Commons Sitting of 16 April 1947

Preamble
The House met at Half past Two o'clock
PRAYERS
[Mr. SPEAKER in the Chair]

SOVIET DELEGATION (LETTER OF THANKS)
Mr. Speaker: I have received the following communication, which I think I ought to read out to the House:
"Dear Mr. SPEAKER of the House of Commons,
On leaving the borders of your country, the Delegation of the Supreme Soviet of the Union of Soviet Socialist Republics expresses to you, and in your person to the whole of the House of Commons, its sincere thanks for the most cordial welcome given to our Delegation. We are returning to our homeland convinced that the strengthening of friendly relations between Great Britain and the U.S.S.R. is the common aim of our peoples and will contribute to the establishment of a universal, stable and lasting peace.
Allow me to transmit through you to the people of Great Britain my best wishes for its success in its economic and cultural progress.
(Signed) V. KUZNETSOV."
Hon. Members: Hear, hear

PRIVATE BUSINESS
  LONDON COUNTY COUNCIL (MONEY) BILL
  "to regulate the expenditure on capital account and lending of money by the London County Council during the financial period from the first day of April one thousand nine hundred and fortyseven to the thirtieth day of September one thousand nine hundred and fortyeight and for other purposes," presented, and read the First time; and referred to the Examiners of Petitions for Private Bills.
  FORTH ROAD BRIDGE ORDER CONFIRMA TION BILL
  Read the Third time, and passed.

STANDING ORDERS (PRIVATE BUSINESS)
The Chairman of Ways and Means (Major Milner): I beg to move,
"That the several Amendments to the Standing Orders relative to Private Business hereinafter stated in the Schedule be made:—
SCHEDULE
Standing Order 39, page 116, line 6, after "Home Office," insert "the Ministry of Agriculture and Fisheries."
Standing Order 39, page 116, leave out lines 22 to 28.
Standing Order 39, page 117, Leave out from the beginning of line 34 to the end of line 8, in page 118.
Standing Order 211, page 209, 19, at end insert: "except as provided by Standing Order 228A."
After Standing Order 228, insert new Standing Order 228A: (Application of S.Os. 169, 191 and 218):
(1) The following Standing Orders shall apply to Bills to confirm Provisional Orders issued under the Procedure Act in like manner as to Private Bills, that is to say:
Standing Orders 169 (Attachment of financial memorandum to certain Bills) and 191 (Tolls and charges not in the nature of a tax).
(2) Standing Order 218 (Order of Proceedings in House on Confirming Bills) shall apply to Bills to confirm Provisional Orders issued under the Procedure Act."
These Amendments to the Standing Orders relating to Private Business are quite mild ones. If I could, with your permission, Mr. Speaker, take them all together, the first three relate to Amendments to Standing Order No. 39 merely to secure that the Minister of Agriculture and Fisheries receives a copy of all Private Bills. In the past, this has not been so, and that Ministry only received copies of Bills which had particular reference to the Ministry. The new Standing Order No. 228A makes no new procedure, but its effect is to apply to Scottish Provisional Orders the procedure which applies to other forms of Private Bills. When the Standing Orders were revised, that particular point was overlooked, and this Amendment puts the matter in order.
Question put, and agreed to.

ORAL ANSWERS TO QUESTIONS
  CIVIL AVIATION

    Air Navigation Order (Amendments)
    Mr. Boyd-Carpenterasked the Parliamentary Secretary to the Ministry of Civil Aviation how many amendments have been made to the Air Navigation (Consolidation) Order, 1923, S.R. & O., 1923, No. 1508, prior to those contained in S.R. & O., 1947, No. 193; and when it is intended to issue a Consolidated Order.
    The Parliamentary Secretary to the Ministry of Civil Aviation (Mr. Lindgren): The text of the Air Navigation (Consolidation) Order, 1923, as amended by thirty-four Orders in Council made to 19th February, 1946, inclusive, was reprinted early last year under the title "Air Navigation (Consolidation) Order, 1923, asamended to 19th February, 1946." No further amendment was made after that date until S.R. & O., 1947, No. 193 A comprehensive Air Navigation Order under the Air Navigation Act, 1947, is in course of preparation, and will be made as soon as practicable.

    B.E.A.C. (Chairman)
    Mr. Geoffrey Cooperasked the Parliamentary Secretary to the Ministry of Civil Aviation, on what special grounds of wide technical, commercial, aeronautical or other experience did the Minister make the appointment of the new Chairman of B.E.A.C.
    Mr. Lindgren: The Chairman-designate of the British European Airways Corporation is deemed by my noble Friend the person best fitted for the appointment, having regard to all relevant considerations, including those specified by the hon. Member.
    Mr. Cooper: Is the Minister not aware that the early association of this individual with civil aviation came about through the Erlanger and Whitehall Securities Financial Groups, and that the workers of this country have suffered long enough under the rule of privilege and incompetence to justify him looking elsewhere when making his appointments?
    Mr. Lindgren: If I might say so, that is an unfortunate observation. The gentleman concerned has a very creditable record in civil aviation right from 1935, including the appointment of Commanding Officer of the A.T.A. during the war.
    Mr. Speaker: I rather deprecate these personal attacks on people who cannot answer.
    Mr. Cooper: The point I want to make regarding this appointment is that the Minister is here to answer—
    Mr. Lennox-Boyd: May I ask the Parliamentary Secretary whether it is not the case that the gentleman appointed—
    Hon. Members: Order.
    Mr. Speaker: Mr. Cooper.
    Mr. Cooper: May I ask the Parliamentary Secretary if his noble Friend is not aware that these appointments are of tremendous importance at this stage of development of the civil aviation Corporations, and that only qualifications of competence and knowledge of the job should be 'taken into account, and not what a man had done during the war?
    Mr. Lindgren: It is knowledge and competence which guided my noble Friend in making this appointment.
    Mr. Lennox-Boyd: May I ask the Parliamentary Secretary whether he will bear in mind that many of us on these Benches who had first-hand knowledge of this man during the war, regard this appointment as a very good one?
    Mr. Walter Fletcher: On a point of Order. Regarding the personal imputation made by the hon. Member opposite, I would point out that it was also made in respect of two firms. Is it in Order, Mr. Speaker, to cast slurs on these firms, and would the Minister make the same remarks on their behalf as he made on behalf of the gentleman in question?
    Mr. Lindgren: I have no knowledge of the firms. All I am concerned with in this House is with the gentleman who has been appointed to the post. In that regard I would further state that my noble Friend, having made the appointment, is fully prepared to justify and defend it.
    Air-Commodore Harvey: Does the hon. Gentleman agree that this gentleman ran a most excellent show in the A.T.A.

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    during the war, and that that in itself is a very good recommendation for the appointment?
    Mr. Lindgren: That is my information.
    Mr. Cooper: Is the hon. Gentleman aware that the efficiency of the A.T.A. never came up for review in this House, and could not the control of that organisation have been equally well carried out by an officer who had done operational service?
    Mr. Speaker: I think we had better get on.

    Corporation Staffs
    Mr. Geoffrey Cooperasked the Parliamentary Secretary to the Ministry of Civil Aviation the present size of the staffs of B.O.A.C., B.E.A.C. and B.S.A.A.C., respectively.
    Mr. Lindgren: In supplementation of the figures given in the British Overseas Airways Corporation report for the year ended 31st March, 1946, the present number of employees in the three Corporations, including staff locally engaged overseas, are: British Overseas Airways Corporation, 24,497; British European Airways Corporation, 5,731; British South American Airways Corporation, 972.
    Mr. Cooper: In view of the Ministry of Labour's Inter-Departmental Report, issued towards the end of the war, which showed that, in the case of B.O.A.C., there was no proper system of staff control, can my hon. Friend say what steps are being taken to see that there is a proper system of staff control applicable to these three Corporations, because of these ever increasing figures of staff?
    Mr. Lindgren: Staff management in its detail is a matter of management to be decided inside the Corporations. By the express desire of this House, my noble Friend is excluded from the day-to-day management of the Corporations.
    Mr. Cooper: Would it not be appropriate for my hon. Friend's noble Friend to take into consideration the fact that the staff should be in proportion to the tasks which the Corporations have to perform?
    Mr. Lindgren: Yes, Sir, and it will be in order for this House to do so when the annual statement is before it for discussion.

    Continental Services
    Mr. Errollasked the Parliamentary Secretary to the Ministry of Civil Aviation when he intends to inaugurate direct air services between the Ringway airport of Manchester and Continental cities; and if he will now publish the routes and separate dates of inauguration.
    Mr. Lindgren: As I stated on 30th October, 1946, in my reply to a similar Question by the hon. Member, British European Airways Corporation plans to start services to the Continent of Europe from different cities in the United Kingdom as soon as the necessary aircraft and ground facilities can be made available. The setbacks in the delivery of Viking aircraft have materially affected the programme of the Corporation, and decisions cannot yet be taken as to the dates or routes on which Continental services can be inaugurated.
    Mr. Erroll: Does the Minister realise that Manchester is a great centre of our export trade, and will he get the matter speeded up as much as possible?
    Mr. Lindgren: Yes, Sir. But in fairness to the hon. Gentleman who put the Question down, I think I ought to make it clear that the first allocation of Vikings will be made to the Continental service from London, and not to the services from the provinces.

    U.S. Aircraft Orders
    Air-Commodore Harveyasked the Parliamentary Secretary to the Ministry of Civil Aviation if he will make a statement giving a complete list of U.S. aircraft on order for British air Corporations or about to he ordered.
    Mr. Lindgren: There are six Boeing Stratocruisers on order for the British Overseas Airways Corporation, and three Sikorsky S.51 helicopters for the British European Airways Corporation. An order for two Bell type 47B helicopters also for the British European Airways Corporation is about to be placed. No further United States aircraft orders have been authorised on behalf of British air Corporations.
    Air-Commodore Harvey: Does that mean that the Ministry does not intend to order Constellations fitted with British engines?
    Mr. Lindgren: I could not give that undertaking. As a result of exploratory exchanges between the Bristol Aeroplane Company and the Lockheed Corporation, a proposal has been received for the development of a new version of the Constellation aircraft powered with Bristol Centaurus engines. The merits of the project, and the commitments which would be involved, are under examination by the Corporations concerned, in consultation with my Department and the Ministry of Supply. It would be premature to make any statement at the pre-sent time. I need hardly repeat, however, that it is the policy of my noble Friend that British aircraft should be employed on British airlines to the maximum extent practicable.
    Mr. Beswick: Could the Minister tell us the cost of the aircraft?
    Mr. Lindgren: Which aircraft?
    Mr. Beswick: The American aircraft.
    Mr. Lindgren: Yes, Sir. The information has already been given to the House. For the Stratocruisers it is about 12 million dollars, for the Sikorsky helicopters it is £15,000 each, and for the Bell, £7,000 each.
    Mr. Beswick: Can the right hon. Gentleman say why it is possible to publish particulars of American aircraft and not of British aircraft?
    Mr. Lindgren: I cannot answer that question beyond saying that we do know the cost of this because it is a direct purchase.

    Night-Flying Tests
    Air-Commodore Harveyasked the Parliamentary Secretary to the Ministry of Civil Aviation if he is satisfied that the pilot's B licences in night-flying test, as laid down, are reasonable; and, in view of what happened to the four pilots carrying out these tests on 15th January, r947, if he will review the whole matter.
    Mr. Lindgren: The night-flying tests for a pilot's B licence, which are laid down by paragraph 99(1)(f) of the Air Navigation Directions, 1936, are under review.
    Air-Commodore Harvey: Will the hon. Gentleman bear in mind the fact that the tests now laid down are out of date, are useless, and are dangerous to the pilots?
    Mr. Lindgren: The tests which were given up to a little while ago have been discontinued pending the review which is going on. All that is now required are night take-offs and night landings, under the supervision of a staff pilot of the Ministry.

    Yorkshire
    Mr. Granville Sharpasked the Parliamentary Secretary to the Minister of Civil Aviation why no proposals have yet been made by his department for an airport and air service for the Leeds, Bradford, and heavy woollen district of the West Riding of Yorkshire; whether the proposed extension of the Yeadon airport has been finally rejected; and whether he will bear in mind that an airport at Doncaster will not provide the service required.
    Mr. Lindgren: The only airport in the Leeds-Bradford area is Yeadon which is at present unsuitable for regular scheduled services. A detailed engineering survey, which has not yet been carried out owing to shortage of staff, will be completed as soon as possible to determine whether Yeadon can be improved to the necessary standard, and at what cost. The answer to the second part of the Question is "No, Sir." As regards the third part my noble Friend recognises that the distance of Doncaster from Leeds and Bradford is a disadvantage.
    Mr. Sharp: Can the Parliamentary Secretary say how long these considerations will continue, in view of the fact that his Department have been going into them for the last 12 months?
    Mr. Lindgren: The staff available for carrying out these work surveys are limited, and they have to take them in order of precedence. Yeadon is fairly high in the list, and we hope it will be undertaken fairly shortly.
    Mr. M. F. Titterington: Can the Parliamentary Secretary say whether there are any prospects that the Yeadon airport can be made into an all-weather airport?
    Mr. Lindgren: That, Sir, will be one of the considerations of the investigations. I think I ought to say that it is a very difficult airport, and that the installation of both S.B.A. and S.C.S. 51 will present some difficulty, but they will be included within the survey and in the recommendations arising from it.
    Mr. Walkden: Can the Minister tell us when the Ministry are going to make up their minds whether or not they want Doncaster airport? If they do want it, we want to know when it is to be taken over. If they do not want it, we should like to put the land to better use.
    Mr. Lindgren: That is an entirely different question, and if the hon. Gentleman will put it down, I will give it consideration,
    Mr. Walkden: The hon. Gentleman's Ministry have been considering it for the last 18 months.

  GERMANY

    Control Commission (Staff Redundancy)
    Sir Waldron Smithersasked the Chancellor of the Duchy of Lancaster what was the total cost to the taxpayer of the 223 Control Commission for Germany employees who were engaged, but did not take up their posts in Germany.
    The Chancellor of the Duchy of Lancaster (Mr. John Hynd): The gross cost of these appointments, terminated as a result of reductions in the establishment of the Commission, was £8,702.
    Sir W. Smithers: Can the Chancellor of the Duchy of Lancaster say who is responsible for this waste of the taxpayers' money, and whether disciplinary action will be taken against those responsible? Does he not realise that if someone got the sack for these misdemeanours, these things would not happen so often?
    Mr. Hynd: I do not think it is correct to say that this is a result of misdemeanours. It has been a considerable task to set up the vast organisation necessary at the beginning of the occupation of Germany. It had to be done rapidly and involved many thousands of people being recruited at short notice. There were a number of factors which intervened, including the slower run-out of military Forces, the difficulty of finding accommodation suitable for the new personnel, and, subsequently, the very heavy cuts which were made in the establishment.
    Mr. Wilson Harris: Is not this an example of the result of recruitment of officials by bulk purchase?

    Special Police Corps
    Mr. Price-Whiteasked the Chancellor of the Duchy of Lancaster if the terms of a recent questionnaire submitted to all members of the Special Police Corps of the Control Commission for Germany indicate an intention of the authorities to reduce the establishment of that corps; and if he will give an undertaking that no engagements will be terminated so as to prejudice the pension rights of any police officer in respect of former police employment in this country or in respect of pension rights at the end of the term which he originally contracted to serve in the corps when appointed.
    Mr. J. Hynd: The answer to both parts of this Question is in the affirmative.

    Heavy Industry (Nationalisation)
    Mr. Bramallasked the Chancellor of the Duchy of Lancaster if he will now make a statement about the nationalisation of heavy industry in the British zone of Germany.
    Mr. J. Hynd: I regret that I am not in a position to make a statement at the present time.
    Mr. Bramall: Does my hon. Friend realise that there is a very considerable uncomfortable feeling in this House and elsewhere that this policy, which was announced six months ago by my right hon. Friend the Foreign Secretary, has been shelved owing to external pressure on this country?
    Mr. Hynd: I do not know whether it is correct to talk in terms of external pressure. Certain complications have arisen since the last statements which were made in connection with this matter, which have delayed it, but have not in any way held up the proposals which are being examined at the moment.
    Mr. Butcher: Will the hon. Gentleman give an assurance, in view of the increasing ties between our zone and the American zone, that he will ensure the closest harmony between the Americans and ourselves in this and all other matters?
    Mr. Hynd: This is a matter which refers only to the British zone and does not affect the Americans or American administration.
    Mr. Stephen: Can the hon. Gentleman give us the assurance that 'it is the intention of the Government to proceed with this nationalisation?
    Mr. Hynd: Yes, Sir. That assurance has already been given. I would like to make it clear that the considerations which are involved at present are technical considerations not affecting policy.
    Mr. Pickthorn: Has the hon. Gentleman yet found out on what principle, either of international law or of democracy, there can be any right thus to nationalise industries in military occupied territory?
    Mr. Hynd: I do not know that the question of international law comes into this. The Government of Germany at the moment is not a German Government. The Government is in the hands of the occupying Forces and the Commander-in-Chief is the authority in his own zone. It is necessary that he should organise affairs, economic and otherwise, in that zone as efficiently as possible.
    Mr. Lennox-Boyd: Is it a fact that the Russians have put a stop to nationalisation in their own zone because they want reparations paid?
    Mr. Skeffington-Lodge
    Mr. Lennox-Boyd: Could I have an answer?
    Mr. Speaker: The Question relates only to the nationalisation of industry in the British zone.
    Mr. Bramall: Will my hon. Friend make a statement which will give an indication of the difficulties which have been met? So far, several questions have been asked and no statement at all has been made.
    Mr. Skeffington-Lodge: Will the Minister bear in mind that all the established political parties in Germany thoroughly approve the idea of nationalisation of heavy industries in the Ruhr?
    Mr. Hynd: So far as statements have been made by the political parties, I think the suggestion in the last supplementary question is substantially correct. In regard to the other supplementary question, I am afraid I cannot say more than I have said, that certain problems are being examined. In reply to the preceding question, the answer is that it is a matter
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    for the Russian zone, and I cannot answer for them.

    Nazi Leaders' Fortunes
    Mr. Garry Allighanasked the Chancellor of the Duchy of Lancaster what are the amounts of the private fortunes, seized by the Allies, of Himmler, Goebbels, Hess, Von Papen, Schacht, Schmidt and each of the Nazi criminals executed under the Nuremburg verdicts, respectively; and to what purpose they have been devoted.
    Mr. J. Hynd: The amounts seized in the British zone of Germany are as follow:

    Ribbentrop, Rm. 690,000.

    Von Papen, Rm. 721,000.

    Rosenberg, Rm. 657,000.

    Keitel, Rm. 1,045,000.

    Doenitz, Rm. 153,000.

    Goering, Rm. 4,000,000.

    British inquiries have so far failed to trace any assets outside Germany which can be established as the personal property of any of the Nazis in question. Full details of what additional amounts have been discovered by the Allied Powers in the other zones of Germany or outside Germany are not yet available. The amounts seized in the British zone are being held under control, pending quadripartite decision as to their disposal.
    Mr. Allighan: Can the Minister tell us whether the sums that have been seized from these Nazi criminals are being devoted to relieving the plight of the German people, and thus relieving the British taxpayer?
    Mr. Hynd: No, Sir. The answer I have given is that the disposal of these assets is a matter for quadripartite agreement, and no agreement has yet been reached.
    Mr. Allighanasked the Chancellor of the Duchy of Lancaster to what purpose Goering's bank balances and securities, to the nominal value of 4,000,000 Reichmarks, seized inside the British zone, have been devoted.
    Mr. J. Hynd: The amounts are being held under control pending quadripartite decision as to their final disposal.

    Housing Requisition
    Mrs. Leah Manningasked the Chancellor of the Duchy of Lancaster if any planned scheme exists for the requisitioning of German homes for English families;

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    what becomes of the evacuated families; and whether they are allowed to keep their furniture and the gardens attached to their homes.
    Mr. J. Hynd: Normally requisitioning takes place only after consultation with the German housing authorities, who are responsible for providing suitable alternative accommodation for displaced Germans.. As for the second part of the Question, I would refer my hon. Friend to the answer I gave on 19th March to my hon. Friend the Member for West Leyton (Mr. Sorensen).
    Mr. Skeffington-Lodge: While I did not hear the Minister's reply, I would like to ask him to bear in mind that the apparently indiscriminate requisitioning of houses in Germany has done almost more than anything else to lower British prestige and justice in the eyes of the Germans.
    Mr. Hynd: There is no indiscriminate requisitioning On the contrary, the difficulties in accommodating our own people are very much wrapped up in this question, and the fullest possible consideration is given to German accommodation.

    Correspondence Censorship
    Mr. Skeffington-Lodgeasked the Chancellor of the Duchy of Lancaster under what regulations letters from the British zone of Germany addressed to Members of this House are censored; and if he will issue instructions forbidding this practice.
    Mr. J. Hynd: The regulations in question are laid down by quadripartite agreement and are applicable to the private correspondence of Germans in all four zones of occupation. It would clearly lead to difficulties if I introduced exceptions in the British zone.

    Food Parcels (Distribution)
    Mr. Keelingasked the Chancellor of the Duchy of Lancaster whether he will arrange for parcels of food sent to Germany for distribution among displaced persons by the British Red Cross to be earmarked for a particular nationality at the request of the sender.
    Mr. J. Hynd: As I stated in my reply to the hon. Member on 2nd April, distribution of these food parcels is a matter for the British Red Cross who allocate them to those whose need is greatest. I
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    know of no grounds which would justify my seeking to influence these arrangements.
    Mr. Keeling: Does not the Chancellor think that if people in this country want to give part of their rations, for example, to people displaced from the Baltic countries, some means ought to be found of allowing them to do so?
    Mr. Hynd; As I say, the arrangements are a matter for the Red Cross authorities, and, while I would not like to make any official comment on these arrangements, I think it should be regarded as equitable that the supplies should go to the parts where the need is greatest. In so far as the Baltic displaced persons are in need, I think their needs are provided for.

    Poles
    Mr. Prittasked the Chancellor of the Duchy of Lancaster what steps he is taking to ensure that Polish recalcitrants sent to Germany shall have an opportunity to earn an honest living and that they do not resort to crime or join any Fascist or semi-Fascist organisations there; what will be done to authorise their passage to other zones or to prevent unauthorised passage; and whether he has the assent of the authorities in the other zones to any arrangements he is making.
    Mr. J. Hynd: On arrival in the British zone of Germany, these Poles will be demobilised and required to register at German labour offices, which may direct them to employment. They will then be subject to the same regulations regarding employment and travel, and liable to the same penalties for criminal or subversive activities, as the ordinary German population. Demobilisation of these Poles is taking place in the British zone only, and the authorities in the other zones haw not been consulted.
    Mr. Pritt: Does not the Minister recognise that there are special dangers in connection with people who will not live in Poland, in putting them in a country where they cannot even speak the language, with no particular ties, where they are very likely to get into bad company or to get into neighbouring zones? Will he take special precautions?
    Mr. Hynd: Yes, we are acutely aware of the difficulties arising from these situations and from these foreign elements in

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    the German population. Therefore, they come under the restrictions to which I have referred, and which I can assure my hon. and learned Friend are very rigid.
    Vice-Admiral Taylor: Can the hon. Gentleman tell us what category of Poles is constituted by the term "recalcitrants"?
    Mr. Hynd: I am not responsible for the term which is used in the Question, but I gathered that it referred to those Poles in this country who are not prepared to join the Polish Resettlement Corps, nor to accept repatriation.
    Mr. Lennox-Boyd: On a point of Order, Mr. Speaker. May I seek your advice and ask whether it is in Order to put down a Question in which an adjective of a hostile and unflattering description such as this is used in connection with people who are merely doing what they have been publicly told they can do, and that is to opt not to return to Poland? It does appear to be a grave misuse of the opportunities of Debate and Question in this House to put down a Question using such a word.
    Mr. Speaker: I do not know how the Oxford Dictionary would describe the word "recalcitrant." I do not think it is a particularly offensive word. It passed the Table and, therefore, I think I am satisfied that it is in Order.
    Major Tufton Beamish: Further to that point of Order. Is it in Order to insinuate, as is insinuated here, that these men might wish to join a Fascist or a semi-Fascist organisation, in view of the fact that they are members of a country which was an Ally of ours from the first days of the war to the last?
    Mr. Speaker: The hon. Member who puts down the Question is entirely responsible for what is in it.
    Professor Savory: Has the hon. Member any ground whatever to suppose that any of our gallant Allies would resort to crime, as suggested in this very disgraceful manner?

    Screening
    Mr. Dribergasked the Chancellor of the Duchy of Lancaster if he will publish in HANSARD, in tabular form, the results of the latest screening of German prisoners at Radwinter Youth Camp,
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    showing the numbers of prisoners in the various categories from A to C+ before and after this screening.
    Mr. J. Hynd: Yes, Sir. I am circulating a table in the OFFICIAL REPORT.
    Mr. Driberg: Would my hon. Friend say whether that table will show that satisfactory progress is being made in this very important experiment?
    Mr. Hynd: I think that when my hon. Friend reads the figures in the table he will be satisfied that considerable progress has been made.
    Following is the table:

    GRADING OF GERMAN PRISONERS OF WAR AT RADWINTER YOUTH CAMP.

    Category.

    Number in each category.

    Before the latest screening on 22.2.47.

    After the latest screening on 22.2.47.

    White—A

    5

    76

    Grey—B

    438

    823

    Black—C

    203

    124

    Ardent Nazis—C+

    343

    26

    Unscreened

    60

    —

    Total

    1,049

    1,049

    Looted Art Treasures
    Mr. Garry Allighanasked the Chancellor of the Duchy of Lancaster what has become of all the art treasures, tapestries and other valuables looted by the Nazis and found by the Allies in Karinhall, Goering's country mansion in the Schorfheide; whether they have been sold; and to what purpose the proceeds have been devoted.
    J. Hynd: No information has been received regarding the disposal of art treasures found in Karinhall, which is in the Soviet zone. A number of art treasures which had been removed by Goering from Karinhall to South Germany were recovered. These have not been sold, but are being restored under the agreed restitution procedure to the Governments of those countries from which they were removed.
    Mr. Allighan: Will the Chancellor of the Duchy say whether he has made any approaches to our Allies to find out whether they have seized this property, and what they have done with it?
    Mr. Hynd: As Karinhall is in the Soviet zone I do not think it is for us to suggest that treasures might be going to particular parts. It is for our Allies to announce.
    Mr. W. Fletcher: With regard to goods recovered in the Southern district mentioned by the Minister, will he see that they are not only restored to the Governments concerned, but to the original owners, whether museums or private owners?
    Mr. Hynd: I do not know whether I can go so far as to dictate to the Governments concerned, but I will certainly look at the point.
    Major Bruce: Has any request been received from our Soviet Ally for the services of those British nationals who were entertained at Karinhall before the war, in order to identify the art treasures concerned?

  RUSSIAN-BORN BRITISH WIVES
  Mr. Thomas Reidasked the Secretary of State for Foreign Affairs if the Soviet Government have given permission to Soviet women married to Britons to join their husbands; and if it has given permission to Soviet women to marry British men.
  The Minister of State (Mr. McNeil): In the past permission has been given to a number of Soviet women married to Britons to join their husbands, but there are, as the House is aware, at the present time 15 such wives to' whom permission has not been granted. Formerly, Soviet women were free to marry British men, but by a Decree of the Praesidium of the Supreme Council of the U.S.S.R., dated 15th February, 1947, marriages between citizens of the U.S.S.R. and foreigners are now prohibited.
  Mr. Hollis: Is it not a fact that at least one of these marriages took place before that date, and that one of these gentlemen was specifically given a Soviet visa to go to Russia in order to marry?
  Mr. McNeil: I should be surprised it all the marriages had not taken place before this date.
  Mr. Pickthorn: Can the right hon. Gentleman tell us whether this is a new
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  thing in international relations, a general forbidding of marriages between the nationals of two friendly States?
  Mr. McNeil: I have such respect for the hon. Member's ability in research that I should like notice of that question.
  Mr. Gammansasked the Secretary of State for Foreign Affairs if he is in a position to make a further report on the representations which have been made by him to the Government of the U.S.S.R. regarding the release of the Soviet wives of British Servicemen, who are at present detained in the U.S.S.R.
  Major Beamishasked the Secretary of State for Foreign Affairs what were the reasons given by the Soviet Government for refusing to allow visas to the Soviet-born wives of Britons; and what further steps he is proposing to take in this matter.
  Mr. McNeil: No reason has been given by the Soviet Government for withholding exit visas from these Soviet wives. The hon. Members will almost certainly have seen that I drew to Mr. Kuznetsov's attention, before his departure, the widespread interest taken in this country in this question, and I am confident that he will so report on his return to the U.S.S.R.
  Mr. Gammans: Does the right hon. Gentleman realise that this action by the Soviet Government means that they have decided deliberately to divorce themselves from the long-established practice of civilised international procedure?
  Lady Grant: Is the Minister aware that these women were married under Soviet law, and that at that time their husbands were given no indication whatsoever that there would be any difficulty in their leaving the country; and that, furthermore, some Soviet women have left the Soviet Union to come to this country to join their husbands who are British subjects?
  Mr. McNeil: I am aware that Soviet women have previously been allowed to leave their country to join their husbands here. I am also aware that there was no ban at the time of the marriage. It is for these reasons that His Majesty's Government have pressed so forcefully and persistently for this.
  Miss Bacon: Is my right hon. Friend aware that two of the reasons given to me when I was in Moscow last year were: First, that those wives who have been

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  allowed to come to this country have been ill-treated by their British husbands; and second, that the Soviet authorities wanted the best type of Soviet women to come over here, and that the British husbands had evidently not chosen the best type?
  Mr. McNeil: I think I ought to say that, happily, this Government have not yet added to their burdens by seeking to approve spouses that may be chosen by British subjects.

