. If that is done it will fail.

7.09 p.m.

Sir Ian Fraser (Lonsdale)

The hon. Member for East Middlesbrough (Mr. A. Edwards) regretted that the Chancellor had not put a tax on appreciation of capital. He said he did not think anyone could produce an argument against such a course. He then went on to say that there was no reason why allowance should not be made for losses due to reduction in the value of a capital asset; all that had to be done was to tax the asset when it rose in value. It was just as simple as that. I venture to suggest that there are two fallacies involved in this matter. First, the income which is taxed varies in proportion to the value of the capital from which it comes, and if the income is greater, then the capital asset is greater. They are related. Let me give a simple illustration to show the fallacy on this point. If I own just one house—and the hon. Gentleman spoke of property owners as in the category which ought to be taxed—which was worth £1,000 before the war and is now worth £2,000, I ought to be taxed on the appreciation of capital value, according to his argument. But if I were to lose over a period of years, if my one house came down from £2,000 to £1,000, I should not get anything back and, the hon. Gentleman says, there is no reason why I should.

Mr. A. Edwards

If I said so, I did not mean quite that. A man who loses ought to be able to offset that against his gains, but that is no argument against the principle of taxation. In America they have taxation of capital appreciation and Stock Exchange profits.

Sir I. Fraser

I felt sure that the hon. Gentleman must have had in his mind the possibility of offsetting losses against profits, but that is what he said.

Mr. Edwards

I am sorry.

Sir I. Fraser

The hon. Gentleman tried to make out that there is no need to do that. My whole point is that if it is done, there will be no gain whatever. Therefore, the hon. Gentleman is making a suggestion to the Chancellor which may sound attractive on the platform but is of no value whatever. It is far better to tax the fruits of the increased capital value, which are always increased income. I deplore this Budget and I must oppose it, because I believe that it is leading us along a most dangerous path. We are not balancing our accounts. I do not know that I blame the Chancellor for that, because perhaps no Chancellor could have balanced them in this year, but no attempt, it seems to me, is being made to approach a balance and no indication comes from the other side that they have in mind the dangerous course which we are taking.

As I see it, there are only two ways to stop inflation. One would be drastically to reduce expenditure—not a course which I recommend, though I think expenditure must be progressively reduced, and our financial authorities should tell us their plan for doing it. I do not want to see any Geddes Axe suddenly brought in, because of the disturbing effect it would have. But if they are not going to reduce expenditure, all will agree that we must increase production. What incentives are there in this Budget to encourage an increase in production? In my judgment the things which men work for are power and influence, interest, comfort and amenity, which are represented by money. Those are the things they work for, together with the right to leave whatever small or great fortune they may be able to amass in their lifetime to their children.

Those, I think, are laudable objects. They are the springs of human enterprise; I do not blame humanity for them. I cannot see that it is a bad thing for a man to try to improve his position, to try to become more wealthy, and to try to leave a fair part in it to his children to give them a better chance. But the Chancellor increases Death Duties, he makes it much more difficult for any man in the professional classes, or for any small business man gradually developing into a moderate sized or big business man, to make any serious savings—I will not say a fortune—whatever for his old age or for his children. If he does, somehow, miraculously succeed, the Chancellor does everything he can to take it, or most of it, away when that man dies.

He therefore takes the heart out of him, and makes the opportunities which are to be found in other countries more attrac- tive. He is quite obviously and quite definitely stifling enterprise at a time when we want it above all things. The Chancellor is taking off the Excess Profits Tax. That is a good thing, but he must needs accompany that with a threat to put on some new tax if industry does not behave itself in some undefined way. He does not tell us how they are to behave, but warns them that the National Defence Contribution, which he is now going to call the Profits Tax or something like that, may be put upon them in a penal sort of way if they distribute their earnings amongst their shareholders. I ask the House to consider whether this is wise. He alters the name of this tax to Profits Tax, no doubt with a political purpose. so that he may be able to please some of those who support him—not all, because some of them know better—so that they in turn may be able to pass it on to their constituents and say "Here is a Chancellor taxing profits. What a splendid Chancellor he must be if he can do that."

A profit is the difference that is left when all expenses have been paid, and if there is no profit, over any length of time, you will go bankrupt. That applies whether you are a State, a person or a firm. It is a profound mistake for it to go out, as Government policy, that profits are to be penalised and taxed. It is a profound mistake for the Chancellor to put these sharp unpleasant little phrases into almost everything he says in order to raise a cheer from his back benches, because the effect of that is to make the people who would like to go out and get busy and make profits feel that they are not going to be given a chance. If we are to recover from our difficulties, if we are to get building going, to get restrictions off, to get clothes and all the things we need, we want greater freedom and more opportunities for making profits rather than the reverse. The Chancellor then follows up this taxation by penalising, or at any rate not relieving as generously as he might, those who earn. All through this Bill will be found attempts to throttle initiative, to put a tax on the profit makers and the persons upon whom we must specially rely for the initiative we need. So I say that the course which is now being followed is one which is conducting us directly on the road towards inflation.

There is probably always inflation, and always has been over the centuries, and it is perhaps a good thing that there should be, because a moderate rise in prices over a long period of time, followed by a moderate rise in wages and remuneration over a long period of time, gives that constant incentive to business to go forward. If you look back historically you will see that there has in fact been progressive inflation ever since money has been used, but the inflation of the last six years has gone ahead to such an extent that probably the £has halved in value during that time, and there is a very great risk of it continuing. If it does continue, who will benefit? Certainly not the wage earners. They have all become rentiers now. They all have a stake in the vast sums they are contributing by way of social insurance and otherwise. The investment which they have made becomes worthless in terms of benefits they will receive every week this process of inflation goes on.

The war pensioners always find it difficult through their spokesmen to secure rises in their pensions and allowances comparable with the rises the trade unions can demand in industry. Always a pressure group has to bring pressure to bear on the Minister of Pensions and the Chancellor of the Exchequer to try to bring up a little the inadequate pensions paid to men disabled in war so that they may keep pace with the rises in costs. They will all suffer if inflation goes on. The whole working class suffers. It is the greatest fallacy in the world to suppose that the working class as a whole can possibly escape the effects of high taxation and inflation. In fact, the wealth of the country is preponderantly in the hands of small men, and it is the small men who must pay the taxes, directly or indirectly; whether they pay them in reduced wages because industry begins to fail and languish, in Purchase Tax or in Income Tax. The money for these fast growing State services and State activity must come out of the pockets, primarily, of wage earners and small men and through taxation; and high taxation affects them and affects them most adversely. I, therefore, say that it should be our aim and our duty to oppose this Second Reading of this Measure because it neither controls expenditure nor encourages production.

7.22 p.m.

Mr. Norman Smith (Nottingham, South)

The hon. Member for Lonsdale (Sir I. Fraser) has performed what seems to me the extraordinary feat of discussing inflation without mentioning the word "debt." I believe I am right in saying that throughout this Debate no reference has been made to the existence of the present swollen and immense National Debt. The only departure from complete orthodoxy contributed by any hon. Member today was the suggestion by the hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies) that the Chancellor of the Exchequer should deliberately unbalance the Budget for the next two or three years by taking 3s. in the £ off Income Tax. I rejoice in that suggestion, because if there is any fantastic fetish current in this country today it is the preposterous superstition that Budgets ought invariably to be balanced. It is my sincere belief that to balance the Budget in the next few years will prove to be completely impossible.

I want to make a few suggestions by way of helping the Chancellor of the Exchequer to deal with the difficult Budgetary situation that has arisen. My right hon. Friend the Chancellor of the Exchequer did say in his Budget Statement something to the effect that he looked upon the floating debt as being nothing about which to bother. That was admirable sentiment. The right hon. Gentleman the Junior Member for the City of London . (Mr. Assheton) said in this House only a few weeks ago that he hoped the Chancellor of the Exchequer and the Financial Secretary to the Treasury would keep an eye on the need for funding the debt. If that is to be the contribution of the Party opposite to meet the difficult financial position in which this country finds itself —that we should deliberately proceed to fund the floating debt, thereby burdening posterity in perpetuity through cancelling out some £6,000 million to £7,000 million of floating debt now bearing interest at five-eighths of one per cent. per annum or one half of one per cent. per annum, and substituting funded debt bearing interest at something like 2½ to 3 per cent. per annum—if that is to be the contribution of the Party opposite, I say it is a great pity they are not able to apply their vast experience of these matters to better purpose.

Mr. Peake

May I ask the hon. Gentleman to whom he is referring? Is it the Junior Burgess for Oxford University (Sir A. Herbert)?

Mr. Smith

I refer to the right hon. Gentleman the Junior Member for the City of London, to his speech of 13th May, when he said he hoped—I have not the quotation with me, but my memory is extraordinarily good—that the Chancellor of the Exchequer and the Financial Secretary to the Treasury would—I think this was his phrase—keep a close eye on the need for funding the debt. I, instead of funding the debt, would proceed painlessly, courteously and surreptitiously to wipe it out. The thing to do with the floating debt, which now must be between £6,000 million and £7,000 million, roughly a quarter of the total National-Debt, is just simply to wipe it out

What, after all, is the criterion of financial probity and financial honesty? If an hon. Member of this House comes to me and wants to borrow a pound, I lend it to him, and I expect to get that pound back because I part with a pound. By lending him that pound I go short of a pound. But that is not what happens with the floating debt The floating debt is a pure and simple creation of credit. I quote from an article in "The Times" newspaper of 30th September, 1942: It is sometimes said that the Government 'spends new money into existence,' but before it can be spent it has to be created. It is created by the banks by the simple process of taking up Treasury Bills or bonds, and crediting the Government account for the corresponding amount. Not all borrowing creates new money, but practically all the floating debt and a certain proportion of even the funded debt consists of new money created by the act of lending.

I could never understand why a Government; desiring money, should not be permitted to create the money for itself but, instead, must borrow it at interest from bankers who create it out of nothing merely by a stroke of the pen; and I applaud the action of the Chancellor of the Exchequer last autumn—it was a very arbitrary action; it was, if you like, a dictatorial action—when he cut in half the interest on the floating debt. He reduced that interest from 1¼ or from one per cent. to five-eighths or to a half of one per cent. That arbitrary and dictatorial action was tantamount to cutting in half the total amount of the floating debt; but it was done without hurting anyone, because those who lent the amount of the debt had parted with nothing. I wish the Chancellor of the Exchequer would make a very searching probe into the whole amount of the National Debt; and I suggest that whenever it is found that a unit of debt was in fact created out of nothing, he should quite simply wipe it off; and in that way he would relieve the country of about a quarter of the total national indebtedness.

I want to refer to one other thing to which reference has been made in this Debate, and that is the Purchase Tax. I confess I am simply appalled at the staggering lack of originality of hon. and right hon. Members where this Purchase Tax is concerned. I submit that, in considering the future of this tax, regard ought to be had to the circumstances of its origin. If I remember aright, the late Sir Kingsley Wood, with much cogency and justification, justified the introduction of the Purchase Tax by pointing out that in the conditions of war —when great numbers of people were working on munitions and were getting wages for doing that work, but there was not a corresponding flow of consumer goods into the shops against their wages, so that masses of purchasing power were competing for comparatively small amounts of goods—it was right that we should have the Purchase Tax in order to discourage consumers. The right hon. Gentleman the Member for North Leeds (Mr. Peake), who opened this Debate for the Opposition, was good enough to refer to the circumstances of 1931, which were precisely the converse of those prevailing during the war. I want now to put it to the House that if it is right during a war, when the goods are not in the shops but the purchasing power is outside the shop windows, if it is right then to put on a Purchase Tax, it is only logical and equally right, in the circumstance's to which he referred earlier this afternoon, namely those of 1931, when the shops were full of consumer goods and consumers were walking about with no purchasing power, for the Chancellor of the Exchequer to have a negative purchase Tax.

It follows that under deflationary conditions or conditions where there is an abundance of consumer goods, it would be right for the Chancellor of the Exchequer to say that he will have a negative Purchase Tax, by which I mean a price discount. I should like to see the Chancellor set up, as he could do at very little cost, a really comprehensive statistical department to examine carefully, over three-monthly or six-monthly periods, the relation between production and consumption in this country. If he found, as he would find now, that production was lagging behind consumption, then let the statistical department prescribe the extent to which there ought to be a Purchase Tax on retail goods. They could take the figure 100 as normal, and make it 100 plus x. But the contrary would happen when, as will probably occur during the lifetime of this Parliament, the opposite situation developed, and we had a condition of things where production overtook the purchasing power of the people, and the purchasing power of the people became insufficient to take the goods off the market as fast as the goods flowed on to the market. The Chancellor would then be able to announce that as from the following Monday he would arrange that retail goods should be sold at a prescribed fraction of the normal price, a fraction which might be three-quarters, a half or even a quarter of the normal retail price. The retailer would have the difference reimbursed at agreed intervals by the Treasury from money created for the purpose and not borrowed from the banks.

If the Purchase Tax is right according to Sir Kingsley Wood's argument, a price discount would be right on my argument; and under conditions of abundance, instead of the price being increased by Purchase Tax to 100 plus x, it would he reduced by price discount to 100 minus x. I have never seen any alternative financial proposals put forward by any economist, whether Socialist or Capitalist, which would enable production to keep pace with consumption under the conditions of abundance. In the circumstances of 1946 there is precious little use in asking whether we are going to have direct or indirect taxation. We have come to the limit of direct taxation, for reasons which have been stated with great force from both sides of the House. As for indirect taxation, let indirect taxation be organised through continuing the Purchase Tax on the basis I have explained.

The essence of the whole thing is that power should be given to the Government to have the right to create money, and not merely get money by taxation on the one hand, or by borrowing from banks who create money out of nothing, on the other. I, therefore, submit that Budgets should not be balanced. It is perfectly well known to hon. Members on both sides of the House that in normal times there is an increase, year by year, in the amount of money circulating in the country. Most of it circulates not as bank notes or as coins, but as cheques passing from one banking account to another. I put this idea forward not in any partisan spirit. I see the hon. Member for Bath (Mr. Pitman) in his place. He has been on the board of the Bank of England and he will confirm what I say, that in normal peacetime years there was an annual increment of the order of 3 per cent. per annum in the total of bank deposits, that is, of the volume of money needed to sustain the business and industry of the country My contention is that that increment should not come into existence as a debt owing to the banks, but should be created by the Government and added to the credit side of the Budget, which would be unbalanced to that extent. I see the hon. Member for Devizes (Mr. Hollis) in his place. He represents the farmers of my native county; and in my little study at home there are a dozen works sacred to me, which are the only books in my library that have not been put aside after once being read. I return to them over and over again, and among these books is one by the hon. Member for Devizes, entitled "The Breakdown of Money." It is one of the best books I have ever read. I only hope that the hon. Member may have more success in putting his ideas over to his party, than I have so far had in putting my ideas over to my party.

7.35 P.m.

Mr. Hollis (Devizes)

It is with gratitude but with some embarrassment that I find myself called to speak at this particular moment. Many hon. Members wish to address the House, and I have given a promise that I would address it very shortly. I had no intention of speaking on that topic, but the hon. Member for South Nottingham (Mr. Smith) has brought me very flatteringly into the concluding remarks of his speech. All I can say is that none of us believe that Budgets must invariably be balanced. If there is a situation where a great quantity of consumable goods can be thrown almost at once into the market, that is the situation in which new money can be created, but that is by no means the situation of the present moment. As my right hon. Friend the Member for North Leeds (Mr. Peake) says, that was something like the situation in 1931. It has been the situation at many other times, and perhaps it will be the situation again, but it is not the situation at the moment. There are four points which I wish to raise.

Firstly, on the question of incentives, hon. Members have rightly stressed the importance of making the most of all incentives to production. There is one incentive to production which has been strangely overlooked. One of the great defects in our taxation is that the small business is greatly handicapped in contrast to a large business. It is not the fault of this Government, but the fault of the Finance Act, 1922, which lays down that any business with less than five partners has to distribute its profits as dividends which become subject to Surtax. It is almost impossible, therefore, for a small business to do what it is desirable it should do, namely, to plough its profits back into the business. I urge the Financial Secretary to give attention to this matter, and to give relief of taxation to the small businesses in order to enable this incentive to production to work more freely.

With regard to Surtax or Estate Duties, it seems to me that we should not merely consider what are the precise figures to be taxed. The real point is not so much whether a person has £1,000,000, but what sort of £1,000,000 he has. If we are to have taxation on a very high level, it is important that some distinction should be drawn between money being used for production purposes, the fortune that is the capital of a working business, and money being used simply for pleasure. I should like strongly to support the admirable maiden speech of the hon. Member for Greenwich (Mr. Reeves). He called for relief on visual aids for education. The Chancellor has a strange passion for diascopes and epidiascopes—a passion which is the less guilty because these articles of adornment are almost non-existent—but he hardens his heart against the much used film strip. I would only say that he did not make his point as strongly as he could have made it, because film strips do not pay 33⅓ per cent., but 100 per cent. We have the extraordinary paradoxical position of having no Tax on unexposed 30 millimetre films, whereas when the films have been exposed and are shown as educational films they pay no tax, but, if they are shown as film strips, they have to pay 100 per cent. tax.

I express my very great regret that relief has not been made in respect of children's allowances. We had an Amendment about that on the last Budget, and it was defeated, but the majority against it was a great deal smaller than that against any other Amendment upon which there was a Division. The Chancellor made an extremely sympathetic speech, in which he was good enough to say that he objected to nothing which had been put forward, except for the £17 million which it would cost and which could not at that time be afforded. The "Evening News," in a leading article, even went so far as to say that the Amendment touched the heart of the Chancellor. I think that my right hon. Friend the Member for West Bristol (Mr. Stanley) is the authority in this part of the House on the Chancellor's cardiac processes. I will not say therefore whether the "Evening News's" phrase was justified or not, but I would appeal to the Financial Secretary to reconsider the matter. For every other relief that is granted makes the greater the contrast that relief has not been made in children's allowances. It is true that family allowances are to be paid but the class that benefits from family allowances is quite different from the class that benefits from children's allowances.

My final point is a non-controversial one. The Financial Secretary spoke about his dismay that there was some difficulty in getting football teams to reduce their prices in response to the reduction of Entertainments Duty, and there was general approval of the threat which he made to football teams that they might not get the reduction of tax, if they could not reduce their prices. I certainly hope that football prices to the public will be reduced. But I should not like hon. Members, who may not be as intimately connected with the details of football finance as the hon Member for Huddersfield (Mr. Mallalieu) and I, too think that we are not appreciative of the difficulties of small Third Division football teams. There are a few clubs which are abnormally rich, and which can well afford to make large financial concessions, but there are a number of other clubs, which have to produce teams to play against such teams as the Arsenal, which get extremely small gates and struggle, in normal times, under great difficulties. During the war, they carried on patriotically, having suffered in some cases, like Plymouth Argyle, the destruction of their grounds and buildings, but they carried on because they thought that it was patriotic to do so. It is by no means easy for those clubs to make concessions. I hope that some scheme can be devised whereby the richer clubs can help the poorer clubs. But I would not like it to go out from this House that we are not appreciative of the difficulties of the small clubs.