  BRITISH EMBASSY, MOSCOW (EMPLOYEE)
  Mr. Gammansasked the Secretary of State for Foreign Affairs if the wife of Sergeant J. E. Bolton, 102, Falkland Road, N.8, is still employed by the British Embassy in Moscow; or for what reason she is no longer employed there.
  Mr. McNeil: His Majesty's Embassy in Moscow were informed in February by the Soviet authorities that Mrs. Bolton could not be registered for employment with the Embassy. Requests for reconsideration have been unsuccessful. Mrs. Bolton has not yet been replaced, however, and she still remains, therefore, with the Embassy.
  Mr. Gammans: Does the right hon. Gentleman attach any special significance to the fact that this woman's licence to work in the British Embassy has been withdrawn?
  Mr. McNeil: I do not know what I am being invited to infer. The fact is, as I understand it, that unless this or any other woman is registered by the Protocol Department for employment of this kind, we cannot employ her. I cannot add anything to that.
  Mr. Gammans: Is the right hon. Gentleman aware that whilst it was granted before, it has now been withdrawn, and does he attach any special significance to the fact that it has been withdrawn?
  Mr. E. P. Smith: Can the right hon. Gentleman say whether Mrs. Bolton is, in fact, a British subject?

  ANGLO-IRANIAN OILFIELDS
  Mr. Piratinasked the Secretary of State for Foreign Affairs whether he will publish the report on labour conditions
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  in the Anglo-Iranian oilfields which was made to him by the three Members of this House, following a special advisory mission in June, 1946.
  Mr. McNeil: The valuable reports rendered to my right hon. Friend by the hon. Members, which were not confined to the question of labour conditions, were in the nature of confidential reports, and I do not, therefore, consider that it would be appropriate to publish them.

  CHINA (BRITISH EMBASSY)
  Mr. John Patonasked the Secretary of State for Foreign Affairs when he' proposes to appoint an agricultural attaché to His Majesty's Embassy in China.
  Mr. McNeil: In view of the need for economy in trained manpower 'and in foreign exchange, I do not think that such an appointment could be justified in present circumstances.
  Mr. Paton: Is my right hon. Friend aware that Chinese Government spokesmen have been asking for this kind of agricultural attaché; that the United States Embassy has had an agricultural attaché for many months, who has done such good work in China that he is extending United States influence in a most beneficent way; and is not that an example we might well follow?
  Mr. McNeil: I am very ready to discuss this proposal with my hon. Friend. However, I know he appreciates that our exchange difficulties and manpower difficulties are very real at present.

  BRITISH EMBASSY, ROME
  Mr. Sharpasked the Secretary of State for Foreign Affairs why it is proposed to build new embassy offices and residence at Rome at an estimated cost of 350,000.
  Mr. McNeil: The old residence is unsuitable for modern residential needs, and has for some years been used as offices. It is inadequate, however, for the present staff of the Embassy, and is not suitable for modern office needs. It was, moreover, damaged by a bomb explosion in October last. Temporary arrangements

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  for housing the Ambassador and the offices have been made, but it will be necessary to provide permanent quarters.

  COLONIAL EMPIRE

    Annual Reports
    Mr. T. Reidasked the Secretary of State for the Colonies what progress has been made in preparing the comprehensive handbooks, one for each Colony, with comparative facts and figures for different periods, promised by his predecessor in reply to the hon. Member for Swindon.
    The Secretary of State for the Colonies (Mr. Creech Jones): The publication of Annual Reports on Colonial Territories is being resumed in the new form to which I referred in my reply to my hon. Friend's Question on 30th October. Reports for the year 1946, which, I hope, will include brief reviews covering the period during which the issue of these Reports has been suspended, are being prepared by Colonial Governments, and will be published as soon as possible.

    Interned Civil Servants (Salaries)
    Sir Dymoke Whiteasked the Secretary of State for the Colonies on what authority 10 per cent. was deducted from the salaries of Malaya and Hong Kong civil servants during their internment by the Japanese.
    Mr. Creech Jones: Payment of the salaries of interned civil servants less the deduction referred to was authorised by my predecessor in 1945 on behalf of the Civil Governments of Malaya and Hong Kong prior to their re-establishment. There was not at that time any legal authority for the payment of the salaries of Malayan officers, but the payments actually made were validated by legislation enacted after the re-establishment of civil government. The reasons for making the deduction were explained in a memorandum issued in April, 1946, a copy of which I am sending to the hon. Member. Certain representations recently made to me in this matter are now under consideration.
    Mr. Gammans: Would the right hon. Gentleman say why the civilian internees had a cut in their pay, whereas the military prisoners of war did not? Would he also say why Europeans were treated far more generously in this matter than Asiatic employees?
    Mr. Creech Jones: That raises a much larger question than the Question on the Order Paper.

    Export Duties
    Mr. T. Reidasked the Secretary of State for the Colonies what steps are taken in respect of goods imported by Britain from the Colonies to ensure that colonial export duties levied before or after prices have been agreed on with the British Government for such imports, are not paid by British consumers.
    Mr. Creech Jones: Where prices are agreed for bulk purchase transactions on a Government to Government basis, it is normally understood, if it is not provided for specifically in a contract, that no increase will be made in the existing rate of export duty except for seller's account, or, if the duty is paid by the purchasing Ministry, with that Ministry's prior agreement.
    Mr. Reid: Is this country at present paying export duties on tea and copra?
    Mr. Creech Jones: In regard to tea, the price is determined by the world market, and in any case the Ceylon Government had the right to impose duties, because contracts had expired.
    Mr. W. Fletcher: With regard to Copra, will the right hon. Gentleman reply to the last part of the supplementary question? Is it not a fact that a 50 per cent. export duty on copra, imposed after the five-year contract had been signed, is costing this country £15 a ton?
    Mr. Creech Jones: It is quite true that the Ministry of Food had a contract with the Ceylon Government on a f.o.b. basis which did not specifically cover this duty point.

  AFRICAN COLONIES

    Hausa Broadcasts
    Mr. Keelingasked the Secretary of State for the Colonies for what reasons it is found impracticable to broadcast in Hausa to the 10,000,000 Hausa-speaking peoples in British West Africa; and how soon the matter will be reconsidered.
    Mr. Creech Jones: Broadcasts in Hausa are already made over rediffusion systems from six stations in Nigeria, and it is hoped to provide this year three new stations, all in the Northern Provinces.

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    The resumption of Hausa broadcasts from the Gold Coast is also being considered. The question of arranging broadcasts in Hausa from London will be kept under review. At present there is an insufficient number of receiving sets in the Northern Provinces of Nigeria to justify the use of staff and wavelengths urgently required for other services.
    Mr. Keeling: Does riot the Secretary of State think that a supply of broadcasts would create a demand for sets? Has should be made available for the Hausais understood by more British subjects, outside India, than any other language, except, of course, English?
    Mr. Creech Jones: I think the hon. Member will appreciate that I am most anxious that broadcast arrangements should be made available for the Hausa speaking peoples, and that, therefore, I am doing all I can to extend this particular service.

    Palm Kernels and Rice
    Mr. Youngerasked the Secretary of State for the Colonies whether standard prices are still fixed for palm kernels and rice in Sierra Leone; whether the quota system is still applied to the production of these commodities; and whether farmers are still required to barter their produce in return for manufactured goods, as was the case during the war.
    Mr. Creech Jones: Standard buying prices are fixed for these commodities in Sierra Leone. The quota system is not applied to the production of palm kernels. Rice producing chiefdoms are required to sell a small proportion of their production to the Government at the standard price. Since 1945, farmers have not been required to barter their produce for manufactured goods.
    Mr. Younger: Is the right hon. Gentleman satisfied that the system he described is no longer giving rise to serious local shortages, as was alleged some time ago?
    Mr. Creech Jones: I think that is the case at the present time.
    Mr. Erroll: Can the right hon. Gentleman say how long the rice levy is to be maintained to feed the population of Sierra Leone?
    Mr. Creech Jones: At the moment there is only a very small proportion of the crops which the respective chiefdoms surrendered. At the moment it is a precautionary measure, and will not stay longer than is absolutely necessary.
    Mr. Youngerasked the Secretary of State for the Colonies whether the Association of West African Merchants and other firms are still operating as agents for the Government in handling rice and palm kernels produced in Sierra Leone; and what commission has been paid to these firms for their services up to date.
    Mr. Creech Jones: Firms who are members of the Association of West African Merchants and other firms operate for the Government of Sierra Leone in handling rice and are paid a commission of 5 per cent. The amount thus paid out since 1944 is £23,855. In the case of palm kernels, merchant firms act as agents of the West African Produce Control Board. Between 1st September, 1942, and 30th August, 1945, purchases by merchants from producers were regulated by quotas, and the firms remunerated on a cost-plus-profit basis, the amount paid out being £46,530. On 1st September, 1945, quotas were abolished, and the price at which the Board bought from the merchants was fixed at £2 13s. 6d. per ton above the minimum price at which the merchant might buy from the producer.

    Import Restriction
    Mr. Youngerasked the Secretary of State for the Colonies whether the right to import into West Africa is still restricted to the Association of West African Merchants and other firms on the basis of their past performance for 1937–41; and when he expects to be able to end this system.
    Mr. Creech Jones: No, Sir. The issue of import licences is no longer restricted, as a general rule, to firms that can prove past trade, though the restriction is still in force in at any rate one West African colony for a limited range of scarce commodities. All colonial governments are aware of the desirability of ending this restriction as soon as circumstances permit.
    Mr. Erroll: Can the right hon. Gentleman say that equal trade facilities will be granted to non-British trading firms?
    Mr. Creech Jones: I think that is the case with regard to African firms.
    Mr. Erroll: And to other firms?
    Mr. Creech Jones: That is another point.

    Coal, Southern Nigeria
    Commander Galbraithasked the Secretary of State for the Colonies whether deposits of good quality coal exist at Udi, Southern Nigeria; and what steps are being taken to exploit the resources of this coalfield.
    Mr. Creech Jones: I would refer the hon. and gallant Member to my reply to the hon. Member for Altrincham and Sale (Mr. Erroll) on 12th March. In addition to the measures referred to in that reply, I am arranging for the Government of Nigeria to obtain expert advice from this country on the development of the existing colliery.
    Mr. Drayson: Can the Minister also arrange for the Minister of Fuel and Power to go out and investigate these deposits?
    Mr. Creech Jones: He is aware of them.

  MALAYA (MEDICAL SERVICE)
  Mr. W. Fletcherasked the Secretary of State for the Colonies the total number of officers and other grades of European origin and of non-European origin employed in the Malayan Medical Service at 1st January, 1946, and at 28th February, 1947, respectively; and the ratio of increase of salaries to compensate increased cost of living that is being paid to the members of this service.
  Mr. Creech Jones: The information requested in the first part of the hon. Member's Question is not immediately available in this country. I have, therefore, asked the Governors for a Report, and will write to the hon. Member when I receive it. As regards the last part of the Question, a cost of living allowance is payable to European and Asiatic officers alike. I am sending the hon. Member a copy of a statement giving details of this allowance, from which he will see that it is calculated on a basis which cannot be expressed as a ratio of salary. All public salaries in Malaya are to be reviewed by a commis-
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  sion, whose investigations will begin this month.
  Mr. Fletcher: Is the Secretary of State aware that any breakdown in the Malayan health service at the present juncture, particularly when there is a great deal of disease there, would be a disaster? Would he see that the discontent in the service is promptly dealt with, so that we carry out our first obligation?
  Mr. Creech Jones: That matter is well in hand now that the salaries commission has been appointed. It will start its investigations straight away.
  Dr. Haden Guest: Would the right hon. Gentleman put into the OFFICIAL REPORT the information he said he was going to give to the hon. Gentleman opposite?
  Mr. Creech Jones: Yes, Sir.
  Mr. W. Fletcherasked the Secretary of State for the Colonies what steps are being taken to increase and improve the Malayan Medical Service and to retain its present members; and whether he will consider offering the necessary inducements to service medical men stationed in Malaya to encourage them to join the Malayan Medical Service rather than to return to this country.
  Mr. Creech Jones: As regards improvements in the Malayan Medical Service, I would refer the hon. Member to my reply to a Question by the hon. Member for Croydon, South (Mr. Rees-Williams), on 24th February, and to a Question by the hon. and learned Member for North Hammersmith (Mr. Pritt), on 19th March. With regard to the second part of the Question, inducements are offered to Servicemen by allowing increments of salary in respect of the years spent on war service.
  Mr. Fletcher: Will the Secretary of State see that further real inducements are given? Otherwise there is considerable danger of the medical services being seriously depleted and breaking down
  Mr. Creech Jones: Yes, I will certainly keep the point in mind

  HONG KONG (GOVERNMENT SERVICES)
  Mr. W. Fletcherasked the Secretary of State for the Colonies what steps are being taken to augment the strained

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  Government services, including police, medical and social welfare in Hong Kong, to cope with the increased population.
  Mr. Creech Jones: Additional staff has been engaged for the police, and additional nursing staff is being engaged. Other measures which assist in meeting the situation include the modernisation of police equipment and the intensive training of new recruits, the establishment of temporary hospitals, the increase of facilities for public inoculation, and the setting up of a Social Welfare Department.
  Mr. Fletcher: In view of the Secretary of State's recent statement that there are over a million new inhabitants in Hong Kong, will he see that really adequate large-scale measures are taken, and not merely those which, up to date, have been really insufficient to cope with the job?
  Mr. Creech Jones: There is great strain on the services, but there are signs at the moment that the population is slackening a bit.
  Sir Ralph Glynasked the Secretary of State for the Colonies if he is now in a position to make a statement concerning the general situation in Hong Kong, especially in regard to the large influx of Chinese and the heavy increased cost for services, etc., that in consequence fall upon the Colony; what steps it is proposed to take to raise money in rates and taxes from these Chinese migrants; and, in view of the peculiar conditions prevailing in China, if special expert attention is being paid to these problems
  Mr. Creech Jones: I would invite reference to my replies to Questions on 5th and nth March, regarding the influx of Chinese and also taxation. I have nothing to add at the moment. I can assure the hon. Member that the conditions prevailing in China are taken into account in dealing with these problems.
  Sir R. Glyn: In view of the great importance of the position in Hong Kong, will the Minister consider laying a White Paper dealing with the whole matter?
  Mr. Creech Jones: I am not clear that a White Paper is called for, but I shall be very happy to provide my hon. Friend with any information on the situation which he may wish to have.

  COCOS-KEELING ISLANDS
  Mr. Gammansasked the Secretary of State for the Colonies in view of the fact that the majority of the coconut trees on the Cocos-Keeling Islands have been cut down to make new runways for the R.A.F., what steps have been taken to develop alternative industries which, by export, may ensure the subsistence of the inhabitants of the islands.
  Mr. Creech Jones: The Governor of Singapore informs me that 250 acres on one of the Cocos-Keeling Islands, about one-sixth of the total productive area of the group were cleared of coconut trees for an airstrip. He adds, however, that this has not materially affected total exports of copra, since export from the island in question has never been found very economical. The possibility of establishing subsidiary industries in the Cocos-Keeling Islands is being explored.
  Mr. Gammans: Has this reduction in area meant the removal of any of the inhabitants to the mainland?
  Mr. Creech Jones: That is a point that is under consideration now, and I believe it is possible that very shortly some hundreds will move away to the mainland.

  SEYCHELLES FISHERIES
  Mr. Dumpletonasked the Secretary of State for the Colonies what sum has been allocated in the 10-year development plan for the Seychelles for the development of fisheries.
  Mr. Creech Jones: The amount allotted to fisheries in the draft plan is £10,000. This plan is, however, still under consideration in the Colony, and therefore subject to modification.

  BERMUDA WORKERS' PETITION
  Mr. Dumpletonasked the Secretary of State for the Colonies whether he will now make a statement regarding the petition which was presented by the Bermuda Workers' Association on 1st November, 1946, relating to conditions in Bermuda.
  Mr. Creech Jones: Yes, Sir. I have been in communication with the Governor of Bermuda regarding this petition and

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  have now asked him to invite the Legislature of Bermuda to take it into consideration. Meanwhile the Bermuda Workers' Association are being informed that this has been done and that I will make my reply to the petition in due course in the light of the results of its examination by the Colonial Legislature and of the Governor's observations upon them. I am presenting the correspondence in a Command Paper which is now available in the Vote Office.

  ROYAL NAVY (IMPROVEMENTS)
  Major Bruceasked the Parliamentary Secretary to the Admiralty the names of those ships which have been equipped, since 23rd October, 1946, with galleys up to the U.S. standard.
  The Civil Lord (Mr. W. J. Edwards): As the reply is rather long and contains a nominal list, I will, with permission, circulate it in the OFFICIAL REPORT.
  Following is the list:
  The chief difference between the galleys in His Majesty's surface ships and corresponding ships of the U.S. Navy during recent years has been that our ships had oil-fired ranges and the American ships electric ranges. Electric ranges are, however, now being installed in His Majesty's ships under construction or undergoing refit, although in the latter case such factors as space, additional load on the ships' electricity generating plant besides supply difficulties with the ranges themselves, have effected the rate of introduction.
  A total of 50 ships are now fitted with electric galley ranges of which the following have been so equipped since 23rd October, 1946:
  Aircraft Carrier: "Magnificent."
  Cruisers: "Birmingham," "Devonshire," "London."
  Destroyers: "Agincourt," "Aisne,"
  "Barrosa," "Jutland," "Matapan,"Solebay."
  Depot Ship: "Woolwich."
  In addition, other improvements such as the provision of more modern steam cooking equipment, additional domestic machinery and refrigerated storage are being made as far as possible concurrently with the work of fitting electric cooking
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  equipment. His Majesty's submarines have always had electric galley ranges.
  Major Bruceasked the Parliamentary Secretary to the Admiralty the names of those ships in which improvements in air-conditioning have taken place since 3rd July, 1946.
  Mr. W. J. Edwards: Since 3rd July, 1946, improvements in air-conditioning have been made in 24 H.M. ships in service, details of which, I will, with permission, circulate in the OFFICIAL REPORT.
  Major Bruce: Will my hon. Friend say what further proposals he has in hand?
  Mr. Edwards: I cannot give the exact number of ships, but it is proposed to increase this number as and when we possibly can.
  Following is the list:
  Aircraft Carriers: "Formidable," "Theseus."
  Cruisers: "Achilles," "Australia," "Belfast," "Euryalus," "London," "Newcastle," "Phoebe," "Sussex," "Sheffield."
  Destroyers: "Aisne," "Barossa," "Concord," "Consort," "Conus," "Dunkirk," "Gabbard," "Gravelines," "Saintes," "Sluys," "St. James."
  Submarine Depot Ship: "Montclare." Repair Ship: Alaunia."

  ARMED FORCES

    Disabled Personnel (Discharge)
    Sir Ian Fraserasked the Minister of Defence if he will arrange with the Service Ministers to retain in the Services and in uniform officers, non-commissioned officers and other ranks, who are still undergoing plastic and other more or less continuous treatment for severe wounds and mutilation, having regard, particularly, to the bad psychological effect of discharging these men before their treatment is completed.
    The Minister of Defence (Mr. A. V. Alexander): Personnel suffering from disabilities attributable to or aggravated by service are at present retained in the Services, in uniform, until medical or surgical finality is reached, within an overriding time limit of 4- years. I am glad to say that in future, however, such men will not be discharged from the Services until their treatment is completed, provided that there is a prospect of this within a predictable time.
    Sir I. Fraser: May I take it that that means even if it is after 2½ years?
    Mr. Alexander: We shall not adhere to the 2½ year limit in future, but will keep men in the Service except in those cases where finality of the treatment is unpredictable.

    E.V.T. Text-Books
    Squadron-Leader Kinghornasked the Minister of Defence if he will have investigations made about text-books now surplus to the requirements of the E.V.T. scheme in the Forces; and if he will make these books available for use in schools in this country.
    Mr. Alexander: Over 50,000 surplus E.V.T. text-books have already been provided for use by the Ministry of Education, and this practice will certainly continue.

    Compulsory Service
    Lieut.-Commander Clark Hutchisonasked the Minister of Defence whether he will give an assurance that the Government's decision to reduce the period of fulltime compulsory military service laid down in the National Service Bill from 18 months to 12 months will not entail any men at present serving in the Forces, or about to be called up for service, remaining in the Forces for a longer period than would have been the case had the original term of 18 months been maintained.
    Mr. Alexander: Yes, Sir.
    Mr. McGovern: Has the Minister considered the question of the young lads being called up this year for two years' service, and is there a corresponding reduction proposed by the Government in their service?
    Mr. Alexander: The answer I have given is the only one which I can give at the present time.

  FOOD SUPPLIES

    Meat Issue, Meriden
    Sir John Mellorasked the Minister of Food why he has compelled butchers in the Meriden rural district to accept, as part of the meat ration, animal tissue described as "New Zealand boneless cow;" whether he is aware that the butchers refused to supply this to their customers but are required to pay the same price for it as for
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    meat; and whether he will permit this tissue to be sold for dogs and cats and provide meat of fair quality to cover the ration.
    The Minister of Food (Mr. Strachey): This meat was issued in error. I have given instructions that in future it will be used only for manufacturing purposes.
    Sir J. Mellor: Will the butchers be required to pay for this meat issued in error, or will the amount be refunded?
    Mr. Strachey: I will make inquiries on that, but I should have thought it would be refunded.

    Civic Restaurants
    Mr. Jannerasked the Minister of Food what is the policy of his Department in regard to the continuance of British Restaurants, in view of the fact that no further financial help is available to them.
    Mr. Strachey: As my hon. Friend may recollect, the Civic Restaurants Act lays the financial responsibility for these restaurants upon local authorities. I hope and believe that local authorities will make the fullest possible use of their new powers to run restaurants.

    Seized Goods {Indemnity)
    Sir J. Mellorasked the Minister of Food what were the terms of the indemnity required, as a condition of payment for goods seized by him under the Seizure of Food Orders, 1942 and 1946, from defendants acquitted or not prosecuted after the seizure; why he sought indemnity; and why he withheld payment pending receipt of indemnity.
    Mr. Strachey: I am sending the hon. Member a copy of the form of indemnity which has been used by my Department since 1942. Its purpose is to ensure that the proceeds of sale are returned to the legal owner, and it offers a much simpler method of doing this than if formal proof of ownership had to be given and verified.
    Sir J. Mellor: What does the Minister want proof of ownership for, when he has seized the goods from the owner?
    Mr. Strachey: It is just in those cases where the ownership may be in doubt.

    Dog Biscuits
    Mr. Jannerasked the Minister of Food whether he is aware that dog

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    biscuits are unobtainable in the Leicester area; whether they are in short supply over the whole country; and what possibility there is of an increase, in view of the fact that they are the staple diet of dogs at the present time.
    Mr. Strachey: There have been shortages of dog biscuits in some parts of the country, including Leicester, because of fuel cuts at the factories and transport difficulties during the severe weather, this should right itself now.
    Mr. Janner: Will the Minister be good enough to speed the matter up, particularly in view of the fact that people are afraid that their dogs will suffer and prosecutions may possibly be taken against some?
    Mr. E. P. Smith: Is it not a fact that the shortage in Leicester is very largely because human beings are eating dog biscuits?
    Mr. Beswick: Are not too many of these dog biscuits going to feed the political jingoes to whom the Chancellor of the Exchequer referred?

    Miners (Army Surplus Food)
    Mr. David Thomasasked the Minister of Food (r) what steps he has taken since 27th February to give extra non-rationed food to mining communities; and if there has been any increase allocated to South Wales;
    (2) on what basis were allocations of non-rationed foods made to the South Wales development area in 1946; and what change has been made since then.
    Mr. Strachey: I would refer my hon. Friend to the answer given to the hon. Members for Neath (Mr. D. J. Williams), North-East Leeds (Miss Bacon) and Stockton-on-Tees (Mr. Chetwynd) on 10th March. With permission I will circulate in the OFFICIAL REPORT a list of the areas in South Wales which, on 31st March, received increased allocations of rationed ingredients for meat products, cakes and fish frying, and the list is rather too long to read aloud, and the Welsh names are too difficult. He will see that these areas cover the whole of the South Wales coal fields.
    I take this opportunity of informing the House that we have just been able to arrange for some three quarters of a mil-lion surplus army ration packs each con-
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    taining foodstuffs sufficient for one man for six days to be made available for purchase by coal miners all over the country through the colliery managements and the National Union of Mineworkers.
    Mr. D. J. Williams: Can the Minister say if the extra allocation to the mining areas merely brings them up to the national average?
    Mr. Strachey: Oh, yes, that is the purpose.
    Mr. Manningham-Buller: Will the Minister say whether or not lie can make some of these packs available to agricultural workers?
    Mr. Strachey: It was decided, rightly, I think—
    Mr. Manningham-Buller: By whom?
    Mr. Strachey: By the Government. It was decided that the best use for these packs, as a small additional supplement of food, at the present time would be in the coalfield.
    Mr. Assheton: Is the Minister aware that the production of agricultural workers is higher than it was before the war?
    Mr. Stephen: In view of the fact that Ministers cannot pronounce Welsh names, will the right hon. Gentleman consider recommending Home Rule for Wales?
    Mr. Walkden: Would it be very difficult to publish complete lists in the OFFICIAL REPORT of all the coalfields, in view of the complaints we receive that certain mining villages are being left out altogether?
    Mr. Strachey: I will consider that.
    Following is the list:
    The County Borough of Cardiff.
    The Urban Districts of Brynmawr, Abercan, Abertillery, Bedwas and Machen, Bedwelty, Blaenavon, Caerlon, Cwmbran, Ebbw Vale, Mynddislwyn, Nantyglo and Blaina, Pontypool, Rhymney, Risca, Tredegar and Usk.
    The Rural Districts of Magor and St. Merlons, Pontypool, Crickhowell, Vaynor and Pendryn and Ystradgynlaid.
    The County Borough of Newport.
    The Administrative County of Glamorgan. The County Boroughs of Merthyr Tydfil and Swansea.
    The Boroughs of Kidwelly, Llanelly and Pembroke.
    The Urban Districts of Ammanford, Burry Port and Cwmamman.
    The Rural District of Llanelly.

    international Food Board
    Mr. Pickthornasked the Minister of Food in what documents and announcements the functions and powers of the International Emergency Food Board may be ascertained.
    Mr. Strachey: I am sending the hon. Member a copy of a document setting out the functions, membership and procedure of the International Emergency Food Council. The document has been available in the Library of the House for the last two months.
    Mr. Pickthorn: Can the right hon. Gentleman tell the House whether that is the document referred to by his Parliamentary Secretary on 12th February, and, secondly, will he tell us why that document is not allowed to be seen by members of the public, and whether Members in this House would be committing any offence if they copied it and showed it to members of the public?
    Mr. Strachey: I imagine that no offence would be committed, but I must have notice of that question.