7.45 p.m.

Mr. Mallalieu (Huddersfield)

I am conscious of the fact that a number of back benchers wish to speak, and, as I think it is in the interests of back benchers to stick together, I am going to make this a streamline speech and confine myself to the one rather Committee point, which the hon. Member for Devizes (Mr. Hollis) has just brought forward.

The Financial Secretary in dealing with this question of football clubs and Entertainments Duty said that he wanted the benefit of the concession to be shared by the spectators, and I very much agree with that. I would suggest to him, however, that the reduction in admission charges is not the only way in which spectators on football grounds can participate in the benefit of a reduction in the tax. I do not believe there is a general demand for a reduction in admission charges—I think 1s. 6d. for an afternoon's football is pretty cheap—but there is a demand for improvement in the facilities which a man finds once he is inside the football ground. The need for improvement of these facilities is very marked indeed.

The hon. Member for Devizes has mentioned Plymouth Argyle. Because of the blitz they have no grandstand at all. Perhaps that is not quite true; they have a double-decker 'bus. I am told that the directors drive it to the station to pick up the visiting team, and then drive it up to the touch line so that they can watch the game from the top deck. West Ham has had one of its stands shattered during the war, and we are all very conscious of the disaster that occurred on the Bolton ground the other day. I will not say that that was entirely due to lack of repairs during the war, but I think that that may have been a considerable factor. I would urge the Chancellor of the Exchequer, through the Financial Secretary, to bear in mind, in any negotiations and discussions which are now taking place with the football clubs, that there are other ways in which his intentions can be carried out other than by this cut in charges.

7.47 p.m.

Mr. Cooper-Key (Hastings)

In asking for the indulgence of the House, my first remark will be addressed to the very great concern which many of us feel at the tendency which there is today towards inflation. I feel that unless this is checked, there will be very serious results in the country. The causes of inflation are many, but I believe that the main ones are generally recognised as being the vast State expenditure, and consequently high incidence of taxation on the people, which is somewhere in the neighbourhood of 40 per cent., and the absence of any wage plan,

The consequences of the absence of a wage plan are to be seen in the auctioneering between industries of the wages of the workers. I suggest that it is time that the Chancellor of the Exchequer practised what he preached and insisted on some form of rationing or control of expenditure. A great deal of the social expenditure which is going on today was agreed by hon. Members on this side of the House, during the war, in the Coalition days, but it was rather assessed on the basis that this social expenditure would take place in the days of prosperity, similar to those in the early part of 1939, and which we thought might exist after the war. Unfortunately, that is not so. After the war, we found ourselves a poor country, turning to a foreign nation for a loan. I would suggest that we can no longer afford the full scope of public expenditure which existed previously. It seems to me, therefore, that the confidence of the country would be consider- ably strengthened if it were thought that the Chancellor had a system of priorities in his programme of expenditure. At the same time, we are now experiencing something of a financial boom domestically—a fake boom, and one, I think, which is extremely dangerous. There is more money in the pockets of the people of all classes than ever before. Even today it is heaven for the man paying 19s. 6d in the £, when he realises that if he just draws a few thousand pounds of capital, with the present inflationary movement on the Stock Exchange, his capital will be considerably increased and more than cover his day to day or month to month drawings.

Incidentally, we find in every direction of our industrial life an enormous expansion in profits. This will continue, I suggest, until the sellers' market is saturated and when the downward trend of prices starts, as it must do eventually, our export trade will diminish and I fear that the results will cause disaster. I do not believe slumps can be avoided merely by decree, and I think it is time now when the Chancellor should seriously consider reducing expediture and examining the financial situation from a more practical angle than he shows signs of doing.

In this boom that is going on there is the chance that people who are not sharing in the good fortune of others are being penalised because of the increased cost of existence and of services which were never thought of when their present incomes were fixed. I refer to those hundreds of thousands of people up and down the country who are professional men, Service men and women, officials and civil servants, who are relying for their existence on pensions, annuities and fixed incomes. I have the honour to represent a constituency where there is a very large number of these people. They have done very well for the country and have served the nation well. They are a class which we should do well to encourage, and, as an insurance to our future, we should encourage people to join their ranks. Furthermore, they have a just claim for a square deal which we should meet. Scarcely a day passes without their posts containing letters demanding further cheques or further requests for money in regard to arbitrary arrangements, increasing costs of electricity, rates, coal and other commodities, to say nothing of such tyrannical impositions as a 100 per cent. increase in their wireless licences. During the last 20 to 40 years successive Chancellors have engaged in a practice of clipping the coinage, with the result that these people find their income is only half of what it was before.

I referred a moment ago to the posts received by a certain class of my constituents. The envelopes in the last few days have, no doubt, contained the same franking message as the envelopes of the letters we receive at this House—"30 years of National Savings." I believe that the national characteristic of thrift should be encouraged, but I think that if those people to whom I have referred look back 30 years they will sometimes wonder whether they were entirely wise in obeying successive exhortations from different Chancellors to save, especially if they look around and see that, had they put their money into material articles, they would have been considerably better off today. I was interested in checking the effect of 30 years' saving, to find that if a man or woman had saved £35 a year for those 30 years in the Post Office Savings Bank, he or she today would be worth £1,500 15s. The purchasing power of that is, I think, generally accepted as considerably less than half of what it was in the early stages of their savings. I look round for other instances of what they might have bought in those days. There are many things like carpets, pictures and so on which, owing to the general inflationary trend in the last 30 years, would have enabled the buyer today to make a profit out of them. However, I take whisky, and I find, if a man had purchased,-35 worth of whisky and had not drunk into his stock, it would, at the ordinary retail price today, be worth £2,210. If it were put up for auction it would be worth £6,868, which is a considerable figure. Incidentally, if that person was socially minded, he would have paid £692 as a contribution towards the Exchequer, whereas the other, I am afraid, contributed nothing.

What sort of security or comfort is this to the man or woman who is invited to face the future? Without a guarantee of the purchasing value of his or her money in the future, a career in the service of the Crown will not prove attractive to people who must be recruited for this vast new Civil Service machine which will direct our State controlled social and industrial services. I should like to make two specific suggestions towards helping the people to whom I referred, the first in regard to annuities. I think that the Treasury should offer annuities similar to those offered by insurance companies, whereby the return of capital is made separately with a consequent reduction of tax liability. I understand that the Government have powers to offer annuities in that form, but those powers are not being implemented at the present time. I should also like to suggest in the same connection that State annuitants be given the right to convert their present annuities to that form. Secondly, that sensible percentage increases in pensions be put into force commensurate with the salary increases of the profession of the individual. When I say "sensible" I do not mean one of those index figures no one understands, and which bears no relation to the cost of cigarettes and the other amenities of life, but a sensible increase by which these people can pay the inflated rise in expenses.

I come now to another section of the community to which we should pay more regard, not out of sympathy, but because I think it would pay us. I refer to those in the higher ranges of earned income. The craft and enterprise of this nation are dependent on the superior brain power, training and ability of a fortunate section of the community. The need today behind our drive for economy is for men of the £10,000 a year ability. Industry today is looking for these men be it £10,000, £15,000 or £20,00 a year ability. There should be no limit at all. I like that idea of having no limit. Let us get rid of this tendency by the highly skilled and potentially useful men of industry now spending three days of the week looking after their vegetables instead of coming up to town and continuing a full week's work, because a large proportion of the fruits of the work they do in the City is confiscated by the State to the detriment of the nation's progress and to their vegetables. If highly paid people took further and bigger responsibilities, I think the country would progress to a greater extent. Here is an opportunity for a new class of keen scientific mergers in our industrial development. It may be thought that the suggestions I have made would add to the inflationary tendency rather than check it, but they arise from the tendency which already exists. They are the natural result of the twisted economy we have today of uncontrolled national expenditure, together with a policy of controlling all spheres of our daily life except that class which it is politically expedient to please.

We see all round us, today, instances of the falseness of our financial life. The vast subsidy towards the cost of life is most misleading. When people buy articles on which there is Purchase Tax, they do so without realising what percentage of the total cost goes in labour or tax. We find it in the case of that hop-flavoured drink known as beer. Seven-pence of every elevenpence worth of beer goes in tax, and one and eleven-pence of every two and fourpenceworth of cigarettes goes in tax. We also find it in the extraordinary method which has lately been developed of selling coaldust and stones as Derby Brights. All these things are an artificiality of financial standards.

I come now to my final suggestion. I wonder whether the time has not come to reorganise the basis of our taxation, and whether it would not be to the country's interest if a Royal Commission were formed of the industrial, labour, financial and educational interests, to consider whether some of the practices which have been so casually handed down from Chancellor to Chancellor, are the proper methods and principles of taxation today. There are the complications in our industrial life, the development of applied science, and a new relationship growing between finance and labour, which are producing entirely new problems which, I feel, should be approached from the taxation point of view in a modern, up-to-date way. I believe it would be of great service to the country if this vital need were approached as a matter of vital importance, and one which should exercise the best research brains of the country.

8.5 p.m.

Lieut.-Colonel Hamilton (Sudbury)

It is my pleasant duty to congratulate the hon. Member for Hastings (Mr. Cooper-Key) on his maiden speech. I think we all must have admired the ease and the confidence with which he went through what is always found to be something of an ordeal. He showed that he had prepared his case with care, and spoke with obvious sincerity—a quality we always appreciate very much in this House. I hope we shall all hear him again, and I am sure we shall all look forward to his further interventions in our Debates.

Members on the other side have shown great concern today at the high level of taxation in this country. I do not believe that we need worry unduly on that account. It is not as though the money which the Chancellor extracts from us is thrown into a bottomless pit; it is redistributed to our citizens, to those members of our national family who are in special need and to those who perform various useful services for us. In fact, to adapt Francis Bacon's well known saying, it is a case of "spreading the muck," and getting it well scattered so that we fertilize all the ground. That has an advantage for two reasons. First, because of the direct benefit it gives either to the recipients of the money or to those who benefit from the services; and second, because, by the very wide distribution of purchasing power the demand for all the most necessary articles of life is increased, and production in our industries is thereby encouraged.

I would like to say a few words about the Purchase Tax. Contrary opinions have been expressed from both sides of the House about this tax, some in favour of it, and some must emphatically against it. There seems to be a tendency on, the part of some Members to regard any form of indirect taxation as evil in itself. I do not think we can all agree with that view. It is true that in certain cases Purchase Tax and indirect taxes have done, or can do, harm, and for that reason I welcome the remissions which the Chancellor has made. Anything that lightens the task of the housewife is welcome. Among our workers no one works such long hours as the housewife. Her work is never through, and we can all encourage the manufacture and purchase of anything that lightens her drudgery. For that reason, I would have liked to see the Chancellor go a little further in his remissions. I should like to see electric irons, washing machines and vacuum cleaners freed from the Purchase Tax. All these things play such a large part in reducing the housewife's drudgery. I should also have liked to see a reduction of Purchase Tax on visual aids to education. As a former parttime teacher, I place tremendous importance on visual aids to education, and it is sad that so large a tax as 100 per cent. should still be applied to film projectors, film strips. wall charts and the like.

Apart from these special cases, surely the sensible way to regard taxes is that both direct and indirect taxes have their advantages and disadvantages. Direct taxes have the advantage that they cannot be evaded, and can be honestly adjusted according to a man's capacity to pay. But they have the disadvantage, which has been emphasised, that in certain cases they may lessen the incentive to effort. A wage earner who is near the borderline of taxation does not feel inclined to do a lot of extra work if he is not going to get much extra remuneration by doing so. Indirect taxes do not have that disadvantage; on the contrary, they may act in the reverse way; that is to say, if a man badly wants cigarettes and the price goes up, he may work a bit harder so that he can still buy as many cigarettes as he did before. Indirect taxes also have the advantage that they do not cause the same resentment as direct taxation. I do not mean that people like paying a great deal more for things than it really costs to produce those things. Of course, they do not like it, but they do not mind it nearly as much as they mind having their hard-earned wages dragged away from them before they have had a chance of spending them. I think that must be accepted as true. How many hon. Members, when they pay heavy postage bills, ever give a thought to the fact that they are paying indirect taxation pretty heavily at the same time? It is rather invisible.

Indirect taxes do have their disadvantages, as has been emphasised. It is very easy for them to bear too heavily on the people who can least afford them; that is to say, on people on the lowest income levels. Statistics that were worked out before the war showed pretty conclusively that, taking the combined effect of direct and indirect taxation, people on the lowest income levels were mulcted to a higher degree, in proportion to their incomes, than people who were a bit higher up in the scale. That is something which we certainly ought not to tolerate. I do not think it is in any way inevitable, and I think it can be overcome by following two principles. One of them is the permanent Socialist principle of keeping up and steadily raising the lowest income levels, whether they are attained in the form of old age pensions, unemployment benefit, or sickness benefit, or in the form of wages. We are always out to reduce that great gap which still exists between the highest and lowest incomes in the country. The second principle is that the Chancellor should be always working out what is the combined effect of direct and indirect taxation at any time, so that he can see that the poorest sections of the population are not having an undue burden placed upon them. I think that what we want is a judicious mixture of direct and indirect taxation, and Purchase Tax will certainly have its part to play. But I think that indirect taxes should be more scientifically worked out than they have been hitherto. They have been imposed in a very haphazard manner. It is of interest to notice that in the Soviet Union they depend almost entirely on indirect taxation; that is to say, on the profits which the State makes on all its enterprises, which, after all, is simply a form of Purchase Tax for the community to pay.

I should like to say a few words about Death Duties. I am very glad the Chancellor has stepped them up, and I should like to see them stepped up a good deal more steeply. The Chancellor gave a good reason for stepping them up when he spoke of the demoralising effect that a legacy or an intending legacy might have on the recipient, or the prospective recipient. I would like to add the principle of common justice. After all, if a man comes into a large sum of money, what does it really mean? What does getting hold of £1,000,000 really mean? It means simply that that man can call on a very large number of his fellow citizens to work for his exclusive benefit. If we take £250 a year as a normal sort of income, a man who possesses £1,000,000 can call on 100 of his fellow citizens to work for his exclusive benefit for 40 years, or, to put it in another way, a battalion of £1,000 men to work entirely for him for four years. I quite agree that if a man is fortunate enough to have a father who by diligence, by shrewdness, by luck, or by craft, has been able to amass a certain amount of money, we might agree that he should get some benefit from it. Probably we would all give him the benefit of the doubt and assume that it was collected mainly as a result of services to the community. But surely no one can claim that he could ever deserve such benefits as those which I have described.

I would like to turn to the question of balancing the Budget. The right hon. Member for Warwick and Leamington (Mr. Eden) spoke in the Budget Debate of, his anxiety that the Chancellor should put by, something as a reserve against the lean years which will inevitably come; but when he spoke of lean years which would inevitably come, he forgot something. He forgot that we now have, for the first time in history, a Socialist Government in power. It was a very natural mistake for him to make, because for 150 years boom and slump have followed each other with clockwork regularity. That trade cycle, as it is called, is in no way a law of nature. After all, we are continually improving our command over nature. Our progress in the standard of living should always be upward. The only reason for those extraordinary alternations has been the haphazard working of our capitalist system. I would remind hon. Members that even at its best, even in times of boom—to take the interwar period—we never had fewer than 1,000,000 good men unemployed.

Mr. Brendan Bracken (Bournemouth)

When the hon. and gallant Gentleman is reminding us of the capitalist system before the war, perhaps he will address his mind to the fact that Socialist Governments have existed in countries like Australia and New Zealand, where there have been many trade depressions and a great deal of unemployment?

Lieut.-Colonel Hamilton

I am afraid I have not got statistics to throw back at the right hon. Member for Bournemouth (Mr. Bracken), but I still maintain that the trade cycle is not a law of nature, that it ought to be quite the other way round, and that under a Socialist Government it will be the other way round. We shall maintain a continuously increasing production of goods simply by planned economy, and a continually increasing standard of living. Indeed, in the future, the Chancellor's trouble will not be, as it is at the present moment, trying to mop up the surplus money which there is about in order to prevent inflation; his job will be to see that he is always pumping enough money into circulation, into our pockets, to buy the very large and increasing quantity of goods and services that will be produced.

8.20 p.m.

Mr. Molson (The High Peak)

The hon. and gallant Member for Sudbury (Lieut.-Colonel Hamilton) has indulged in a good deal of eloquence. I do not think he has given full attention to a much more thoughtful speech made by a colleague of his sitting behind him, the hon. Member for East Middlesbrough (Mr. A. Edwards). In a very remarkable speech that hon. Member pointed out that for the first time the Socialist Party is not only in office but in power and that promises or expectations for the future will be of interest to the country at the next Election only if the performance of this Government with their Socialist majority has justified the promises which they made at the last General Election.

I wish to address two special questions to the Chancellor of the Exchequer. Since neither he nor the Financial Secretary to the Treasury is on the Treasury Bench at the present time, perhaps I may rely upon the Solicitor-General, whom I see there diligently taking notes, to pass my questions on to the Chancellor when he comes back. The hon. and gallant Member who last spoke promised great things for the future because the Government are a Government of planners. I also believe in planning, but When I watch the different Socialist Ministers I am convinced that they are putting no plan into operation. My questions to the Chancellor of the Exchequer relate to his financial plans for the future. I very well remember his Budget speech last October, when he said that the Budget he was then introducing was the first of a series and that, unlike previous Budgets in the unregenerate days of capitalist Chancellors of the Exchequer, there was now to be a long and carefully prepared plan. Will the right hon. Gentleman take the House and the country into his confidence in two respects which are of great importance. One is with regard to public expenditure in the next four or five Budgets, which must necessarily result from the legislation already on the Statute Book, and now being discussed. Secondly, I want to ask about how capital will be provided for the reconstruction of industry.

One of the great changes made in the last few years is that the annual Budget has not in itself been the most important financial incident of the year. The most important financial incident has been the new White Papers that are presented to Parliament at the same time as the Budget, presenting in great detail the national income and expenditure of the United Kingdom, and dividing up the sources of income and expenditure. In particular, they deal with the amount of public and private expenditure upon consumption goods, and the amount of the national savings which go into investment. I think it is common ground among us that the whole of that expenditure cannot add up to more than 100 per cent. of the national income, and that if that should happen, scarcity and inflation result. Probably we do not find ourselves very far from that state of affairs at the present time. We have just seen an increase in the price of utility garments. I welcome the step that has been taken by the Board of Trade because it will bring the matter on to a sounder financial basis. I would ask the Government whether they can give us the plan of the series of Budgets over the next five or six years which the Chancellor told us was already being conceived in his mind last October, and tell us what he expects the national expenditure will be.