  DOCKERS' DISPUTE, GLASGOW
  Mr. Rankin(by Private Notice asked the Minister of Labour whether he is aware that as a result of the dockers' dispute at Glasgow 70 ships, many of which carry cargoes of food; are immobilised; what steps are being taken to meet the dockers' grievances, particularly on the redundancy issue, and the question of discrimination against the Clyde; and what action he is taking to bring the dispute to an end.
  The Minister of Labour (Mr. Isaacs): I am aware of the present situation in the Port of Glasgow, which arises from the necessity to reduce the dock labour force. It is a matter for regret that such a reduction of the labour force should have become necessary. A fact-finding committee, containing representatives of both sides of the National Joint Council for the Port Transport Industry, examined the position at various ports, including Glasgow, and it was on the basis of this committee's report that my right hon. Friend the Minister of Transport reached his decision. The stoppage took place as soon as this decision was announced. There is no question of discrimination
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  against Glasgow; in fact, reductions of registers have already taken place elsewhere on the basis of this committee's report.
  My right hon. Friend and I have been anxious throughout to agree, with the trade union, the action to be taken on the report, but the negotiations, which extended over several months, were, unfortunately, not successful. My officers have been in constant touch with both sides, and I made it clear to the union that while the conclusion of the fact-finding Committee must be accepted as the basis of discussion I would make every endeavour to facilitate consideration as to the method of giving effect to the necessary reductions. After consultation with my right hon. Friend, I have also informed the union that while the Conditions of Employment and National Arbitration Order does not bind the Crown, they can assume that the Ministry of Transport would act as if they were bound by it. This means that if the union wish to claim the protection of that Order to secure arbitration in regard to questions as to the reinstatement of any of the men dismissed, no obstacle will be raised, although, of course, there would need to be prior agreement to accept the award.
  The trade union side of the National Joint Council are meeting this afternoon to consider the position, and I have requested that they should later meet officers of my Department so that the whole matter may be fully discussed. I sincerely hope that the dockers of Glasgow will realise that if they will return to work, in order to enable discussions to proceed in a constitutional way, their position will in no way be prejudiced. I am aware of the serious inconvenience and loss occasioned by the present stoppage, and the Government have felt it necessary to take appropriate steps to safeguard essential food supplies.
  Mr. Rankin: While thanking my right hon. Friend for his answer, I would like him to expand one or two points that arise from it. First, is there any foundation for the rumour that there is unfair discrimination in the selection of men for dismissal? Second, could he assure us that a return to work will not prejudice the re-employment of any man whom the inquiry shows to have been dismissed unfairly? Third, could he say who are the parties taking part in the meeting today?
  Mr. Isaacs: I am glad to answer those questions because I think they are helpful. As to prejudice, in choosing men for dismissal that is the point on which we are urging the union to bring cases to us for examination. If there has been any unfair discrimination in the selection of men for dismissal out of the numbers who are redundant I am sure that an independent inquiry, such as we can hold, would clear up the matter. As to return to work, I want to assure my hon. Friend that if the dockers will go back to work, and it is found that any men have been unreasonably dismissed, we shall use all the influence we have to secure their return. As to the parties who are taking part in the meeting, they are the four unions which comprise the workers' side of the Joint Industrial Council—the Scottish Dockers' Union, the Transport and General Workers' Union, the Municipal and General Workers' Union, and the Stevedores of London. They have all joined with representatives of the Glasgow union in the hope that we can settle this matter in such a way that it will not only 1'e a Glasgow settlement, but the basis of a settlement of the whole question.
  Captain John Crowder: Can the Minister tell us how many of the men concerned are over 60? Does that come into the question?
  Mr. Isaacs: Not quite. One of the points is whether men employed in the docks before 1939 should be retained, in preference to those who came in afterwards. I do not know whether age or conduct comes into it. We are anxious to investigate these points, but we cannot do so while there is a stoppage.
  Mr. W. J. Brown: In view of the right hon. Gentleman's reference to negotiations having gone on for a period of several months—if I understood him aright—is he satisfied as to the adequacy and speed of the machinery for negotiations on such matters as this, or is that possibly a predisposing cause of the trouble, which may be put right?
  Mr. Isaacs: I am sure that in this case it is not a question of adequacy or speed; it is the tenacity of the Scottish dockers in holding to their opinion.
  Mr. Gallacher: Is not the right hon. Gentleman making a mistake in saying that the strike took place since this decision was announced, in view of the
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  fact that fully three weeks ago a deputation from the docks was here, and got into touch with his Department to try to get this question discussed in order to prevent a strike?
  Mr. Isaacs: The only discussion they wanted was with reference to the absolute withdrawal of the attitude taken up, but we pointed out that as this followed on a decision of the Joint Industrial Council, to which they were parties, we could not step in and overthrow that decision.
  Lieut.-Commander Gurney Braithwaite: Can the right hon. Gentleman tell us what steps are being taken to safeguard essential foodstuffs?
  Mr. Isaacs: We are ensuring that all facilities are given to unload the necessary food supplies. We must differentiate between a strike-breaking movement and a food supply movement. It must be said, in fairness to the dockers, that they are making no attempts at all to interfere with the soldiers who are unloading food supplies.

PRIVILEGE (NEWSPAPER ARTICLE)
Mr. Quintin Hogg: Pursuant to the notice which I gave to the House yesterday, Mr. Speaker, I feel it my duty to submit for your consideration a document which, I shall submit, contains four or five major breaches of the Privileges of this House. I am informed that the correct procedure for one who seeks this Ruling is to read out the paragraphs concerned, and reserve any comments that he thinks it is necessary to make, until after the Chair has made a Ruling as to whether a prima facie case has been made out. With your permission, Sir, I propose to follow that procedure.
The document is the feature article, on the front page of a newspaper called the "World's Press News," in the issue for 3rd April, 1947. I understand that it is a newspaper written by journalists for journalists, and has considerable influence in the journalistic world. The article purports to be written by the hon. Member for Gravesend (Mr. Allighan) to whom I have given notice that I intend to raise this matter as a question of Privilege. The article, or as much of it as I desire to complain of, reads as follows: The first heading is this:
"This May Be Dynamite!"

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The next heading is:
"Labour M.P. Reveals His Concept of How Party News Gets Out."
It says that it is an article written by—and then mentions the name of the hon. Member for Gravesend. The first two paragraphs of the article refer to an incident which will be within the recollection of the House, in connection with the hon. Member for Bilston (Mr. Nally), and I do not think that it is necessary for me to repeat them, but I must read one introductory paragraph to give the context. It refers to the hon. Member for Bilston, and reads:
"This pool-busting, Co-op-nominated journalist M.P. was righteously angered by the fact that the 'Evening Standard' manages to get what the Parliamentary Labour Party has, for years, referred to as 'leaks'. What does all this really amount to? In my opinion it all adds up to two conclusions: that the 'Evening Standard' is highly enterprising, and that the Parliamentary Labour Party is highly ingenuous."
I hope that this will not be treated as a party matter, because it is one which affects the whole House. The author of the article goes on to say:
"Every week about a dozen different party meetings are held in the House, to none of which the Press is admitted. I attend an average of six weekly. So far as recollection serves, the 'Evening Standard' has published, on an average, something about one of these per week. How do they get the stuff? Anyone with wide Fleet Street experience would know that there is nothing mystic about this."
Here comes the first passage of which I complain in that context:
"Every newspaper in the Street has anything up to half a dozen M.P.s on its 'contacts' list. They always have had—what's the contacts file for, otherwise?
Some of the 'contacts' are on a retainer, some get paid for what they produce, some are content to accept 'payment in kind' personal publicity."
Then I particularly invite the attention of the House to the paragraph which follows:
"I, as news editor of the 'Daily Mirror, used to O.K. payments to several regular M.P. contacts, both for stories, 'info' and tip-offs."
What is referred to there is clearly not legitimate journalism of news and views.
"At least two of them were prominent Labour M.P.s—one is a Cabinet Minister of such prominence as to be in the first four of potential Premiers."
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I invite the attention of the House particularly to that sentence. That is the first passage to which I desire to draw the attention of the House as a prima facie case of breach of Privilege. The second is this:
"That is one way any enterprising newspaper gets what the party calls 'leaks.' Another way more accurately justifies that description. M.P.'s 'leak' around the bar. Being no less human than subs, some M.P.'s 'knock 'em back' at the bar and, being less absorptive than reporters, become lubricated into loquacity."
After reference to an hon. Member who is, I think, a vice-chairman of the party opposite, which I do not propose to read, he goes on to say:
"No worth-while reporter could fail to get the stuff. If he knew no other way, and had no other contacts, all he would have to do would be to spend his time, and the paper's money, at the bar, and if he did not pick up enough bits and nieces from M.P.s in search of refreshment to make a first-rate 'inside' story, he ought to be fired."
Then comes another curious passage:
"Herbert Morrison is not half the Party 'boss' he's accused of being—if he were he'd put the bar out of bounds to Labour M.P.'s"—
I implore hon. Members to believe that I am not putting this forward as an attack on the party opposite, but it is a matter which affects the whole House. The actual phrase seems to-involve one party rather than another, but I would not attach the slightest importance to any phrase coming from this particular source. I draw the attention of the House to this particular passage:
"If he were, he'd put the bar out of bounds to Labour M.P.s, some of whom have succeeded in approaching the fringe of semi-sobriety."
Then there is a passage about three hon. Members of the House, which I do not think it necessary to repeat. The article goes on to say:
"Enterprising reporters who have the House for their 'beat' do not spend much time in the Press Club—they eat and drink on the job. That is where and how the 'leaks' are picked up. Any news editor would tell Willy Nally that. So could the cashier of any newspaper—the 'swindle sheets' of Parliamentary reporters contain almost as many 'to entertaining M.P.s' as any dance-band leaders' to entertaining B,B.C. producers'."
I draw the attention of the House to that, and, again, to the fact that it is an attack on the House of Commons. Then it goes on—and it is particularly important to observe that it goes on

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immediately after that allegation in that context—to say:
"Some of the 'Evening Standard' stories have been verbatim reports, and having been present at the meetings, I would go further and say that they were accurate verbatim reports Who could have taken the speeches down? I reply: Any one of the score or more M.P.s who can be seen at every party meeting making voluminous notes. On one occasion—here I 'leak'—the chairman had to appeal to them to restrain their note-taking energy."
Then he passes to this paragraph, which is a breach of Privilege, apart from its being an obviously defamatory libel on an individual Member.
"Not that the 'Evening Standard' gets all the scoops. Both 'The Star and the 'Evening News' run a good 'leak' service. One of the best leaks 'The Star' had was a report of what Haydn Davies had said at la party meeting—and how well he had said it. Despite his past associations with The Star,' nothing would convince me that Haydn had leaked—although many of Our Dear Comrades went around that day declaring that he had taken care to get a good Press."
This, I submit, is a particularly despicable way of putting forward a defamatory libel about someone for which you have not the courage or decency to take the responsibility. There is one more paragraph only which I am going to read:
"On one or two occasions I have 'leaked' a couple of words to Jack Broadbent or Percy Cater—but not so's you'd notice it. In fact, they always think I've let the Daily Mail' down in not telling them the inside stuff. it's difficult when you take a newspaper's money for your journalistic services and sit tight. as an M.P., on the stories they really want."
As I understand it, my duty is not at this stage to offer any comment upon what I have read. I should like at a subsequent stage to do so, because I think this is an unusual and important case. I submit that I have made against the author of this article, against the publisher and the owners of the newspaper and against the printer a prima facie case of breach of Privilege of the House of Commons, flagrant, open and gross. May I ask for your Ruling, Mr. Speaker?
Mr. Speaker: Will the hon. Member bring the paper containing the article to the Table?
Copy of newspaper delivered in.
Mr. Speaker: It is, of course, customary for the Clerk to read out the alleged breach of Privilege, but so much has been said that I think we can dispense with that on this occasion. I think that the House will readily agree that I have no
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option but to declare that a prima facie case has been made out.
Mr. Hogg: Now that that Ruling has been given, there are one or two things that I want to say. It is my intention to submit a Motion that this matter should be referred to the Committee of Privileges, but as this is an unusual case, I want to indicate why I think this is the only way in which this can be dealt with honourably. I want to make this clear at the outset. My dominant desire, and I believe the dominant desire of every Member of the House, is for the good name of the House of Commons. It is vital when we use this instrument of Privilege that it should never get about, or be supposed for a minute, that we use it for the purpose of suppressing the truth. It must be realised that it is the desire of the House of Commons never to hush up any genuine scandal which may exist and, therefore, we must never, in my submission, accept too readily a retractation when specific allegations have been made. We have a right to clear our good name in this matter. I start from that proposition.
Secondly, I desire to say this regarding the paragraph in which, as I read, an hon. Member has said that he had, in fact, a number of Members of Parliament, including a Member of the present Cabinet, in his pay, for the disclosure of information which they were not free to make—"info and tip-offs" is the phrase which I read in the article. The hon. Member for Bilston made a general allegation some weeks ago. That is one thing, and he was allowed to withdraw it, but this is infinitely more serious. This is a specific allegation—a boast almost—by an hon. Member of this House that he, personally, has assisted in the payment of money to Members for the disclosure of information which no hon. Member can be in the position freely to disclose at all. This is a specific allegation, and it is for this House in my submission to clear its name from the malicious concoction, if that be the case, to which it has been subject. He says he himself paid money for "tip-offs" and "info" and that is how party leaks get out. In my submission we cannot overlook that. We must insist that it shall be properly investigated.
May I say, in passing, that no one could be less inclined than I to suggest that if

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an hon. Member has a serious allegation to make, he should not be perfectly free to make it, but we owe this much to one another in this House. This House has its own Rules of Procedure, and under them we are perfectly free, if we wish and if we think it is our public duty to do so with a due sense of responsibility, to make a charge against any one we please. But what we must not do, in my submission, is to go writing articles to the Press in which we make general allegations of a kind when some of the mud may conceivably stick, and when, as in this case, weeks may elapse before the procedure of the House can bring the culprit to book. If we have anything to say, let us say it openly in accordance with the procedure of this House.
The second paragraph deals with the question of insobriety. Some years ago a Member of the House of Commons was publicly admonished from the Chair for having suggested that Members were at some time the worse for liquor, but this case is rather worse than that, because the suggestion is not only that they could not hold their liquor like gentlemen, but that they did, in fact, disclose, under the influence of drink—deliberately administered for that purpose by that very honourable body of men, the Lobby—information which they were not honourably free to disclose. That is the allegation, and it is in my submission a most serious charge which must be substantiated or withdrawn completely.
Then it goes on to something which is, in a sense, more difficult to deal with because it is less definite. It is the suggestion that what are described as "swindle sheets"—I am afraid I do not know what "swindle sheets" are—contain large items for the entertainment of Members of Parliament which are greater than the amounts spent on entertaining B.B.C. producers. In the light of recent disputes and investigations I submit that that can only mean one thing—it is a deliberate charge of corruption made against the Lobby, and against the House of Commons, by this hon. Member. I ought to add that a charge of corruption having been made, there is a specific allegation made in the most unmistakable terms that Members go to party meetings which they are honourably bound to keep confidential, and take voluminous notes almost publicly, so
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that some of them may be able to disclose the proceedings. May I say this? Without party government we should get no Parliamentary government, and honour towards one's own party, if one is a member of a party, is just as much a part of honourable conduct for a Member of Parliament as voting in this House. It is just as venal and dishonest to take money for breaking the confidence of one's Parliamentary friends, as it would be to take money for voting in this House in a particular way.
I have read that passage of the article which is a vicious and unjustified attack upon a particular hon. Member, and I say nothing more about that. I would beg the House to appreciate that in raising this matter, I have done so solely with a desire to vindicate the good name of the House of Commons. What I find most offensive about the whole article is not so much the charge of insobriety or loquacity or even the charge of corruption. What I find and what I am sure hon. Members will find the most offensive and the most disgusting of all is the calm assumption, the cynical allegation, that this is nothing much to worry about; that a particular Member who expressed indignation was an ingenuous fool, because everybody knew that sort of thing went on, and that this was rather the established standard of morality. That is what I find most offensive about this article. We are accustomed in this House to refer to one another when we disagree as "honourable gentlemen."
When we agree we refer to one another as "honourable friends." These epithets are no mere conventional courtesy, no mere meaningless symbols; they are part of the concrete reality, part of the granite foundation upon which this House of Commons has raised its authority and prestige value that have become one of the great institutions of the world, one of the few deliberative Assemblies which have really succeeded. If we do not protect and defend our good name when it is openly and viciously attacked as it is at the moment, we shall not maintain our position as a great institution.
It was represented to me by some that this was a small matter, and one which could be lightly passed over, that its author was a person who could not be seriously regarded and that the organ in which he published his opinions had such

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a small circulation that this breach of Privilege should be ignored. I do not take that view. A deliberate statement by a Member of this House cannot be treated as the irresponsible babbling of a person simply writing for money, and although this organ has a circulation which is perhaps not large, it is a trade journal, deliberately designed to inform the opinion of journalists whose trade it is to inform the world. I beg to move,
"That the matter of this complaint be referred to the Committee of Privileges."
Mr. Bowles: Before the hon. Gentleman sits down may I correct a mistake that he has made? He referred to the vice-chairman of the Labour Party, that is myself, but I am not mentioned in the article in any way.
Mr. Hogg: I hasten to agree. The hon. Member for Nuneaton (Mr. Bowles) is not referred to in any way. The hon. Member referred to is, I understand, the chairman of the party and is not referred to in any fashion which could cast the slightest reflection upon his good name, and it is precisely for that reason that I did not think it necessary to read the passage.
Dr. Haden Guest rose—
Mr. Churchill: On a point of Order, Mr. Speaker. You, Sir, have ruled that this is a prima facie case. Does it not now rest with the Leader of the House?
Mr. Speaker: First of all, we must have a Motion referring the matter to the Committee of Privileges, and the hon. Gentleman was rising to second it.
Dr. Haden Guest: I beg to second the Motion. I do not propose to discuss the matter since it is one which affects the honour of the whole House.
The Lord Privy Seal (Mr. Arthur Greenwood)rose—
Mr. Speaker: May I just say that if the hon. Member referred to is in his place it is normal that he should now be heard and then asked to withdraw before any further discussion takes place, if he is prepared to do so.
Mr. Garry Allighan: I had been prepared this afternoon to make withdrawal complete and apology complete, but as there is now a Motion before the House, I prefer to keep what I have to say until I appear before the Committee. With your permission, Sir, I will withdraw.
The hon. Member then withdrew.
Mr. Arthur Greenwood: I would—not gladly, but as a matter of duty—have been willing to move the Motion which was moved by the hon. Member for Oxford (Mr. Hogg). Had nobody else risen to speak after your Ruling, Mr. Speaker, it would have been my duty to move the Motion which I am sure will be carried by the House. Those of us who are Members of the Committee of Privileges do not welcome the accession of cases that come before us, but here the honour of the House has been impugned, and I associate myself with what has been said in support of the Motion.
Mr. Churchill: I always understood, Mr. Speaker, that on your giving a Ruling that there is a prima facie case the Leader of the House moved that the matter should be referred to the Committee of Privileges. If, however, a Private Member can do it, that is quite agreeable to us. At the same time I think it should be seconded—[Horn. MEMBERS: "It has been"]—Are we then to understand that His Majesty's Government have no views on this matter? I think it is important that His Majesty's Government should be associated with it.
Mr. Greenwood: I thought I had expressed my views very emphatically. If not, I associate myself with what has fallen from the lips of the hon. Member who moved the Motion.
Mr. Gallacher: May I also associate myself with this Motion? [Interruption.] I can do so as one who has been here for 12 years. I have never been offered a drink and I have never received an offer of any kind, although I have been in conversation with Pressmen time and time again.
Lieut.-Colonel Sir Thomas Moore: As I seem to be mixed up in this business I ask your permission Mr. Speaker, to disclose my interest. Although I did not see and was not aware of the article in question until I actually read it, I should like the House to realise that I am a director of the company which publishes this journal. It is a non-political and non-party paper, and the editor, under the authority of the board, publishes such matters as he considers are in the public interest. I can only assume that the article in question was published in that discretion, but I, personally, would withdraw any possibility of association with its contents.
Question put, and agreed to.

FINANCE BILL (PROCEDURE)
Resolved:
"That, notwithstanding anything to the contrary in the practice of the House relating to matters which may be included in Finance Bills, provision may be made in any 'Finance Bill introduced in the present Session for giving effect to any Resolution which may be passed by a Committee of the Whole House and agreed to by the House authorising the payment out of the Consolidated Fund of sums to the Post Office Savings Bank Fund and the Fund for the Banks for Savings, of expenses (including the remuneration of members and officers) of the Inspection Committee established under Section two of the Savings Banks Act, 1891, and of expenses incurred by the National Debt Commissioners, and providing for the repeal of Subsection (z) of Section four of that Act."—[Mr. Dalton.]

ORDERS OF THE DAY

  WAYS AND MEANS
  Considered in Committee. [Progress, 15th April.]
  [Major MILNER in the Chair]

  WAYS AND MEANS

    AMENDMENT OF LAW
    Question again proposed,
    "That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance."—[Mr. Dalton.]
    4.10 p.m.
    Sir John Anderson (Scottish Universities): The performance of the Chancellor of the Exchequer yesterday, when he held the attention of the Committee continuously for more than three hours, can, I think, justly be described as a remarkable tour de force. He exhibited, as he has done before, his outstanding gift of lucid exposition and, in a speech which might well have become dull and dreary, he managed to be reasonably brisk and lively to the end. My admiration was the greater because I could not possibly hope to emulate his performance myself. But, while I pay the Chancellor that compliment, I feel bound to add that I think that his skill in exposition had the effect sometimes of obscuring somewhat the reality of the situation he was describing.
    For example, he spoke of the surplus disclosed by his Budget.. I concede at once that there was legitimate ground for satisfaction in some of the figures exhibited in that Budget, but the Chancellor of the
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    Exchequer claimed a surplus of no less than £248 million. He went on to qualify that presentation by saying that such surplus could not be regarded as available for tax reduction and that there might not, in fact, be any corresponding surplus next year. That seemed to me tantamount to admitting that it was not, at all events wholly, a genuine surplus. The calculations included, for example, £95 million realised from the disposal of war stores, and no less than £292 million under the heading of "Miscellaneous Receipts." There the Chancellor gave us a vivid description of the acitivities of His Majesty's Treasury, almost I suggest feline activities, in "clawing back," as he put it, large sums that had gone astray apparently in various parts of the world.
    The Chancellor must recognise that, in large measure, if not wholly, the items making up the £292 million are in a sense little more than adjustments of account. They represent a retirement of advances made at earlier stages during the war to various organisations whose activities have come to an end, or at all events have dwindled, and who can now release the sums of money that had been made available to them. Certainly in that sense such items cannot be regarded as genuine revenue receipts. That, at any rate, is my submission. But I want to submit to the Committee that no figures could be satisfactory that include the enormous total of expenditure which appears in the present Budget. After the efforts put forth during the war and after the lapse of nearly two years since hostilities came to an end, no one can take satisfaction in expenditure totalling £3,181 million.
    I had something to do with the Budget that was presented in the House at the corresponding stage after the first European war. I was then Chairman of the Board of Inland Revenue and was one of the small circle associated with the then Chancellor, Mr. Austen Chamberlain, in framing the Budget of 1920. I was interested to look back to see how the figures of that Budget compared with the figures today, because that is a very good indication of how things have moved in the interval. Then the expenditure budgeted for was £1,184 million as compared with £3,181 million, and the estimated Revenue was £1,418 million as against the figure of £3,429 million today. It is interesting that the estimated surplus then in relation to lower total figures was

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    almost the same as today, a paper surplus of between £200 million and £250 million. These figures show very clearly how our national financial situation has worsened, as compared with the period following the first European war, and what a tremendous effort will be needed to restore it.
    Therefore, my first criticism—one, I am afraid, of many—must be that again, as last year, we have from His Majesty's Government no evidence of a real desire to save. In this respect I feel bound to say that the Chancellor seemed to me to be neglecting one of his first duties. He still talks of mounting expenditure in a complacent way. I will say nothing about songs on this occasion, but he was betrayed yesterday into saying that he was happy, in one particular connection, to see expenditure going up. He withdrew the word at once and substituted "content." In another connection he even claimed to have prodded a spending Department. I want to say, quite frankly and quite definitely, that in my view it is no part of the business of a Chancellor of the Exchequer to constitute himself a spending authority. Unless his attitude seen to be always critical of expenditure, although he may be willing to be convinced on occasions by good arguments and good evidence, we shall never get the attitude of mind on the part of spending Ministers and Departments which is necessary for any real effort in the direction of economy.
    I pass to the question of food subsidies, on which the Chancellor had a good deal to say. I feel justified in reminding the Committee that when the Chancellor presented his first Budget, the so-called interim Budget in October, 1945, I reproached him for having done nothing about food subsidies but, on the contrary, having given an absolute and unqualified undertaking to maintain the price level where it was, irrespective of what might happen. When he presented his first full year's Budget at this time last year, I noted with pleasure that his attitude had been modified to some extent. Now, at long last, when the total of subsidies, mainly on food, partly on utility articles of various kinds, amounts to the colossal figure of £425 million, he changes his attitude. But still, while we may welcome that, as I indeed do, the steps that the Chancellor contemplates taking are still left somewhat obscure.
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    I would comment, in that connection, that a change in our methods of calculation cannot really affect the substance of the matter, although it may provide a convenient occasion for a review and a change of policy, and we shall certainly await with much interest the further proposals which the Chancellor indicated he expected to submit to the House, with opportunity of debate, in the course of the next few months when the new index figure has been worked out by his colleague the Minister of Labour. I would add, in that connection that a moment when relief from direct taxation is being provided would seem to me eminently suitable to choose for a determined effort to bring down those subsidies. Our national economy will never be on a satisfactory basis until they have been reduced to negligible proportions. But there are many other directions, in my belief, in which the pruning-knife could be used. As I have said before, I think a complete change of attitude on the part of His Majesty's Government towards the question of economy in public expenditure is called for.
    Before coming to the Chancellor's proposals in regard to taxation, there are two or three topics on which he addressed the Committee with which I would like to deal briefly. He spoke at sortie length on the subject of deflation. I do not think that he endeavoured to attribute to hon. Members on this side of the Committee any declaration which he regarded as mischievous on that matter, but I wish to leave no room whatever for do. ht as to the attitude that we on this side adopt on the questions of inflation. on the one hand, and deflation on the other. First, I would say, though I said much of this only a short time ago when we were debating the general economic situation, that one must always draw quite a clear distinction between ordinary inflation and runaway inflation; one must draw a similar distinction between ordinary deflation and uncontrolled deflation. I say without any hesitation that I would not myself be a conscious party to any measures likely to lead to uncontrolled deflation, with its deplorable effects on the people of this country and particularly on the poorest sections of the community. At the same time, I want to make it clear that some form of deflation can only, in practice, be avoided if we are successful in avoiding the antecedent inflation. That is the only way in which we can avoid some

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    measure of deflation if we are to preserve, as I said before, the value of the people's savings, and that is an object to which we are all deeply pledged and absolutely committed. I hope that on that topic I have left no room for doubt as to the attitude which we here take up
    Now I want to say a word about the cheap money policy to which the Chancellor devoted quite a large part of his speech yesterday. What he said was full of interest. I think that in presenting to the Committee the advantages which, in his view, flow from the cheap money policy, he has omitted to call attention—as a balanced statement to my mind would appear to require—to some of the disadvantages, because there are some. There is always some hardship associated with the transition from one interest basis to another, and that is a definite disadvantage. I think the Chancellor even seemed to be claiming some advantage from a cheap money policy for this country in so far as it enables other people outside this country to borrow from us at a much cheaper rate, but surely he does not mean that? We may be very glad to see a friendly Government—and especially a Dominion with whom we are in close association—benefiting from the cheap money policy. But do not let us shut our eyes to the fact that the benefit in that case is gained at our expense—our imports cost us more. So do not let any of us—the Chancellor, or anyone else—be so carried away by enthusiasm for the cheap money policy as to shut their eyes to such obvious facts as that.
    Now I have more than once associated myself with the cheap money policy, which has been developed progressively over a considerable number of years. I have always said, however, that I thought there was a danger of carrying that policy forward too quickly and too far, and I think that the Chancellor has fallen into that danger. I think he was in too great a hurry to get down to the 2½ per cent. basis. It may be, I do not know, that he had in his mind some thought that it would be possible to get down eventually to an even lower basis than 2½per cent. I have never taken that attitude, and I still question whether a normal 2½ per cent. basis for long-term borrowing allows sufncient elasticity against the
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    time when interest rates again enter into the price mechanism, upon which sooner or later we shall have to rely. At all events I think that a mistake was made when an irredeemable loan was issued at 2½ per cent., though I have no doubt that the Chancellor of the Exchequer was careful to take advice, and it may well be that some of his advisers advocated that course.
    I thought the Chancellor yesterday made some reference—I am not sure that I caught it correctly—to the possibility that people in this country might be so avaricious as not to be willing to lend their money at 2½ per cent. I do not think that question really arises at all. The difficulty is that many people cannot afford to risk losing the capital value of what they lend. When you issue an irredeemable loan at 2½ per cent., or at any other percentage, while there is still any uncertainty at all as to the permanence of the interest rates current for the time being, there must be that risk. That, to my mind, was the strong argument against making that particular loan irredeemable.
    I wish to say a word about overseas debts. The Chancellor was very frank in what he said to the Committee on that subject. He gave us a glimpse—a very unpleasant glimpse—of an awkward situation looming ahead. He brought us face to face with it. Then, it seemed to me, he moved on to other topics, without giving us any very clear idea of what he thought he might be able to do about it. That is a situation which we shall all have to face before very long. The possibilities are very grim. We must have a policy.
    Similarly, when the Chancellor was talking about sterling balances, he seemed to be on the verge of some epic pronouncement. Again, we had a vague formula. We do not know what it means. It may be we shall be able to support him wholeheartedly when he comes to interpret it, and when we see what his practical proposals are. But, at the moment, we are in the dark. We do not know what progress has been made with the negotiations contemplated under the Washington Loan Agreement in that matter. It is a matter which must be handled with very great care and delicacy, and we must be absolutely firm that no vital interests of this country shall be sacrificed in a pedantic attempt to deal with these wholly

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    exceptional balances as if they had arisen in the normal course of trading.
    I cannot take up all the points the Chancellor made in his long speech yesterday, and would not dream of wearying the Committee to that extent. He seemed, naturally enough, to be claiming a great deal of credit for the Labour Government for the financial situation in which we find ourselves. I cannot help wondering what that situation would have been if we had had some other kind of Government. May I indulge in the luxury of speculating for a short time as to what might have been the situation? I think the revenue figures would certainly have been quite as good. I am sure the expenditure figures would have been very much better. [An HON. MEMBER: "Higher or lower?"] Lower, of course. I think we should have had real economy. I mentioned a moment ago how the Chancellor had spoken of the energy displayed by the Treasury in clawing back some of the money. What about the terrible scandal of the millions of pounds lost through currency speculation in Germany?
    The Financial Secretary to the Treasury (Mr. Glenvil Hall): Who was Chancellor then?
    Sir J. Anderson: A long time has passed since the present Chancellor took office. That speculation amounted to £40 million in one financial year, and at least £20 million in the financial year following. That is not a matter about which there can be any complacency at all. It is a very, very grave state of affairs—
    Dr. Morgan: The right hon. Gentleman opposite was Chancellor then.
    Sir J. Anderson: I certainly was not. My charge against the Government is that they have not left themselves time to deal with matters of administration. They are so much engaged in giving effect to their own airy fancies. This is a question of sound administration, and we will not get sound administration unless Ministers give the necessary time to it, and stimulate it. Only in that way can we get the finances of this country back on an even keel.
    I think another Government would have approached the problem of tax reduction in a less niggling way. Certainly, all the reliefs already granted, and now promised, could have been granted, and would have been granted, and, in addition, I believe that by this time we could
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    have had a further significant reduction in the standard rate of Income Tax. If the Chancellor is unable, because of the course of events under a Labour Government, to make such a reduction, he should at least have cast his mind forward, as Budget considerations are no longer limited to a single year, and indicated what he hoped to achieve in the future in the way of reduction. The restoration of earned income relief at one-sixth, up to an income of £1,500—as I pointed out at the time—ought to have been done, in justice, last year. I deplored the omission to restore fully the allowances that were reduced during the war by my predecessor when he undertook to give corresponding Income Tax reliefs. Those reliefs were abolished without restoration of the allowances. I think that was a great blot on last year's Budget, and I am glad that it has been put right now. I welcome the increase of the allowance in respect of children to £60. Coming as an addition to the new family allowances, it ought to be regarded as very generous. Similarly, the dependent relative allowance is something which we all welcome. But, very much more than that was needed by way of tax relief.
    As the Chancellor pointed out with great emphasis yesterday, we must have enormously increased production, particularly of goods for export. That is our most urgent need. What is wanted for that purpose is further incentives all along the line, incentives especially affecting those untouched in the main by the reliefs already granted, those who determine policy and who, in business enterprises, settle what risks have to be taken. Such incentives, in my judgment, would provide a financial return out of all proportion to their relatively small cost.
    Other considerations arise in connection with this question of the excessive level of direct taxation. I make no apology for dwelling for a few moments on what I regard as the most baneful effects of the existing high rate of tax, especially on the upper ranges. They are not only a curb on enterprise and initiative, but they have other effects, even more mischievous. People with a position in life to maintain are forced to live on capital. That is not a desirable thing, either from the individual, or national, point of view. It is inflationary, and involves, in many cases, real hardship, eating into savings

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    which have been relied upon for declining years. A proportion—I fear a growing proportion—are yielding to the temptation to enter the black market in some form or other, or to resort to various devices, doubtfully within the law. In this connection, I wish to ask the Chancellor whether he, or the Financial Secretary, who is to speak later in the Debate, can throw some light on the meaning of Resolution 15, to which the Chancellor made no reference yesterday? The heading is:
    "Benefits procured for directors and employees."
    It is cast in wide terms, apparently designed to enable the Revenue authorities to correct abuses, such as I think we all know are prevalent, and are becoming increasingly prevalent. I hope that we shall have some light thrown upon that Resolution.
    Yesterday the Chancellor used an expression—
    "We stand … for justice.…"
    He added;
    "Most of all the Labour Party."— [OFFICIAL REPORT, 15th April, 1947; Vol. 436, c. 78.]
    I concentrate on the words "We stand for justice." I hope we all do. I hope that justice means one law for all. I am sure that the Chancellor must realise that it is not so at present. I am bound, in this matter, to refer for a moment, incidentally and by way of illustration, to the announcement which the Chancellor made in this House and which I think won universal approval, about the Prime Minister and his salary, when he said that £4,000 of the Prime Minister's salary would, for reasons he gave, be exempt from tax. He went on to say that of course it was necessary in order to ensure that the Prime Minister would be able to fulfil his duties "with dignity and efficiency." With that, I am perfectly certain we should all agree. Not a word of what I am saying is intended to reflect on what was done in regard to the Prime Minister's salary. The point I wish to make is that the rule under which that tax concession was made is a rule of limited application. It is applicable only to a limited class of persons receiving remuneration from public funds. No one would doubt that while the Prime Minister's case may be an extreme one, there are other persons occupy-
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    ing public positions, which they ought to be able to fill with dignity and efficiency.
    What is the position in regard to those persons? The rule that applies to them is quite different. The rule applicable to the Prime Minister and other persons in a similar exceptional position gives complete discretion for the Treasury to say that so much remuneration shall be exempt from tax. That is an end of it, and the Revenue authorities have no power to go behind such a decision. But the ordinary law, embodied in Rule 9 of Schedule E, is in very stringent terms. It says that a taxpayer under Schedule E, which deals with all employments,
    "who is obliged to expend money wholly exclusively and necessarily in the performance of the duties of his office, is entitled to claim relief from taxation in respect of such an expense."
    That raises a serious question of principle. Rule 10, under which the Chancellor presumably acted, is a rather remarkable example of delegated power, given to the Executive, to amend the Revenue law in this case of particular individuals. Rule 9, which is applicable in all other cases, is administered, and should be administered strictly, by the Commissioners of Inland Revenue, subject to the ordinary machinery of appeal.
    I have the most profound admiration for the Inland Revenue authorities. I do not pretend to be unbiased in the matter. I was, as the Committee knows, at one time closely associated with them officially myself. I do regard that organisation as the most perfect instrument of its kind that has ever been devised anywhere in the world. I see great danger indeed of its being broken down. The staff are almost overwhelmed by their day-to-day burdens. They have the black market to look after, they have all the complications of P.A.Y.E.,, and if they have, at the same time, to administer strictly the terms of Rule 9 against the background of the sort of decision which has been taken by the Chancellor—quite rightly and properly—in a particular case, their task will be very difficult indeed. In my judgment the only way to establish reasonable equality of treatment as between taxpayer and taxpayer, and to get rid of abuse, is to reduce direct taxation to the point at which the respectable and law-abiding taxpayer would have no need to resort to doubtful expedients to reduce the burden on his income.

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    I urge the Chancellor to look into this matter carefully; it is very much in the interests of the country that he should do so. I am not sure whether the Chancellor was aware of the contrast I am making between the two rules. I do not know whether he brought it to the notice of his colleagues or the Prime Minister. I ask him to look into it, and I ask the Committee to recognise that I have been trying to express myself with studied moderation. I could easily have used stronger and harsher terms. I would suggest to him that it might be worth his while to look further into the working of P.A.Y.E. I have no sympathy with certain wild suggestions which have been made for getting rid of P.A.Y.E. or of making drastic changes. The trouble about P.A.Y.E., as the Chancellor said last year, if I remember aright, is that people object not to P.A.Y.E., but to P.A.Y.I.N.G. There may be some way of adjusting the general structure of Income Tax which would get rid of the sharp contrast which arises in men's minds when their remuneration passes one of the critical points at which tax begins to be collected at a higher rate I suggest to the Chancellor that it might be worth while looking into that.
    With the Chancellor's decision not to go further with the project of a betting tax, I am wholly in sympathy. I had some experience of the experiment with which my right hon. Friend the Leader of the Opposition was associated a good many years ago when I was at the Home Office. The Chancellor's decision was fully justified. After all, if one reflects that one penny on the Income Tax means a revenue of £10 million, without any new machinery, without any new expense of collection, it is pretty obvious that no new tax, involving new machinery, can be justified unless it is to yield substantially more than £10 million. I do not think that a betting tax, if he had been able to devise one, would have proved anything like so productive as most of the advocates suppose. It would have landed the Chancellor, I am quite sure, in immense administrative trouble and difficulty.
    As regards the decision about Legacy and Succession Duties, I regret that the Chancellor was not content to leave the matter where it was in the last Budget when he put up the Estate Duty on the higher estates by a very considerable
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    amount. I think that the decision to double Stamp Duty is wholly indefensible. A duty of two per cent. in relation to the declining interest yield on investments is, in my judgment, much too heavy.
    Mr. Glenvil Hall: I am sorry to interrupt. I wonder whether, to complete the story, the right hon. Gentleman would tell the Committee what he himself assisted in doing in 1920 in the Budget to which he referred earlier?
    Sir J. Anderson: That is perfectly true. I recommended that the duty should then be put up.
    Mr. Glenvil Hall: Doubled.
    Sir J. Anderson: I recommended that the duty should then be doubled. This is a proposal to increase it further. The fact that a duty has once been doubled, so far from being a reason for doubling it again, is a reason for being content with what has already been done. At any rate, that is my view.
    I come now to another matter about which I have to be critical. Although I listened very carefully to the Chancellor yesterday, and have read since the report of what he said, I cannot understand the logic by which he sought to justify what he is proposing to do about bonus issues. In so far as bonus issues are not legitimate they are now prohibited, and they can still be prohibited under instructions to the Capital Issues Committee. Does the Chancellor not recognise—I thought from what he said yesterday that he did—that there are many bonus issues justified from the point of view of presenting accurately to the public, the shareholders, and everyone concerned, the actual state of the capital of a business? Why on earth should the Chancellor seek to claim what he called a "rake-off" on these legitimate transactions because there is quite another class of transaction which can be regarded as not legitimate? I really cannot understand it. In any case, I submit to the Committee that the Chancellor's proposal will defeat its own object, because the proposal to levy a tax of as much as 10 per cent. on such issues will, in a great many legitimate cases, prove prohibitive.
    I now refer to the new Profits Tax. I think there is some reason for concluding that the Chancellor's proposals in regard to that tax were, in fact, more moderate than had been expected in some informed

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    quarters in the City. The question whether such a tax is legitimate at present, is one of a rather nice balance. I would have been ready to justify a new tax on profits if it served to enable a substantial reduction to be made in the standard rate of Income Tax. With all the disadvantages, and they are great, of a Profits Tax, I think that, on the whole, it would have been justified for that purpose. If I had been putting on such a tax, I would not have made this discrimination which the Chancellor has made between distributed profits and un-distributed profits. Distributed profits, after all, pay no Surtax, and, if a Profits Tax were to be imposed, I think it might be imposed quite reasonably on distributed and undistributed profits alike.
    The trouble about this tax, apart from its actual incidence and its deterrent effect, is that it must operate unequally as between different concerns with a different—I think the word is "gearing"—where the capital structure differs. Debenture interest is accepted as a charge but preference dividends and dividends to equity shareholders come out of profits, and where the proportion of preference shareholding is high, the effect of such a tax on the equity shareholders, whom it may be very desirable to encourage, is proportionately great. That is a very strong argument in theory, and in principle, against such a tax. Nevertheless, as I say, I would have been prepared, in certain circumstances, to face it.
    I do not want to deal with every individual item in detail. I come to the question of the increase in the tax on tobacco. The Chancellor explained yesterday that he had two objects in view in proposing that increase. I think they were both legitimate objects. The first was to reduce dollar expenditure. The second was to effect some transfer from direct to indirect taxation.
    The Chancellor of the Exchequer (Mr. Dalton): I said that in my view the first was incomparably the more important. I said I was very much more concerned to save dollar expenditure than to collect additional revenue..
    Mr. Churchill: That is a point I made.
    Sir J. Anderson: I was not for the moment differentiating. I said there were
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    two objects and I said they were both desirable, in my view. But how much is the Chancellor going to save by this decision out of the vast dollar expenditure which we are incurring? He does not know. We do not know. At the best it will be a very small proportion. Possibly it may be£7 million. On the other hand, what is the extent of the transfer from direct to indirect taxation? Again, we do not know. The Chancellor has made an assumption which is wholly arbitrary. I venture to doubt whether that assumption will be realised in practice. I do not agree with the Chancellor in the slight importance which I gather he attaches to transfer from direct to indirect taxation. I think that process might, with great advantage, be carried very much further. My criticism of this tax, this very heavy increase, is that its result, as the Chancellor himself has shown, must be purely speculative. Incidentally, I would point out that in relation to the tax of £2 14s. rod. per lb. on tobacco, which compares with 8s. 2d. in Mr. Austen Chamberlain's Budget in 1920, the margin of preference is retained at the old money figure which, in relation to the increased amount, is really wholly derisory. The difference between £2 14s. 10d. and £2 13s. 3½d.—what is the good of that?
    To sum up; In my judgment this has been a Budget of expedients, of shifts and devices, some commendable, some trivial, some positively mischievous; a Budget which fails to face squarely some of the most urgent aspects of our present situation, notably the need for rigorous economy and the impossibility of maintaining anything like the present level of direct taxation without running into disaster. It is a Budget which discloses no broad, statesmanlike plan for extricating our country from her present unhappy plight.
    5.o p.m.
    Mr. Benson: I am very grateful for having been given the first opportunity, on this side of the Committee, of congratulating the Chancellor of the Exchequer on balancing a Budget within two years of the end of the war. The right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) was, if I may use so derogatory a phrase, rather sniffy about the surplus. Admittedly the surplus is made up of

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    non-recurring items. For that reason the Chancellor is extremely wise in regarding it and treating it as such; but it is not the only non-recurring item. There are a very large number of terminal expenses on the other side which are also not recurrent. If one struck the non-recurring items out of both sides, I am not at all sure that the surplus would not be even larger.
    The right hon. Member compared the Budget of 1920 with the Budget of 1947. He pointed out that expenditure now is something like three times as high as it was in 1920. That may be true, but 147 is not 1920, nor is the national income now the national income of 1920; nor is our view of what is legitimate national expenditure the same now as it was then. The right hon. Member accused the Chancellor of having no desire to save and he made a strenuous demand for real economy. In the minds of a very large number of hon. Members behind the right hon. Gentleman there is a picture of a Government Department as living a rather corybantic life, distributing pound notes much as girls distribute rose leaves at the Carnival of Nice. The right hon. Member knows perfectly well that to have large economies there is only one method, and that is by changing policy.
    For a century, the Treasury has been the watchdog on expenditure. No Department in any Government of the world has become so perfectly adapted to that function as our Treasury. I do not say that the Treasury has eliminated all extravagance, but I say that we have now got to the stage of Treasury control at which we reach the administrative limit of economy. If economies are to be made in the future they must come either from the cessation of the terminal expenses, from decrease in our armed Forces or from complete changes in the policy of the Government.
    What policies is it proposed to change? The change that the right hon. Member himself prefers is in food subsidies. Very wisely, he did not suggest economies either in social services or in education. There, undoubtedly, our expenses will go up. I want to take up his challenge on this matter of food subsidies. I do not believe that reduction of food subsidies will lead to deflation. On the contrary the most likely effect of it will be another wage spiral and probably even greater inflation—but that is a debatable point. [Interrup-
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    tion.] All I can say is that the particular change of policy on which the right hon. Member picked, fills me with a great deal of apprehension. [Interruption.]
    Mr. Clement Davies: On a point of Order, Major Milner. I do not know what you feel about the matter, but on this side of the Committee we are rather wondering whether it is the hon. Member for South Cardiff (Mr. Callaghan) o. the hon. Member for Chesterfield (Mr. Benson) who is addressing you. We have the greatest difficulty in following the argument of the hon. Member for Chesterfield because of the interruptions.
    Mr. Benson: I understood the right hon. Gentleman the Member for the Scottish Universities to say that no one on that side of the Committee wanted deflation or would demand it. I may have misunderstood the right hon. Gentleman, but in the Debate upon the economic situation he appeared to be most clear and definite on the point. He said that we must have deflation. I have the quotation here. He said:
    "But there must be deflation"
    Then the right hon. Gentleman went on to say:
    It must be controlled deflation, "[OFFICIAL REPORT, 11th March, 1947: Vol. 434, 1184.]
    From that time onwards I have been puzzling over what he meant by the expression" controlled deflation.
    Sir Arthur Salter: No doubt the hon. Member recalls the time when we were suffering from a rather terrible deflation. Strong support was given at that time to the possibility of what was then called "reflation." Is there not now an equally strong reason at a time of inflationary tendency, for what I might call a counter-inflation policy? It might have the same effect, as a safeguard against inflation, as reflation would have had in regard to the previous deflation.
    Mr. Benson: The problem of inflationary movements is one of the key economic problems of the world today. I do not think we shall have any deflation. The inflationary potential—I do not claim that the expression is original—is due to matters far more fundamental than Budget surpluses or deficits. Hon. Members opposite have attributed the inflationary situation to the cheap money

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    policy, to the policy of nationalisation and to heavy Government expenditure. I do not believe that last year any one of those three things had any real inflationary effect whatever. Certainly they had no effect upon prices. Let me take them seriatim, beginning with the cheap money policy, which the right hon. Member dismissed very largely with a wave of his hand. I am now referring to his speech upon the economic situation. He said that it was far less important than the increased mobility of capital due to nationalisation. The right hon. Gentleman the Member for the Scottish Universities said:
    I think, however, there has been a much more serious contributory cause, and that is what my right hon. Friend the Member for Aldershot referred to when he spoke of making mobile capital which was static. That process has gone on at a tremendous pace." —[OFFICIAL REPORT, 11th March, 1947; Vol. 434, c. 1185.]
    Sir J. Anderson: I am sure the hon. Gentleman does not wish to misrepresent what I said. May I point out that in that speech on the economic situation, I referred to the different kinds of inflation and the different sources of inflation—price inflation, wage inflation, and capital inflation—but whether we talk of inflation or deflation, one has to recognise that any increase of spending power which is not associated with a corresponding increase of goods and services, has a potentially inflationary effect, and that the converse is true of any contraction of spending power. What we have always to be on guard against is the vicious spiral, whether inflationary or deflationary.
    Mr. Benson: I entirely agree with the right hon. Gentleman. I do not wish to misrepresent what he said, but I want to get the question of the causes of an inflationary situation straight. I think the right hon. Gentleman has fallen into a gross error when he says that the nationalisation policy has had the effect of making static capital mobile, and that this process has gone on at a very great pace. So far there has been only one such issue of Government securities, which was for the nationalisation of the Bank of England, and nobody can say that even the Chancellor's gilt-edged stock is really any more mobile than bank stock was. That issue amounted to
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    £58 million—a transfer from one highly mobile stock to another highly mobile stock. The right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) drew a parallel between pithead baths and gear and Government securities. He actually attributed the increase in bank deposits to nationalisation. Yet apart from the issue dealing with the Bank of England stock, there had been no issue whatever, so quite obviously that could have had no effect upon inflation last year. However one does not take the right hon. Member for Aldershot very seriously. As regards the deficit last year, I can find no trace of that producing an inflationary effect. Wholesale prices increased by eight per cent. over the year. There is an adequate explanation for that increase in the fact that wage rates increased by eight per cent. due to the unions policy of bringing peacetime rates to the level of wartime earnings. Imported raw materials increased by 10 per cent., and that the import of manufactured articles, which are very largely semi raw materials for our industry, showed a price increase of 18 per cent. Those are the causes of the increase in wholesale prices. The increased volume of money was held by our controls, and the mere effect was that, as the volume of money increased, the velocity increased. That is shown by the fact that although there was an eight per cent. increase in wholesale prices, there was an extraordinarily small increase in notes in circulation—only three per cent. That increase of three per cent. while there was a price increase of eight per cent. obviously shows that there was a sharp decrease in the velocity of money.
    We have to face the fact that, domestically and industrially, he whole equipment of the country is practically worn out. There is a tremendous urge to renew it, and that urge is backed by liquidity to an amount of something like £30,000 million, or a large proportion of that. There are gilt-edged securities of the National Debt amounting to £,25,000 million, and there are £5,000 million of bank deposits. A very large proportion of that £30,000 million is not long-term investment, but savings accumulated for the definite purpose of expenditure when expenditure becomes possible. It is that pressure to spend those accumulated savings that is the real pressure behind the inflationary potential I do not think that

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    potential will drop. If we run into a world slump, undoubtedly we shall meet very difficult problems. Then there will undoubtedly be a grave threat of deflation. There has been a great deal of talk and a great deal of misgiving about the possibility of a world slump, but there is an alternative to it which has given me at least considerable thought, and that is, not the possibility of a world slump, but the problems that will arise if there is a prolonged world boom. If that happens, there will be problems to face about which we have not even thought—problems of full employment, problems of a famine of raw materials. These are sufficiently serious to merit very serious consideration. I do not put the probability of a world slump very much higher than 50 per cent. I seriously think there is a very good chance we shall be faced not with slump, but with world boom. It is about time we started to think about that.
    The key to the situation is in the United States, and those problems will have to be faced if the United States succeed in solving their own full employment problem. I do not see any valid reason why they should not do so. They are a very ingenious people; they have accepted responsibility for full employment in the National Trade Agreement, and the Department of Commerce has been carrying on magnificent educational work on the subject for years. Certainly the State Department is quite prepared to deal with a slump. Although nobody can deny that there may be setbacks, I do not believe that either American industry or labour is prepared to put up with another 1932.
    I think there is a very good chance, apart from slight set-backs while they as well as we are learning the technique of full employment, that there will be no slump in America, and that will mean there will be no slump in the world. On the contrary, if America avoids a slump, then the world is safe for a long period of what I referred to previously as inflationary potential. A very large area of of the world is, like ourselves, suffering severely from war damage, which has to be made good. Another very large area of the world has developed something which we have never had before, namely, a deliberate intention to industrialise. The industrialisation of primary countries in the past has been haphazard, but the new Government of India is deliberately
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    set upon industrialisation, and Australia and South America are also set upon industrialisation. The demand for capital goods will be colossal. All it is waiting for now is coal, and an American surplus to make it effective, and time will bring both of those.
    Unfortunately, at the present moment the United States have no pressure of surplus. They are still making up the enormous backlog in both capital and consumer goods, but sooner or later, the colossal growth of American production will lead to a surplus, and that surplus will force the supply of dollars in the world. The importance of an adequate supply of dollars for the world has been preached by the Department of Commerce for the last six years; an adequate supply of dollars to finance the surplus is one of the key factors in the maintenance of full employment in America, and I am convinced that it will be forthcoming. I do not anticipate an American slump, I am not afraid that American competition and exports will bring about the buyers' market so many people fear. Why? Because the very best that the United States can do in the next 20 years will be a mere trickle into the bottomless pit of world needs.
    What effect will that have upon us? There will be a repetition of what has happened in the past, except that it will be on a gigantic scale. In the 1920's the United States had an export surplus of approximately 8,000 million dollars, and financed that surplus by long-term loans of approximately 8,000 million dollars—chicken feed compared with what will happen in the future. But the effect of the outflow of that 8,000 million dollars in goods was to stimulate production throughout the world enormously. The effect upon us was to give us a magnificent favourable balance, and the two were very closely linked. It is only necessary to compare the fluctuation of our favourable balance in the 1920's, with the fluctuation of American exports and lending. In the 1930's, when America ceased to lend. we developed an adverse balance. The effect of the irrigation of the world by American exports, plus the multiplier effect that it must have, will solve for us a problem which, at the present moment is almost insoluble. It will find us an adequate market for the high export level

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    which we shall have to attain to pay our way.
    But even if we solve half the problem, namely, the problem of markets, we shall nevertheless have very difficult problems to face. We are one of the largest importers of raw materials in the world, and there will be a scramble for raw materials. I do not necessarily mean food. The food problem will tend to solve itself very much more rapidly than will the problem of industrial raw materials. We shall be faced with full employment, and we are only just beginning to realise the industrial problems involved in full employment. The sooner we start thinking about this the better.
    As I am being thoroughly unorthodox, may I take just five minutes more of the Committee's time to say that I do not believe that American tariffs are fundamental in this business? If America reduces her tariffs, and if that leads to increased imports into America, it will reduce the volume of loans required, and that is all it will do. If America is to succeed in solving her full employment problem, she must export and finance her exports by loans. What is not paid for by imports she will have to finance by loans, and I am not at all certain that I want to see imports into America grow too rapidly. The world is so starved of goods that for some years to come, the world will be better served if those goods are not exported to America. For instance, how it would ease the situation if America could become once again self-sufficient in copper and lead, instead of importing vast quantities as she is doing now.
    American imports are bound to be large enough to service whatever loans she can make, because she herself has to import so many raw materials. Ultimately, there may be a payments problem, but it is an ultimate and not an immediate problem; it is a problem that not our generation, but the next will have to solve. I do not believe there will be deflation. I am not making a prophecy. All I am asking the Committee to do is to realise that there are problems ahead, which may not be problems of deflation but rather of how to control inflation arising from the fact that all over the world, a boom may continue year after year.
    5.29 p.m.
    Sir Stanley Holmes: We have just listened to a very interesting address from the hon. Member for Chesterfield (Mr. Benson) on the subject of inflation and deflation. He apparently was not able to forecast whether we should have a world slump or a world boom, but all I would say on that matter is that, whether the present Chancellor of the Exchequer or some other Chancellor is in office when one of these things occurs, I hope he will have to face the problems of a world boom rather than a world slump. To my mind the likelihood of deflation is very small. It appears to me that the problem of the Chancellor of the Exchequer, so far as this country is concerned, is to prevent the spiral to which my right hon. Friend referred. Apart from that, the hon. Member for Chesterfield merely contented himself with saying that there never was a more perfect Budget introduced before in this Committee.
    The Chancellor of the Exchequer is not backward in praising himself or in taking credit for things that have been accomplished in this country. He devoted a considerable time yesterday to eulogising his success in arriving at a 2½ per cent. interest basis for Government borrowing. He gave no credit to his predecessors, but it was only the result of the work of my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) and his two predecessors, right through the war, in gradually bringing down the basic rate of interest, that he was able to put the last touch upon it and bring it down to a basis of 2½ per cent., and it is rather doubtful whether he has not, in fact, attempted to do it a little too fast.
    Another thing which the Chancellor of the Exchequer endeavours to do from time to time is to persuade the Committee and the country that he is the man who has put heavy taxation on rich people. He had nothing to do with it. The man who first deserved the epithet of having "soaked the rich" was Sir John Simon, now Lord Simon, who, when he was Chancellor of the Exchequer, raised E.P.T. to 100 per cent, and Income Tax and Surtax to 19s. 6d. in the pound. The present Chancellor has reduced, and is now finally getting rid of, E.P.T., and has left the total of Income Tax and Surtax on high incomes exactly the same as those imposed

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    by Sir John Simon. It may be that the Chancellor realises that he himself had done nothing towards taxing the rich man in his first Budget, and he therefore decided that, as he could not tax the rich men any further when alive, he would tax them when they were dead. He has apparently decided by the increase of Death Duties and Legacy Duty to "soak the rich" when they are dead.
    To my mind, the greatest point to be made about the Budget lies in the fact that it made so small a contribution to the production drive. It will be remembered that we had a recent Debate on the White Paper, which Paper was most wonderfully described by my right hon. Friend the Member for Woodford (Mr. Churchill), whose description I can-not improve. During that Debate, reference was made to the fact that there was no reference in the White Paper to financial policy, and it was demonstrated that it was quite impossible for this country to have a successful economic policy unless something was done by the Chancellor and the Treasury to assist it. It may have been that, when the Prime Minister and the other Members of the Cabinet were preparing the White Paper, and they invited the Chancellor of the Exchequer to make a contribution to it, he said what he always says in this House—that he could not anticipate his Budget Statement. Now, we have had his Budget Statement, in which he makes two proposals.
    The first is to increase the earned income relief from one-tenth to one-sixth—the one-eighth passed last year has not come into operation yet—and to increase the maximum to £250; secondly, to increase the child allowance from £50, to £60. What I want to say to the Chancellor is that these concessions are at least one year too late, and that they were rejected by the party sitting behind him in this House on the Committee stage of the Chancellor's first Finance Bill on 28th November, 1945. My hon. Friend the Member for East Aberdeen (Mr. Boothby) then proposed to increase the earned income relief from one-tenth to one-sixth and the maximum to £250—exactly the proposals which the Chancellor of the Exchequer is making in his Budget. Later on the same day, the hon. Member for Devizes (Mr. Hollis) proposed to increase the children's allowance to £60 instead of £50—exactly what the Chancellor is doing
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    today. Both these Amendments to the Finance Bill were defeated by the big majority on the other side of the Committee.
    I venture to say that the Chancellor's proposal is at least a year too late. If this proposal is now made by him in order to assist the production drive, I say that, if he had put it in the last Budget, he would have been assisting the production drive during the whole of last year, and that, probably, we should never have had the crisis that we had in January. It might even have been that the result of the increase in income which he is now conceding, and which he explained to us yesterday would mean that a man would get £8 free of tax instead of £6, and £9 instead of £7 and so on, would have been that, taking the miners alone, they might have produced that extra five million tons of coal which would have saved the situation at the end of last year. So I venture to say that a most disappointing feature of the Budget is the small amount which the Chancellor is doing so far as the production drive is concerned, and I express my regret that he did not introduce these proposals at this time last year.
    I want to ask the Financial Secretary if he will answer a question regarding Death Duties. The Chancellor is accepting estates by way of payment of Death Duties. Is the amount of the Death Duties reduced by the executors offering landed estate to the National Trust, and is only the balance of the Death Duties paid to the Treasury? I will give an illustration. A man dies, and the Death Duties on his estate are £75,000. But the Chancellor accepts landed property for the National Trust to the value of £50,000. Does the Treasury only pay the difference of £25,000 into the Death Duties account?
    That is the difference between the total amount of £75,000 due, less the £50,000, the value of the property taken over by the National Trust. I cannot help feeling that that is so, because, otherwise, the Chancellor would not have been able to say that the £50 million which he set aside last year had not been touched. I suggest to him that the proper course is to pay the full £75,000 into the Deat Duties account and to draw £50,000 in purchase of the property from the National Trust Fund. I hope that that point is clear to hon. Members.