Two years ago a colleague of mine on the Tory Reform Committee, and I, made an estimate of what the postwar Budgets were likely to be. We took the 1938 expenditure, a little over £1,000 million, and added to it the best estimate we could make of the additional expenditure that would result from war pensions, increased cost of the fighting Services, the Beveridge Report, the National Health scheme and education. We added them up and they came to £1,971 million. When I compare that estimate with the estimate that has been given to us——

Mr. Stokes (Ipswich)

And half a year's war.

Mr. Molson

The hon. Gentleman, who is so full of bright, new and original financial ideas, is now falling into the popular fallacy of supposing that it is possible in peace to go on spending at the rate that we were spending in war time. It is obvious that the country is not prepared to go on indefinitely paying taxes and saving at the same rate, and undergoing all the stringencies of food and clothing rationing, which is the only way by which it is possible to bear that expenditure.c

Mr. John Lewis (Bolton)

Would the hon. Member say from where he proposes to get his food?

Mr. Molson

I do not quite follow the relevance of that question.

Mr. Stokes

Does the hon. Member suppose, if the war had gone on for another six years, that things would have collapsed owing to the absence of money?

Mr. Molson

All I can say is that if Lend-Lease had gone on indefinitely we should not be in the position we are in now. That is the answer also to the hon. Member for Bolton (Mr. J. Lewis). Now that Lend-Lease has ended, if we wish to import food from overseas we have to pay for it by exports.

Perhaps I may return to the line of argument I was pursuing before I was interrupted. If we are to have—I would welcome the idea—a planned series of Budgets, it is important that we should know what the expenditure will be. The estimate that we made showed that the social services which we had undertaken at that time, with the support of hon. Members on this side of the House, would mean a total expenditure in the neighbourhood of £2,000 million a year. From estimates which have been presented to the House, the total cost is now greater than we estimated it to be. For example, we have increases on the National Health Service and the National Insurance Scheme. The expenditure of £2,000 million works out at about one-third of what we estimated the post-war national income would be. The country is bearing a very heavy burden of taxation. According to the last White Paper presented to the House that burden amounted in 1945 to 34 per cent. of the total national income. Obviously it is important for us and for the country not to deal with large Measures of social reform in isolation. Each individual Minister presents his legislation to the House, and the House considers each particular Measure upon its merits. Once a year, the Chancellor of the Exchequer comes to the House, and then it is his responsibility to tell us how the finance for all those Measures is to be found.

We have not been told by the Chancellor of the Exchequer his estimate of the total expenditure which we shall have on all the social services and on the Defence Services and so on for the next four or five years. We have had, it is true in a White Paper a Report of the Government Actuary which tells us what will be the burden upon the Exchequer of the National Insurance Bill, the cost of which goes up from £175 million in 1948, to £452 million in 1978, but we have not so far been allowed to have from the Treasury a conspectus of what the anticipated total expenditure on all services will be over the next four or five years. If, therefore, there is any substance at all in what the Chancellor of the Exchequer said in his October speech to the effect that his looking four or five years ahead, I think he should take the House into his confidence and tell us what is his expectation of the national expenditure upon the various Government Departments. That is the first point.

The next point, which is equally important, is what is the calculation of the Government about the savings of the country which will be invested in the various social services and the various industries. Here I am moving from expenditure on consumption goods to expenditure upon capital goods. What is the estimate of the Government as to what will be needed, what is the expectation of what the savings of the country will be, and is there any system of priorities? At any particular quaffing it is impossible to get more than a pint of beer out of a pint pot, and if one looks at what the anticipated expenditure is going to be one finds it bears no relationship at all to the volume of savings before the war. The net investment in the year 1938—here I am quoting from the "Economist," from a series of articles which they published in 1944 and have reprinted in pamphlet form under the title "A Policy for Wealth"—was only £250 million a year, or 3 per cent. of the national income. Against that £250 million, £255 million was spent on building and only £20 million was spent on plant and machinery. This made a total of £275 million, and we drew upon our overseas investments in order to effect a balance. We drew upon our existing possessions to the extent of £100 million.

That was in 1938. Now, nearly all our overseas investments have very nearly gone. Under the Government's housing programme over the next 12 years they must spend on an average £330 million a year. That is 4,000,000 houses, I take it at £1,000 per house—the figure the Minister approves at the present time is £1,200, but I am hoping there will be a fall in price—and that is to be done over 12 years which means a capital expenditure amounting to £330 million annually. If we take steel, under the steel industry's own proposals they are planning to spend £22,500,000 annually over seven and a-half years. That is already £2,500,000 more than the total amount that was spent on plant and machinery by the whole of industry before the war. The week before last the Minister of Transport indicated a programme for the roads of the country, and in answer to a question from one of my hon. Friends he said that the expenditure in the first year—he admitted this would increase later—would amount to £80 million. Thus, in all, £432,500,000 are to be spent upon housing, steel, and roads alone in comparison with a total saving before the war of £250 million.

Mrs. Jean Mann (Coatbridge)

Is not the sum of £400 million just what we are getting as the yield from the tobacco tax?

Mr. Molson

The hon. Lady is there referring to income. What I am talking about here is the national savings of the country to be spent upon the reconditioning of industries and upon capital goods like roads and railways, which, on common ground to both sides of the House, is urgently desirable. Take the coal industry. The cost of modernising the coal industry has been estimated as £250 million. The steel industry is——

Mr. Stokes

The mineowners have neglected it.

Mr. Molson

The hon. Gentleman is not really following my argument. I am not engaged in a political controversy about private or public ownership. We are agreed at the moment that a certain amount of capital expenditure is required. I have taken some of these figures from Government estimates, and the hon. Gentleman will agree that capital goods have to be provided in some way or another; and I am asking where the money is coming from, and, because this is a Gov- ernment of planners, they obviously know how it is going to be provided. It is a matter of the men and materials being made available for capital goods.

Mr. David Jones (The Hartlepools)

Men and materials, not money?

Mr. Molson

The hon. Gentleman is not following my line of reasoning. Either men and materials are going to be made available for consumption goods or capital goods, and in so far as they are made available for capital goods, they are not available for consumption goods. The total income of the country must be divided between consumption goods and capital goods. I am asking how the Government are going to make this amount available for expenditure on capital goods.

Mr. Braddock (Mitcham)

Let the men work.

Mr. Molson

I should be very glad indeed to hear the Labour Party, not only Cabinet Ministers but also the rank and file, giving a great lead to the country by asking for an increase in production. The electrical industry is proposing to spend £220 million and the gas industry £50 million, while in the artificial silk industry, Courtaulds alone are proposing to spend £40 million. In the case of these few individual industries alone, there is sketched out a programme for their modernisation at a cost of £728 million. I am saying nothing at all about the shipbuilding industry or the cotton industry, or anything about what will be required for schools, hospitals and so on. What I am asking is how do the Government propose that the savings will be made available for expenditure upon capital goods during the next few years in order that industries may be modernised, and the social services developed. If there is, as has been claimed in so many speeches opposite, a plan for the conduct of the finances of this country during the next five years, I hope that either tonight or on some subsequent occasion the Chancellor of the Exchequer will indicate to us his financial plan for the coming years.

8.40 p.m.

Mr. Stokes (Ipswich)

I regret it if I threw the hon. Gentleman the Member for The High Peak (Mr. Molson) out of his stride. I did not mean to do anything of the kind, but I found his argument very elementary. Surely the whole problem is this, and he really admitted it once I had interrupted him: the whole problem is how you are to equate the available manpower and intelligence to the raw materials. It has nothing whatever to do with money. It is going right back into the old, dim, distant days to think that you have to balance things up in the way the hon. Gentleman was implying in the earlier part of his speech. What we have to do now is to realise that during the war we found a way of spending something in the order of £4,000 million or £5,000 million a year; I agree with the aid of raw materials supplied through Lend-Lease, but we made our raw materials, the natural resources of this country, available in a way they had never been made available before. We organised our manpower. I agree that we treated our manpower almost as slaves in order to win the war, but we produced a volume of goods for destructive purposes such as had never been produced out of this country before.

All we say on this side of the House is that if you can, as we did, produce guns and tanks—even bad tanks as I have said so often before—in quantities which had never been dreamed of when the war started, every kind of paraphernalia that was used in the process of destruction, and we had the manpower and raw materials to do it, then surely when peace breaks out, as thank goodness it has broken out, we can carry on, without the slavery aspect of it, setting men free to work where they will, at the best price they can get, wherever they wish to go, and equally keep those vast natural resources free in such a way that they can be made available for the people of the country so that their effort can be applied in producing all the wonderful things that can be produced in peace and plenty for the whole population.

I got up really to talk about one subject only—my regret that my right hon. Friend the Chancellor of the Exchequer has not seen fit in this Finance Bill to deal with the whole question of land monopoly. I listened a short time ago to another subject on which he has been more advanced. The hon. Gentleman the Member for South Nottingham (Mr. N. Smith) spoke about the nonsense of being in the hands of the money creators, the bankers, who create money out of nothing. At least we have taken the first step, we have nationalised the Bank of England and we have got hold of the credit of the nation so that money can be created for the use of the people in such quantities as the Government of the day may require for the purpose of making the wheels of industry revolve. On that subject, in passing—I would like to rub this into the right hon. Gentleman the Member for Bournemouth (Mr. Bracken)—it is as well to remember that under this ridiculous debt system we are now paying in the service of the debt annually a sum of approximately £650 million a year, which is equivalent to the whole of the National Debt as it was before the 1914–1918 war.

Surely if it proves anything—without going through all the intermediate stages which one would have to do with Form 1AA economists—it proves that the whole of this money business is absolute humbug. That is what is happening today, and the sooner the people realise that of their Income Tax today, wherever it comes from, whether high or low grade, about 5s. in the £ is service for the National Debt, the better it will be. Five shillings of the Income Tax paid by everybody is merely paying interest on loans, a very large majority of which were given by people who had nothing to lend and who merely created money out of nothing. That is what is happening, and the sooner that humbug is exploded the better.

I come to the issue which I wished to raise, this fundamental one that all Chancellors seem to hedge over since the late Lord Snowden once had the audacity to get a Measure on the Statute Book some years ago which was disreputably removed by the party opposite about two years later on false grounds of economy. That is the Measure which he introduced in 1930, the comprehensive tax on land values. I do not need to read a lecture to hon. Members on this side of the House on what the taxation of land values is, or how it works. But it is not a bad idea to put on record once again what the principles are and why it is essential that something of the kind should be done, and done now.

Mr. A. Edwards

Give some detail; a lot of them have not heard about it.

Mr. Stokes

That may be so. The only way to the freedom of mankind is to free the natural resources in the way God meant, so that they are made available to all. The land and natural resources were made for everybody, not to be limited, restricted, and used in the interests of the few. I regret very much that there is no reference in this Finance Bill to any valuation or any intention on the part of the Chancellor to introduce such a Measure. I know my hon. and learned Friend the Solicitor-General will take note of what I am saying and I hope that when the Chancellor winds up he will give the great number of hon. Members in this party who feel strongly on this issue some promise of better things to come.

Land monopoly really stands in the way of everything. I do not need to go into a huge series of details, but clearly the Chancellor is in a jam at present owing to the antiquated monetary system, and he is in need of funds. Quite rightly, our party fought the General Election last year on a tremendous plan of social improvement for everybody, and those improvements have got to be provided. The funds wherewith to provide them have to be found somewhere. We often hear from hon. Members on the other side of the House how terribly short of cash everyone is going to be.

Mr. Bracken

The hon. Member must not accuse hon. Members on this side of the House of saying that we are going to be short of cash in the future. In our view, if the Government continue their prolific policies in the future, there will be too much cash.

Mr. Stokes

The right hon. Member has misunderstood me. I was not thinking of his bogus idea, which seems to ferment in the brains of bankers and pseudo bankers, that the amount of money in circulation is a thing of importance. If goods and prices are controlled, that is a thing which does not matter much. We have to get the effort distributed in the right way and supply the material funds for the social services. What better way than to go to the one source which has never yet been properly tapped? Here is the Chancellor. As I was saying when the Chancellor came in, with all the tremendous schemes he has rightly got before him for the improvement and wellbeing of the nation as a whole, he has to get the necessary funds to finance them. Where better could he turn than to land values? Here is a value created by the nation itself, not by the landlords who own the land. Ownership of land never gave land a pennyworth of value; only the efforts of the people have given it any value. My right hon. Friend knows this subject, naturally, not so well as I do, but very nearly as well, and I hope that before this Parliament ends, he will know it even better than I do. He knows that on a conservative estimate, the capital value of land is reckoned without the value of the improvements to be not less than £10,000 million and if he were to levy a tax of 5 per cent. he would get £500 million a year out of it.

There is £500 million a year sitting on the doorstep and waiting to be picked up by the Chancellor of the Exchequer and he does not do anything about it. It surprises me. If I could get alongside him as Financial Secretary to the Treasury—[Interruption]—I am now trying to woo my right hon. Friend perhaps to reply to me—I would give him a bad time until he took note, and then perhaps something would be done. I commend to the Chancellor's notice that if he cannot at once do what I think is the right thing, and insist upon a comprehensive valuation of land all over the country, so that in the next Budget, or the Budget after the next, he can come along and take the necessary measures to recover for the people what is their right—the value which they have created—surely he might do what the other side of the House has never been prepared to do, and let local authorities do a little of this for themselves. There are quite a number of local authorities who would gladly make their own local valuation in the hope that it would be the intention of the Chancellor that they would be allowed to raise a fair proportion of their rates on land values. It so happens that "The Times" of Monday has come to my aid. There has been a gold rush in South Africa. Here is a good example of what happens as a result of natural resources being discovered and of population desiring to go to a particular place. It is worth reading to the House: Main attention at Odendaalsrust "——

Mr. Dalton

Where is that?

Mr. Stokes

In South Africa. To continue my quotation: —"is shifting gradually away from share speculation and is concentrated on the buying of property. Plots and stands have risen spectacularly in price. The record price of £12,000 has been paid for a small building plot in the centre of Odendaalsrust, which fourteen days earlier changed hands at £2,700. An offer of £7,000 has been rejected for a building plot formerly worth less than £100. One sold ten years ago for £52 is priced £5,000 today. And so it goes on. This is because they are expecting population to flow there. It has nothing to do with the actual fact that there is gold underneath. I have often urged that the gold should be left in the ground instead of it being mined and shipped over by the Americans to another hole in Fort Knox. This is a typical example of what happens whenever we try to make progress.

I must digress for a moment to talk about the Purchase Tax. It has its implication. I am sorry that the Chancellor has been led away on this question. Reducing it is not good enough. It ought to be abolished. I was almost equally sorry to hear the hon. and learned Member for Montgomery (Mr. C. Davies), who I thought was a radical Liberal, if one can put the two terms alongside one another, also advocating the Purchase Tax as a good idea. He seemed to indicate that he had changed his mind about Income Tax, which I think should be abolished. It can be done if we really set about it in the right way.

The Purchase Tax reminds me of a story of a famous Sultan who required funds wherewith to pay his armies who were engaged in fighting wars in far distant lands. He imposed a tax on fig trees. The result of imposing a tax on fig trees was that the farmers cut down all their fig trees except those which were sufficient to feed themselves. [An HON MEMBERS: "What happened to the leaves?"] I do not know whether the Official Reporter caught that one. It really is irrelevant to my argument because this was a male army. The point I am trying to make is that the result of placing a tax on fig trees was to stop the production of figs, with the result that the peoples of the cities starved, the armies did not get enough to feed on and the whole country got into a mess. But this Sultan had a very wise Grand Vizier, or Financial Secretary to the Treasury, who came to him and said, "Look here. You have got this wrong. What you ought to do is not to place a tax on fig trees but to place a tax on the land in proportion to the capacity of the land to produce figs." The Sultan adopted this plan and, in consequence, the farmers were forced economically to produce figs, everybody in the towns had enough figs to eat, the armies grew fit and virile and they went forth and conquered their enemies. Whilst not wishing the Chancellor to carry it to the extent of sending large Forces overseas, I would commend the parable to his notice.

To turn to matters nearer home, the Chancellor knows well enough—he understands this matter—that we are obstructed at every turn. I want to quote one or two examples of obstruction and the extent of it. I will take housing as an example. In war we did not get all the figures we would like to get and those I am going to quote are a little out of date, I am afraid. It is fantastic when one realises that in the five years ending 31st March, 1938, £8 million was spent by local authorities on acquiring land for housing estates amounting only to £35,000 acres. They had to pay what is the equivalent of a sum of £200 an acre for land which had never contributed a penny to the rates. It was all agricultural land and, therefore, derated. All the owners had to do was to sit back comfortably and wait until the land was wanted for housing. Then they opened their mouths and the plum dropped in. Surely, that is wrong. Then there is the notorious case of the London County Council and land in the areas around Roehampton and Becontree. I have forgotten the exact acreage of the land. The rateable value was only £7,000 but, believe it or not, when that land was acquired by the London County Council for development they had to pay £835,000 for it—120 times its rateable value. We talk about 20 years purchase and so on in capitalistic circles, but we accept this and allow these ridiculous prices to be paid for land, thus pouring money into the pockets of persons who never gave it one pennyworth of value.

Then we have this great Education Act and we are determined to see it through. Land will be needed for schools and for all the ancillary things which go with big education development. Here is an example of what happened in this instance. One hundred and five sites involving 290 acres, all derated because it was agricultural land, cost £218,000.

The simple arithmetic of that is that £700 per acre, land which never had contributed a penny to the rates, was poured away into the pockets of the landowners. I do not illustrate this for the benefit of this side of the House, but for the benefit of the lean benches opposite. [An HON. MEMBER: "Why lean benches?"] I assure the hon. Member that there was nothing personal in my remark. Look at the absurdity of the position. A man keeps his house in good order or improves it in any way, and what happens under our present rating system? The result of extending it and keeping it in repair is that he pays more rates and is penalised for it. If householder B, or property owner B, allows his property to fall into disrepair, what happens? He gets a gratuity from the local authority in the form of a reduction in rates and pays less. If a visitor came from Mars, he would think this whole planet was crazy. Here you get a man who owns a valuable property and does nothing at all with it, and it may be worth millions, but he is not penalised at all, but gets off scot free. Truly, this is a world gone mad.