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    I now want to speak about company dividends. For over 18 months the Chancellor has been making vague and threatening remarks about the increased dividends paid by limited companies. These remarks of his always draw loud cheers from the benches behind him. I would point out, as I have pointed out before, that an increased dividend is of no value whatever to a wealthy man. The reason is that on the dividend he has to pay 19s. 6d. in the £.If a company declares an increased dividend and a rich shareholder gets an extra £1,000, he only retains £25 of it, and £975 is ploughed back into the Treasury by way of Income Tax and Surtax. Therefore, it is of no interest whatever to a wealthy man to recommend to a company that it should pay increased dividends.
    Mr. Norman Smith: What about the average shareholders?
    Sir S. Holmes: I was coming to that. Directors of companies have to consider what may be termed the "small shareholders." A few months ago, I went to an annual meeting of a well-known company, one for which I am in no way responsible. This company had an ordinary share capital of £800,000. During the war and up to last year it had put aside, in addition to paying moderate dividends, £500,000. That £500,000 was standing as "carry-forward," and was available at any time for the payment of dividends. After the chairman had made his speech, a man got up and said that he was a retired teacher, that he had saved enough money to live in retirement and was looking for increased dividends because of the increased cost of living. He thought it was disgraceful that the company had not increased its rate, and had in "carry forward" some 62 per cent, of the whole capital of the company available for dividends. To my surprise he was supported by other shareholders, and when it came to the vote of thanks to the chairman and directors for a really magnificent report, six shareholders voted against it on the ground that increased dividends were riot being paid. The hon. Member for South Nottingham (Mr. Norman Smith) asked about the small shareholders. Last year, I mentioned a company which made a very careful analysis of its shareholding list, and which came to the conclusion
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    that of its 22,500 shareholders, 22,000 of them did not pay Surtax
    A progressive limited company has from time to time to raise new capital. Its best hope of getting more money is from its existing shareholders. The Government find it easy to raise money. They merely have to create Government stock by the use of the printing press. A limited company cannot do that. In order to obtain new money, it must have had a successful past and good prospects for the future. It must be willing to give a reasonable share of the profits to the shareholders in acknowledgment of the risk which they have taken. The Chancellor has now seen that his policy of threat was unworthy of him and unreasonable. He now says to each limited company, "You will pay a five per cent. Profits Tax on all your profits, but on the profits which you distribute by way of dividends in any year, you will pay an extra 7½ per cent." That new tax may he open to discussion. I venture to say that, while I think it is hard, companies would rather have Draconian constitutional severity than Daltonian unconstitutional threats.
    I would like to ask the Financial Secretary a number of questions on this particular matter. The first is, Will the dividend paid by a wholly-owned subsidiary company to a parent company be subject to the extra 7½ per cent. tax? If so, will the parent company's profits, including the dividends received, also be subject to the 7½ per cent.? In other words, is it to be double taxation in those cases? The second question is, Does the provision in the White Paper mean that if a company's year ended on 31st March this year, the extra 7½ per cent. will be paid in one-fourth of the total dividend paid on the equity shares for that year?
    I wish to say one word with regard to bonus issues. So far, with regard to bonus issues, the Chancellor has been like Mr. Molotov. He has always said "No." There is now a change of mind on the part of the Chancellor and he has decided to allow applications to be made to the Capital Issues Committee for the issue of bonus shares. If the application is granted by the Committee, the Chancellor proposes to collect To per cent. on the amount of any "bonus element." Why should this imposition of 10 per cent. be made? I suggest that it is merely a sop

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    to Cerberus, and that the Chancellor of the Exchequer is not willing to be a Hercules. If I may, I will give an illustration. A company is formed with a capital of £10,000, and it pays a dividend of 10 per cent. each year. In the course of a few years, after paying its dividends, it accumulates out of taxed profits the sum of £10,000—shareholders' money available for the payment of dividends. The company does not desire to pay dividends out of that sum. It has followed the Chancellor's wish that the money should be ploughed back into the business. It may be assumed that this is a case in which the Capital Issues Committee would give approval for £10,000 bonus shares to be created, so that £10,000 would be set aside out of the profits to become the permanent capital of the company. Why should a company have to pay a fine of £1,000 in order to carry out the Chancellor's wish that the money should be permanently ploughed back into the business?
    While I am speaking of the Capital Issues Committee, I would like to ask whether it is an independent body or whether it acts under instructions laid down by the Chancellor. May I refer to what has happened in the past year? We had a very active year in which many permissions have been given by the Capital Issues Committee to companies. Companies have desired to convert into a lower interest category a debenture or a preference issue, where the rate of interest was reasonable at the time of issue but today is above the yield required by the public. Such conversions were always agreed to by the Committee, as it helps the Chancellor in maintaining a lower rate of interest. in the second place, companies have sought additional capital in order to instal modern plant and equipment to fight American or other competition, or to go all out in the development of exports. These proposals have nearly always been accepted by the Capital Issues Committee. But, in the third place, I cannot help feeling that permission has been given to far too many issues where the reason was that the existing owners wanted to sell out. I do not want to criticise the Capital Issues Committee, because they have done a difficult task well, but I feel that they have too often devoted themselves too much to the terms of the issues rather than to the objects. The last question I want to ask on this point is:
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    When an application for an issue of new capital is made to the Capital Issues Committee, why does it have to be referred to a large number of Government Departments for comment and advice, and will the Financial Secretary say which Departments are so consulted and for what reasons?
    I want to make one or two general comments. I could not help regretting the very steep rise in the Tobacco Duty. One understood the Chancellor's anxiety with regard to dollars, but, nevertheless, it has rarely been my privilege to hear in this House a Chancellor of the Exchequer from any party impose a tax which affects rich men less than it affects other people. One cannot help thinking of the number of people—I shall not merely mention old age pensioners, because there are many others—who will be completely unable to afford to buy an ounce of tobacco for their pipes at 3s. 9d. a time. I regret very much that the Chancellor has found it necessary to put so high a duty on tobacco.
    Notwithstanding what my right hon. Friend the Member for the Scottish Universities said, I very much regret that the Chancellor has not been able to deal with betting. Yesterday he sheltered himself behind what my right hon. Friend the Member for Woodford had done in 1929 when he was Chancellor of the Exchequer in withdrawing the betting tax. I would remind him that circumstances today are entirely different from what they were in 1929. Today we have a "tote" on every racecourse and greyhound track, and we have the football pools. The only people who are left are the bookmakers. I hope the Chancellor will think again on this matter, because I am sure a tremendous number of people would like to sec this source taxed for the purpose of getting a high income for the Treasury. Lastly, I would repeat, because I regard it as most important, that the most disappointing point about the Budget is that it does so little to assist the production drive.
    5.57 p.m.
    Mr. Clement Davies: I have not intervened earlier in this Debate because I, with others who have had experience of listening to the hon. Member for Chesterfield (Mr. Benson), wished to hear him speak. For many years in Budget Debates we have heard from him thoughtful contributions which

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    have been the result of deep study and research. Today was no exception. I only wish there had not been a counterattraction within a short distance of the Chamber which has taken so many Members away. I suppose we shall all read with care the very thoughtful contribution which came from the hon. Member today. I hope that his optimism is justified. I am afraid I take a much more pessimistic view of the conditions which may arise within the next two years. While I am congratulating him, may I add my congratulations to the Chancellor of the Exchequer?
    Lieut.-Colonel Sir Thomas Moore: On what?
    Mr. Davies: Why should the right hon. Gentleman not be congratulated? I would like to congratulate him, first, on his great task, which was wonderfully well performed. It was the longest Budget speech which has been made since 1909, if I remember rightly, and on that occasion there was a break, because it was felt that otherwise the strain would be too great. On this occasion, the Chancellor was up to the strain, mentally and physically. I may add that it was all done with great charm and good temper, despite the taunts and jibes which he can never resist, though they are always uttered with a smile and in the best of temper.
    Times have changed. Chancellors of the Exchequer nowadays take a much wider view of their duties than their predecessors did. Their predecessors conceived it their duty merely to act as a check upon the spending Departments, to raise the necessary revenue according to the accepted canons of taxation and, if possible, to balance the Budget year by year. I should like to re-emphasise what was said by the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) with regard to the checking of expenditure. I regret having observed a certain amount of amusement, almost hilarity, coming from the benches behind the Chancellor, although not from him, with regard to the right emphasis placed by the right hon. Gentleman upon the duty of the Chancellor to watch the spending Departments. It has always been, so far as it possibly could be, the duty of the Chancellor to say "No," until he was persuaded that it was essential, in
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    the public interest, that expenditure should be involved. It looked to me as if the attitude of some of his supporters was rather "Let us eat and drink, for tomorrow we die. We take no heed of the morrow. Let us go on spending as long as we possibly can."
    When I first suggested that the duty of the Chancellor should be wider and greater than his predecessors had conceived their duty to be, and that he should take a longer view than the mere year under review, I well remember that that suggestion was scoffed and sneered at. But now the Chancellor realises that he has not only to consider the expenditure of the Government and the spending Departments; he has to take full account of the national wealth, the national income, and the national expenditure of all of the people quite outside the Government itself. I know the Chancellor spoke for three hours yesterday. I hope that before the close of the Debate he will have another opportunity of dealing much more fully with the question of how he views the coming year, whether the national wealth will increase or decrease, what will be the national expenditure, what we shall be spending it on, and so on. I will return to that point in a few moments, when I deal with the inflationary period through which we are now passing.
    Before I go into those wider aspects, I should like to mention one form of expenditure which is continually increasing, and is becoming daily more and more of an unwieldy burden upon the people, especially in certain areas. I refer to the very heavy expenditure which has now to be incurred by local authorities, necessitating, in many cases—I would almost say in most cases—a rate of over 20s. in the £. I was glad to hear the Chancellor say that he was in close consultation with the Minister of Health and the Secretary of State for Scotland to see whether they cannot rearrange the relationship of local to national finance. Here reform is long overdue. To my mind, two reforms are necessary. Certain services are, in my opinion, really national and not local services, and should fall to a greater extent, if not entirely, upon the national Exchequer rather than upon local funds.
    Let me give the Committee an example, which I suggested in the course of the last Budget discussions, without, at that time, receiving very much support,

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    although soon afterwards receiving a great deal more support from the country. I only use it as an illustration. I remember the White Paper that was published by the Government when introducing the Education Act, and the proud boasts that it was an Act to make education, which should be national, really national. But what they did was to put the burden, in the main, upon the local authorities and only partly upon the national Exchequer. I then suggested that education should, in fact, be a national charge and should not fall so heavily, and in the unequal way that it now falls, upon the weaker authorities, who have to bear much too heavy a burden, which possibly handicaps the children in the areas of the weaker authorities as against those who have the advantage of being born and educated in the areas of the wealthier authorities.
    That is an illustration of the kind of thing into which I hope the Chancellor will look, to see whether those are not matters which should fall upon the national Exchequer and not upon the local rates. Another example is that of the roads, which fall all the time and more and more heavily upon rural areas than upon the urban areas. For example, I believe the two counties which have I o contribute most out of the rates towards their road funds are my own county of Montgomery and the adjacent one of Cardigan. I forget the figures at the moment; I have given them to the Committee on other occasions: they are in the neighbourhood of something like 15s. in the £ as compared with, for example, Middlesex, which can meet its road expenditure with a rate of 9d. in the £. Those are two illustrations of that question. The second reform I suggest is a complete overhaul of our out-of-date rating system. This is a matter which ought to have been attended to many years ago.
    Coming back to the national position, a great many of us now realise that we are in an inflationary period, in which the upward thrust of inflation is stronger than it has ever been in the experience of this country; it is stronger than it was e' en at the end of the Napoleonic wars, or at the end of the 1914–18 war. We know from the White Paper which was recently issued that, after payment of taxation, the amount of money left in the hands of the
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    public is £7,000 million, and the estimated value of the goods and services which are available to be purchased with that money is only £6,000 million. Therefore, the upward thrust must be terrific, and, quite rightly, the Chancellor has borne that in mind in his Budget. Perfectly obviously, it was a matter which had received his most serious consideration all the time. However, I wish he had dealt more fully with the details and with what he expects will be the result of the proposals which he has made:
    The first essential to deal with such a situation as that was, of course, the balancing of the Budget, and this he has succeeded in doing. In an inflationary period not only, quite rightly, should the Budget be balanced, but there should he, if anything, a large surplus, as the Chancellor very rightly admits, over and above the expenditure, by drawing that money from the pockets of the taxpayers, thereby lessening the amount which is free in their hands and building up a position which will be of great advantage when the depression comes. That is the whole purpose of the suggestion which I believe I was the first to make in this Committee, which has now become generally admitted, that there should be a view over a much longer period than a single year. The Chancellor has found himself, at the end of his Budget proposals, with £270 million excess in hand. So far so good
    Really, there was no actual surplus of revenue. The Chancellor made great play with miscellaneous receipts—the nest egg over which he not only gloated, but cackled, because it had come now, as he described it, by the enterprise, vigour, and hard work of the Treasury. I should like to say two things about it. One is, that the amount that was so brought in was £292 million—an enormous sum of money; not revenue, but capital, that had been put on one side and would be nonrecurrent. Deduct from that £292 million the £270 million which is the Chancellor's excess over his expenditure, and that leaves million. So that really, on revenue account, his Budget shows a deficit of £22 million.
    The other comment I should like to make on this is, that this is a measure of the failure of this House—which is a matter to which some of us have called attention in the past—now and for many years, to keep that close attention and

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    watch upon the expenditure of the spending Departments, and where the money is and has gone. That is a matter of vital importance in the administration of the country. Less and less is this House now capable of watching what happens to the supplies it has voted, and what is happening to the money. The fact, to use the words of the Chancellor of the Exchequer, that this sum of £292 million has been, at least partly, in the hands of some of the spending Departments for a number of years is a reflection, clearly, upon the Treasury in the past. The Chancellor shakes his head. I accept it. But it is certainly a reflection upon us, that we are not watching this matter as carefully as we should.
    With regard to expenditure, it is difficult in the few short hours that have elapsed since the Chancellor made his statement, to consider with the care that they need the items of expenditure in the way that one would like, but I do doubt whether the Chancellor has been as firm with some of the spending Departments as I think he should be in these difficult times, especially on the question of staffing or over staffing; for not only is there waste of money in that way, but waste of manpower, when this country is so tremendously short of manpower.
    Very rightly the Chancellor of the Exchequer has had a wider conception of his duties than his predecessors had, and has had to consider two matters: whether he can, by his Budget proposals, increase the incentive to production, and whether he can provide a deterrent against unwise expenditure, not only by Government spending Departments but by the people themselves. May I turn for a few moments to the incentive point? Undoubtedly, much can be done through the concessions that he has made. It will be interesting to see the developments that will ensue from the fact that 750,000 will now be completely free from such deterrent effect as Income Tax may have. There are again two comments that I should like to make with regard to this. I wish that the right hon. Gentleman had also given an incentive to the higher wage earners, especially the managerial type; for, after all, we depend upon them for the production of ideas, for enterprise and initiative; we depend upon the organising powers of
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    these men, and it is to them that we should look, in the main, for providing the means whereby those under them and guided by them can give the increased production that we require. I should have thought that the Chancellor of the Exchequer could have and should have made some provision to increase the incentive for those people to earn more and do more than they are doing.
    The system of P.A.Y.E., of course, is far and away better and wiser than the old system of deferred payment. Again, I was one of the persons, with the Chancellor when he sat on this side, who suggested that this should be done. We suggested that it should be done in the early clays of the war, because we knew that wages would rise, and that, possibly, there would be subsequently deflation, which had such gruelling effects at the end of the first world war. So we are agreed that that is the right thing. Where we are disagreed is on the way in which it should work and its incidence. The stepping up is too great and too rapid; and that, undoubtedly, has had a deleterious effect on production. We hear that from all quarters. I wish the Chancellor would look again to see whether, in addition to the reliefs he has already granted, it is not possible, some way or another, to lower those steps, so as to encourage extra work by people who otherwise may not be tempted to give that extra effort, or to do that extra work, or to work for an extra hour, which would make all the difference to production.
    Before I turn to the position of this country face to face with other countries in regard to imports and exports, may I say one word about the subsidies which have already been mentioned by the right hon. Gentleman the Member for the Scottish Universities? I am glad that, at long last, the Chancellor has decided that they will look into the cost-of-living basis figure. It is absurd that we have been using as our standard the borderline of 1904. Quite apart from the 'tremendous changes that have taken place in the tastes of men and women, in their ideas, the value of money has changed enormously. If I remember rightly, in 1904 £2 would purchase £5 worth today.
    Mr. Brendan Bracken: A lot more.
    Mr. Davies: I think they were the figures given by the Chancellor a few months ago. However, it is a reason why we should bring this standard more up to date with modern conditions. I only wish this work had been undertaken by the Chancellor and the Treasury when the Chancellor first took office; and then he would have been in a better position today to tell us what he proposes to do now that we have reached this extraordinary position. The figure has now grown to £400 million to maintain prices in order to keep down the actual cost of living in food and clothing. It is an appalling figure. What it really means is that all of us, in order to purchase our food and our clothes, are really resorting to a sort of Poor Law institution. It is all wrong.
    Mr. Montague: Would the right hon. and learned Gentleman allow me to interrupt him a moment? Will he tell me what is the difference between subsidising in order to keep down the prices of food, and paying the whole cost of elementary education out of rates?
    Mr. Davies: Would the hon Member go on to say that the right thing to do is for him to make his contribution to the Treasury, and for everyone else to make their contributions to the Treasury, and then ask the Treasury to feed us all?
    Mr. Montague: Far better. Everyone would be fed then, and everyone is not being fed now.
    Mr. Davies: What we are anxious to know is when we can get back to normal, and that is undoubtedly what was in the mind of the Chancellor of the Exchequer yesterday. I am afraid that further discussion of this must be postponed until we get the new figures, and the Chancellor will then put the matter before us.
    Our position in relation to other countries is grim. I agree with what the Chancellor said at Swansea and repeated yesterday, that we must export or perish, that we must either increase our exports or decrease our imports, or both, and preferably both. That is why I view this situation, especially with regard to hard currency as not only grim but likely to get grimmer. We ran into debt last year, as the Chancellor said, to the extent of some £400 million, and that was almost entirely in hard currency. This year it is
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    likely to be far more and the position far worse. That is why, whatever may have been the incidence of the increased taxation on tobacco, the imports we are making from hard currency countries, and especially from America, should be limited; they should be limited to those items which help us in our difficulties and increase our own production. That is why one is asking for more machinery and things of that kind. I do not know why the Chancellor limited himself to trying to put a deterrent only on tobacco. Surely there are other items which we are importing, such as films, which should have come under his review. I have the feeling that if this tax does not have the effect the Chancellor thinks it may have, then he is prepared to take mach more drastic steps. I am glad to see that the Chancellor nods his head. I think it is only right. I believe it would have been much better to have started off with rationing, and not to have taken this risk. He estimates that even now we shall import three-quarters of these enormous quantities of tobacco.
    I welcome what the Chancellor said about taking over land in place of money for Estate Duties. As he is aware, this was urged upon him when he became Chancellor of the Exchequer. No other Chancellor of the Exchequer has taken advantage of this provision, which has been on the Statute Book since 1909. I am perfectly sure that the tenants of these estates who have suffered so much from bad housing, rotten buildings and lack of amenities will now receive comforts which they have long missed, and that in course of time new houses and new buildings will be given to them. I am sure that they will receive as much sympathy as they did from the old-fashioned landlords, who have long since disappeared. I am told that there has been a long lag in taking over estates, and that there are complaints by tenants that they do not know to whom to turn for answers to their questions.
    I welcome the expenditure on forestry This is a matter of vital concern to us. The Forestry Commission in 1919 and the Forestry Commission of a year ago both emphasised that this country is capable of growing timber of finer quality and quicker than any other country. Nevertheless, we have neglected our forestry so badly that we were importing 94 per cent. of our hard timber and 97.8 per cent. of

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    our soft timber up to the beginning of the war. That is a shocking state of affairs. I am glad that the Chancellor is now urging greater efforts in this direction.
    I agree with what was said in regard to betting, firstly because of the amount of money the Chancellor might be able to get from it. The Chancellor said that if he had to deal only with the football pools and totalisators it would be easy, bat why is it that someone can gamble with a bookmaker by telephone, but if he wants to gamble on the street both he and the bookmaker are guilty under our laws? Has not the time come to make our laws a little more logical, and to say that if it is a crime on the streets then it is a crime everywhere else and should be stopped; or if people want to gamble, let them gamble in the way laid down by the Government? This matter is causing alarm to a great many of us, but it might be that the Chancellor could both provide himself with a certain amount of revenue and control gambling. In regard to all these matters, we shall have to go into them much more fully when we come to the Finance Bill.
    6.28 p.m.
    Mr. Scott-Elliot: In our present circumstances, I think a Budget should do three things. It should provide incentive for greater production, cut down the supply of money in excess of the supply of goods, and limit nonessential dollar payments. I should like to say a word about each of these three things. Within the limitations of the estimates already submitted, my right hon. Friend has produced an extraordinarily good Budget, which he explained with great lucidity. Firstly, let me turn to the question of incentives. All high rates of taxation make for some degree of dis-incentive, and, therefore, we have to try gradually to reduce the level of taxation. That means, of course, reducing expenditure. So long as we are spending £900 million on the Armed Forces, which we are spending this year, we are bound to have a certain amount of dis-incentive taxation. I know that £100 million is supposed to be terminal 'expenditure, but I believe I am right in saying that before I had the honour to be elected a Member of Parliament the late Sir Kingsley Wood gave a tentative estimate that postwar
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    expenditure on the Forces would be something like £500 million, and no more. There is a very great discrepancy between that figure and the figure which has been presented to the Committee today. That point needs to be emphasised, because I hope that it will be possible to reduce that expenditure in further years.
    I hope that my right hon. Friend will be able to make further reductions in taxation that will produce greater incentives still. I give one example, the raising of the earned income allowance from one-eighth to one-sixth. I hope the day will come next year when my right hon. Friend may be able to raise it from one-sixth to one-quarter. It will cost a lot of money, but it will take a lot of workers out of P.A.Y.E., out of Income Tax altogether. If there is one thing we have discovered it is that the workers object to paying Income Tax. They do not understand it, and they are more prepared to pay taxation that is indirect rather than direct. I think that is generally accepted now by a great many hon. Members, not only of the Opposition, but on this side of the Committee, and I make no bones about saying it. In passing, as one who grumbled a little last year about how difficult P.A.Y.E. was to understand, may I congratulate my right hon. Friend upon the improvement in the new tax tables? I always found that working out the old tax tables was extraordinarily difficult, and I know that many other people have found the same. The present tax tables are a great improvement.
    I now come to the question of the inflationary gap which was described by my right hon. and learned Friend the Member for Montgomery (Mr. C. Davies). As he showed, there is a gap between £7,000 million of money and £6,000 million of goods. Obviously, there are two ways in which we can try to bridge this gap: first, by producing more goods and, secondly, by cutting down surplus money over and above what is needed to purchase these goods. May I make a few comments—which are bound to be somewhat in the nature of over simplifications in view of the short time available to me—with reference to how to cut down the inflationary gap? The thing to do is to produce a Budget surplus. For the first time for many years, during the early months of this year we had a Revenue surplus. It was noticeable, indeed,

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    that during that period the note issue, which had reached its high peak, began to go down and that bankers' deposits which, before Christmas, had reached an alarming figure, came down quite substantially. In other words, provided the estimates work out all right, there should be a surplus of £270 million to help to close the inflationary gap.
    It is perfectly obvious that a national savings campaign is wanted, and I am very glad to see we are going to have a bigger one. It was good to hear my right hon. Friend say yesterday that, for the first time, he is going to give the net figure, because the way in which the figures have been issued in the past has been terribly misleading. I suggest that it is just as important to keep people from cashing in their previous savings as it is to make fresh savings. If we can get people to make fresh savings and, during the present year and perhaps next year, to refrain from cashing in on their past savings, we should have a very substantial net gain.
    Now I come to something rather more contentious. It has been suggested by Members on the other side, and in certain financial quarters, that my right hon. Friend should abandon the cheap money policy. He dealt with that magnificently yesterday, and there is little more I need say about it, but I think it would be absolutely disastrous to retreat from cheap money. I believe that to enable us to carry the heavy weight of War debt cheap money is absolutely essential, and is the foundation of a full employment policy in the event of a trade recession. I spoke about this subject when I first had the honour to address the House a little over a year ago, on the Borrowing (Control and Guarantees) Bill. In the event of a trade recession which may possibly take place in America in the next year or two—who can say—it is likely to take place in the capital goods industries. Unless there is cheap money to encourage industrialists they will be unwilling to embark upon the capital reconstruction that is so badly needed.
    Mr. Spearman: Without dissenting altogether from the hon. Gentleman's point of view on cheap money, may I suggest that if a depression does take place it would be a greater stimulus to recovery if the Government had in their power the opportunity of making money still
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    cheaper? If money was at 3 per cent., and they moved it down to 2½ per cent. that would be a more effective stimulus.
    Mr. Scott-Elliot: I quite see the hon. Member's point. It seems that in the event of something happening, such as he envisages, it might be possible to make money still cheaper than 2½ per cent. So far as big savers are concerned, I am convinced that they must understand what is needed in the public interest. I want to clear up a misconception, which seems to have been bruited about in financial quarters, about the attitude of small savers. It is suggested that they will be deterred from saving by a reduction of half per cent. in the interest they will receive. I do not believe that for one moment. I am convinced they save at the present time for three reasons. First, in order to have a nest egg put away for a rainy day; secondly, because the Government tell them that it is their duty to save; and, third, because they have nothing else to do with their money. I cannot possibly accept the idea advanced from Members on the benches opposite, or from their friends [HON. MEMBERS: "Who?"]—Well, I have seen it stressed in the Press. I cannot name any specific paper. But I cannot accept the idea that a cut to 2½ per cent. will mean that savers will be deterred from saving by this lower rate of interest.
    Now I would like to come to the question of food subsidies. I cannot agree with my right hon. and learned Friend the Member for Montgomery. I am pleased that the Chancellor is to maintain the subsidies, at any rate, to the tune of £425 million. During the war, and during the transition period, the fact that there were stable prices for certain essential foods and types of clothing was our sheet anchor. I am convinced that we must go forward in that way, remembering that so long as people recognise that there are certain types of essential food, and certain clothing which they know will not go up in price, they will have a greater feeling of security.
    Mr. Boothby: The Chancellor never said that he was going to maintain subsidies at £425 million per annum beyond the period when the new cost-of-living index comes into operation. In fact, he hinted strongly that he hoped for a reduction.
    Mr. Scott-Elliot: The Chancellor of the Exchequer said that he was going to maintain the rate of £425 million until the new cost-of-living index came into effect. I do not think there is any disagreement between us.
    There is one point which I would wish to stress. Many financial writers have been writing as if these subsidies will continue with us for ever. That may not be the case at all. Who can say what will be the price of imported food in a few years' time? Europe is slowly recovering, and there is a tremendous demand for food in the world, which will lead to a considerably increased supply. Therefore, I think that it is reasonable to hope that the cost of food, which I agree is advancing in America, will not go on advancing for ever; indeed it may come down. I am not here to make a prophecy, but I think that before the year 1950, it may well be that the terms of trade, which are at the present moment so very much against us, will have swung round in our favour. Not only will that affect the right hon. Gentleman's food subsidies at that time, by causing him to pay less in the way of subsidies on imported food, but, what is infinitely more important, it may affect our whole overseas balance of payments. That is a very important point. I think that it would be a great mistake to begin by assuming that we have to go on paying these subsidies year by year, irrespective of what happens in the rest of the world.
    I now come to the question of cutting down non-essential expenditure. I congratulate my right hon. Friend on his courage. I think that he is absolutely right, although I am sorry from the point of view of the old age pensioners. They have had certain things done for them, but I recognise that it is going to bear hard on them. They have received priority in the paying out of benefits under the National Insurance Act, and they, have also received complete priority in the paying out of postwar credits. They are the only individuals, apart from the joint stock companies, who have received their postwar credits both last year and this year. I hope that the Financial Secretary, when he speaks later this evening, may find it possible to make some helpful concession.
    I have already congratulated the Government on their policy. It is not very
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    easy under democracy for a Government to do unpopular things. [Laughter.] Hon. Members opposite laugh, but if their memories go back aright they will find how often a Conservative Government in the past has run away from something unpopular. Undoubtedly that is true of any democratic government. I do not want to say anything controversial in this Committee, but I am convinced that that is true. That is why I welcome the line taken by the Government, because I believe that they are not taking the line of least resistance, which is so easy, but facing the difficulties and giving a lead.
    May I, in conclusion, say this, in all seriousness, to the Government: "Tell the people what is wanted, and tell them why it is wanted; then they will do it, just as they did throughout the war." Let us go forward in that spirit, confident that however trying the task before us, we can and will win our way through the difficulties that beset us.
    6.45 p.m.
    Lady Grant: I should not have ventured to take part in this Debate, among so many financial experts, did I not feel that something should be said, on the Budget, regarding the attitude of the average man and woman in the country today. They are, after all, very interested in the proceedings of this House, because they themselves, in the last resort, have to foot the bill. We, on this side of the Committee, welcome particularly the earned income relief, and the relief allowances for children, which, I might add, have been consistently pressed for by hon. Members on these benches.
    There are certain points in which, I believe, many people in the country are very interested just now. One gathers that from ordinary conversations among one's constituents. Two things strike them about the Budget. First, there is the question of the enormous subsidies to the cost of living. The announcement of the Chancellor of the Exchequer yesterday, I think, left us all rather vague as to what exactly were his intentions. I trust that he will give a firm indication of what he proposes to do when the cost-of-living index is revised in about six months' time. People who have the job of running a home in these difficult days—-agriculturists and others—are seriously concerned to know whether they are to expect a general rise in prices or not.

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    The second point, I think, which is so obvious, is the question of whether the Chancellor will give a clear indication of the manner in which he hopes to reduce the spending of his own Government Departments. After all, he exhorts us to save, and to put our money into Government securities. I think that he said, "properly and securely invested", which is a matter of opinion. Nevertheless, the average person has been led to expect that the Government, at the time of the Budget, would give a shining example of thrift in all forms of national expenditure, and this has, I suggest, been sorely lacking. I think that all who read their newspapers this morning would agree, after reading the Budget speech, that there is no great hope of any reduction in national expenditure; because, after all, we are accepting a Budget of £3,000 million and there has been no indication that we may expect any diminution in direct taxation. Any country where the amount of direct taxation rises above 20 to 25 per cent. may expect very great industrial and social problems. I am informed that we have now reached nearly 40 per cent., yet we are told that this is an incentive Budget.
    I suggest that we are fast getting to a state in which people are interested not so much in money symbols as in goods, and, therefore, it is sad to reflect that, after 20 months, with the present Government in power, we heard no indication yesterday that there was any likelihood of a larger percentage of consumer goods on the home market. Yet it has been well acknowledged by the Government that goods, as such, are the greatest incentives to human endeavour at the present time. We see it in the mining areas, and we are told that the people there are to have extra food as well. Now, all we hear is that certain goods are to have the Purchase Tax removed from them, and electrical goods are to go back as they were before. Because of the experience we have just suffered, I would like to ask the right hon. Gentleman if he is sure that when he takes the Purchase Tax off linoleum, there will be adequate supplies.
    I suggest, therefore, that we are in a state in the country today where this Budget very much conceals the true state of affairs. The Chancellor himself said that this Budget would in any case have to be balanced. At the same time he
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    admitted that certain expenditure would not recur. Furthermore, he told us that overseas trade has shown a deficit of £400 million and that the situation abroad was very serious indeed. One can only conclude that at this time of a sellers' market the Government have not been paying due regard to what is surely an honour and a great task given them by the people, namely, to organise the country's resources with thrift and foresight, so that the country would not be in the terrible state in which it is now in 1947.
    Lastly, I would suggest that the average person in the country today has an uneasy feeling that this Budget is only a camouflaged one. In fact, it is a Budget which might be termed a popular one given to people who are crying out for relief after severe austerity. Indeed, it is very like an electioneering Budget and perhaps it may well prove so to be. To sum up, I would say that I very much regret that the Chancellor has not seen fit to consult with his colleagues in the Government, to induce them to refrain from pursuing a policy, in the face of the grave economic facts of today, which can only be described as wasteful, highly irresponsible and quite unworthy of a great nation.
    6.52 p.m.
    Mr. Crawley: The hon. Lady the Member for South Aberdeen (Lady Grant) combined a note of undue optimism about electioneering, with a general pessimism, and I am sorry that anybody who addressed the Committee with such grace and fluency should have joined in the prophecies of doom and gloom which are so constantly heard from the other side. The right hon. and learned Gentleman the Member for Montgomery (Mr. Davies) drew as gloomy a picture as he possibly could. Of course, it was right for the Chancellor yesterday to emphasise the seriousness of our position in regard to the foreign exchange situation and particularly in regard to the dollar exchange situation, but when people talk about financial crisis and the desperate condition of this country and when the Chancellor says that we must "export or expire," what is really in the back of his mind and what should be in the minds of those other Members?
    Mr. Boothby: We do not say silly things like that.
    Mr. Crawley: When you say "Export or expire" you imply that it might be

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    possible for this country to stop exporting. That, however, simply is not so. It may be that in two years' time we shall not have bridged the gap between our dollar exports and imports. None the less the world is a very large place and even if it happened, which is highly improbable, that all private business in America refused to invest money or lend money to this country, or if the American Government refused to lend money to this country, there is no doubt that within a period we could procure elsewhere most of the things which we get from America today. No doubt, we should have a difficult period for a year or two while the adjustment was taking place, but this country would not expire. We have, for our size, more natural resources than any other country in the world. We have a skilful and industrious population, and the rest of the world is crying out for the goods we make. If forced to, we could go forward without the help of America at a lower standard. But I believe that help will be forthcoming and we can attain it by the international co-operation for which we are now striving. But when we talk about a financial crisis, we should not overpaint the picture.
    Mr. Boothby: Why did the Government take the American loan?
    Mr. Crawley: For reasons which I have already stated, namely, to secure international co-operation, which I admit is difficult, but I would still support the accepting of the loan from America if only to bring America along with us as I think we are bringing her along.
    The main theme of criticism of the Budget from hon. Members opposite, is that there is not enough economy in the expenditure of public money. There is a fundamental difference between the outlook of hon. Members on the other side of the Committee and those on this side of the Committee about public expenditure in general. I do not say that we do not require to look carefully into excessive expenditure, or extravagance by Government Departments, but we regard many kinds of public expenditure as the best type of expenditure in which the country can indulge. When the hon. Lady the Member for South Aberdeen spoke of thrift in l] matters of public expenditure, I should like to remind her and hon. Members
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    opposite that there are many Departments concerned in public expenditure which we on this side of the Committee would like to see expanded and would like to see spending more. While hon. Members opposite criticise the Government in regard to public expenditure, they have not suggested, in any great detail, where they would economise, on any considerable scale, except, I think, in one respect, namely, on food subsidies.
    There have not been many details or detailed arguments put forward in this House on this matter of reducing the subsidies on food, but I have in my hand a copy of an article which appeared in the "Sunday Times" last Sunday and which was written by Lord Woolton, who, as Chairman of the party opposite, can be expected if not to dictate at least to inspire their arguments in regard to this matter. He supports in this article a reduction of the food subsidies and indeed hints at their abolition on certain grounds. First, he says that bulk purchase has been inefficient and uneconomic. About that I am going to say something in a moment, and I will put forward some figures which will make that assumption very difficult indeed to maintain at the present time. I hope hon. Members opposite may have figures with which they can refute my arguments. Secondly, Lord Woolton says surprisingly that the subsidies have been only partly successful in their object because they have not enabled the Government or industry to resist any rise in wages. Thirdly, he says that men need incentive, and the money which is now spent as subsidies would do much better if it went into the pockets of the people and the prices of food were left to find their natural level.
    Let me take the last two arguments together. In wartime if people demanded rises in wages they were, in fact, holding the country to ransom at a desperate time in its history, and it could be argued that subsidies on food were partly at any rate to prevent a rise in wages. But in peacetime I am not sure whether the party opposite will argue that the main purpose of food subsidies is to prevent any rise in wages. If that is so, what they believe is that the share of the national income and of the country's food which wage-earners got in 1938 and 1939 was an adequate share. We on this side of the Committee take a different view of that

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    matter. It has been an opinion which I have expressed before that the wage earners and also the salary earners of this country for two or three generations have been greatly underpaid, and the whole question of reward for work needs an even greater adjustment than can he made through the process of direct taxation. One of the facts which has pleased us on this side most about the operation of food subsidies since the end of the war has been that—owing to the index figure of wages rising more than that of the cost of living—a great many people have been able to obtain a much greater share of the rationed foods and foods in general than they were able to before the war. Although hon. Members opposite dispute that frequently, I have only to go round the villages of my constituency to find very many people of whom it is perfectly true, and who, even today with all the difficulties, are feeding better simply because they have more wages in their pockets. They can get rationed foods, and the one thing they beg of me is to keep my eye of food prices and urge the Government not to lift the food subsidies to any extent that would endanger the lower income groups.
    Yet there is no doubt whatever that it the policy advocated in this article were put into practice, exactly that would happen. What does Lord Woolton suggest? He suggests that the subsidies representing 3s. in the £1 in Income Tax should be removed—I think he implies as quickly as possible—and that the 3s. in the £1 should be given back to the taxpayers. But who would get that money? From the figures in the White Paper one can see that there are only a million persons who earn more than £500 a year. There are 12 to 14 million under that figure, excluding a very large number of old age pensioners who de not come into these calculations, and some eight million earning less than £250 a year. Under the new reliefs which the Chancellor is giving this year, the majority of these people, when married, will he brought out of Income Tax altogether and a very much larger number still will pay at reduced rates. If we give back the 3s. in the £1 Income Tax which the—
    Mr. Spence: Does the hon. Member suggest that it can be given back only in the form of Income Tax? Could it not be given back in indirect taxation?
    Mr. Crawley: Again, indirect taxation, as we know, bears most heavily on the lower wage scales. The argument in this article suggests that it could be most easily repaid in Income Tax. If, in fact, that were done, it is quite obvious that the people who obtained most of the benefit of a reduction of subsidies in this form would be those who are among the highest paid wage earners. Food prices would, of course, rise, and there is no question that unless subsidies were kept on to a considerable extent while shortages exist the lower paid wage-earners of this country would not get enough food.
    Finally, as I understand it, the argument in this article is that if you do that you will, none the less, check inflation. Lord Woolton says that the proportion of a man's income now spent on food is very much less than before, and that if that proportion is raised there will be less to spend on other goods, which would cut down inflation. That is a most astonishing argument. I do not know what advice Lord Woolton has been taking on this matter but, as I say, the people with whom I am in touch are not spending a smaller proportion on food. In fact, in many cases, they are spending a higher proportion than ever before. Many earning £4 to £5 a week spend as much as one-quarter to one-third of their income on food. Do the party opposite suggest that that proportion should be raised, that food prices should be allowed to find their own level, and that we should return to the conditions of the years before the war when many people had barely enough left over to find the necessities of life? It is indeed the most astonishing argument. I have heard Lord Woolton described as "great" on that side. I have no doubt that he did a great job during the war, but if the arguments behind this article are his qualifications for greatness in peacetime then I think the electorate is to be congratulated on its intuition. If there were not an indirect suggestion of a compliment in the epithet, I would say that this policy is not merely bankrupt but bovine.
    I should like now to say one or two words about bulk purchase. We have heard a great deal about the inefficiency of bulk purchase, and we are told by hon. Members opposite very frequently that, in fact, this country, owing to State buying, in whatever form, is obtaining less

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    food for higher prices than if State buying were abandoned and the business left to private traders. I have never seen a list of the commodities on which that argument is based, but looking at cocoa, sisal, sugar or a great many others—
    Mr. Walter Fletcher:Linseed—
    Mr. Crawley: —or linseed, one finds that the world price of these commodities is very much above the price which the Government are paying. [Interruption.] This is a serious argument which can be backed by figures. I am sorry that hon. Members opposite take such a lighthearted view of the matter. There are many experts in this country who believe, with very sound grounds, that the balance at the moment in these commodities which we are buying is in fact in favour of bulk purchase.
    Mr. W. Fletcher: Is the hon. Member's argument really this? It is a very good thing for the Government of this country, with its well-known views about international trade, to make long-term contracts which are greatly to the advantage of this country and, therefore, must be greatly to the disadvantage of the producer and the small man on the other side?
    Mr. Crawley: Many of these contracts are not long-term. Secondly, it cannot possibly be said that such long-term contracts are greatly to the disadvantage of the other party.
    Mr. W. Fletcher: I give the hon. Member the case of the five-year contract that was made for copra and oil seed in Ceylon last year, and which made necessary an explanation from the Government in this House. It so lowered the standard of living of the producers, that it has been increased by 50 per cent.
    Mr. Crawley: It cannot be said because of one contract that the Canadian wheat agreement, for example, will be greatly to the detriment of wheat producers, or the cocoa agreement to the detriment of the producers of West Africa. In actual fact, there are better arguments, I think, to suggest that long-term contracts of that nature—though many of them are not long-term but annual contracts—will in the end do a great deal more for the producer, in stabilising prices, than anything else. If we did go over from bulk pur-
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    chase arrangements to private trading, there is very little doubt that the prices of most foodstuffs would rise; and what guarantees can hon. Members opposite produce to show that the food prices are going to come down? I suggest that we are entering on a period where, by international operation, we are doing all we can to put into practice the nutritional advice we have been given during the last five or 10 years.
    Mr. W. Fletcher rose—
    Mr. Crawley: I should be grateful if the hon. Member would allow me to develop my argument. Our aim is not only to produce much more food, but to encourage the consumption of much more food all over the world, particularly in the backward countries which themselves are becoming rapidly industrialised. We are entering a new phase when a shortage of food is likely to be a constant factor in the world, and there is very little chance, whether under private trading or under organised State buying, of the price of food coming down to any considerable extent. I think the light-hearted way in which this parrot cry about bulk purchase is taken up by the Tory Press, is an irresponsible act likely to recoil very much to their disadvantage in the not very distant future.
    Lastly, may I say something about the Profits Tax? What I have to say really has relation to the duty on bonuses and the whole question of the taxation on the higher levels of income. The criticism of this tax and of all such taxes, including Supertax, is that it reduces incentive. But whose incentive does a profit tax of this kind really reduce? Obviously, if one is thinking of the big companies with thousands of shareholders who do not work in the business it is not they whose incentive will be reduced. It is not the managers, who rely on the incentives of good salaries. In the big companies with special conditions for reserves, it is difficult to argue that it reduces incentive.
    But obviously such a tax can act in a detrimental way to incentive in small companies where the people who manage them are owners of the company and derive much of their income from the dividends and the profits. These people are very important to the country. They do not only create wealth for themselves, but by a good deal of hard work and initiative they create much work for other

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    people, and they should be encouraged. Not that at the moment much can be done to encourage them. Because of the shortages of materials, they are not likely to be able to expand their businesses to any great extent, but in the long run it would be a very good thing if incentive could be given to the men who work as well as own the shares and without creating the undoubted injustice which is created if all those who simply have shares derive income from them without working to the same extent.
    This question of profits and profit policy seems to be one of the points on which, to quote something which was said by the hon. Member for Chippenham (Mr. Eccles) in the last economic Debate, honourable Members of both sides of the Committee can come down and to some extent meet in the middle and do some thinking. This side of the Committee feels that at the moment it is among the lowest paid workers that incentive is most needed, for a good many reasons that are obvious. Secondly, it is most needed among the skilled workers and the smaller business men. Thirdly, it is our opinion that the rewards of ownership in the more passive sense have been too high for a long time and that the balance of incentives have therefore been wrong.
    The question is how we can increase incentives for such owners who have initiative and can use it and are prepared to work, without producing a sense of injustice among the non-owners who are the wage and salary earners, because by lifting Super Tax and Profit Tax we benefit the passive owners of shares. A profits policy is not a thing which can be imposed by a Government. It must be arrived at by consultation with all those in industry. As to the basis of it, it seems to me that one has to ask what function profits really have. We certainly admit that where there is risk, there must be a chance of high profit, but when an industry gets established, what should the objects of a company really be? Should it be always to try to earn the highest profit or should it take into consideration, once it has become firmly established and is steadily expanding, the consumer and the worker and treat them as partners in the industry and regard its profits from a much broader social point of view? It seems
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    to me that it is in this question of the social implications of profits that some change of mind on both sides of the Committee may be profitable. On this side of the Committee there is too much suspicion of profits as a whole. The other side of the Committee too automatically assume that profit is the carrot which must be made as large as possible to draw capital into industry. From a habit of mind, they always think in terms of success meaning simply every company producing the highest profit it possibly can.
    Mr. Boothby: This is the spiritual side.
    Mr. Crawley: However many or however few people do in fact live on dividends from shares in companies in which they do no work, the fact is that their income is unearned. What is really important is that the knowledge of this is one of the greatest obstacles to incentive among the rest of the population. The whole basis of our economy today is, and must be, that everybody should earn their living. Yet there is in the mind of the trade union movement and the workers as a whole the feeling that even today there are a great many people who do not earn their living. Unless we can remove that feeling we shall not get a proper understanding of the function of profits in our economy and we shall not get higher production.
    There are many things that could be done. I hope that the Companies Bill will bring some improvements. But I welcome the taxes that the Chancellor has introduced on profits and bonuses not only because this year and next year they will take money which cannot be used because of the shortage of material but also because it will give some impetus to those who do direct industry and work in industry to get rid of the habit of mind which always tends to increase profits without thinking of the social effect; that is, to consider whether in fact the right basis for profits is not simply that amount of interest or dividend which will over a period attract sufficient money into the industry.
    7.17 p.m.
    Sir Waldron Smithers: Throughout this Debate the speeches have taken a course which would seem to imply that we are living in normal times instead of being face to face with the biggest crisis in history. All sorts of details have

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    been discussed, but I do not propose to go into much detail tonight. I want to talk about some of the big principles under which our economic and financial life exist. If a home, or a Government, or a country applies sound principles, the results will, inevitably, be successful. The opposite is also true. I say that the principles which inspire the policy of this Government are evil principles and must ultimately bring disaster.
    My main reaction to the Budget speech of the Chancellor can be summed up in two points, the first being internal and the second external. Internally, he has juggled with figures and he has got a so-called balanced Budget, but the external position, as he acknowledged in his speech, is still desperate. I would refer the Committee to Table 14 in the Financial Statement. I ask the Committee and the Financial Secretary whether any recognised firm of chartered accountants would be able to sign that statement as a true and correct statement of the Budget prospects for the country for this year. The last item under Estimated Revenue "Miscellaneous" is shown as £270 million. I think the Chancellor has got that by pawning the pram and the piano, and calling it revenue. On the other side, there is an estimated surplus of about the same amount. It seems to me that this is altogether fake bookkeeping and that we are taking as revenue what should have been used as capital or used to pay off debt. Taking the right-hand side, I want to call attention to the figures of the total of the Civil Estimates of £1,698 million. Last year the total of the Civil Estimates was £2,090 million, but in the Budget speech of the Chancellor he referred to
    "the Ministry of Supply which has a civil element also.''— OFFICIAL REPORT, 15th April, 1947; Vol. 436, c. 41.]
    And the Ministry of Supply is down for £100,300,000 this year. Would the Financial Secretary tell us how much of the civil expenditure of this year is hidden in the civil element in the Supply Estimates to which the Chancellor referred? It would be interesting to know that. In view of the fact that he has announced larger expenditure on some of the social services, I want to see why the Civil Estimates have been reduced from £2,090 million last year, to £1,698 million this year.
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    I beg hon. Members on all sides of the Committee, in all their financial and economic thinking, to remember that England is different from nearly every other country in the world. To live, we have to import one-half to two-thirds of our food and raw material. We have lost, in the cause of freedom, the great bulk of our overseas investments—over half of them—and we have to export goods and services at world competitive prices or starve. In his speech the Chancellor referred to the necessity for an export drive. Other Ministers have referred to that, up and down the country, and I would beg of them to add to their plea "at world competitive prices." Britain must face the fact that she is different from every other country in the world. We have, as I say, to import from one-half to two-thirds of our food and raw materials. To import, we have to export at world competitive prices, instead of stifling the twin incentives to hard work—fear of loss and the hope of gain. That is a hard thing to say, but it is true and it is human nature.
    We had a long Debate the other day on Command Paper 7046. I will not discuss that now but the Command Paper on the "Economic Survey for 1947" was 32 pages of wishful thinking. Britain was not built on a five-day 40-hour week, and she cannot continue to exist on a five-day 40-hour week. I give way to no one in my desire to help the whole community, the workers especially, but the workers of this country have to face the fact that unless we work just as hard as is necessary to export at world competitive prices, we are faced with starvation. The suppression of free enterprise has caused the worst failure in administration known in our history. The cost of production, including the expenditure on social services, the reduction in output per manhour, the shorter hours worked, the higher wages demanded and granted, must increase our cost of production and must, therefore, impede or destroy our ability to compete in the markets of the world.
    In the economic life of a country there are three processes—production, manufacture and distribution. State interference and State control represent a mortal danger to all those three, but are most dangerous to distribution, because in distribution there is more detail, and you must leave it to the man on the spot to decide

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    how this or that should be distributed or conveyed, and that interference with the economy of distribution is the main reason—I have this on the highest authority, from a Member of the Government; I will not give his name for it would not be fair—for the fuel crisis the month before last.
    An interesting point about the Economic White Paper—I am told this by a big industrialist who is connected with a large range of industries, and I wish the Government would take note of this—that already Cmd. Paper 7046 is out of date. The three or four weeks' stoppage, the three or four weeks necessary to get back into production, the output per man hour being down by 30 per cent., have resulted in the fact that already the production programme for 1947 is down by 20 per cent. I hope the Government will look into those figures and warn the Departments and the people if, as I believe, they are correct. The President of the Board of Trade speaking at Bristol to the Trade Union Labour and Co-operative Guilds is reported in the "Sunday Times" of 30th March as saying:
    "Britain may have to borrow £350,000,000 abroad this-year to meet our export deficit."
    That is a terrible thing to be said by one of the leading villains in the piece. Who is to lend us £350 million more with the already enormous debts around our neck? Then he is reported to have said:
    "I have done my damnedest to get the Soviet Union to do a deal on industry of any kind, particularly in timber, but they are not able to. Consequently, we have to buy from across the Atlantic and spend dollars."
    The Soviet Government is fooling him as it is trying to fool other Ministers
    I said I would try to talk about basic principles, which affect this country and the world and which affect the success or failure of this Budget. The root cause of the troubles of the world today is the poison of Communism. [Laughter.] It is no good the hon. Member for West Fife (Mr. Gallacher) laughing. I have some information to give the Committee which I think will surprise hon. Members. I would direct the attention of the Committee to the three articles in the "Daily Telegraph" of the last three days by the right hon. Gentleman the Leader of the Opposition. The war is not over. The war between good and evil is still raging, although the guns have stopped and bombs have ceased to fall.
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    In support of my remarks, may I draw the attention of hon. Members to some books which I beg them to read? There is one called "Nationalisation—Chaos or Cure" written by the hon. Member for Canterbury (Mr. Baker White). It is a remarkable thing that the United States Chamber of Commerce, a non-political body, has published two pamphlets lately called "Communist Infiltration into the United States" and "Communists Within the Government." There is another book, by Mr. Cronin, called "The Menace of Communism." Then there is "The Great Globe Itself," by Mr. Bullitt and "I Chose Freedom" by Kravchenko. If hon. Members will read those books, they will find that what I am about to say is completely justified. Communist power is increasing all over the world. One man in America can call out 400,000 miners—he is even stronger than the Government. One man can call out 300,000 telephone workers—
    Mr. Gallacher: Will the hon. Gentleman allow me to interrupt?
    Sir W. Smithers: No, I cannot give way.
    Mr. Gallacher: On a point of Order. Is it permissible for an hon. Member to suggest that one of the most outstanding supporters of individual enterprise in America, or in the world, John L. Lewis, has anything to do with Communism?
    The Temporary-Chairman (Mr. Touche): That is not a point of Order.
    Mr. House: Has this talk about Communism in America anything to do with the British Budget?
    Sir W. Smithers: Communism is a world-wide movement and I am going to show how the poison is percolating here. I have pointed out how one man could call out 300,000 telephone operators. Again, to show the power of the insidious working of Communism, I am told on good authority that the concession in regard to "C" licences in the Transport Bill Committee proceedings was made because of the urgent request—I will put it no higher than that—of the Co-operative movement. [Laughter.] Hon. Members do not like these truths. Look where we like in the world, look at the morning papers, the troubles in India, in Palestine and all over the world, the unofficial strikes—all due to Communist poison.
    The Temporary-Chairman: I think the hon. Member is getting very far away from the Budget Resolutions.
    Sir W. Smithers: I will come right home. The Government have appealed for extra output, yet we have Communist shop stewards calling men out on unofficial strikes for no good reason. I am told by responsible trade union leaders, "It is no good, we have lost power. The power has gone to the Communist shop stewards." Today we have a strike in Glasgow holding up, I believe, 70 food ships and, according to the evening papers today, a bomb has been found in a Whitehall office—
    The Temporary-Chairman: I must ask the hon. Member to relate his argument to the Budget Resolutions.
    Sir W. Smithers: With great respect, if the Government offices are blown up by Communists, how can we possibly carry on the business of the country? Then again, Communist technique is holding up our dealings with the rest of the world. England is more dependent on other countries than is any other country in the world, yet the Foreign Secretary—[An HON. MEMBER: "A Communist?"]—the one redeeming feature of the Front Bench—has had to say that he spent four weeks in Moscow and has done nothing. How can he present our case to the United Nations organisation—
    The Temporary-Chairman: I must ask the hon. Member to relate his argument to the Budget Resolutions.
    Sir W. Smithers: I will obey your Ruling, Mr. Touche. I am trying to show the danger of Communism all over the world. Over and over again, the Foreign Secretary has protested about the amount of money which the Chancellor is providing in this Budget for Germany and the Control Commission of Germany. In his speech yesterday the Chancellor said:
    "Less pleasing to me are some of the other Supplementary Estimates which we have had to vote-439 million for the Control Office, in addition to the original estimate of go million, to feed and administer the Germans in our zone"—OFFICIAL REPORT, 15th April, 1947; Vol. 436. c. 39.]
    I have some information here—[Laughter]—I have taken a lot of trouble to get this information, and I ask hon. Members to listen. It has been checked from three independent sources. There
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    have already been references by my right hon. Friend the Member for Scottish Universities (Sir J. Anderson) to the currency scandals. The trouble is the Control Commission of Germany. In the Chancellor's speech mention was made of N.A.A.F.I. I am told authoritatively that N.A.A.F.I. charges 50 per cent. more for supplies in Germany than is charged in grocers' shops in the United Kingdom, and the Control Commission personnel have preference over the Army, higher -tobacco and spirit rations, and that most of the black-market operations are carried out by the Control Commission in Germany.
    In regard to the £80 million to which the Chancellor referred, I am told that supplies of steel from the Ruhr are diverted to Russia at the rate of two train loads a day, and that the Control Commission officials are much too soft with the Russians in the Russian zone. Coal from the British sector of the Ruhr is supplied to the Russian zone by 14 train loads daily, and we are supposed to receive a ton of briquettes for three-quarters if a ton of coal. All the coal is diverted to Russia, but the briquettes in return are 80,000 tons in arrears. One of the troubles is the return of empty trucks. I am told that they are deliberately held up by the Russian authorities because they do not want prosperity in the British sector, and the return of empty trucks is from 2,000 to 6,000 behind. Another point is that the trains from Hamburg to Berlin should go by Ulzen and Salzwedel—
    The Temporary-Chairman: I am afraid that unless the hon. Member can relate his remarks more to the Budget Resolutions, I will have to ask him to resume his seat.
    Sir W. Smithers: I have already said that the Chancellor said we are paying £39 million to the Control office, and £80 million to feed and administer our zone in Germany.
    The Temporary-Chairman: The hon. Member seemed to be getting in Order on that point.
    Sir W. Smithers: I am trying to show how that money is being wasted, and deliberately wasted, by Russian intervention. I will try to keep in Order. I submit that the facts I am giving are definitely related to the £80 million and the £39 million mentioned in the Budget