In London, in 1914, there were 8,000 idle acres of land which paid in land taxes and rates only £2,594, an equivalent of 6s. 5d. per acre. There were 66,714 acres in London which paid £16 million because it was used, an equivalent of £237 per acre. I am sure the Chancellor will recognise that it is more than probable that the 8,000 idle acres were as valuable per acre, in fact, as the 66,000, and that all the landlords had to do was to sit back and wait, hoping that someone, sooner or later, would come along, buy them out, and that they would get off with the swag. I ask the Chancellor if he cannot have a comprehensive valuation at once, in order to assist us in all these great development schemes, housing and the like, that we have on hand, and if he will at least issue instructions to the local authorities telling them to get on with it themselves. There is a simple remedy Make the landlords value it themselves. We can make the landlords state the value of their possessions and then make them pay tax on the values they fix or buy it at that price. They will not fix it too low for fear of purchase nor too high for fear of taxation.

I wish to recapitulate, that the whole point about taxation is that it should not hinder, but help. The objection which I have to any kind of tax on industry is that it hinders production. Tax buildings and improvements and you immediately hinder all development of building and improvement. Tax commerce, and you at once hinder it. The Purchase Tax is obviously hindering people from buying, and that was one of the reasons why it was put on, but you can tax land until the cows come home and it will not decrease in quantity or decrease in value, but will increase in productivity if you insist on taxing it according to its value, whether used or not, as that will force the owners to make use of it in the interests of the community. I hope the Chancellor will realise that other forms of taxation, wrong and outworn as they are, were bequeathed over to us, that he will realise that all ordinary accepted forms of taxation supported by the party on the other side are no use at all, and that we need to stimulate the wealth of the country by bringing in a thoroughgoing system of the taxation of site values.

9.5 p.m.

Mr. Osborne (Louth)

I do not propose to try and contend with the hon. Member for Ipswich (Mr. Stokes) in his own peculiar particular style, but I am delighted to see the hon. Member for East Middlesbrough (Mr. A. Edwards) back on the benches opposite because I think he talked some of the soundest sense we have heard from the Government side since Parliament assembled. He talked sound commonsense about Civil Service control of industry. I hope he will get a very good Press on the front page of the "Daily Herald" tomorrow morning. At the beginning of the Debate, the Financial Secretary said that the expenditure for the year would be cut by £500 million, and he took great credit for that. That is a good beginning, but it is not half enough because we are still spending the colossal sum of £3,800 million per year, which is far too much. During the war we, quite rightly, lost all sense of money values because, as the hon. Member for Ipswich will agree, we were fighting for our liberty and money did not matter.

Mr. Stokes

We are still fighting for liberty.

Mr. Osborne

We are not fighting for quite the same kind of liberty. I feel that there is now a danger of a financial crisis such as will make 1931 look quite simple. I am sure that hon. Members on both sides of the House will agree that taxation is too high and that it should be brought down, largely because if either the worker or the employer is taxed too much, there will not be sufficient incentive in industry, and people will not put their best foot forward. Therefore, I make a special plea that taxation should come down. My complaint is that, although there has been a cut of £500 million in the Budget Estimates, more ought to be done. I would draw attention to the item of £335 million which the Chancellor proposes to set on one side for food subsidies. If the House will permit me, I will quote what the Chancellor said on 9th April: I would like at this stage to say a word on the cost of living subsidies. With regard to these, we are spending a formidable total. We are providing, this year, no less than £335 million for cost-of-living subsidies.… We should seek to hold the index where it then was, and not allow it to vary by more than an insignificant amount. I am sure that has been a wise decision. I agree it has, but I think the method by which the Chancellor is seeking to uphold that decision is wrong. Instead of putting the subsidies forward, he ought to take his courage in both hands and say to the country, "You have got to spend your money much more wisely." I plead with him to take away these subsidies altogether. In the same speech he said: The Committee must appreciate that this policy of price stability is costing a lot of money. Later, he said: and it may rise still higher. Finally, he said: But we cannot go on doing this indefinitely, regardless of cost. We shall have to reconsider this matter next year. We might even have to do so earlier.…"—[OFFICIAL REPORT, Tuesday, 9th April, 1946: Vol. 421, cc. 1813, 1814, 1815.] Does the Chancellor mean that he may take off those food subsidies next year when unemployment may be worse than it is today, when the extra war wages will have gone, and when people are less able and willing to pay the higher prices for food that they will have to pay? If so, it is a very dangerous thing to do. I want him to take courage in both hands and abolish those food subsidies now, because it would be a real economy and it would save the agricultural interests which, in part, I have the honour to represent, from the one great fear they have—a repetition of 1921. It is worth waiting all day to catch the Speaker's eye in order to have the Chancellor here to talk to. I want to ask the Chancellor a question. Why should food be sold cheaper than its real cost? Why should the industrial workers be made to live in a fool's paradise so far as the cost of their food is concerned?

Mr. Shurmer (Birmingham, Spark-brook)

They did it for years.

Mr. Osborne

A loaf which is sold for 4½d. costs 6½d. to make, and an egg, when we can get one, which is sold for 2d., costs 3d. to produce. No representative of the industrial workers would say that the people have not the money to spend. They have. I ask the Chancellor to remember that the industrial worker is willing to pay 2s. 4d. for a packet of cigarettes which is worth only 8d. Why should he not pay a proper price for his food? If he is lucky enough to get a bottle of whisky, he is prepared to pay 25s. for it, and it is worth only 7s.; he will even stand in a queue for it. People are prepared to pay 1s. a pint for beer which, I am told, is little better than coloured water. We are not putting first things first. Why is it that food—the one thing that really matters—is the one thing for which the Chancellor tells the people they shall not pay a proper price?

Mr. James Callaghan (Cardiff, South)

Why not?

Mr. Osborne

Does the hon. Gentleman want to perpetuate a folly like that?

Mr. Callaghan

Would the hon. Gentleman tell me why it is a folly?

Mr. Osborne

It is folly to tell people that they can live in a fools' paradise and that they can have food which costs 6½d. for 4½d. We cannot go on doing that; let the hon. Gentleman ask the Chancellor. Many times hon. Members opposite have told us—especially those of us who are new in this House—about their wonderful pamphlet, "Let Us Face the Future." I say, let us face the facts and look at things as they are today. I plead that the £325 million shall be taken off at once. It will require a lot of moral courage, and I doubt if hon. Members opposite have that courage. As I see it, the objection is this: there will be the old political cry, "Hands off the people's food"—the old Liberal cry. Incidentally, I am sorry they are not here now. My reply is this: if people paid the proper price for their food they would regard it more wisely and they would waste less of it. Things which we get too easily and too cheaply are not valued, and that applies also to food. Secondly, I repeat my statement that it is morally wrong to tell people that they can have something for nothing. Life does not permit that. It is an extraordinary thing that a Socialist Government, backed by some of the best brains from the learned profession—at least temporarily—are prepared to subsidise the food that the rich people eat in the West End hotels. It is ridiculous. It is preposterous.

Mr. Chater (Bethnal Green, North-East)

It is.

Mr. Osborne

The other argument that can be advanced against me is that if we tell the people of this country they will have to pay higher and proper prices for their food there would necessarily be a demand for increased wages. I just do not believe it. Let me give this example. Hon. Members opposite will know that the average family in this country smoke at least one packet of cigarettes per day, for which they pay 2s. 4d. If they were to smoke only 16, forgoing the extra four, I think the hon. Members opposite who belong to the medical profession would agree, if they were honest—[Interruption]—I said if they were honest, and I mean it.

Mr. Pritt (Hammersmith, North)

On a point of Order. Is the hon. Member entitled to attribute dishonesty to every member of the medical profession sitting on this side of the House?

Mr. Deputy-Speaker (Mr. Hubert Beaumont)

I think the hon. Member was only indulging in a flight of imagination.

Mr. Osborne

If they told us what they know to be the truth I think they would say that the country as a whole would be better in health if each person smoked four cigarettes less per day. The average family also eats one loaf of bread per day. If the cost of those four cigarettes was put on to the price of a loaf the agri- cultural workers could be paid a decent wage, and this subsidy could be taken away. If we were to say to the industrial workers of this country, "You must pay a higher price for the food you eat," it would not necessarily follow that there would be this spiral of increased wages. Another objection that may be put against me is that it would damage our export trade. I do not believe that is true either. We have not reached anything like loo per cent. efficiency in our industrial organisation. Wages are not the only factor in our cost of production. Therefore, it is wrong to say that if the people of this country were made to pay a proper price for their food the industrial position would thereby be injured. The farmers and the farmworkers remember 1921 and are frightened. I nearly said they were frightened stiff of the Chancellor, whom they regard as their greatest enemy. [HON. MEMBERS: "Oh."] Because of his office. If hon. Members opposite will be good enough to listen I think they will agree. The farmers and farm workers remember what happened in the early 1920's and they are frightened of history repeating itself.

Mr. Jack Jones (Bolton)

Before the early 1920's.

Mr. Osborne

Hon. Members opposite know the difference.

Mr. Jones

We are under entirely new management.

Mr. Osborne

I would remind the Chancellor that in the agricultural constituencies men are not returning to work on the land. The Women's Land Army is losing its members, and too few are willing to get in the harvest. Agricultural Members have been asked to support the appeal of the Women's Land Army for more recruits, and their slogan is "Food Comes First." If food comes first, the country should pay for it, and pay a proper price. May I give this other example. Some weeks ago there was a strike at the Ford works at Dagenham, and the demand was for equal pay for men and women, for skilled workers 4s. od. an hour and for unskilled 3s. 1d. an hour. That works out at £9 12S. for a skilled man or woman and 6s. for an unskilled one. I know it was a demand which was not granted, but how can we make appeals to people to come and work on the land for 52s. 0d. a week for women and 70s. 0d. for men when the industrial workers expect to get all that? How can we pay decent wages on the land unless we sell the fruits of the men's labour for a good price? [An HON. MEMBER: "Cut out the middlemen"] May I conclude with this appeal to the Chancellor, and in doing so give this example of unwise spending. The advertisements say, "Guinness is good for you." [HON. MEMBERS: "Oh."] I thought hon. Members opposite would know the value of that slogan. For half a pint you pay 1s. 1d. Milk is sold at 2¼d. per half pint. Is there any person in this mad world who will say that Guinness is worth six times as much as milk?

Mr. Callaghan

Bring it down.

Mr. Osborne

I ask the Chancellor to disregard some of his own back benchers and do what he knows is the right thing, and say to the industrial workers, "One day I shall have to make you pay a proper price for your food; you might as well start now while trade is good and you have plenty of wages." That is what I want him to do. I would like him to take upon himself the mantle of Isaiah and say to his people: Wherefore do ye spend money for that which is not bread? and your labour for that which satisfieth not? Hearken diligently unto me and eat ye that which is good.

I appeal to him to go to our people and say, "Do not waste your money, spend it properly on good things, cut out the rubbish." Then he would be able to do away with these £325 million subsidies, and enable us to pay the agricultural workmen a decent wage.

9.23 p.m.

Mr. M. Philips Price (Forest of Dean)

The hon. Member for Louth (Mr. Osborne) has given us a racy speech and quite a lot of what I think is very unsound advice. He asks, amongst other things, why the Chancellor should not take away these food subsidies altogether now. I cannot imagine a Chancellor of the Exchequer drawn from any Front Bench, still less from this side, contemplating so unwise and rash a step. The hon. Member knows quite well that food subsidies have been a recognised method of assisting the lower income groups. We have for a long time subsidised milk, meals for children and so on, and this is only an extension of that same kind of social service. I do not say that food subsidies can rise to an unlimited figure, and while I do not wish to interpret what the Chancellor meant in the speech that was quoted by the hon Member, I think he probably meant it to be a warning that there was a limit to these subsidies.

But to suggest that the whole thing should be swept away is irresponsible. Besides, the hon. Gentleman purports to speak for the farming community; but I have farmers in my constituency, and I am a farmer myself, and I am not aware of the fact that there is a great fear of what the Chancellor is going to do, although there is a great desire, undoubtedly, for stability for the farmer, who wants to know where he is, and is not quite sure a present.

The Finance Bill which the House is considering now arises from the Budget Resolutions. Speaking on the Budget Resolutions, the right hon. Gentleman the Chancellor of the Exchequer was able to show a very much more hopeful position in regard to the finances of the country than any of us would have thought possible. I am sure we all congratulate him on being able to show this state of affairs. On the other hand, many of us have doubts about the future, because, taking a long view of it, there are a great many unknown factors to govern the income and expenditure of the country.

An hon. Member on the opposite side asked, quite reasonably, I think, that we should try to get some idea of the income and expenditure of the nation over the next few years. I admit it must be very difficult to form that idea, but if the Chancellor of the Exchequer possibly can give the House, on this occasion or on some other, an idea of the future income and expenditure as he thinks it will be, it will be of great advantage.

The right hon. Gentleman the Member for North Leeds (Mr. Peake), who spoke first for the Opposition, made certain suggestions in regard to economy in expenditure. There is certainly room for very careful examination of all items of expenditure, but I must say that I thought that the suggestions that he made did not seem to take us very far. One of his suggestions was that we should be more rapid in the disposal of war stores. One thing upon which I think we can congratulate the Government is the fact that they have disposed of the war stores in a more orderly manner than that in which the Government of the time disposed of the war stores after the first world war. Many of us remember in what a foolish way stores were disposed of then, and the profits made by private contractors in the process. That we have avoided this time, and I am surprised that the right hon. Gentleman who spoke for the Opposition apparently recommended our going back to those bad old days.

Then he rather criticised the expenditure on the road programme. It seemed to him to be the kind of thing one ought to go in for in time of depression. I cannot take that view. After all, a cheap system of transport in this country will have a very big effect on the price at which we can put our goods on the market, particularly on the foreign market; and, therefore, I think it would be a good investment even now, and I think the Government are quite right not to wait for a depression to see that our transport system is at the very highest level of development. Then again, in regard to the British Council, while the right hon. Gentleman the Member for North Leeds may be right in saying that we need not spend a great deal of money on illustrating the British way of life in the Dominions, because they know it fairly well, especially after the experiences of these recent years, I should be very sorry indeed if the Government cut down on the expenditure of the British Council in foreign countries. I had occasion to see in the Middle East how important that work is, if it is well carried out. I am not so sure it is always well carried out; but that is no excuse for getting rid of it altogether.

I said just now that there are many unknown factors in regard to our future, and one of these is the money which will have to be spent on defence. The Chancellor of the Exchequer referred in his Budget speech to a figure which was mentioned by the late Sir Kingsley Wood in one of his Budget speeches, in which he said that the probable figure for peacetime defence would be something like £500 million. That, of course, depends upon a whole series of factors. No one knows what is to be our position in Asia, or whether we shall be involved in any military expenditure in India. For example, shall we be able to get out of the Middle East without difficulty, and shall we be able to solve the Palestinian problem without sending out troops for police purposes? I certainly hope that we can rely on the Opposition to assist the Government in these matters. I hope that they will not criticise the policy of withdrawal which will enable us to recognise the right of these countries to manage their own affairs, and at the same time escape a heavy burden of defence expenditure which would have serious repercussions on our internal situation. The figure of £500 million is something to aim at, and I hope that the Opposition will assist the Government in trying to bring down our expenditure on defence to that figure. It all depends on the success of the Government's foreign policy.

The Chancellor of the Exchequer foreshadowed that the cost of social services would rise in the course of the next two years from £500 million to £700 million. We should not be asked to cut down our expenditure in this regard, because this is a great national investment. The Government are right to indulge in it, and I have very little doubt that we can afford this figure. If our industry is brought up to the highest level of efficiency, then this figure, and an even higher figure, can be found. It is wrong to look at this from a cheeseparing point of view. It is a question of the size of the national income, and the size of the national income is entirely dependent on the capacity of the country to produce efficiently, and to sell its goods upon the markets of the world. The Chancellor has given a number of reliefs in taxation which are very welcome, particularly in regard to the lower income groups. We hope on the next occasion that he will be able to do still more.

Is it not possible to have a more simple P.A.Y.E. scheme? The system of assessment and allowances is still very complicated, and I know that some work-people do not know where they stand, accepting any figure with the result that they are often overcharged and have to get it back with great difficulty. I consider that a simpler system should now be adopted.

I think that there are other classes of income and of enterprise which are due for relief. I am in agreement with many hon. Members who have spoken on the opposite side of the House that there is some need for looking into the possibility of relieving real enterprise. For instance, it is absolutely vital for the industrial future of this country that industry should be able to plough back some of its profits in order to invest in new machinery and take part in the latest methods of production. In this respect, surely, 9s. Income Tax and 1s. Profits Tax is a pretty severe wet blanket. It is not going to be easy for an enterprising firm, with taxes of this kind, to plough back as much as they would like to do. We are thankful that the Excess Profits Tax has gone, and the Chancellor is quite right to warn companies that dividend payments must be on a moderate scale. If he could go a little further, and make it easier for enterprising companies to invest in improvements, I am sure he would be taking a step towards raising the national income.

We are not concerned with relieving the higher unearned incomes, but there are some higher earned incomes for which there might be relief. After all, the greater part of industry is still being run by private people, and so far as we know it is likely to be for some time. If these private industries are still being managed by private managers and higher grades of clerical workers, earning from £800 to £1,500 a year, and even £2,000 a year, I do not see why they, as well as the lower groups, should not receive consideration in some future Budget. They are, after all, brought up in an atmosphere, which is perhaps not so strong as it was in the past, in which they desire to save so that they can retire. I am afraid that if there is no recognition made of their efforts in some future Budget, there will be a tendency for this class of people to retire now, as some of them are doing, at a time when their services to industry may be very useful and important. Unless there is to be a considerable expansion of public ownership of industries which, so far as I know, it is not intended to put under public ownership, I think that some recognition should be made of these classes of earned income. The Chancellor has very rightly, made certain provisions in the Finance Bill. One of them, I was particularly glad to see—the £50 million Land Fund which he proposes to build up.

To give permission to the Inland Revenue office to accept real estate in payment of death duties is, I think, a very important step. True, as has been said already, it was always permissible to do so, but the Chancellor is going to be more energetic with this form of payment. It is very vital that it should be so, because one sees throughout the countryside many properties and estates broken up and virtually destroyed as economic units, their amenities thrown away and their timber sacrificed unnecessarily, all because of the necessity to pay Death Duties in taxes. The Chancellor will now administer this new form of payment of Death Duties in such a way as will make it possible for the Inland Revenue to accept blocks of real estate, and is so taking a great step forward towards the preservation of the English countryside. The Budget is a great credit to him and I should just like to say, finally, that I hope that on another occasion he will let us know, as far as he can, the probable future trend of income and expenditure, so that we will be able to judge better what is the outlook for the future.

9.42 p.m.