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    speech. Instead of the trains going straight through, they have to go all round via Hanover, Brunswick and Magdeberg at very heavy increased expense to the British taxpayer.
    In addition Russia is taking an enormous quantity of food and goods out of Germany for sale in Russia. Hundreds of miles of rails, railway equipment and factories are dismantled and sent to Russia and yet they say the Allies have had more reparations than Russia has had. That is the reason why it is so difficult for any British subject to get into the Russian zone. Here is one rather interesting example—
    The Temporary-Chairman: The hon. Member cannot go into that matter.
    Sir W. Smithers: Then I must go on to my next point. I will obey your Ruling, of course, Mr. Touche, but I submit, with great respect, that I am trying to show how the money of British taxpayers is being wasted in Germany. I wish to put it on record that I was not allowed to complete my argument.
    My next point concerns what is to me a very serious matter. It is rather an effort to make my point, and I hope the Committee will try to treat the matter seriously. 1n his speech the Chancellor said:
    "There have also been many acts of God and natural disasters since the war came to an end, out of all proportion to man's average fate in these matters. Droughts, floods arid bad harvests have been widespread."—[OFFICIAL REPORT, 15th April, 1947; Vol. 436, c. 68–9.]
    The world is faced with a major catastrophe—I say this with reverence—because man is not obeying God's law. By that I mean not man-made laws but the law, as laid down in the Ten Commandments and the four Gospels. I say that this Government are breaking that law. In the Ten Commandments we are told—
    Mr. Pargiter: Will the hon. Member tell us which one?
    Sir W. Smithers: —we are told "Thou shalt not steal" and "Thou shalt not covet." I wish to give an example from the Transport Bill—
    The Temporary-Chairman: That is obviously not in Order.
    Several Hon. Members Several Hon. Members rose—
    The Temporary-Chairman: Mr. Gordon-Walker.
    7.43 p.m.
    Mr. Gordon-Walker: It is not easy to follow the hon. Member for Orpington (Sir W. Smithers) and remain within the bounds of Order. But I was sorry, Mr. Touche, that your duty compelled you to call the hon. Member to Order on a number of occasions, because he was making a speech that all of us, I think, found entertaining.
    Sir W. Smithers: On a point of Order. I sat down to look at some more notes. You did, Mr. Touche, within your powers, call the next Member. I had not meant to sit down, and I wish to enter the strongest protest against not having been allowed to complete my argument
    Mr. Gordon-Walker: In the earlier part of his speech the hon. Member talked about the "so-called surplus" in this Budget. He said that the surplus had been achieved by pawning the pram and calling it revenue. Other hon. Members opposite have made the same point in their speeches. It seems to me that from the point of view of the effect of the Budget as an anti-inflationary weapon, it does not matter how the surplus has been got together. The essential thing is that the Government, in order to combat inflation, shall take more out of the pockets of the people than they put back. It does not matter whether it is done by non-recurring items or not. The surplus is the essential thing, however it is collected.
    I am in a position to answer two of the questions which the hon. Member for Orpington asked. He said that the surplus should be used to pay off the National Debt. That is what surpluses are automatically used for when they occur in the Budget.
    Sir W. Smithers: There is not one this year.
    Mr. Gordon-Walker: We have a surplus in these Budget Estimates. The hon. Member also said that the President of the Board of Trade had said that we would have to borrow 350 million more dollars this year, and he asked from where we were to borrow that sum. We have already been granted it through the American and Canadian credits. We are drawing upon the existing credit.
    Sir W. Smithers: The point of the remark of the President of the Board of Trade to which I referred was that we had to borrow 350 million dollars more in addition to the existing American Loan
    Mr. Gordon-Walker: I think that the hon. Member misunderstood the President of the Board of Trade.
    I would like to congratulate the Chancellor of the Exchequer on the Budget from two points of view. It not only increases social justice and equality in the country, and makes, within the limits possible this year, considerable contributions in that direction; it is also used as an instrument operating on the national wealth. It seems to me extremely important that our Budget should always be regarded from that point of view. There are one or two aspects of that about which I should like to speak. The first concerns the tobacco duty and dollars. It is absolutely right to use desperate methods now to husband and save our dollars, but this is, as the hon. Member for Harwich (Sir S. Holmes) has said, an extremely regressive tax. There was a book written by the present Chancellor of the Exchequer called "Public Finance," which I would recommend him to re-read, because the author of that book would be appalled at the regressive nature of this new tax, which falls very heavily on the poorer people—not only old people but poor people. It seems to me that when indirect taxes reach such a height as in the case of tobacco we should seriously consider introducing a progressive or graded indirect tax, a tax that falls more heavily on the more expensive brands of the product and less heavily on the cheaper ones. On the cheaper tobacco there should be a tax of lower percentage and a correspondingly higher one. on the more expensive tobacco. Thereby, the same saving of dollars could be effected without loss of revenue, and the sacrifice would be a little more equal. As proposed by the Budget the saving will be effected by stopping poorer people smoking altogether and by stopping richer people from smoking quite so much. A graded tax would make the proposal much less regressive.
    I wish to say a word on the tax on distributed profits. It seems to me wise It is anti-inflationary, and I disagreed with the point made by the right hon.
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    Member for the Scottish Universities (Sir J. Anderson) when he said that the distinction between the distributed and undistributed profits should not be made It is essential, as an anti-inflationary measure, to stop or check distribution of income in the form of dividends. It is right, as an anti-inflationary measure, to make this distinction. The tax on distributed profits will also encourage companies to re-equip their works and factories as fast as possible. But I would make the point that the distinction does not seem to be the right one. The distinction should not be between distributed and undistributed profits but between used and unused profits. Undistributed profits may not actually be used. One of the great causes of unemployment in ordinary times is the inability of the nation to use all its savings and invest them in real things, and, as Lord Keynes taught us, one of the chief causes of wastage in unused savings is undistributed profits. This does not matter now, when we are in a period of inflationary pressure, but it will matter very much later on. If, as I trust, this profits tax is to be permanent, I hope the Chancellor will consider remoulding it so that it is based on the distinction between used and unused profits, and not between distributed and undistributed profits. Then, when we are out of the period of inflation, that will be a powerful extra weapon against unemployment arising as it did in the old days
    Although I welcome it, it is really not a Profits Tax which we want at this moment so much as a profits policy. A tax is a generalised thing. It falls equally on everybody. A profits tax is discriminatory. It distinguishes between profits on the things which we want made and the profits on the things which we do not want so much. The whole essence of planning is discrimination. It is the actual choosing between what we want and what we do not want to be made. It is, if you like, being unfair in a public and honest way and explaining why we are being unfair, as we have to be in wartime and on other difficult occasions, to people who are making things which are not so socially desirable as other things. The Profits Tax falls absolutely indiscriminately on the making of ping-pong balls and on the making of steel. At the moment, there is no way of using the tax to make more profitable the making of things we want and less profitable the things we have to

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    go without because, whether we want them or not, we have to put them well down the list of our requirements.
    The Purchase Tax is a discriminatory tax. The Profits Tax ought to be used to reinforce the Purchase Tax to that effect. Profits Tax, added to Purchase Tax, would go a very long way towards helping it to be more profitable to make the things we want, and less profitable to make the things we do not want. A wages policy will not enable us to get all that we want. Wages are by no means the only things that attract workers into industries. Account must be taken of the conditions and amenities as well. In order to get decent amenities in an industry, more money is needed in that industry. Therefore, we must put more money into the priority industries, whether they are publicly or privately owned, so that we can create not only better wages but better amenities. By using a Profits Tax with discrimination, together with Purchase Tax with discrimination, we could go a long way towards getting the results which hon. Gentlemen opposite try to get but would not succeed in getting by a wages policy.
    A word about inflation. It seems to me there are two sorts of inflation and part of the difficulty in this Debate has been that the two have been confused. There is a good and a bad form of inflation. There is what we could call full employment inflation, the inflation that we get in a period of full employment. That is the sort of inflation which we want to have always, because a sensible Government in a sensible country endeavours to maintain the country permanently on top of a boom. That involves the maintenance of full employment and, of course, at the top of a boom we always run into the danger of inflation, so always there will be the danger of inflation. It is a good thing which is a by-product of full employment. Moreover, it gives the pressure from below which enables us to operate such devices as a profits policy.
    In addition to this full employment inflation which we have, and I pray God we shall always have, we have the inherited inflation from the war. That is nobody's fault. It is made all the harder to handle because of the full employment inflation. We have this vast accumulation of unspendable purchasing power and I wish to make two concrete suggestions for dealing with it. One suggestion is the
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    imposition of a tax on football pools and totalisators, I am extremely sorry that we have not got a tax of that type. It is not that I want it from a moral point of view, but it is a perfect anti-inflation tax. [AN. HON. MEMBER; "What about dog-racing?"] I include dog-racing totalisators. A tax of this nature would draw vast sums of money from the people by means which would use very little labour and material. If only we took some of that money to the State, we would be reducing the piled-up purchasing power of the people in an extremely convenient and social way. My right hon. Friend the Chancellor of the Exchequer used the argument that if we tax pools and totalisators, we must also tax bookmakers. It seems to me that here again we are frightened of discriminating. It is no more unfair to do this than it is to discriminate, as we are doing in this Budget, between electric fires and electric clocks. The simple thing is that we should tax totalisators and pools and it would help as an anti-inflation measure. I ask the Chancellor of the Exchequer to think on that subject again and not to worry too much about being unfair.
    My last point is that we have to change the habits of our people in regard to savings, particularly in the case of small savings. I am all in favour of cheap money. I think that the arguments of the Chancellor for his cheap money policy are overwhelming. There is, however, a very good case for raising the interest rates on a small range of selected savings up to limited amounts. I refer particularly to Post Office and other similar types of saving. An amount of, say, £1,000 or £500 could be fixed, on which a big interest rate would be paid. The effect of that would be that, to some extent, people would cease to think of these savings as postponed expenditure and would begin to think of them as capital which brings in revenue. That would enormously decrease inflationary pressure and would transform the money that is now piling up against our blockades, so that instead of pouring through it would translate itself and become capital which people would leave there for ever in order to get the great benefit of regular income. There would still be an inflationary pressure but it would be that of the interest instead of the capital. It appears to me that that would help to achieve one of the things for which the Chancellor of the Exchequer

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    is rightly seeking, namely, a reduction in this inflationary pressure, without using crude old-fashioned methods, and without suffering an inflationary break-through, which would do almost as great damage.
    7.57 p.m.
    Mr. David Eccles: I agree with much that was said by the hon. Member for Smethwick (Mr. Gordon-Walker). I found his speech very interesting. I do not agree that the miscellaneous items which are going to provide the surplus this year take any money out of the people's pockets. These items are simply transfers of balances that are in other accounts coming back to consolidated fund. I was very glad to hear the hon. Member admit that there is an inflationary potential. I was sorry that the hon. Member for Chesterfield (Mr. Benson) denied it because, like all other hon. Members of this House, I have a great respect for the hon. Member's financial knowledge. I thought that he went a little wrong when he said that there was no inflation present today.
    Several times yesterday the Chancellor of the Exchequer used the phrase, "I am going to speak frankly and conceal nothing from the Committee." I must admit that those words always put me on my guard. I was particularly unhappy when he began his passage about our overseas position with that opening gambit. He wanted us to believe that our finances can be divided into two separate realms. He seemed to say that at home we are in the money; he nearly had the courage to admit that abroad we are going bankrupt. This separation of our finances into two spheres does not correspond with reality. Great Britain is more dependent upon imports than any other country in the world. It can never be right to weaken the will to work of our own people by telling them that the position is satisfactory at home when, in fact, it is critical abroad.
    The Chancellor did not tell us exactly when the American and Canadian loans will run out. The precise date is not important compared to the certainty that these credits will be exhausted long before our exports are large enough to secure a tolerable standard of life for the British people. We are not going to be able to pay for the imports necessary to keep body and soul together. The reasons are
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    beginning to be well known outside this House. We have wasted 20 months on an unplanned Socialist honeymoon. Our exports had lost their buoyancy even before the fuel muddle robbed us of any chance of meeting the 1947 target. The prices of almost everything which we buy from abroad are steadily moving against us. The output of food from our own soil fell last year and must fall again this year. The gap that separates what we must import from what we can afford to import is now no longer being closed; in fact, it is getting wider.
    I want to put the matter bluntly: When the dollar loans are exhausted, either we must again borrow heavily or we must go hungry and unemployed. That is the cloud on the horizon which will draw nearer every month, darkening party politics and threatening our very existence. I cannot believe that exaggerating the little that was achieved in 1946 is a good way to help this country to ride that storm. The Government's methods of flattering and buttering the public have the very opposite effect. The very reason why we now need a change of heart and a revolution in effort is because the last 20 months have achieved so little.
    There were times yesterday when the Chancellor talked in that self-satisfied strain. He was far more self-satisfied on the wireless. The comment in my-household was; "If the Socialist Government have done as well as that, there is no need to ask us to work harder." That was actually the comment made to me at breakfast this morning. I will give one example of the Chancellor's attitude. He bragged about the 200,000 overtime babies. He did not mention that that is one of the few forms of production for which no licence or permit is required. That is a moral which should be drawn. He did not mention either that those children will have to be housed, fed, clothed and provided with imports by the working population for 16 years. We all rejoice that they have been born but the great questions remain, From where in 12 months' time, are they to get their food? Will there then be enough raw materials to keep their fathers and mothers fully employed? Those are the great anxieties which, as this summer wears on, will submerge all other problems. Shall we borrow again or shall we go hungry?
    Before I come to the financial aspect of that critical dilemma I want to say

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    one word about the size of the gap to be bridged. The Chancellor admitted that the estimate of our import requirements was badly wrong in the White Paper. It was very much too low even at the time that the White Paper was drafted, which was before the fuel crisis. The demand for imports is like the demand for electricity; it has been greatly stimulated by the redistribution of wealth, which is a good thing, and by the inflationary policy of the Chancellor, which is a bad thing. Wages are up 65 per cent. over prewar, old age pensions and social benefits show sharp increases, while the volume of savings in the hands of the public is much larger. All those increases in money incomes and in capital create expectations of a fuller life.
    The Committee should not accept the Government's estimate for imports which, like their target for coal production, was pitched so low that it implied a swindle upon the general public. We ought not to hide from the people of this country what it means in imports if their hopes are to be fulfilled. Even assuming a much more vigorous policy for British agriculture than we have had up to now—and I have no faith in that assumption—I reckon that the import requirements of this country are at least £250 million more than the White Paper target.
    When I look on the other side of the gap I cannot believe that we can attain the export target of £1,200 million this year; indeed unless something like 220 million tons of coal are raised in the next coal year, and unless the whole energy and temper of the country are roused, I see no reason to think that we shall do better in 1948. I estimate the export shortfall in 1947 at £150 million. The gap which should be the measure of our problem between exports and imports is therefore not the £350 million of the White Paper, but at least £750 million. I put it to the Committee as a serious estimate. I hope that the Minister who is to reply to the Debate will give reasons in detail if he disagrees. This gap is the key to our present difficulties.
    What have the Government done to prepare for the coming foreign exchange crisis? They began well by borrowing 5,000 million dollars from the United States and Canada, without which our
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    rations would have been cut to ribbons. They were only justified in paying the very heavy price for that breathing space if they had made it their first duty, the very centre and mark of their whole economic policy, to create conditions in which Great Britain could stand on her own legs when the loans were finished. For such a policy there were two great and obvious principles, to avoid inflation and to stimulate production. These should have been the twin principles of all the action of His Majesty's Government from the day they decided to borrow from America. The world can now see that they have not followed those principles.
    I wish this evening to deal with one aspect of the failure of His Majesty's Government: the financial policy of the Chancellor of the Exchequer. The Chancellor of the Exchequer is the traditional guardian of British credit, but this particular Chancellor—I ask the Committee to note this point—takes a nineteenth century view of the definition of national credit. By what test should the credit of a nation be measured? By the rate of interest at which His Majesty's Government can borrow from themselves or from their servants, the banks? Or by the value of our money when it is offered at home and abroad in exchange for goods and services? The only genuine test is not the yield of Government securities but the purchasing power of the £. But we find that the Socialist Chancellor of the Exchequer has put a programme of crushing expenditure and his own personal ambition to lower the rate of interest in front of the value of the £ and in front of the credit-worthiness of Great Britain. He has been intellectually blind to what he has been doing. He is like an ostrich: he has stuck his head into his own paper money and seems not to believe that the rest of the world knows what he is about.
    The Committee will have noted that the right hon. Gentleman was silent about the main facts of the monetary history of the past financial year: £800 million have been added to the deposits in the banks. £60 million have been added to the note circulation, and what is perhaps as important, there has been a sharp rise in the daily clearings of cheques between the banks. In other words, the Chancellor forced the public to hold a much larger stock of money, the public chose to turn over that stock more rapidly, and even

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    before the fuel crisis there was no increase in the supply of goods to keep pace with the swelling volume of cash and credit.
    I would remind the Committee that a large proportion of the goods which were sold to the public last year were obtained with borrowed money from America. The sale of those goods in our shops is an instrument of deflation, taking sterling out of circulation. The Committee may well ask themselves what will happen when this great safety-valve ceases to function. How, then, will the Chancellor finance his items under the line of capital expenditure when he is no longer receiving enormous sums in sterling from the public, against which he now pays out nothing? The only answer which the Chancellor can give to these charges of inflationary finance is that he relies upon controls and restrictions to conceal and to check the danger. We on this side would much rather that inflation was dealt with in this way than not dealt with at all. We would say of a man who has broken his leg that it is very much better to put the leg in splints than to do nothing about it, but it would be very much better still if the leg had never been broken, because once the man has met with the accident, there is no knowing whether he will ever again be able to walk with his accustomed vigour and freedom. We say of the Chancellor's financial policy that it is an unnecessary injury to our economy, and we cannot tell—no hon. Member can tell—whether British industry will ever again recover from the consequential treatment of controls and restrictions.
    The Committee will look for causes for this increase in cash and credit since the war ended. I feel sure hon. Members will agree that the two most powerful have been the high level of expenditure and the cheap money policy. My right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) dealt faithfully with the high level of expenditure, and I want to add only a word or two about the cheap money policy. I understand the temptation to which the right hon. Gentleman the Chancellor has yielded. Here, for the first time in British history, is a Chancellor, owner and master of the Bank of England, inheritor of Lord Keynes' monetary discoveries, and able to practise the new technique behind the rampart of the most efficient exchange control in the world. No wonder this particular Chan-
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    cellor fancied himself as the boss of a concentration camp of investors. How he must have chortled to think that these investors, unable to escape the cage of sterling, would have to- accept the domestic rate of interest he was pleased to offer. It all looked so easy and so enjoyable being cock of the gilt-edged market.
    But the right hon. Gentleman forgot something. He forgot that a great many of these investors can still choose to hold cash rather than Government securities, and they can choose to invest the proceeds of Government securities which they no longer wish to hold in other securities and in other goods. That, in fact, is what has been happening. The more blatant pressure he had to use to lower the rate of interest, the more the preference for liquidity and for other forms of investments grew. The Committee will be aware that the methods employed to persuade holders of Government securities to accept lower yields have increasingly been the methods of the racecourse and the bucket shop. Long-term investors have been deliberately turned into short-term speculators. The Chancellor has been the chief tipster on the Stock Exchange He has incited Tom, Dick and Harry to join him on the merry-go-round of rising capital values. He has out-manoeuvred the widow and the trustee by subscribing to his own issues. We do not know what proportion of debt is now held by Government Departments.
    To this stock jobbery the final result is not in doubt. The British investing public the most discriminating and experienced in the world, and when a Chancellor of the Exchequer broadcasts to all and sundry that gilt-edged securities are going to be as speculative as mining shares, the public is not slow to take the hint. They realise that a great game is on between themselves and the Treasury. But what the right hon. Gentleman has not realised is that in the end the public must win this game, for when they choose, they can stay out of the market, whereas all Chancellors are in it up to the neck now and forever. It is hard to measure or exaggerate the harm which has been done by the cheap money policy, coupled with high rates of taxation, to the good character of the investing public.
    Hon. Members on this side of the Committee observe that the enormous powers

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    of the Treasury have been used for the wrong purpose. These great new powers—and they are enormous since the discoveries in monetary technique—might have been used, and would have been taxed to the full, in keeping the value of the £ steady. That was the primary objective. Wise monetary action could have achieved this great advantage, and as a result the controls and restrictions could have been limited to genuine shortages of supplies. But what do we find? We find that the Socialist Chancellor has mobilised these great powers for the secondary objective of making scoops in the gilt-edged market, and the nation has had to pay a price not yet to be reckoned for his fun and games. Controls and restrictions have had to be multiplied and increased in severity, as every hon. Member knows, simply in order to keep inflation in check. Cheap money is a good thing, for the reasons which the right hon. Gentleman gave yesterday—all of us on this side of the Committee agree with that—but no political doctrine demanded that this policy should be pursued at so disastrous a rate and in so demoralising a way. The harm can never be undone, but even at this late hour we ought to have a firm assurance that no more new money will be created to enable the Chancellor of the Exchequer to play another round in the gilt-edged game. If we do not get that assurance, it will not be possible for the Government to persuade industry that the controls and restrictions which now hamper recovery can ever be removed.
    I said in the House some weeks ago that planning for increased production is not possible against a background of inflation. I know I am right. No Government of whatever party could organise the scarce resources of a country with a view to abundance if all the time they were under the threat that unless everything is tightly controlled, the level of wages and prices will get out of hand. It follows that we shall not be able to prepare for the day when the loans run out unless the extravagance and caprice of this Chancellor are replaced by some more prudent, sensible finance, designed not to cause a great deflation in prices—I agree entirely with what my right hon. Friend the Member for the Scottish Universities said on that matter—but designed to bring stability into our monetary affairs. That is a prerequisite of recovery.
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    I can now return to the main question of what will happen when the loans run out. When there are no dollars except those which we can earn with our own exports, who will then take sterling and add it to his balance in London? On this point I wish to put an important question to the Government. In the period immediately following the exhaustion of the American loan, is there any prospect whatever that we can secure a volume of imports from soft currency sources which will enable us to maintain anything like our present rations, or anything like our present level of employment? Is it a fact that His Majesty's Government have already considered this matter and, rather than face the crushing cut in food and raw materials which they see coming, are going to ask America for further assistance? I press that point. Have the Government made up their minds about the import breakdown in a couple of years' time, and have they not also made up their minds to ask America for another loan?
    We must have an answer on this point, because no Government have the right to keep the people in the dark about such momentous issues. Let them consider the time-table. The sands are running out. Even if they have the courage to tell us the whole truth now, how few months remain before we must either accept another American loan—whatever the terms may be—or find ourselves, without any adequate preparation, forced to endure the rigours of a siege economy. If Ministers remain silent—and I say this in all seriousness—they will be denying the British people the time and the opportunity to save themselves, and for that they will never be forgiven.
    In conclusion, everyone of us has a duty to do all that he can to put our industry and finances on a sound basis before it is too late. Even if our eyes were opened and our hearts were stirred now, in April, 1947, we have scarcely time left to prepare for this, the greatest crisis in our economic history. I think the Committee know quite well what are the prerequisites of recovery: stable costs and prices, maximum supplies and wise use of scarce materials, efficient administration of Government and a general willingness to work hard. All these things are lacking today. Every single one of those four requisites is lacking today, and I would add that something more is required than economic and financial

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    remedies for recovery. We have to find a political and moral basis upon which the great majority of the people of this country can come together and work out their own and their country's salvation. The Government make no attempt to find such a basis. They act as if they wanted the country to remain divided. One moment they threaten, and the next they flatter.
    Free and intelligent men and women will not work hard for unconvincing flatterers, inefficient administrators and vindictive politicians. In all walks of life those men and women who are capable of leading our recovery are those who respect the truth and who respond when their own best efforts are not affronted and wasted by unnecessary controls and sectional party politics. I do not care who they are, labourers, foremen, managers, farmers or professional men and women, they all now want two things: they want an overall plan which measures up to our problem, and they want elbow room to do their individual best to carry out that plan. They see that the present Government, so long as they a-e tied to these narrow Socialist doctrines, cannot give the national lead for which they are looking. The sands are running out, and grave events will soon dictate enormous changes.
    8.26 p.m.
    Mr. Gallacher: Hon Members opposite show what might be called an arrogant presumption that has become second nature to them, though they are absolutely unconscious of it. The hon. Gentleman the Member for Chippenham (Mr. Eccles), talking about the Government and the gilt-edged market, says that if the Government treated the gilt-edged market like a gamble in mining shares, he would warn the Chancellor that the public would get the best of The public. What is he talking about when he is talking about the public?
    Mr. Eccles: Every holder of Savings Certificates.
    Mr. Gallacher: Is he talking about the miners? There are very large numbers of miners in this country, but they are not after the gilt-edged market There are very large numbers of engineers, transport workers, and agricultural workers, but they are not after the gilt-
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    edged market. What he is talking about is a small section of robbers who are continually watching for an opportunity of getting something for nothing
    Lieut.-Commander Gurney Braithwaite: Is the hon. Gentleman seriously describing all those members of the public who have bought Savings Certificates on the Chancellor's advice as robbers?
    Mr. Gallacher: There are very few of these; there may be an odd one here or there who keeps his eye open for what is called the big chance; there are very few who go in for that sort of thing. The public the hon. Member was talking about is a particularly well-known and recognised type in this country, and the sooner we get rid of that "public" the better it will be for the country.
    I listened to the Chancellor yesterday with very great interest and I thought, right throughout his speech, that we were going to have a fairly nice time, until in the last round we got a heavy Baksi body blow and learned that no longer could we afford to let our hopes vanish in smoke—it would be a rather costly way of getting rid of them. I was, however, very pleased the Chancellor made the concession on P.A.Y.E. It is a very valuable concession. I may mention that last week I had to write a short article for a weekly paper and I pointed out that, if the Chancellor would make a concession of this kind, it would be a splendid stimulus to the worker in the drive for production. I am very pleased that the Chancellor of the Exchequer made that concession. I was particularly interested in his reference to a profits tax. When one listens to Members opposite, one would think that the capitalists of this country were lying against the workhouse door. The Chancellor said:
    "I cannot pretend to be satisfied with the large increases in distributed profits and the higher dividends which have been paid out in so very many cases in the last 12 months. Too much, in my judgment, has been distributed, and too little ploughed back into the business."—[OFFICIAL REPORT, 15th April, 1947: Vol. 436, c. 84.]
    That is always the case. It was the case in the mining industry, and that is why we are so short of coal at the present time. The money is always taken out and too little ploughed back, and by the time bankruptcy has been reached the nation has to take over and try to make