Mr. Walter Fletcher (Bury)

In the many Debates that we have had in this House recently on financial matters, the Chancellor has always referred to Karl Marx as his ultimate authority. That is only half the story, because this is a "Marx & Spencer" act, 75 per cent. of it being Marx, and 25 per cent. Herbert Spencer. [An HON. MEMBER: "Only four marks for that."] It is, indeed, a sad commentary on the first of the series of political financial plans, that the Chancellor has to go back to two antiquated and discredited Victorians to find inspiration for it. One of the chief features in this Bill must undoubtedly be the question of cheap money. The Chancellor is the greatest advocate of cheap money which, of course, has its great advantages in trade and industry in many ways, but I see a hidden and lurking danger in this theory of cheap money. Many things by their very cheapness discredit themselves in the eyes of the people. We have only to look back a very short way to the time when bread and potatoes were so cheap and plentiful that no one regarded them with the same affection as they do today, and the cheap money policy has that very same great danger inherent in it.

It is, in the end, not cheapness which will prove the benefit of money to the country; it is the wise use of the money. Money may be borrowed at 3, 4 or 5 per cent., but if it is used well, it will turn out better in the long run than if it is borrowed at 1 or 1½ per cent. and misused as I believe the Chancellor is likely to do as a result of the Budget and the Finance Bill which follows it. It is easy to have cheap money available. The Chancellor seems to have a curious personal ambition to see that 2½ per cent. Consols go to par. That is another form of looking the dollar in the eye which he deprecated as a policy from this side of the House not so long ago. It is exceedingly dangerous. It is a sign—we have had many signs—that his eye is too much on the Stock Exchange prices and not on real values. We have had a touching picture drawn for us of how, waking up in the morning and after his early tea, the Chancellor turns eagerly to that pink put potent journal which takes both its opinions and complexion from one of its chief owners or chief directors, and that attitude is to my mind a very great danger to the country. It titillates the palate of the Chancellor to think that he and his friends, the banker barons of the City, whom he uses for other purposes in his various committees, are all doing so very nicely out of this first of the new revolutionary, Socialist Finance Bills.

Indeed, I say with great regret that the only things about the Chancellor's efforts that are cheaper than his money policy are some of his methods. For the Chancellor of the Exchequer, one of the great figures of this country and one of the great leaders of the Party in power, to descend to talking about the mink coats of the mistresses of millionaires, to descend to gibing outside the House at those who pay 19s. 6d. in the £—biting the hand that feeds him so richly—is cheaper than his money policy. Incidentally, when I asked a Question about the proportion represented by those whom he singled out as his important target, he said it was 014 per cent. of the total taxpayers in the country—a worthy target for a worthy national figure! The only hope that the right hon. Gentleman will be weaned from these cheap ways is that he should continue to study the pearls and the gems gathered up on the beaches of Bournemouth and so richly displayed for him every morning.

There is another great danger that this Bill, like many other actions of the Government, will soon be felt by the average man to be oppressive. Oppression in any form has dire results. We know from history what happens when oppression takes place. It is said by hon. Members on this side that oppression will kill enterprise. That is only half the story, and indeed, I beg to differ from some of my hon. Friends and some hon. Members opposite, in that it does not necessarily kill enterprise, but it certainly drives it out. Undoubtedly, one of the results of these oppressive measures will be the export of brains and enterprise, which is already making itself felt. One has to go back quite a long way in history to get the first instance of it, when the Children of Israel left Egypt. That happened also to provide the first, and, as far as I know, the only, instance in history of successful bulk buying of grain. I would point out to the right hon. Gentleman that that was carried out not, as was done by this Government, by destroying the whole market, as in Liverpool, but by entrusting it to the hands of those who were naturally, and had proved themselves to be, apt at it, and by keeping it in the hands of a family concern. This oppressive taxation will have the effect of driving out of this country really important enterprise. We have seen how oppression drove the Huguenots to this country, to our benefit. We know how the oppression of the 1848 period in Europe drove many of the best elements of Central Europe to America and to this country. We know how, in Ireland, oppression drove people away. Let the Chancellor and his friends be very careful that this oppression and this spirit of vendetta do not, in the long run, lose for him those very brains and that great skill which he hopes to harness to the national machine. To use one of the Chancellor's own phrases, let him not be filled with "dubiety" in the matter. Let him know, once and for all, that there is no dubiety about this fact.

Another very important point to which I want to refer is inflation. [Interruption.] Possibly, I can talk from experience as one of the inflated. The word "inflation," like "planning" and "black market," has ceased to have any meaning because of the misuse of it in the newspapers and the public mouth, but it is extremely important. We hear from the Chancellor all the time that "we must do everything to prevent inflation." The plain fact is that we have already a very great degree of inflation. We are well up in the spiral of inflation. That is not necessarily the fault of anybody. During my life I have had to study inflation in many countries, and my knowledge was, I believe, when the Chancellor was at another Ministry, of some use to him. There are certain forms of inflation which are not due to the Government concerned trying to escape from a difficult financial situation by deliberately using inflation. The classic instance of the abuse of inflation was after the last war, in Germany, when, in order to cancel the internal debt and make it impossible for Germany to pay in certain ways, she deliberately turned on the printing presses and ruined her own nationals, and brought misery on many others, too.

We are in the middle of a spiral of inflation which arises from totally different causes. I do not make any accusation that the Government are deliberately inflating in that way. They inherited a very fine financial situation. One might almost say that Hugh the Drover has still got fine cattle to drive, and fine, fat cattle that he obtained not necessarily by purchase, but by other means. He must be careful that he does not overdrive them. But it is a great mistake to pretend that we have not got a high degree of inflation. When a difficult situation has arisen and there is real danger, physical or financial, there is only one possible way round it, and that is to say frankly to the man-in-the-street, "We are in the middle of an extremely difficult financial period." Let us not, as the Chancellor has done, paint a rosy picture of prices rising on the Stock Exchange.

Mr. Dalton

They fell yesterday.

Mr. Fletcher

That was only because the Chancellor was going to speak today. There is no doubt that if the Chancellor takes the man-in-the-street, the taxpayer, into his confidence, and points out that there is a certain degree of inflation, which is the natural result of the war stopping in the way it did and the difficulties we have had since—the difficulties of Bretton Woods and the Loan—the dangers which exist, and which are very real, can be got round; but they cannot be overcome if we pretend that we are going to avoid inflation altogether. I must refer to its effect abroad. This is a very delicate and difficult subject, but I believe it is a public duty not to bypass it altogether. It should be brought out into the open to some extent. We have vast overseas commitments which will have to be liquidated sooner or later. The atmosphere in which those huge commitments were taken on by us in pursuance of the war were thoroughly honourable in every way, but that atmosphere no longer exists. It is of the utmost importance that the credit standing of this country should be maintained in the highest degree.

We are at present living in a world in which the value of the £ as opposed to the dollar is a fictitious one. The intrinsic value of the £ today can be judged from the very few open financial markets that are left. That lower intrinsic value is not necessarily the correct value. There is good will for sterling, naturally, in view of our past financial and general history. The Chancellor must see to it, more than any other task that falls to his lot, that he maintains the good will of sterling. He will do that by complete frankness and openness about our financial policy, internally and externally. I hope he will avoid the pitfall of throwing easy financial sops to his Left Wing supporters; I hope he will be weaned from that, and will go back to a greater financial rectitude by cutting down expenditure and not being blinded by artificial cheap money and its short term effects.

Chancellors come and Chancellors go. Where they come from is a matter of wonder. Where they go to is—without an undue degree of wishful thinking—very certain. But Chancellors and their policies are not the most important financial element in this country. The most important person is the British taxpayer. He is the bedrock of the whole of our finance. As long as he is satisfied that his money is not being wrongly expended he will not grudge it for experiments or for new ideas. He will grudge it if he thinks it is being thrown away on a mistake, such as bureaucratic control and too many bureaucrats. The Chancellor has had the great and wonderful idea of creating a series of national parks and recreation grounds throughout the country and, in any airy way, he produces £50 million. Everything about that is splendid. The urge to generosity is splendid, but let me point out in passing that it is vicarious in character. The Chancellor is not the giver. He is only the man who gets the kudos for collecting the money from other people. When we get the national parks, I hope that we shall find in them two statues. One statue should be of the Chancellor of the Exchequer. I think Epstein would make a very satisfactory job of it. He is a good model for Epstein. The real statue that ought to be erected there is to the man who bears the burden, whose interest must be looked after and whose money must not be wasted, and that is "the Unknown Taxpayer."

9.58 p.m.

Mr. Baldwin (Leominster)

I wish first to say a few words in reply to the hon. Member for Ipswich (Mr. Stokes). When I listened to his contribution to the Debate I was not quite sure whether I was listening to a music hall turn or to a serious contribution to a Debate upon finance.

Mr. Stokes

As the hon. Member does not seem to have recognised the cogency of my arguments, I hope that he will read my speech carefully in HANSARD tomorrow morning.

Mr. Baldwin

I most certainly shall, but I wondered whether his speech was really an attempt to make a serious contribution. The hon. Member brought in the subject of the taxation of land values. Let me remind him that a Member of this House many years ago tried to tax land values. What was the result? After three or four years of expensive valuation of the country, the matter was turned down. It was realised, as a result of the famous Form 4, that the prairie land of this country is worth nothing at all and that the whole value of the land of the country has been created by the landlords. [Laughter.] Hon. Members laugh. Let me tell them that I have sold many thousands of acres of land and that I have never sold land which made the value of the buildings, roads, drains and ditches which were on the land and which were put there by the landlord. If any hon. Member disputes what I say, I suggest that if he sees a farm put up for sale he should take a quantity surveyor there and ascertain the value of the roads, ditches, etc. He will find that the land will not make what those things cost.

Mr. Stokes

Does the hon. Member realise that I was not talking about farm land, but about valuable town land?

Mr. Baldwin

The hon. Member was talking about land values. I am suggesting that land value is decided by the district valuer, who is a Government official. If the hon. Member had had the pleasure of meeting the district valuer as many times as I have, he would soon find out that the valuer is not prepared to agree to any sum which the land is not worth.

To return to the question of food subsidies, the hon. Member for Louth (Mr. Osborne) rather anticipated me—I was sitting next to him and I wonder whether perhaps he may have seen my notes—but I want to support him in what he said. In my opinion food subsidies are entirely uneconomical and a menace to this country. The Chancellor, in his Budget Statement, said that he was determined to hold the cost of living; the idea of the food subsidy was to stop a spiral increase of wages, and so far as it operated during war time it was necessary, but I would point out to the House that although that subsidy has risen from £15 million to £318 million, and possibly by now to £350 million, this has not stopped the increase of wages. Since 1938 the increase in wages in this country amounts to £2,000 million per annum. It seems to me that it is not right to say that the food subsidy of £318 million could not be paid out of that very great increase.

I know 1 am holding myself open to a great deal of misrepresentation in taking up this line, but I want to make it clear that I have no desire to penalise the lower ranges of Income Tax payers. I would ask the Chancellor of the Exchequer to do away with the food subsidy——

Mr. Dalton

Do away with it?

Mr. Baldwin

—and raise the price of food to an economic level, assisting those in the lower income groups by increasing the personal and children's allowances and by increasing old age pensions. What I feel is that at the present time we are spending this huge sum of money not only to subsidise the food of the working man, but also to sudsidise that of people who can afford to pay cost price. If I make any comment it is to say that the food of the rich is being subsidised by the poor at the present time. They are contributing to the Exchequer in the form of P.A.Y.E. and Purchase Tax a very considerable sum of money that is helping to subsidise food for people who could quite well afford to pay for it.

I look upon this huge subsidy also as a menace to the primary producer. The Chancellor, in his Budget Statement, said that there was a very serious deficit between overseas expenditure and receipts from visible and invisible exports amounting to £750 million. I would suggest to him that if he appeals to the primary producers of this country we can improve our output by 50 per cent. and close that gap. All we ask is that we should have something like a fair price for the commodities we produce. Only last February there was a price review for farming, and after a great deal of higgling—with the Minister of Agriculture feeling that he had the Chancellor looking over his shoulder—the price of wheat was increased by 1s. 9d. a cwt. for the season of 1947. This 1s. 9d. per cwt. represents one fifth of a penny a lb., or 5d. less than this packet of cigarettes I hold in my hand. That is the reward for producers of the commodity for which the world is crying out. I suggest that the price of bread which is 4¼d., or a little more now than that a little has been taken off the weight, might well be increased to 6d. per 2 lb. loaf. The result of that would be a saving of an amount of £48 million on the bread subsidy of £64 million. I suggest that the butter subsidy could be halved. The consumer——

Mr. Bowles (Nuneaton)

On a point of Order, Mr. Speaker. I want to know whether these questions dealing with the disposal of money, as in the case of these subsidies, is in Order on the Finance Bill.

Mr. Speaker

I think these Debates go fairly wide. I was wondering very much whether these farming prices were in Order. I hope that the hon. Member will not go too far on the matter of prices.

Mr. Baldwin

I was not trying to teach the Chancellor of the Exchequer economics but trying to show him a way in which he could save a very great sum of money in the future. If we do not face up to the expenditure that is going on, we shall have an increasing spiral of inflation. What has happened since that vast increase of £2,000 million is that the public have spent an increased sum of £271 million on food and £790 million on drink and tobacco. In my opinion, that is still pushing us further down the slope of inflation. There is another subsidy, that for potatoes, and in that case it would be no hardship to the consumers in this country to pay a little more for potatoes. At the present time, they can buy 14 lbs. of potatoes for the price of a pint of beer. That position seems rather absurd—[An HON. MEMBER: "There is no tax on potatoes."]

Mr. Speaker

We are raising money. That is the main object. Inflation is affected by the way we raise money, but to go into details in that respect is, I think, outside the Second Reading of the Bill.

Mr. Baldwin

I thought it was just as important to save money as to make it, and I was endeavouring to show the Chancellor of the Exchequer a means of saving a very considerable amount of money. I hope that what I have been allowed to say may help in his decision. I do think that the people of this country should be told quite plainly that they must pay an economic price for their food. We have been raised in the last 80 years on a policy of cheap food and it has ruined agriculture in this country and many other countries of the world. Whether we had a war or not, we were due to be short of food, and we are reaping the reward of past policy in this country. I ask the Chancellor to make it plain to consumers in this country that they must pay a little more for their food, and I am quite sure that if they are told the truth, they will rise to it as they did in 1940.

10.8 p.m.

Mr. Marples (Wallasey)

I am very grateful for this opportunity of catching your eye, Mr. Speaker, because this is the first time I have spoken on financial matters in this House. I will make my effort streamlined for the benefit of hon. Gentlemen opposite. The only reason I wish to speak tonight is because I have recently been abroad endeavouring to do some business for the export trade of this country. In addition, my practice in the past—in 1939 and the years before—has been to go abroad, and from that point of view I have a firsthand personal knowledge of conditions. Hon. Members today have spoken about inflation from an internal point of view. I shall speak tonight about the finances of this country as they strike a foreigner's eye in the present year. I want to make my position clear at the outset; I am not a financial wizard like the hon. Member for South Nottingham (Mr. N. Smith), nor a financial fanatic, like the hon. Member for Ipswich (Mr. Stokes). Furthermore, I am not reading this speech, I have a few rough notes, and I do not wish to say anything which would embarrass the Government on this occasion.

Mr. Stokes

Shame.

Mr. Marples

On other occasions I do, but on this occasion I do not, and I hope the Chancellor of the Exchequer will take me at my word——

Mr. Dalton

indicated assent.

Mr. Marples

—and if I say a wrong word or wrong phrase I know that, with that generosity of heart which he always shows to hon. Members of this House, he will forgive me. First I want to speak about the Swiss people's attitude before the war, that is in 1939. If the hon. Member for Ipswich wishes to interrupt, I will give way.

Mr. Stokes

I do not think that has much to do with the Finance Bill.

Mr. Marples

That confirms my view that the hon. Member is a financial fanatic. What I was going to say about 1939 before the war was that the Swiss people then had grave suspicions of the German economy. The German economy at that time was controlled by Dr. Schacht. It was a siege or a closed economy.

Mr. Stokes

What on earth has this to do with the Finance Bill?

Mr. Marples

The hon. Gentleman will find out if he listens for a moment without interrupting. If the hon. Member will give himself the unusual treat of not smiling and interrupting so much, but listening, I am sure he will learn a lot. As I was saying, Dr. Schacht imposed this economy on Germany. It was a siege economy, a closed economy, and the financial rates of the mark to other currency varied before the war. There were three rates. The official rate for commercial relations was 12 marks to the £; the registered mark rate, which was a special rate given to tourists to encourage them to go to Germany, was 20 to the £ to encourage people to go there and see Germany. It was called a free market in those days. There was a free market which was divorced from the official Nazi market and in the free market the marks were sold at anything from 20 to 80 or 100 marks to the £. I know personally of some Jewish refugees who walked over the border with enormous sums of marks in their physical possession and who had to give 80 or 90 of them for each pound.

Now the mental attitude of the Swiss towards those regulations was that one of two things would happen: the first one would be inflation of the mark; the second that there would be a war. It is within the recollection of the House, and of the hon. Member for Ipswich too, that there was a war. The Swiss people at that time had a phrase about the mark which particularly stayed in my mind. It was this: "Der mark stinkt." I would say that the word "stinkt" does not mean in German what it means in English. After the war, in 1946, I went to Switzerland to try to get some exports and I found the reaction of the Swiss to England at the moment from a personal point of view was that they were emotionally in sympathy with this country; they were grateful for this country having, as they think, and as I think, saved Switzerland from Germany. They were kindness itself, and there was an enormous amount of hospitality which I thoroughly enjoyed, but, from the business point of view, their mental attitude compared the £ in 1946 with the mark in 1939. Now this comparison was not to the same extent, and I would be deceiving the House if I said it was, but nevertheless the same tendency was there to think that the £ was to be inflated. They are not interested in acquiring sterling because they think it will be reduced in value.

They also think that when Bretton Woods comes into operation and this country goes from a closed economy to a free economy, the inflation of the pound will find its level internationally which will not redound to the credit of this country. They think that prices will rise and, before I left at Easter, they told me that prices are certain to rise in this country. I was sorry to see that motor cars are now rising in price, new motor cars, not second-hand cars, and utility clothes have also risen since I returned from Switzerland at Easter. To that extent, their views have been borne out. It is harder to convince a Swiss business man that the £ will not be inflated, than to get the right hon. Gentleman the Minister of Health to join the Tory Party, or to get him to build houses.

When I left Switzerland by air I met quite a number of English people at the airport who had no Swiss francs left. An English person going to Switzerland is allowed £75 worth of Swiss francs, and when he has spent that, it is the end of his holiday. The night before he catches the plane, he and the other passengers get together and decide how to spend their remaining money. Brandy is only 25s. a bottle, and port about 7s. a bottle, so naturally they spend all they have and they arrive at the airport, but have no Swiss francs left. Most of them carry excess baggage but have no Swiss money with which to pay for the transport of this baggage, and it is necessary for them to endeavour to change a pound into Swiss francs through bankers or hotel porters. This makes a free market in pounds in 1946 and the Swiss people are using exactly the same phrase about the £ in the Swiss market as they did about the mark in 1939 and they say, "Der pound stinkt."

Mr. Follick (Loughborough)

"Das pfund stinkt."

Mr. Marples

It is apparent there are fewer Germans on this side of the House than on that. Hon. Members opposite know their own language.

Mr. Medland (Plymouth, Drake)

There are more Fascists on that side.

Mr. Marples

I started by saying that I was not an expert, and in that I was more honest than the hon. Member for Ipswich. The only reason I have risen is to give the Chancellor an opportunity of saying in reply——

Mr. Stokes

May I ask what my hon. Friend means? He said something about being dishonest.

Mr. Marples

First I am not the hon. Gentleman's friend, and further, I did not accuse the hon. Gentleman of being dishonest.

Mr. Stokes

Will the hon. Gentleman repeat what he said?

Mr. Marples

The hon. Gentleman really must listen. He will then hear. More attention and less interruption would be far better.

Mr. Stokes

On a point of Order. Is this a matter which impugns my honour? Has the hon. Gentleman the courage to repeat the remark?

Mr. Speaker

I heard no reflection on the hon. Member for Ipswich (Mr. Stokes)

Mr. Stokes

Perhaps you were not listening, Mr. Speaker.

Earl Winterton (Horsham)

Is the new procedure of this House that an hon. Member can accuse you of not listening, Mr. Speaker? The hon. Member distinctly said that perhaps you, Mr. Speaker, were not listening.

Mr. Stokes

Further to that point of Order, I have heard you yourself say that one of the arts of being a Speaker is sometimes not to hear, and not to see.

Mr. Speaker

I was listening and heard no such remark.

Mr. Marples

I am much obliged for your Ruling, Mr. Speaker. I wish to give the Chancellor an opportunity of making a serious reply in order that I can send it, in HANSARD, to the foreign country concerned, and have it published in the Press. I think that an answer from the right hon. Gentleman would carry more weight than one from a humble back bencher on this side of the House. I shall not ask for 10,000 copies, so the Financial Secretary can rest his mind on that score. I would say that the Chancellor is extremely skilful in Parliamentary matters. He rode out of the Japanese Bonds Debate quite nicely; he played out time very nicely. It was a skilful Parliamentary performance. I do not blame him, because he had no case to make. I should have done the same. In all seriousness, I ask the right hon. Gentleman if he will say something in reply which can be put into print, so that I can send it to the country concerned, and a reasoned reply will do a great deal to help the credit of this country abroad.

10.21 p.m.

Mr. Brendan Bracken (Bournemouth)

Many hon. Members have made journeys abroad. The results have been of varying value, but no one can doubt that the visit of my hon. Friend the Member for Wallasey (Mr. Marples) to Switzerland was most useful, and I would say to him that I hope he enjoyed it as much as we enjoyed his speech this evening. We have had an interesting Debate. The speech that impressed me most was one made by an hon. Gentleman opposite, to which I shall refer in a moment or two. But before I go further, I should like to say a word to the Junior Burgess for Oxford University (Sir A. Herbert), who made some mild criticisms of my right hon. Friend the Member for Woodford (Mr. Churchill) today. The hon. Gentleman worked himself into such a moral fervour today against betting, that he laid himself open to an invitation to lead the Oxford Group. He accused my right hon. Friend the Member for Woodford of introducing a tax and then abandoning it, to wit, the betting tax. He pointed out that in Australia and most other countries a betting tax was successful. But he did not draw the attention of the House to the fact that neither in Australia nor New Zealand, nor any other country of which I know, was there an unholy combination of "bookies" and bishops such as confronted my right hon. Friend the Member for Woodford. Unfortunately, not being Prime Minister in those days he had to bow to superior direction.

The hon. Member for East Middlesbrough (Mr. A. Edwards) made a speech which almost made me conclude that there was no necessity whatever for any further speeches from this side of the House in this Debate. He flayed the Government, and he did so most effectively. He made a tremendous attack on Government nationalisation policy, an attack which my hon. Friend the Member for Orpington (Sir W. Smithers) would have regarded as almost extreme. I agreed with what was said by the hon. Member for East Middlesbrough, more particularly as he used rather more violent language than would ever come from a moderate person such as myself. For instance, he accused the Government of rigging prices, and he asked the rhetorical question—I doubt if he will get any answer from the Chancellor of the Exchequer—" At what time are you going to stabilise something?" He said that if our industrial system were controlled, directly or indirectly, by civil servants we should be ruined, and he ended by saying that this policy of directing industry was inviting disaster. Well, I must say that we on this side of the House cannot but say "ditto" to the wise remarks of the hon. Member for East Middlesbrough.

Mr. A. Edwards

Is the right hon. Gentleman aware that every responsible Minister in the Cabinet has said something on the same lines? Right hon. and hon. Gentlemen opposite are always accusing us of developing a bureaucracy. I went out of my way to point out that certain bureaucracies that exist today had been created by hon. Members opposite, and that the Government, as well as myself, have said that we can control industries without building up a bureaucracy. If we do not succeed in doing that, we are lost.

Mr. Bracken

After paying him so many compliments, I did not expect the hon. Gentleman to make such a defeatist statement. Of course, if the Government feel that the hon. Gentleman is right, I have no doubt that they would have sufficient transport facilities to go to a certain place where their resignation would be accepted. Alas, that happy idea is scarcely likely to come to pass. May I say a word to the hon. Gentleman? He has suggested that the Conservative Party is responsible for the creation of the Civil Service. I wish that were true. I regard the Civil Service as one of this country's most splendid institutions. I wish we could claim that we were its founders. I hope that hon. Gentlemen opposite, who seem to think that civil servants are of lesser consequence that some of the people the Government have picked up—I use the words "picked up" deliberately—to sit on some of the various boards they are establishing——

Mr. Cobb (Elland)

Better than being dragged up.

Mr. Bracken

The hon. Gentleman's intervention reminds me of Lord Chester- field at his best. I am trying to deal with a serious point. I think every hon. Member of this House is proud of the Civil Service and I think every hon. Member will agree with me that taking their record, and recalling the civil servants that we have the honour to know, we much prefer them to these curious gentlemen whom the Government have discovered to sit on boards. A lot of valetudinarians have doddered from a board room into the arms of the Chancellor of the Exchequer and the Minister for Mines and all the other Ministers who are setting up these boards. The one thing these Ministers do not seek, the one quality they discount, is independence of character or indeed business ability of any kind. Let me tell the hon. Member for East Middlesbrough that the qualification of the sort of people he was recommending to the attention of the Chancellor this afternoon is ability to hear a Ministerial bell even though most of them require an ear-trumpet to do so.

Hon. Members will not be surprised if I begin by saying there are many defects in the Chancellor's financial proposals. The worst is that they are absolutely inadequate to the needs of the country. Now, the Chancellor of the Exchequer is a professed planner without a plan. To adapt a line of Pope's, he is "in a mighty maze without a plan." Consider his endless commitments. The Chancellor of the Exchequer and his colleagues are taking over great industries without counting the cost.

They promised to re-equip and extend these industries, again without knowledge of the cost. There are no signs of any plan to co-ordinate or even give priorities to the Chancellor's numberless spending policies. In the old days, when the Chancellor was a back bencher in this House, he used to participate in many financial Debates, and he used to utter words of grave warning to successive Chancellors of the Exchequer about the folly of annual Budgets. When the Chancellor appeared in his present capacity before the House last October, he promised to budget for a longer period than a year. I think that but for the fact that a five years plan has been adopted by a certain country and more or less appropriated by a party the Chancellor does not like, he would have adopted a five years plan here.

I ask the House to consider whether there is any sign of a well designed, or even an ill designed, long term policy in this Finance Bill or in the Chancellor's Budget speech. Never in our history has there been greater need for a long term financial policy. The National Debt now stands at over £23,000 million. The House well knows that we have very large unfunded Imperial and foreign debts, and I regard it as quite surprising that in the course of the Debates on the Budget and on this Bill, neither the Chancellor nor the Financial Secretary has said anything about any plans they may have for funding these debts. It is within the knowledge of everyone here that great sums are required to re-equip many of our major industries dislocated by the war. The expansion of our social services will require vast and continuous expenditure. I should like to ask the Chancellor this question: Is there any master plan for dealing with this colossal expenditure? Has any balance been struck between the demands of Government and industry on our fund of savings?

The Chancellor has made no effort to deal with these vital questions. I wonder has he been converted by the Lord Privy Seal to the view that money is a meaningless symbol. This is certainly a meaningless Finance Bill. It does nothing to foster new capital creation upon which our industrial and financial future depends. The Chancellor has very strange views on new capital requirements. He anticipates that for years to come the demand for capital will be greatly in excess of the supply. I hope I am quoting correctly. He thinks that is "a healthy state of affairs in some respects," and he also said that "we need not be gloomy about it." A healthy state of affairs—when without an adequate supply of capital, there can be no steady increase in the national income, upon which our hope of full employment depends?

There is no bottomless well of capital in Britain. In the decade before the war the fund of savings available for investment was hardly adequate. Today we are faced by the urgent necessity of providing capital for replacing plant and equipment worn out by our war production effort. Much capital will also be needed for new industries and new processes. Great reserves had been built up for many years, but these reserves are not enough now to deal with the heavy problems of re-equipping British industry, or cope with the vast amount of arrears in repairs and renewals. And so I think the Chancellor knows that. in future, industry must draw heavily from our fund of savings. It will have a fierce competitor—the Government. If this Government scoop too much from the pool of savings, there can be no health in industry. If public declarations mean anything, the Government and industry are in complete agreement about one thing—that greatly increased productivity is the only solution to our financial and economic problems. That point was put very well today by the Financial Secretary to the Treasury in his peroration. If the Government hold that view they must decide whether they will translate their words into deeds, and whether they want productivity or sterility through excessive taxation. The time for decision is now.

I would like to say something about the effects of excessive taxation. Most Government supporters laugh at the notion that taxation hampers production, but they pay lip service to the ploughing back process. I ask hon. Members, what is to be the fate of the "ploughers"? This Bill ordains that all sums put to reserve and used for new machinery, or for improving factories or equipment, shall be taxed at the rate of 10s. in the pound. Surely, this is putting a premium on obsolescence. What is the good of Ministers and hon. Members opposite congratulating companies on showing great prudence in building up fat reserves, and at the same time endorsing a Finance Bill like this, which takes half of every pound that a company puts to reserve? There is great need today for big reserves. The marriage of science and industry is transforming industry, and plant must often be scrapped to make way for new processes. In the old days, when hon. Members on the Front Bench opposite were not overburdened by government, they often complained about the backwardness of British industrialists. They said our industrialists did not emulate their competitors in America by scrapping machinery quickly. They said, "We are building up in England a museum of industrial machinery." They put this rhetorical question to British industrialists: "Why do you not emulate industrialists in the United States of America who have no hesitation in scrapping plant and equipment?" I could answer that question. The reason why we cannot quickly scrap plant and equipment, is that if we do so, we have to pay 10s. in the pound on all expenditure on new machinery and factories.

Mr. Scollan (Renfrew, Western)

Why did not hon. Gentlemen opposite do it before the war?

Mr. Bracken

I do not know how many hon. Members wish to interrupt——

Mr. Cobb

Will the right hon. Gentleman answer that point? Why did not hon. Members opposite do it before the war when taxation was low?

Mr. Bracken

I agree there were many imperfections in the Socialist and Conservative Administrations that existed before the war——

Mr. Callaghan

Will not the right hon. Gentleman agree that it was, in fact, a Labour Government which made the most favourable proposal between the wars, for dealing with obsolescence?

Mr. Bracken

It may have been the Labour Government which made the favourable proposals, but they did not do anything to fulfil those proposals. [Interruption.] I am sorry I cannot give way again. I do not want to become involved in an argument on this point. The right hon. Gentleman must know that a generous provision was made by the Treasury for obsolescence, in the Budget produced by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) just before the Coalition Government went out of office——

Mr. Dalton

Due to the stimulus of the Labour Members of the Government.

Mr. Bracken

The Chancellor of the Exchequer, with his usual generosity, says it was due to the stimulus of the Labour Members of the Government. All I can say is that if he believes that, he will believe anything. But I think we are drifting into controversy, and so I must try to find a line of thought which appeals more agreeably to hon. Gentlemen opposite. I was talking—and I know they do not like this—of the effect of taxation on industry; of how it hampers industry because of its effect on the replacement of machinery. But it also affects all selling policies abroad, and if we are to accept the asseverations of the President of the Board of Trade and the Chancellor of the Exchequer, new markets must be found everywhere for British goods. But this vicious tax on company reserves, discourages efforts to find new markets.

I hope the Chancellor of the Exchequer will do something to meet the criticisms which have been levelled against this tax. It is quite true the Chancellor of the Exchequer is not responsible for its introduction; but he could follow the example set by his predecessor, and see what he can do to relieve industry from a very heavy burden caused by a tax of 10s. in the pound on reserves. The Chancellor of the Exchequer has, I am sorry to say, not only retained N.D.C., but he has renamed it "Profits Tax." I remember that in far off days in this House the Chancellor of the Exchequer and I were in complete agreement about the iniquity and folly of this N.D.C. tax. We were for the first and last time in complete agreement. Now the Chancellor of the Exchequer has adopted it, and is to make it a permanent tax. He has had the grace to change its name. The hon. Member for Chesterfield (Mr. Benson) described this tax as "unique in its badness." It is. It is not paid by holders of gilt-edged securities, or by debenture holders, or by those whom hon. Gentlemen opposite call the rentier class. It is a tax to penalise enterprise. It is a tax to hamper the expansion of industry. I do beg of the Chancellor of the Exchequer to return to his old opinions, the opinions he expressed so well in this House against the original N.D.C. This tax is not as important as the Income Tax on company reserves, but it is one shilling in the pound charged directly on the profits of industry. If the right hon. Gentleman could get rid of this ugly tax by his next Budget he would be doing a great service to British industry.

I want to say a word about the effects of this Finance Bill on the professional and managerial classes. My hon. Friend the Member for Bury (Mr. W. Fletcher) made some very good points about this. High rewards for skill are a great incentive in capitalist and in Communist countries. The Government show a dawning realisation of this fact. I do not know whether the Minister of Fuel is here or not. [HON. MEMBERS: "NO."] If he were, and if he would allow me to address him without snarling, I should ask him what sort of salaries are to be paid to members of the Coal Board. The Government recognise the necessity of incentive. Consider the salaries they offer to members of the litter of boards they are creating, although I am bound to say that the salaries paid to some of those old gentlemen ought really to be pensions, and they would be better in a pensioned condition than as members of a Board to manage the coal industry in Britain.

If I were to be asked to prove that I were right in my view about the effect of heavy taxation on the professions, I could not do better than remind the Chancellor that there are disturbing signs that young men are seeking employment in other countries—young engineers, young scientists, young doctors, young managers, men absolutely essential to the life of this country. It may be said that in numbers they are not great, but they make a tremendous contribution to British life and to British industry. [Interruption.] I understand the hon. Gentleman opposite, one of the Whips, to say that that has happened in Scotland for years. Of course it has and greatly to our benefit. But some of the young engineers now leaving this country came from Scotland. It may be that this will afford the British a better opportunity; but it will be a very bad thing indeed if in this country, which was the Mecca of professional men overseas and gave the greatest opportunities to young engineers, young doctors, young managers of all kinds, we discourage brains and encourage young men to go abroad.

Now the Chancellor, of course, has one general justification for overtaxation which is, that the Treasury needs money, and that seems a reasonable proposition. But the Treasury has another need; to return to its main function, which is that of controlling Government expenditure. The Chancellor has been accused by speakers from this side of the House of making in his Budget speech no reference to economy. An injustice was done to the Chancellor. Out of about 150 columns of HANSARD he devoted two platitudinous columns to economy. In the course of his speech he made some plaintive remarks about food subsidies, and the cost of German occupation. The Chancellor should have advanced those remarks or protests to his colleagues in the Cabinet, instead of coming to the House and saying that it was all wrong to spend this money and that the burden of financing the occupation of Germany was intolerable. The right hon. Gentleman is a forceful man, at any rate when he stands up in the House of Commons, and I do not believe that in the Cabinet Room he is any more modest than he is here. I suggest to him that he should inform us what plans he has for liquidating this vast expenditure. We do not expect to see food subsidies swept away overnight. That would be calamitous from the country's point of view. But we do expect the Chancellor to give us his plans for an orderly reduction. But the right hon. Gentleman seems to me to have no respect whatever for economy. He struts, and he spends. Alas, Mr. Speaker, we have an inflated Budget, an inflated currency, and an inflated Chancellor.

I agree with my hon. Friend the Member for Bury that the Government have, as yet, only a limited responsibility for the sizeable inflation which affects us. All wars breed inflation, and the last war bred a considerable inflation here and everywhere, but the Government, by over-taxation and reckless attacks on industry, have increased the inflationary forces in this country. The Chancellor denies that there is any connection, or at least says he cannot see, any connection between over-taxation and inflation. Well, all I can say is that the Chancellor is an economist, and economists never understand simple language, nor do they utter it. But let me remind the right hon. Gentleman that, in the long run, if wage earners and other taxpayers have to choose between heavy direct taxation and rising prices, they will choose the latter. In the past, when kings debased the coinage, they caused great misery, but not a tithe of the misery caused by the democratic debasement of paper money. Inflation is with us; it is still controllable and I say "Let us check it now."

I am sure right hon. and hon. Members in all parts of the House realise the misery caused to people with fixed incomes as a result of inflation. What is the good of giving old age pensioners £1 a week if it will only purchase 10s. worth of food or goods? So far, the Chancellor's proposals have been no check to inflation. The Chancellor's policies and his frequent gleeful reference to Stock Exchange prices have encouraged wild capital inflation. The right hon. Gentleman is the punter's ideal of a useful statesman. They call him in the City of London "the Casino Chancellor." Or perhaps I should say they did, until yesterday, but after the muddle the Chancellor created by the new issue of Savings Bonds, the gamblers are less happy about their hero. He has created more uncertainty in the gilt-edged market. Now even the Chancellor will understand this simple proposition. [Interruption.] I say that because I think he will. He lives remote from the doings of speculators. They only flourish in times of uncertainty. Yesterday he created the utmost uncertainty in the gilt-edged market; to justify his policy he has told certain newspaper gentlemen that he wanted to give moral and financial castigation to the "bulls" in the City, who have been encouraged by his speeches in various parts of the country to believe that the stock market was going up and up. I only hope he will not encourage people on the Stock Exchange to speculate in futures. [Interruption.] Mr. Speaker, I never thought the speculators had so many friends in the Socialist Party.

Now, I must confess to some sympathy for the Chancellor. I do not wish to buffet him in the same way as he was buffeted by Members on his own side. We have consideration for gentlemen who occupy high positions, But as I was saying I confess to sympathy for the Chancellor in his inheritance of a crazy system of taxation. May I borrow a word from the right hon. Gentleman—his favourite word—and say that our taxation system needs "streamlining." My right hon. Friend the Member for the Scottish Universities made a valuable suggestion to the Chancellor. He asked why should we not have an authoritative review of the economic implications of our tax system as a whole. Surely that was a wise suggestion. It ought to appeal to the Chancellor, who boasts of his fresh approach to financial matters, if only for the reason that such an inquiry has never been held before. I think right hon. and hon. Gentlemen in this House should consider—and this should appeal to Members of all parties—the necessity of having some quite impartial report of our whole system of taxation. That system has grown up, it has sprawled rather than grown in the last century, and today it is impossible for anyone, even the hon. Member for South Cardiff (Mr. Callaghan) to understand it. The gentlemen of the Inland Revenue have one day to deal with a tax on armorial bearings dating from past centuries, and the next day with licences for the supply of liquor in aeroplanes. It is necessary to have this inquiry, and I hope the Chancellor will say tonight whether he agrees with the suggestion of his predecessor, the right hon. Member for the Scottish Universities.

This is no time for piecemeal finance. Out of our fund of savings a proper allocation must be made between the needs of Government and the needs of industry, and we must do everything we can to increase our fund of capital. War has destroyed much of the nation's capital, but plenty of new capital can be built up by the brains, energy, and enterprise of the British people if we can eliminate the uncertainty and waste which are the underlying causes of low productivity and rising prices. I regret to say that the Chancellor has been having a riotous honeymoon with power. There is no commitment that the right hon. Gentleman is not willing to jump at. There is not a Minister, however inexperienced, who sits on that Front Bench, who discovers a scheme, however crazy, and takes it to the Treasury, who cannot get an endorsement from the Chancellor of the Exchequer. He is, indeed, the most prodigal Chancellor in history, worse even than Charles Townshend. I would say to the Chancellor that it is time he reformed and improved. I make, most respectfully, to him, the suggestion that he should make a serious attempt to assess the Government's commitments, and, in due course, to give the House a careful survey of the plans of revenue and expenditure during the next five years. Though the Treasury has no prophets, the Chancellor's experts have an uncanny skill in calculating future revenue, and they are also skilled in the sorrowful task of totting up enormous figures of expenditure. Armed with these figures the Chancellor, who is a superb master of the art of exposition, can recall this House to the realities of our financial situation. We were sent here to keep the public purse. We were not sent here to turn it into a sieve.

11.0 p.m.

The Chancellor of the Exchequer (Mr. Dalton)

We have had a number of very interesting speeches in today's Debate, abbreviated though it was by an earlier discussion upon another topic. The hon. Member for Wallasey (Mr. Marples), who at the moment is out of the House, made a speech upon a number of points of interest, as I thought. He asked me to say something which could be reported in the Swiss Press, he having lately been climbing the Swiss mountains—a very good occupation. Now that the Swiss have made an agreement with us, I take no exception to that. Once the obstacles to agreement were overcome, I felt that it was right to withdraw the ban which previously had been imposed upon travelling to Switzerland. I am glad that the hon. Gentleman was one of those who took advantage of that alteration. What I think should be published in the Swiss Press is primarily what I have just said, namely, that now that the Swiss have shown a willingness to be a party to an agreement, we are very glad. It is an agreement similar to that which we have made with other countries who were in the war, and who suffered the loss of many lives of their sons, and other disabilities, from which the Swiss did not suffer. That is all I want to say at the moment about that country, and that is what I would like to go over. We have just relaxed the restrictions. I hope hon. Gentlemen opposite do not think that they should have been relaxed earlier, before the Swiss undertook to play their part and to enter into this agreement to hold our currency. I hope that no Conservative Member thinks that we should have given way to their request until that had been done.

I see the hon. Member for Oxford University (Sir A. Herbert) in his place. He put down a Motion on the Paper to reject the Finance Bill. He said he would like me to give some thought to the subject of a betting tax between now and the next Finance Bill. I gladly undertake to do so. Now that I have given that undertaking, perhaps he will vote against the official Opposition, when they divide. I shall be very glad to give further thought between now and this time next year to the question of a betting tax. I am anxious to do so, but as I said in answer to a Question which he put, there are difficulties in making this a workable show which will produce revenue without creating a frightful amount of friction and ill feeling. This point was illustrated by the efforts of the most illustrious of my predecessors, the right hon. Member for Woodford (Mr. Churchill), who had a go at this matter in the 1926 Budget, if I remember aright. It was not a success. I am not at all confident, in view of that failure, that we could make it succeed. I promise, however, to have another look at it so perhaps the hon. Gentleman will abstain from pressing his opposition to the Bill.

Sir A. Herbert

I shall be astonished if what the right hon. Gentleman the Member for Woodford (Mr. Churchill) could not do, the Chancellor will even attempt.

Mr. Dalton

I shall be more careful before I try. So much for betting. I now pass to land. My hon. Friend the Member for Ipswich (Mr. Stokes) made his usual very eloquent and cogent speech, in the course of which he advanced the proposition that it would be a good thing if we were to gather in large revenues from the taxation of land values. I wish to speak quite frankly to him. Whatever may be said on the merits or demerits of a national tax on land at the moment, there is just not the staff to organise it. The Inland Revenue Department are hard pressed, and I was glad to hear the right hon. Gentleman the Member for Bournemouth (Mr. Bracken) pay a tribute to the Civil Service which was well deserved. They have done a pretty good job, and they have had a hard task. I am anxious to alleviate that task rather than add to it. It is really not practical administration to add such a tax to what they have to do whatever may be the merits of the project of a tax on land values.

On the other hand, if there are local authorities who have the staffs and if they can do it—and many local authorities in the past have passed resolutions in favour of having it—that is a different proposition. I cannot, of course, make any commitment on the matter, but I am interested in the suggestion that my hon. Friend made about that. We shall certainly consider not only the betting tax between now and this time next year, but also the possibility of such a tax on land values, particularly in relation to the adjustment that must take place between national and local finances and the revision of the block grant to which we are committed. I shall be very glad to have representations made from any part of the House, because many hon. Members may be interested in this—on whether, into this new scheme of the financial relations between the Treasury and the local authorities, it would be feasible to fit in some plan whereby the local authorities who wish to do it—because there would, of course, be nothing compulsory about it—would be able to raise part of their revenues from a tax on site values within their own area. Obviously, the suggestion is worth looking into, and I undertake to have a look at it and to keep in touch with any hon. Members or group of hon. Members who have any views about it either for or against. It is a fruitful suggestion, and one which, I think, ought to be pursued.

With regard to land, I should like to make one other observation. Reference was made in the Debate to the National Land Fund, which it is proposed to set up under the Finance Bill. In regard to societies like the National Trust and others, which it is my desire and the desire of the House to help in some appropriate fashion, I am sorry to hear it said that they are to receive such large sums from this Fund, that it will not be necessary for others to contribute to their resources. That was not any part of my intention, and I want to remove any misapprehension of the intention of the Fund. Perhaps I may be allowed to repeat that the provisions in the Finance Bill regarding the National Land Fund which we shall discuss in detail in Commitee are to cover the use of the Fund, only in so far as that will be used to repay to the Inland Revenue the value of land which may be tendered instead of Death Duties. There are other possible uses, which may be determined later on by separate legislation. That cannot be brought into operation this Session, because we have enough legislation to keep the House busy for the remainder of the Session, but we have admirable legislation to bring forward for the attention of the House later. In this matter I will keep in close touch, of course, with my right hon. Friend the Minister of Town and Country Planning, par- titularly as regards the use of the money for a particular purpose.

Mr. Bracken

Why not buy Wentworth Woodhouse from the owner?

Mr. Dalton

We could only do that if the owner of Wentworth Woodhouse were unfortunately to pass away. I should be very sorry if the owner of Wentworth were to pass away. But if that happened, the executors might hand over Wentworth Woodhouse to the Inland Revenue, who might pass it on to the National Trust. Otherwise the Finance Bill does not apply. That is hypothetical and playful illustration.

What I was desiring to explain to the House, and I hope, to the public, in view of the misunderstanding that may have arisen, is that I wish to make it clear, that the National Trust and the other non-profit making societies who are covered and defined in Clause 42 of the Finance Bill, will not at present derive any benefit in cash, from the National Land Fund. I hope, however, that opportunities will arise under these provisions for asking the National Trust, or some of these other societies to hold on behalf of the nation real property which might be handed over at the desire of executors in payment of Death Duties. But there is no question at the moment of my making money available from the National Land Fund to the National Trust to enable it to extend its acquisitions, many of which I most cordially approve, or to provide for their maintenance.

I wish to add this about the National Trust. I regard its work as of great national importance. It has been very valuable. I hope it will be continued on the same broad lines as in the past and on a larger scale. It has now been in existence for 50 years and it is just about to issue, I understand, a Jubilee Appeal to the public for an increase in membership and in financial resources. I wish this appeal every success and should like to do something to reinforce it. I should, therefore, be prepared to recommend to the House, not now, but in due course, to make a grant to the National Trust on a pound-for-pound basis with a view to doubling the proceeds of this appeal. The House would have to approve that on an Estimate, but at the right moment I would be prepared to put it up. There must be a maximum to the amount—it cannot be limitless—but I do not wish at this stage, to name a fixed amount, even if I have one in mind, because this might discourage the success of the appeal, to which I wish all good fortune. I hope that this has made it clear.

Mr. C. Davies

Would the Chancellor consider handing over such land, passed on to him from executors, to local authorities for the same purpose?

Mr. Dalton

Undoubtedly, yes, where landed is tendered in payment of Death Duties. I am anxious that that should become a quite common practice, and I think it will be to the advantage of the executors and the inheritors of the estate, no less than to the advantage of the general public, where Death Duties are paid in part or in whole in land. It is then a question of considering what public body is suitable to perform that duty, and, quite evidently, local authorities would be within the list of suitable public bodies. I hope that over the years, if we get this practice more habitual, there will be a substantial transference of land passing on Death Duties to local authorities in various parts of the country. I welcome that, and would do my best to assist administratively.

I pass to the more general question of our financial position. I have been doing a little quiet research, thinking it would be of interest to Members of the House, into what happened at the end of the last war, and have compared what happened then, with what is happening now. Many of the things that are said now, must obviously be related to our past experience, because at the end of the last war there was a Government, a very gifted body of men, in charge of the affairs of this country, and the Chancellor of the Exchequer was the late Sir Austen Chamberlain, a very distinguished Conservative statesman. I am sure the House would feel that in the difficulties that confronted him then he did his best, and it is interesting to see what that best was. I have been reproached with a lack of control of expenditure. It has been said that under this Government reckless expenditure is taking place, that expenditure is not being reduced. The Estimates for 1946–7, the first full year of peace, amount to 64 per cent. of the expenditure in 1944–5. That was the peak year of expenditure in the war. Hon. Members opposite say that that is a pretty poor percentage, that it ought to be much lower, do they not? Was not that what the right hon. Gentleman said?

Mr. Bracken

I have several times witnessed the Chancellor using percentages in this House. In the hands of such a gifted exponent, a former teacher of the London School of Economics, they might mean anything. Could we have real figures of expenditure, rather than percentages?

Mr. Dalton

Given sufficient time, any quantity of figures can be supplied. They are all here. But I thought it was quite clear, from the right hon. Gentleman's speech, that he thought we were still spending too much. Let us get the general form. The right hon. Gentleman said that we were spending too much, that not sufficient economies had been achieved. Why should hon. Members opposite deny it? That is their view. Let them say boldly that we are spending too much, that, in other words, we have reduced expenditure too little from the high peak. I am not referring to the constituency of that name, which I hope we shall soon have transferred. I do not know who owns it, and I do not want him to die prematurely, but it might operate to our good.

Mr. Molson

It would not be of the slightest advantage to the right hon. Gentleman's Party if I did die.

Mr. Dalton

I was not referring to the hon. Gentleman. I was referring to the owner of The High Peak.

Mr. Molson

I am the owner of The High Peak.

Mr. Dalton

I congratulate the hon. Gentleman on a most happy coincidence, very rare in our Parliamentary relationships. In the circumstances it is possibly a case for a gift inter vivos.

Mr. Molson

When the surging waters of Socialism had risen almost everywhere else in Derbyshire, The High Peak still stood above them.

Mr. Dalton

A remarkable distinction. But to return to the expenditure. As I understand the matter, the criticism is that we are spending too much. Very well. We have done our best, and we are getting the expenditure down to 64 per cent. Hon. Members opposite shall have the figures, if they want them. These percentages are quite interesting. The right hon. Gentleman must not try to get me to conceal them from the public. Our Estimates for 1946–47 provide for spending 64 per cent. of the expenditure in the peak year of the war. We have done our best. So did Sir Austen Chamberlain. His expenditure in the first full peace year was 61 per cent. He only did fractionally better in the first postwar year—61 per cent. as against 64 per cent.—when he had no large new social programme to finance. The increased expenditure on such a programme is naturally bound to diminish the rate of decline in the total expenditure, even though that total expenditure is declining to 64 per cent. of the peak wartime total in the current financial year, by reason—and this is one of the points raised by the right hon. Gentleman opposite—of rapid reductions now being made in the total expenditure on munitions and supplies for the Armed Forces, and in the numbers in the Armed Forces themselves.

It has been said that as a consequence of expenditure being so high, taxation is still excessive. There are some taxes I would be very glad to reduce further. I would like to reduce further the tax on the lower incomes, and those on earned incomes. I would like to reduce taxes on a wide range of commodities that are necessary for the maintenance of a reasonably comfortable standard of life. I would like to do all these things, and I have hopes that I, or succeeding Chancellors, will, and will strive to and will be able to do all these things. We do not, however, admit that we have done nothing so far. In the two Budgets which I have introduced there have been very substantial reductions in taxes. What did Sir Austen Chamberlain do? In the two first Budgets which he introduced after the last war, there were embarrassing tax increases. That should be known and recognised. [An HON. MEMBER: "He did that to stop inflation."] On which my comment is that he did not succeed in that object. In both those Budgets taxation was, on balance, increased. In his first Budget, he increased the tax on spirits. I did not do that. He increased the tax on beer. He increased the Estate Duties at the higher levels. He did not reduce them at the lower levels as I propose to do. He reduced the Excess Profit Duty, the rough equivalent of the E.P.T. of later days, in his first Budget, from 80 per cent. to 40 per cent., but in his Second Budget he swerved and put it up again to 60 per cent. That is not what we do. We inherited the Excess Profit Tax from our predecessors at 100 per cent., and the House agreed to the proposal in my first Budget to reduce it to 60 per cent., and I am now proposing to the House—and here I do not know whether I shall have support from the Conservative benches—to sweep it away altogether. These were much more drastic tax reductions than those of the Tory Chancellor after the last war.

Mr. Stanley Prescott (Darwen)

The Chancellor has quoted percentage figures to the House, mentioning 64 per cent. He should make clear the dates of these Budgets, and he ought also to convert the percentages into actual figures.

Mr. Dalton

The dates for the two Budgets were April, 1919, and April, 1920. The figures are here. The last war, of course, cost a lot less than this war, but everything is relative. I am quite prepared to read out the figures. It really does not seriously affect the argument, because the percentage on today's total will be a larger figure than the same percentage on a smaller total, and to that extent the total left, speaking in absolute terms, will be larger than the total reduction in other terms.

However, I am very glad to give one or two figures to illustrate that. In the last peak year of the last war, 1919–20, the tax revenue was £709,000,000. The debt interest in that year was £332 million, and, in addition to that, there was a total expenditure of £1,622 million. I need not quote our figures because they have been published. If hon. Members wish to hear them, they shall, but the figures have all been published. The comparable figures for 1945–6 are: taxation revenue, excluding E.P.T., which is going off, £2,730 million; plus E.P.T., £466 million; total taxation revenue, £3,197 million. I am not going on reading out these figures. They can all be checked. I frankly say that the figures are larger this time; the reductions I am making ar much larger than those of the Conservative Govern- ment, and the percentages are practically the same.

Sir Harvie Watt (Richmond)

Can the right hon. Gentleman also give the comparable figures of the increases in local rates at the same period?

Mr. Dalton

Local rates vary a great deal, but, of course, I am only too happy to read out statistics to the House either now or at Question time. [Interruption.] I will race the hon. Gentleman up Scawfell any day he likes, although I am not sure that I would make that challenge to the hon. Member for Wallasey, who has been practising in Switzerland. After this digression, I return to the proposition that we have reduced expenditure substantially, as rapidly as and in much larger quantities than the Tory Government did after the last war.

Lieut.-Commander Gurney Braithwaite (Holderness)

I am sure the right hon. Gentleman wants to deal with this subject clearly——

Mr. Dalton

I am most anxious to do so.

Lieut.-Commander Braithwaite

Is there not another comparison? Is it not the case that whereas in 1918 hostilities continued for seven months—the Armistice was signed on 11th November, 1918—on this occasion major hostilities ceased on 8th May, and minor hostilities in August?

Mr. Dalton

We are dealing here with the Finance Bill to cover this financial year, and what I am concerned to argue is that in this financial year we have reduced expenditure as fast as our predecessors did after the last war, and I want that to go over, in spite of these interjections. It is because it is going over—rather uncomfortably for some hon. Members—that these interjections are arising. I go on to say that whereas Sir Austen Chamberlain devoted the first two Budgets after the last war to increasing taxes, we have devoted the first two postwar Budgets to reducing them. They are very substantial reductions. Is that not true? Sir Austen Chamberlain put them up, and I put them down.

Sir Wavell Wakefield (St. Marylebone)

It is 3s. higher than it was in the last war.

Mr. Dalton

That is all the more reason for reducing it. The Opposition are showing a certain disposition not to accept with alacrity something to which I would have thought everybody would agree. These are facts of history. After the last war Sir Austen Chamberlain pushed up taxation by very substantial amounts. It is true he ended by being a Knight of the Garter——

Mr. Bracken

He also balanced his Budget.

Mr. Dalton

cWait and see. Immediately after he balanced it, we relapsed into a most shocking trade depression. Which only proves that the simple-minded Conservative doctrine that we must balance the Budget at all costs, is very foolish. When last practised by Sir Austen Chamberlain it led us to most frightful economic disorders. Sir Austen Chamberlain increased taxation, whereas I, in the two Budgets I have had the honour to introduce, have reduced taxation by more than £500 million. The Opposition do not like percentages, so that is an absolute figure for them. It was not mentioned by any spokesman on the other side. It is a substantial beginning in tax reduction.

Mr. Osborne

I made the point strongly, because the Financial Secretary had made the point. I said it was not enough to reduce taxation by that amount. It is not true to say it was not mentioned on this side.

Mr. Dalton

I shall refer to the hon. Gentleman's speech in relation to the very interesting points he made about the cost-of-living subsidies in a moment. If it is not enough to take taxation off by £500 million in two Budgets, then what can be said of the Tory Chancellor after the previous war, pushing taxation up on spirits, wines, cigars, and much else?

Nor is this all that there is to be said by way of comparison. Reference has been made to the Stock Exchange. I never go to the Stock Exchange, indeed I have never been there; I should not know my way there. But it is noticeable that there is a certain difference between the level of the national credit now and what it was in Sir Austen Chamberlain's time at the end of the first world war. We were then on a 5⅜ per cent. basis. At that time 5 per cent. National War Bonds were being repaid at substantial premiums and were yielding £5 7s. per cent., 5⅜ per cent. That was under a Tory Government and Chancellor, at the end of that war. [HON. MEMBERS: "No."] Well, it was a Tory Government assisted by Mr. Lloyd George for a while, until they got tired of him. The national credit would not help anybody who was trying to build houses then, at any rate. My right hon. Friend is now assured of being able to get his money at 2½ per cent. whereas in those days they were paying 5⅜ per cent. There was a slight improvement in June, 1919, but things fell away into the depression which afterwards took place, and 2½ per cent. Consols, old Consols, in December, 1920, collapsed to a record all-time low of 44. At that time the rate of interest was substantially over 5 per cent.

If I may make one other comparison I would point out that on long term loans we can do 2½ per cent.; they could offer only 5⅜ per cent. National credit stands higher now. In the short term market, Treasury Bills, which, as the House knows, run for months rather than years, were at 3½ per cent. in July, 1919, and went up to 6½ per cent. in April, 1920. The Government at that time had to pay 6½ per cent. accommodation for three months. We now get it at a half of one per cent. The previous all-time high for Old Consols, before this Government came in and improved the national credit, and won the confidence of all except the Opposition, was 94 in 1935. Where are they now, after these events, even after the events of yesterday? They are at 97. That is a very remarkable advance. Measured by the yardsticks of the City this is a better Government than we had at the end of the first World War, and it is doing much better in the whole field of public finance, whether in regard to tax reductions, expenditure reductions, or conditions as a whole. These are facts which should be borne in mind. They provide a background for the generalities of to-day we have now, following upon the events of the last few days, established British national credit for a medium long term—18 to 21 years—at 2½ per cent. That has never been done before within the memory of this House. I do not think even the right hon. and noble Lord, the Father of the House, can recall a time when the national credit stood higher.

Earl Winterton

All I say is "Wait and see."

Mr. Dalton

I am the last person who would ever offer tips to people who frequent the Stock Exchange. We shall certainly wait and see. I am only recording progress up to date, which is very substantial. We have reduced taxation much faster, in spite of new and important obligations which we have taken on, and raised the national credit much higher than our predecessors after the last war.

There has been much gloom in the course of this Debate about cost-of-living subsidies. The hon. Member for Louth (Mr. Osborne) and the hon. Member for Leominster (Mr. Baldwin) made interesting speeches both presenting the extreme opinion which was cautiously repudiated by the right hon. Gentleman who has just spoken. It obviously had not been cleared by their Front Bench.

Mr. Osborne

We have freedom on this side to express our own opinions.

Mr. Dalton

I am anxious to express accurately what was said. They both said that the cost-of-living subsidies were dangerous and should be swept away altogether as soon as possible; that they were unfair to the farming community because they created an unreal impression. The hon. Members, therefore, urged that they should be swept away altogether. I think the right hon. Gentleman opposite did not associate himself with that. I think he was at pains to say that that was not his opinion. If I am misrepresenting him he will correct me.

Mr. Bracken

I never presume to speak for anyone in this House except myself.

Hon. Members

Oh.

Mr. Dalton

Well, that does show a state of disorder and indiscipline on the benches opposite which may go far to explain their position relative to ourselves. The right hon. Gentleman has not told me whether or not, speaking only for himself, he expressed dissent from the views of the hon. Members behind him. I gather he did express dissent. If I am misrepresenting him, he will correct me. He entirely dissociated himself from the views expressed by hon. Members behind, and so do I.

Mr. Baldwin

We were speaking as individuals expressing our own individual views, and we, on this side of the House, are entitled to express our own individual views.

Mr. Dalton

I am very interested in the hon. Gentleman's individual view. It is all a debatable matter. I was only wanting to try to get clear what was thought by the various hon. Gentlemen who spoke on that side this evening. We have also great freedom of speech on this side. Great liberties are recorded here too.

Mr. Bracken

How many Under-Secretaries have you lost?

Mr. Dalton

Well, Sir, we have found as many as we have lost, and we would be able to find more if we lost more. Now, Sir, may we return to the cost-of-living subsidies? The right hon. Gentleman is always trying to sidetrack these discussions, but we want to know whether the Tory Party are in favour of scrapping them. It is only fair that we should know whether the Tory Party recommend to the people that we should scrap them.

Mr. Bracken

The first time the question of the cost of these food subsidies was raised in this House was by the Chancellor who said they were far too high. It is no use his talking as he is doing now. Can he tell the House what plans he has for meeting this intolerable situation?

Mr. Dalton

It is quite clear to me that right hon. and hon. Members opposite do not know, because they have not thought about it. They are all at sixes and sevens. The view of the Government is perfectly clear, and has been stated by me in a manner which, as the right hon. Gentleman was kind enough to say, was lucid. I have said that these subsidies are costing a lot of money. For this year at least, it was my intention, with the full concurrence of my colleagues, to maintain the cost-of-living figure where it now stands; there might well be some small differences, but substantially we were going to hold it where it was, and we are perfectly willing to say that we will gladly have it debated on any platform in the country.

May I add a sentence on the merits? If there is any factor operating to check inflationary rises in wages and prices it is this stabilisation policy on the cost of living. It has already prevented a number of undesirable inflationary elements. But it is important to remember that it affects some of the lowest wage earners and the old age pensioners—and they cannot get as easy an adjustment as some. We stand for protection, but I fear that some of the right hon. and hon. Members opposite stand for stripping this protection off altogether——

Mr. Osborne

Will the Chancellor allow me to make this explanation? I asked that help should be given to the poorest people. I think HANSARD will prove my remarks.

Mr. Dalton

I think the readers of HANSARD will judge in due course. We are in favour of keeping these subsidies and in favour of protecting the poorest people of the land. The Tory Party are split down the middle, and right across, and I do not think they know where they are. They are a discordant horde. Reference has been made to exports, and to the handicap which high taxation was said to put on exports. I would like to say that exports are rising steadily. [An HON. MEMBER: "Not invisible exports."] May I suggest that we start with the visible and then we can pass to the invisible later? In my role of deputy-deputy-President of the Board of Trade, I am in a position to give some information which has not previously been given to the House. Exports last month continued their upward advance. The export drive continues to achieve remarkable success, and I am able to announce that the exports—the visible exports—last April amounted to about £69,500,000 for the month, which is an increase of £2,500,000 over the previous month, and which, in turn, was a high record for this period of the post war time. The rise in exports has been continuous from month to month—I go back to January of this year—representing a steady seven to eight per cent. per month increase. That is very remarkable, and I am sure the House will be very delighted to hear it, and indeed everybody, except those who do not exist in this House—that purely imaginary category who prefer the disad- vantage of their political opponents to the advancement of this country. There are of course no such persons in this House; therefore I am sure everyone here is delighted.

We are going to a Division tonight, but let us be sure on what we are going to divide on. The Conservative Opposition is going to vote against everything in this Finance Bill. They are going to vote against the continuance of Imperial Preference on sugar. This is not light matter, nor will the "Daily Express" so regard it tomorrow. Hon. Members must do better than that. Lord Beaverbrook will make his own comments, above his own autograph, on the attitude of the Tory Party in voting to scrap the Imperial Preference on sugar. We are voting for the Empire, and hon. Members opposite are voting for a "little England" of pseudo-reactionaries. This Bill repeals the Excess Profits Tax; the Tory Party are against doing so. If this Finance Bill were rejected, the Excess Profits Tax would remain at 60 per cent. I propose to abolish it. I propose also a series of reliefs and benefits for business men under the heading of terminal arrangements under E.P.T. My hon. Friend the Member for Edgbaston (Sir P. Bennett) appears a little embarrassed because we are doing it largely at his request. I think he had better abstain from voting or come into the Lobby with us, otherwise one of the few seats the Opposition retain in Birmingham will be submerged next time. We are proposing the relief of small estates of £2,000 or less altogether from Death Duties. The Tories want to keep that tax. They are going to vote against my proposal to make the rich pay more. They are going to vote to shelter the millionaire and to go on fleecing the poor.

This Finance Bill also provides many advantages in the field of Income Tax. It proposes to exempt altogether from Income Tax the contributions to the great National Insurance Scheme of all employed persons, of all employers, and of self-employed persons. The Tory Party are against that. Having clamoured prematurely to make a relief in the earned income allowances last October, when I refused it, now they are going to vote against my proposal to increase the earned income allowance from one-tenth to one-eighth. They are against earned income relief, they are against the relief to the married woman earning, and they are against the old people having postwar credits. They are going to vote against that. They are going to vote against the proposal that the young people should have a bit more of the land which should belong to them and not to a few landowners. Finally, they are going to vote against the reliefs of the Purchase Tax for which I am asking, and to maintain the Entertainments Duty on all forms of outdoor entertainment. I say, Let them go into the Lobby against all those things—and bad luck to them.

Question put, "That the Bill be now read a Second time."

The House divided: Ayes, 181; Noes, 88.

Division No. 174.]	AYES.	111.50 p.m
Adams, Richard (Balham)	Griffiths, D. (Rolhar Valley)	Porter, G. (Leeds)
Allen, A. C. (Bosworth)	Guest, Dr. L. Haden	Price, M. Philips
Allen, Scholefield (Crewe)	Guy, W. H.	Pursey, Cmdr. H.
Attewell, rl. C	Hall, W. G. (Colne Valley)	Ranger, J.
Awbery, S. S.	Hamilton, Lieut.-Col. R.	Reid, T. (Swindon)
Ayles, W. H.	Hardy, E. A.	Rhodes, H.
Ayrton Gould. Mrs. B.	Hastings, Dr. Somerville	Roberts, Sqn.-Ldr. Emrys (Merioneth)
Barton, C.	Henderson, A, (Kingswinford)	Roberts, Goronwy (Caernarvonshire)
Beattie, J (Belfast, W.)	Herbison Miss M.	Royle, C.
Bechervaise, A. E.	Hewitson, Capt. M.	Shackleton, Wing-Cdr. E. A. A
Benson, G.	Hobson, C. R.	Sharp, Lt.-Col. G. M.
Bing, Capt. G. H. C.	Holman, P.	Shawcross, C. N. (Widnes)
Bowden, Flg.-Offr. H W	Holmes, H. E. (Hemsworth)	Shawcross, Sir H. (St. Helens)
Bowles, F. G. (Nuneaton)	Hudson, J. H. (Ealing, W.)	Shurmer, P.
Braddock, T. (Mitcham)	Hughes, Hector (Aberdeen, N.)	Silkin, Rt. Hon. L.
Brook, D. (Halifax)	Hughes, Lt. H. D. (W'lverh'plon, W.)	Silverman, J. (Erdington)
Brown, George (Belper)	Hutchinson, H. L (Rusholme)	Silverman, S S. (Nelson)
Burden, T. W.	Hynd, H. (Hackney, C.)	Simmons, C. J.
Butler, H. W. (Hackney, S.)	Hynd, J. B. (Attercliffe)	Skeffington, A. M.
Callaghan, James	Isaacs, Rt. Hon. G. A.	Skinnard, F W.
Chetwynd, Capt. G. R.	Jones, D. T. (Hartlepools)	Smith, Capt. C. (Colchester)
Clitherow, Dr. R	Jones, J. H. (Bolton)	Smith, H. N. (Nottingham, S.)
Cobb, F. A.	Keenan, W.	Smith, S. H. (Hull S.W.)
Cocks, F. S.	Kinghorn, Sqn.-Ldr. E	Snow, Capt. J. W.
Coldrick, W.	Levy, B. W.	Soskice, Maj. Sir F
Collindridge, F.	Lewis, A W. J. (Upton)	Sparks, J. A.
Collins, V. J.	Lewis, J. (Bolton)	Stamford, W
Corbet, Mrs. F K. (Camb'well, N.W.)	Lewis, T. (Southampton)	Steele, T.
Corlett, Dr. J	Lipton, Lt.-Col. M.	Stewart, Capt. Michael (Fulham, E.)
Daines, P.	Lyne, A. W.	Stokes, R. R.
Dalton, Rt. Hon. H.	McAllister, G.	Swingler, S.
Davies, Edward (Burslem)	McGhee, H. G.	Taylor, H. B. (Mansfield)
Davies, Clement (Montgomery)	McKay, J. (Wallsend)	Taylor, R. J. (Morpeth)
Davies, Harold (Leek)	Mackay, R. W. G. (Hull, N.W.)	Thomas, Ivor (Keighley)
Davies, S. O. (Merthyr)	McLeavy, F	Thomas, I. O. (Wrekin)
Deer, G.	Mailalieu, J. P. W.	Thomson, Rt. Hn. G. R. (Ed'b'gh, E.)
de Freitas, Geoffrey	Manning, Mrs. L. (Epping)	Tiffany, S.
De!argy, Captain H. J	Marshall, F. (Brightside)	Titterington, M. F.
Donovan, T.	Medland, H. M.	Tomlinson, Rt. Hon. G
Douglas, F. C. R.	Middleton, Mrs. L.	Ungoed-Thomas, L.
Driberg, T. E. N.	Mikarde, Ian	Walkden, E.
Dugdale, J. (W. Bromwich)	Mitchison, Maj. G. R	Warbey, W. N
Durbin, E. F. M.	Monslow, W.	Weitzman, D.
Ede, Rt. Hon. J. C.	Moody, A. S.	Wells, W. T. (Walsall)
Edwards, A (Middlesbrough, E.)	Morgan, Dr. H. B.	White, H. (Derbyshire, N.E.)
Edwards, John (Blackburn)	Morley, R.	Whiteley, Rt. Hon. W
Edwards, N. (Caerphilly)	Morris, P (Swansea, W.)	Wigg, Col. G. E.
Edwards, W. J. (Whitechapel)	Moyle, A.	Wilkins, W. A.
Evans, S. N (Wednesbury)	Murray, J. D	Willey, F. T. (Sunderland)
Ewart R.	Nicholls, H. R. (Stratford)	Williams, D. J. (Neath)
Fairhurst, F.	Noel-Buxton, Lady	Williams. J. L. (Kelvingrove)
Farthing, W. J.	O'Brian, T.	Wilson, J. H.
Fletcher, E. G. M. (Islington, E.)	Oldfield, W. H	Woodburn, A.
Follick. M.	Paget, R. T.	Woods, G. S.
Foot, M M.	Paling, Will T. (Dewsbury)	Yates, V. F.
Freeman, Maj. J. (Watford)	Palmer, A. M. F.	Younger, Hon. Kenneth
Gaitskell, H. T. N.	Pargiter, G. A.	Zilliacus, K.
Gan'ey, Mrs. C. S	Peart, Capt T. F
Gibson, C. W.	Perrins, W.	TELLERS FOR THE AYES:
Gordon-Walker, P. C.	Piatts-Mills, J. F. F.	Mr. Joseph Henderson and
Greenwood, A. W. J (Heywood)	Popplewell, E.	Mr. Pearson.
Grierson, E.	Porter, E (Warrington)

NOES.
Agnew, Cmdr. P. C.	Birch, Niget	Braithwaite, Lt. Comdr. J. G.
Aitken, Hon. Max	Bower, N.	Buchan-Hepburn, P. G. T
Baldwin, A. E.	Boyd-Carpenter, J. A.	Bullock, Capt. M
Bennett, Sir P.	Bracken, Rt Hon. Brendan	Carson, E.

Challen, C.	Keeling, E. H.	Poole, O. B. S. (Oswestry)
Channon, H.	Kingsmill, Lt.-Col. W. H.	Prescott, Stanley
Churchill, Rt. Hon. W. S.	Lindsay, M. (Solihull)	Raikes, H. V.
Cooper-Key, E. M.	Low, Brig. A. R. W.	Rouser, Col. L.
Corbett, Lieut.-Col. U. (Ludlow)	Lucas-Tooth, Sir H.	Ross, Sir R.
Crowder, Capt. J. F. E	Lyttelton, Rt. Hon. O.	Sanderson, Sir F.
Cuthbert, W. N.	Macdonald, Capt. Sir P. (I. of Wight)	Stanley, Rt. Hon. O.
Darling, Sir W. Y.	Mackeson, Lt.-Col. H. R.	Stoddart-Scott, Col. M
Davidson, Viscountess	Macmillan, Rt. Hon. Harold (Bromley)	Strauss, H. G. (English Universities)
Dodds-Parker, A. D.	Macpherson, Maj. N. (Dumfries)	Stuart, Rt. Hon. J. (Moray)
Dugdale, Maj. Sir T. (Richmond)	Maitland. Comdr. J. W.	Taylor, C. S. (Eastbourne)
Duthie, W. S	Marples, A. E.	Taylor, Vice-Adm. E. A. (P'dd'ton, S.)
Eden, Rt. Hon. A.	Marsden, Capt. A.	Thomas, J. P. L. (Hereford)
Erroll. F. J.	Marshall, D. (Bodmin)	Thorneycroft, G. E. P. (Monmouth)
Fletcher, W. (Bury)	Maude, J C	Turton, R. H.
Foster J. G. (Northwich)	Medlicott, F.	Wakefield, Sir W. W.
Fox, Sqn.-Ldr. Sir G.	Mellor, Sir J.	Walker-Smith, D.
Glossop, C. W. H.	Malson, A. H. E.	Watt, Sir G. S. Harvie
Grimston, R. V.	Morrison, Rt. Hn. W. S. (Cirencester) Wheatley, Colonel M. J.
Hannon, Sir P. (Moseley)	Neven-Spence, Sir B.	Willoughby de Eresby, Lord
Hare, Lieut.-Col. Hn. J. H. (W'db'ge)	Nield. B. (Chester)	Winterton, Rt. Hon. Earl
Head, Brig. A. H.	Noble, Comdr. A H. P.	Young, Sir A. S. L. (Partick)
Hinchingbrooke, Viscount	Nutting, Anthony
Hollis, M. C.	Orr-Ewing, I. L.	TELLERS FOR THE NOES
Howard, Hon. A.	Osborne, C.	Mr Drewe and Major Conant
Jeffreys, General Sir G.	Peake, Rt. Hon. O
Joynson-Hicks, Lt.-Cdr. Hon. L. W	Pitman, I. J.

Bill accordingly read a Second time.

Bill committed to a Committee of the Whole House for Monday next.