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    good the neglect. It applies again in the case of the other industries. The Chancellor has made a somewhat timid effort to face up to the situation. Why does he not face up to this question resolutely and reintroduce the Profits Tax which Mr. Chamberlain introduced in 1937? That was a real profits tax, a very effective profit tax, and one which would have had the most beneficial results for the people of the country. The City of London and the Press, ably supported by the hon. Member for East Aberdeen (Mr. Boothby), demanded that it be withdrawn. They forced the then Chancellor of the Exchequer to withdraw one of the finest forms of taxation ever introduced into this House.
    Mr. Boothby: Since the hon. Member has made reference to me, I would point out that that tax fell with the utmost severity on all developing and expanding markets, and that is why we opposed it and got it withdrawn.
    Mr. Gallacher: I would be more prepared to accept what the City of London and the financial Press said, that the tax was a tax that was going to strike at the stability of the Stock Exchange and the capitalist system. Of course, it was going to strike at the capitalist system, and I wish the Chancellor of the Exchequer would reintroduce it for that reason. I am certain there is no Member opposite who would be prepared to get up and support me in seeking to get the tax reintroduced. It is a tax which would prepare the way for the complete elimination of the capitalists.
    I wish to say a few words about the Tobacco Duty. It will have a very bad effect in many parts of the country. These bad effects will have to be overcome, because it is quite obvious the tax is going to go through. When the Chancellor of the Exchequer was dealing with this tax, I asked about the old folk. I wrote to the Chancellor of the Exchequer a couple of weeks ago whilst he was preparing his Budget, and I drew attention to the very great difficulties of the old folk. The only pleasure many of them have is a pipe of tobacco now and again, and I pointed out how difficult it was for them to meet the heavy cost of 2S. 4½d. for tobacco. Now the old folk have to meet this increase. This is a form of rationing of a very bad character; it pre-
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    vents the poorest and most needy from getting tobacco, while leaving the wealthy still in a position to get what tobacco they require—
    Lieut.-Colonel Sir Thomas Moore: Class distinction of the worst kind.
    Mr. Gallacher: I understand what the Chancellor is getting at, and I agree with him, but I would rather he had adopted some other form of cutting down imports of tobacco. But the fact remains that he is on a sound wicket when he discusses the question of cutting down the heavy imports of tobacco at the present time. I would, however, like some consideration to be given to the old folk in this matter.
    There is another matter to which I must refer. There has been much talk in this House, when the Army Estimates have been discussed, about waste in the Army. It has often been said that this question of waste has been exaggerated. But the Chancellor yesterday, in talking about the great "clawing back," said that his officials had been very active and assiduous in the chase. He said that as a result of their activity they were drawing back, from quartermasters and others, some £120 million. If they had not been so active and assiduous there would have been a big margin of waste. It seems to me that very much greater care will have to be given to the finances of the Armed Forces. While I agree on the need for cutting down imports of tobacco, it is not imports of tobacco that are running away with the Loan. It is military commitments.
    The serious matter I want to talk about is the reference made by the Chancellor yesterday to our external position. This has been dealt with here from various angles, particularly by the hon. Member for Chippenham who, dealing with the gap between imports and exports, said that it was very much greater than what it was said to be by the Chancellor. This is an all important question in relation to keeping our own house in order. The right hon. Gentleman the Leader of the Opposition, in his notorious Fulton speech, suggested that we should line up as closely as we could with the United States of America. Some people said that he was actually proposing that we should become the 49th State. I will not put it that way at the moment but will

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    say that he advocated that we should line up as closely as possible with America. It is often said that we speak the same language as America. That is a nice soporific that keeps us asleep when we should be active, wide awake. There was never anything so untrue in relation to the serious matters that affect the welfare of this country, as the statement that we speak the same language as America, or that America speaks the same language as we. The proposition of the right hon. Gentleman means complete and irretrievable disaster for this country. I will prove it. When the Leader of the Opposition made that speech, Members of this House did not go about yelling that the Leader of the Opposition loved America and had no love for England, because they understood—those who gave it any thought—that he wanted to line up with America because it was a sure way to save his own class, if it could be saved, without regard to what happened to the mass of the people of this country.
    Sir William Darling: May I ask, Major Milner, what this has to do with the Budget Resolutions?
    The Chairman: It is certainly of doubtful relevancy.
    Sir W. Darling: The hon. Member for Orpington (Sir W. Smithers) was made to resume his seat because he made reference to a very similar subject.
    Mr. Gallacher: I am leading up to the all-important question of imports and exports, and I want to bring in the question of Russia. When I mention Russia, it is immediately suggested that I have a very great love for Russia, and no regard for my own people. I have a very great regard for my own people. It is because I have regard for them that I am so concerned that we should be lined up with Russia—just as the Leader of the Opposition wants to save his own class by lining up with America. I want to make one or two points, particularly with reference to the hon. Member for East Aberdeen who is so anxious to make running comments. I would ask the Chancellor of the Exchequer if there is any future whatever for the production of this country in the American market.
    Mr. Boothby: Yes
    Mr. Gallacher: I ask another question. Is it the case that America, with tremendous industrial potential, and with its enormous and powerful reserves, is trying—and in many cases is succeeding—to drive us out of the South American market, the Dominion market, the Indian market, and other markets of the world? America speaks in the language of the dollar, and it is the dollar that is destroying this country.
    Mr. Spence: Is not the hon. Gentleman aware that there is a big demand in America for things which we make in this country, and which America cannot make and will never be able to make?
    Mr. Boothby: Whisky for one.
    Mr. Gallacher: The Chancellor of the Exchequer, in his speech yesterday, said that the total imports which America takes from us are no more than the tobacco we obtain from America. Is that any hope for the future, for the industry of this country, and for the working class of this country?
    Mr. Spence: The hon. Gentleman has said that we only export to America what we take from America in tobacco. That is under present conditions. If our industry were allowed to develop, the figure would rise to its prewar level.
    Mr. Gallacher: The Chancellor said yesterday that our total exports of all kinds of goods to America amount to no more than our imports of American tobacco. There is no future for British industry in the American market. In America at the present time they are discussing in the financial publications the big opportunities which now exist for the dollar in India, where the influence of Britain has fallen as the result of recent developments and where the situation presents a great opportunity for American finance and American traders. It does not matter where we turn we have that situation, and the Chancellor has told us the position we are in. Hon. Members should try to understand what the Chancellor said. He pointed out that we have to obtain dollars to pay America and that the hard currency countries take little or nothing from us so that we are dependent on the non-dollar countries. They, however, are so poor and have been left in such a plight by the Germans and Japanese that they are almost incapable of buying the goods which we are so anxious to sell.

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    It is a difficult problem. There is no market in the hard currency countries which can promise employment or a prosperous future for the workers of this country. Our only hope is the non-dollar countries. That is what the Chancellor said, and it is clear to everybody. Let me take the Soviet Union. I ask anyone, "Is there a future for British manufactured goods in the Soviet Union—a continual field for the development and maintenance of British exports and British manufactured goods?" Of course there is. The Americans, we are told, are our friends, but it is America that is destroying us.
    Sir T. Moore: Would the hon. Gentleman emphasise that point a little more?
    Mr. Gallacher: America is destroying this country. Is there a market for our goods in the Soviet Union? Of course, there is a continual market. Is the Soviet Union trying to cut us out in the markets of the world? No, because all the products she produces she requires for her own reconstruction. The same applies to Czechoslovakia, the new Poland, Yugoslavia and other countries. But in order to ensure that a market is developed and maintained we have to arrange that our trade relations with these countries are carried on through a process of barter agreements. It is in order to prevent that that America demands that all world trade shall be carried out on the basis of recognised world market prices. There is no possible hope for this country under such conditions.
    If this country faces up to the position which confronts it—the necessity of importing food and the need to export goods in order to be able to meet the commitments that arise from those imports—that brings us right up to the necessity of dealing with the countries which can take our exports and which can make trade agreements with us so as to provide continuous employment and the possibility of a prosperous future for the people of this country.' I say without the slightest hesitation that the line that has been taken of friendship with America—when the American monopoly capitalists are striving by every possible means to use the dollar for the destruction of sterling and, thereby, for the destruction of the economy of this country—instead of developing trade relations with the new democracies of Europe, will lead to disaster for this
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    country. I appeal to the Chancellor and to the Government to take a new and different view of trade relations with the countries of Europe. Let us, while we build up friendship with the American people—it should always be friendship with the American people, not with the American Tories—foster trade agreements with the new democracies in Europe, and by that method we shall bring prosperity to Europe, which will be a sure guarantee of prosperity in this country.
    8.52 p.m.
    Mr. Boothby: The hon. Member for West Fife (Mr. Gallacher) said he was very keen on the subject of Scotland. So am I. I would say this with regard to America—that if the Government had not closed every distillery in Scotland, we should be exporting Scotch whisky to America today, and bringing in dollars. Further, I would ask why can the hon. Member for West Fife not get his pals in Moscow to buy herrings from Scotland? They have refused to do it ever since 1925, though they could perfectly well have afforded to do so.
    With regard to the Budget, I only want to say that I think it is largely fictitious, and wholly dull. I do not blame the Chancellor for the fact that it is fictitious, because he has not the foggiest idea where he is. He does not know whether industry is going to run on a 40, 50, 60, 70 or 80 per cent. basis during the coming year. How could he? The Chancellor of the Exchequer can no more plan either revenue or expenditure or balance his Budget than any individual industrialist can plan. None of them knows where he will be and what he will get in the way of fuel, labour or raw materials
    I agree with all that has been said from both sides of the Committee—but more from this side than from that—on the subject of expenditure. I do not know whether it is the intention of the Government to continue the current expenditure of this country at over £3,000 million a year, but if that is the intention it is a grim outlook for this country. Various hon. Members opposite have asked us in what direction we think that expenditure is grossly excessive. I will mention three, and three only. I think there should be a reduction in defence expenditure. If the Leader of the Opposition could get busy on the Defence Estimates with his

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    red pencil, as he suggested to us a few weeks ago, I would guarantee that he would prune them very sharply. Secondly, we could reduce expenditure if we abolished some of these petty controls at the lower levels, and a vast number of the impudent little girls with pencils over their ears who administer them, who ask us impertinent questions, and tell us what to do. If we abolished much of this vast and unnecessary bureaucracy, we could save a lot. Thirdly, there is, of course, the question of food subsidies; and on this we really must press the Chancellor of the Exchequer and the Government to be a little more candid with the House and with the country.
    The right hon. Gentleman has, quite rightly, decided on a revised cost-of-living index. I agree that the present one is hopelessly out of date. On that the Chancellor is to be congratulated. But what is he going to do? Is he going to try to use this necessary revision to cut down the fantastic expenditure of £425 million, which conceals from the public of this country the real price of food. I was, at the Ministry of Food when we first granted subsidies of £50 million a year. We thought that that was a bold and daring step in, 1940. I still think that milk ought to be subsidised up to the present limit, because it is vital from the nutritive point of view. But I think the Chancellor of the Exchequer should aim at getting these swollen subsidies reduced at every point at which they are not conferring direct benefits. At present, I think that a great deal of these subsidies is a waste of expenditure which should be stopped. I do not see any other way of getting a cut in the standard rate of Income Tax; and a cut in the standard rate of Income Tax is the only real incentive to the people of this country that now remains. In one respect the Chancellor has accepted my advice. He has done what I suggested last year, and restored the earned income allowance to the prewar level. But a cut in the standard rate is the surest way of giving the maximum incentive to industry over the whole field.
    I want now to say one word upon the question of inflation and deflation, which the Chancellor of the Exchequer dealt with at some length. On the subject of cheap money I have nothing to add to what 'he hon. Member for Chippenham
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    (Mr. Eccles) so well said; but on inflation and deflation I would say to the Chancellor that he erected a bogy-man yesterday in order to tilt at it for the benefit and amusement of his own supporters. We are no longer tied to an automatic gold standard, and the Chancellor wields today a far greater power than any previous Chancellor in the history of this country. He ought, in my opinion, to have that power, provided that he uses it well. He should regard himself in relation to the question of inflation or deflation—they are words which can be very loosely and airily used—as in the position of Alice when she was standing in front of the mushroom with the caterpillar sitting on top of it. His business is to keep stability. We do not in fact want inflation or deflation. We know the bitter consequence of deflation between the two wars. Now there is a threat of inflation. The right hon. Gentleman has to nibble at one side of the mushroom or the other to preserve the balance, and keep the ship of State on an even keel.
    Do not let us have all this unnecessary talk about inflation or deflation. When Lord Keynes was putting forward what the hon. Member for Chippenham rightly described as his revolutionary monetary technique, he happened to be living during a period of glut, when commodity prices were low, when there was a lack of purchasing power, and when there was unemployment. A "reflationary" policy was then necessary. We are now living in a period of scarcity, when commodity prices are high, when there is excessive purchasing power, and when there is a shortage of man-power. The conditions are exactly the opposite of those which prevailed in the time of Lord Keynes, and the corollary of the Keynes policy of "reflation," as we may call it, is to conduct a policy, when the conditions are entirely opposite, that we might call "counter-inflation," in order to restore stability. That is all we are doing, and the Chancellor, except for rhetorical purposes, knows that perfectly well. This Budget is, in fact, an approach to a counter-inflationary policy.
    I would like to say a word on the vital question which has overshadowed the whole Debate, namely, that of the balance of payments, which is far more important than the balance of the Budget. That can be made to show pretty well anything we like at the present time, and it does

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    not much matter what it shows, as long as the tendency is against the present prevailing inflationary trend. We can no longer buy cheap in the markets of the world, and sell dear. It is just beginning to dawn on the people of this country that they have a sharply diminished purchasing power abroad. The consequence of that can only be either a greater economic self-sufficiency on the part of this country and the British Empire, or a lowering of the standard of life all round. That is the inevitable result of the diminution of purchasing power which we have suffered as a result of the war.
    I want to put one question to the Financial Secretary. It is an extremely important one. This question of sterling balances has been raised again. It really is vital. This £3,500 million of sterling balances hangs like a millstone round our necks. The Chancellor has not been candid with the Committee about this question. Over and over again, we have asked what is happening and what his policy is; and still more, to what extent we are now selling goods which are being paid for by drafts on the sterling balances in London. I want the Financial Secretary to tell us the truth. To what extent are we actually sending goods out of this country which are being paid for by drafts on the sterling balances? If we are doing so, we cannot afford it. These sterling balances should be completely blocked until a satisfactory settlement is arrived at: and that must be a drastic settlement, too. We were very glad to go to the rescue of all the countries to whom we owe so much; but there is no reason why we should now pay for admission to the battle-fields, for that in effect is what we are being asked to do. We sent our troops to many of these countries—take Egypt for example. It is a fine country, but they did not fight so desperately hard at Alamein as all that. These debts are quite unusual; they are exceptional; and, as somebody said earlier in the Debate, if the principle of Lend-Lease had applied all through, as it should have done, we should never have been in the plight we are in today. The truth is that we alone saved these countries in 1940 and 1941 from destruction, and we ought to take up a pretty tough attitude about those sterling balances. I hope we shall get some reassurance from the Government on that score.
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    On the whole, this Debate on the Chancellor's speech has turned out to be a pretty fierce condemnation of the arrangements made by His Majesty's Government, for which we on this side were in no way responsible, with regard to the loan agreement with the United States. So soon after all the glowing stories that we were told by the President of the Board of Trade and the Chancellor of the Exchequer, the Chancellor came down yesterday and told us of the steady increase in prices in the United States of America. He said:
    "They are not the same dollars today; their purchasing power has to that extent diminished."
    He really might have foreseen that. Then he went on:
    "I regret to state that the two new international institutions—the International Bank and the International Monetary Fund—from which much was hoped, have made a very slow start and have not yet effectively—formally perhaps, but not effectively—begun operations."
    Some of us could have told him that quite a long time ago; and indeed we did tell him at the time that the loan was passed. He also said:
    "If more of what we wanted was being produced outside the hard currency area this would go a long way to solving our difficulties." —[OFFICIAL REPORT, 15th April, 1947; Vol 436, c. 68–9.
    All I would say is that more could have been produced outside the hard currency area if we had taken energetic action two years ago—above all, within the British Empire. If the Government had accepted our advice—and this applies whether they had accepted the American loan or not—two years ago, or a year and a half ago, we would have done far more to increase food production inside this country. We could also have done far more to re-equip and modernise our basic industries than we have done. We could have imported less American tobacco, fewer American films. We should not have thrown away our economic bargaining power, so that we now have to go cap-in-hand to Washington to ask permission before we can even make a trade agreement with our own Dominions. Lastly, we should be getting tobacco and many other raw materials we require from our Colonies in Africa, rather than from the hard currency countries.
    I believe that, in the long run, the answer to the problem of the balance of

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    payments, which this country will have to face sooner or later, is a policy of greater national economic self-sufficiency over the whole field, and a determination to rest far more firmly than we have done in the past on our own Empire, our own Dominions, our own Crown Colonies. There sits the Colonial Secretary. I do not believe he would deny that we have put far too little faith in our Colonies in the past, and have spent far too little money in developing their limitless resources. If we would only have a really courageous policy of domestic and Imperial development, I believe that, more than anything else, would get us out of our difficulties over the next five years.
    9.4 p.m.
    Mr. Nigel Birch: My hon. Friend the Member for East Aberdeen (Mr. Boothby) spoke with a fire and enthusiasm which I can hardly hope to imitate. Connoisseurs of the Chancellor of the Exchequer's oratory tell me that his speech on the wireless last night was fully up to the level of vulgarity of his peroration in the Budget last year, and he ended up by saying:
    "Good night, and good luck to Woodcock.
    It did not turn out to be a very good omen for the British champion. The British champion, I understand, was knocked out by a "sucker's punch." I am told a "sucker's punch" is a left hook, and a left hook is precisely what the Chancellor has attempted to give the British people in his Budget. I think for the moment he has them "punch drunk," particularly on the subject of the surplus of £270 million. In this House one could tell from the tone of the Chancellor's speech that he did not expect to be taken seriously; before a semieducated audience, he could hardly hope to get away with it. He spoke of £292 million, of windfalls, his litter of rabbits, but, if one looks at the actual items, things like the working capital of the U.K.C.C., we see in fact that a large part of the credit side of the Budget consisted of capital items. I do not particularly mind him putting capital items on the credit side of the Budget, provided he puts the equivalent debit items on the debit side above the line. But, that is precisely what he has not done. On the debit side, but below the line, and therefore not counted in his Budget, he put £330 million for war damage, £60 million E.P.T. refund, and
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    £70 million postwar credits, a total of £460 million. The Financial Secretary is a very distinguished casuist and I have no doubt he will make a very good explanation, but what I would like to know is what makes the refund of a postwar credit more of a capital item than the surplus capital of the U.K.C.C.? It appears to me that precisely the opposite is the case.
    If we count both types of items above the line, we find there was a deficit of £190 million. That is not counting genuine capital items like £290 million for housing which are rightly below the line. There is no doubt that the Budget was unbalanced, and the Chancellor's attempt to appease the angry shade of Gladstone was not successful. The Chancellor likes plenty of varnish with his truth, but in this case he would have been wiser to give the unvarnished truth. In regard to tobacco, it would be better to tell the truth, for the increased tax is most unpopular. I hope that when the right hon. Gentleman replies, he will let us know whether the Chancellor of the Exchequer has the permission of his hon. Friend the Member for East Coventry (Mr. Crossman), in view of our experience the other day. Then we found that our whole strategy changed between Tuesday and Thursday, and it may be that our balance of payments will change likewise.
    The Chancellor's speech was curiously out of harmony with what we know to be the state of our country, the state of our country as put forward by the President of the Board of Trade in the economic Debate. There were a number of things he omitted to mention. For instance, the cost inflation, which has been going on this year at a steadily increasing rate—he said nothing about the maldistribution of labour, and nothing whatever about the general distortion of our economy, nor about the effect on our economy of having expenditure and taxation permanently at present levels. Secondly, I think a curious thing about his speech was the way he produced those two grisly skeletons, the cost of-living subsidies and our balance of payments, out of a box, took a look at them, and put them back again.
    The subsidies have been a problem for years, but all the Chancellor said was that we must pause and review the matter afresh. I do not know what that means. I suppose it means that he knows the position to be untenable, that prices will not

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    come down again, to the pegged level, that he does not know what to do about it, and that he is very much hoping that the new cost-of-living index will provide him with some sort of statistical alibi. I think that is what one could read into what he said. The balance of payments, as my hon. Friend the Member for Chippenham (Mr. Eccles) pointed out, is by far the most pressing, difficult and deadly problem we have to face. The Chancellor said:
    "Later on His Majesty's Government will inform the House of the conclusions they have reached on this issue."—[OFFICIAL REPORT, 15th April, 1947; Vol. 436, C. 70.]
    I do not know what those conclusions will be. All we can do is either to export more, import less or borrow some more money. All those things are extremely significant for this Budget, and the conclusion one must come to is either that the Chancellor means nothing at all by his statement or, it he does mean something, that the present set-up of the Budget is bogus.
    The Chancellor had very little room for manoeuvre in this Budget. I do not criticise a number of the things he has done but I would say this about the profits tax. The hon. Member for Chesterfield (Mr. Benson) in the last Budget Debate made a most eloquent speech against the Profits Tax. Unfortunately, he did not have the leisure in his speech this year, to repeat what he said then. The only thing I would say about that is that the Chancellor is putting up this tax at the same time as he admits that a great many people who are being charged it are this year suffering smacking
    losses. What he is really doing is ensure that people in industry lose both on the swings and the roundabouts. I do not think that in the end that will be a very wise thing to do.
    To turn to more general topics, to our general monetary and budgetary policy, the Chancellor of the Exchequer, in the economic Debate, made a fleeting appearance. It was a case of Hamlet without the Prince, or of the Prince only appearing in one of the more irrelevant scenes. I can well understand the Chancellor's motives but it was a pity, because economic policy cannot be discussed in isolation from monetary and budgetary policy. In their economic White Paper hon. Members opposite have rejected direction of labour, have rejected State fixing of wages and have rejected planning in detail. I entirely agree with them but
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    if those three things are rejected, what real controls are left? Only two that mean anything—our monetary policy and our budgetary policy. If those controls are used wrongly, and if the Chancellor gets the price mechanism working against him instead of for him, he will stultify all other Government plans, however good they may be in themselves. That is precisely what has happened. The Chancellor has not only an unbalanced Budget but an unbalanced economy. The Chancellor is the arch anti-planner. I believe, in deference to the hon. Member for West Fife (Mr. Gallacher), the Marxist term is "confusionist."
    I will deal first with monetary policy, on which my hon. Friend the Member for Chippenham spoke so well. The Chancellor did not invent it. The technique pursued now is exactly the same technique as has been pursued in the last 16 years. Long-term rates were lower under Goschen in the 90's. No one denies that when there is a debt of £24,000 million, interest rates have to be controlled. No one denies that it is a most potent method of Government control, and is one of the most important they possess. To put up the straw bogy that everyone on this side wants to raise interest rates to six per cent. is childish and not worth refuting. The criticism is that an attempt has been made to force down long-term interest rates from three to 2½ per cent., by issuing stock which no one wanted to buy, in a period when our resources were overstrained and we were suffering from under-employment.
    What the Chancellor of the Exchequer has been doing is to apply Lord Keynes' cure for low blood pressure to a case of high blood pressure. The results have been very remarkable. The Chancellor left out all the evils. He did not mention them at all. During the last nine months of 1946, bank deposits increased at an average monthly rate of £104 million compared with £36,500,000 average increase during the war period—nearly three times as much. During the last nine months of last year bank deposits increased by an amount which was equal to 40 per cent. of all bank deposits outstanding at the beginning of the war. The Chancellor of the Exchequer succeeded in producing the most rapid increase of credit in our history at a time of great inflationary pressure. I doubt if any

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    Chancellor of the Exchequer has ever been guilty of such gross folly.
    The result is inflated Stock Exchange prices, so that anyone living on capital is given a bonus to do it instead of incurring a penalty. The policy penalises thrift and puts increased pressure on all prices and controls. It weakens sterling in the international markets—it has done that to some tune—and lastly, the Government are trumping their own ace if and when the next trade depression comes. Perhaps that is the most important point.
    For what has this been done? The Chancellor gave a typical—one must not use the word "dishonest"—answer. Anyway he did not look the truth squarely in the face. When he was talking about savings in interest, he reckoned the figures as gross and not net. He did not take off Income Tax. One half per cent. on £1,000 million less tax at 9s. in the £ represents a saving of only £2,750,000. The Chancellor said our main hope of tax reduction rested on the cheap money policy. If that is true, our hopes are thin. I do not know whether hon. Gentlement opposite really believed what the Chancellor was saying. If they believed him they must have wondered very much why he did not reduce interest rates to 1 per cent. That would be much more sensible if economy in interest is the only criterion.
    The Chancellor described this as improving Britain's credit. That is grand nonsense and, as Dr. Johnson said, grand nonsense is insupportable. The test of whether your credit is good is whether anybody is willing to lend to you. Nobody is willing to lend to the Chancellor. That is why bank deposits have increased. That is the reason why small savings were only £330 million. Of that figure £159 million of the increase was in the Post Office Savings Bank which takes money for short periods, and pays 2 per cent. more than the market rate for it. Much of it is, in fact, not new money. Lastly, foreign Governments are increasingly unwilling to leave balances here, with the notable exception of General Franco.
    It is not public buying that has put prices up in the market. It is the Chancellor of the Exchequer who has been buying and who has forced the banks to buy. He has been taking enormous quantities of his own dirty linen. The
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    more stocks he creates as a result of nationalisation, the more he will have to buy. The Chancellor is like the small boy who was warned not to drink sea water. The small boy said, "Never mind, there is plenty more." So long as electric power can be maintained for the printing presses, there is "plenty more" money for the Chancellor with which to buy his stocks.
    The Whole effect is damaging to thrift. The Chancellor of the Exchequer is running a great campaign—and I see that Field Marshal Montgomery has been raked in now—to persuade everybody to be a rentier. At the same time he is crushing the life out of rentiers. There is to be no nonsense about euthanasia. The Chancellor will find that he will have to create more and more money in order to hold prices at this level. The time is past when hot air, at whatever pressure it may be emitted is enough.
    I turn now to the Budget. What is wrong is the size of it; it is out of all proportion to the national resources in real terms. That is masked for the moment by the fact that we are borrowing over £1 million a day from abroad and that last year we went in for de-stocking at a rate of £200 million approximately. The size of the Budget is the reason our economy is stumbling, before we have reached our real test—what will happen when the sellers' market ends. This great expenditure is a result of propaganda by hon. and right hon. Gentlemen opposite that the war was fought to make the world safe for Lord Beveridge.
    The consequences of the war were, first, a dislocation of our economy; secondly, that we became a debtor nation instead of a creditor nation; and, thirdly, that we came out of it with our people morally and spiritually exhausted In spite of that, we said that we must have shorter hours, higher wages, that we must make good all arrears of depreciation and re-equip industry, have 75 per cent. more exports, keep the cost of living steady, have a great housing programme, carry out all the planned social reforms, and at the same time improve the standard of living. I mention things like hours and wages, depreciation and re-equipment, because although they are not strictly budgetary items, they are the principal factors which the Chancellor ought to bear in mind when making his plans. We

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    want all these things at once. To expect all these things to happen at once is to expect another miracle of the loaves and fishes.
    I wish to ask the right hon. Gentleman the Chancellor two questions. First, does he really believe that the flow of domestic savings, plus net borrowing from abroad, can cover the Government's below-the-line expenditure, plus capital expenditure by industry, at any tolerable level? He has got to bear in mind that gross fixed capital formation last year was only two-thirds of prewar. He must also remember that private savings out of income fell from 15 per cent. in 1945 to 8 per cent. in 1946. In fact, what does he really think about the £1,000 million gap? We heard much about it in the economic Debate, but the Chancellor has not deigned to mention it in this Debate. That gap was calculated before the fuel crisis. What does the right hon. Gentleman think about it?
    The second question is, Does the Chancellor really think that national and local government expenditure, which is now running at something just over 50 per cent. of national income, can be sustained without the cost of inflation continuing? These are questions which the Chancellor and his friends have never faced. They never talk about them. One cannot help wondering whether any serious effort has been made to get the shape of the national income right—which is the main task of the Chancellor—and whether any rational and conscious choice between priorities is being made. I should have thought that a rational and conscious choice between priorities was the essence of democratic planning. Any statement from this side of the Committee that one cannot have one's cake and eat it is always pleasing to the Scribes and Pharisees opposite, and the Chancellor took a typical spring cruise in the s.s. "Whited Sepulchre" yesterday when talking about deflation. Of course, these things are very unpopular. Everybody likes to think he can get something for nothing, but I do not believe that the real consequences have ever been put—certainly they have not been put by hon. Gentlemen opposite—to the people of this country; and the consequences of not getting the national income into right shape are very serious—not only more queuing, more rationing, more scrounging, more tax-dodging, not only the fact that such a very large part of the new Britain
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    will be under the counter—not only these things, serious as they are, but steadily rising prices which the Government cannot control; they cannot control cost inflation, wages, or raw material prices. Up they go, and that is bound to happen on the Government's policy. It means that and it also means a decline in our diplomatic power, it means inefficient production leading to unemployment, and lastly it means what so many of my hon. Friends have pointed out, a coming foreign exchange crisis—a crisis in our balance of payments. It is no good being optimistic about that. The only way we shall get out of it on present policy, going on as hon. Gentlemen opposite are now going on, will be by going on our knees to America for another loan. That is what they will have to do, go back to the country so liberally abused by hon. Gentlemen opposite. The hon. Member for West Fife (Mr. Gallacher) may talk about not selling herrings to Russia, but he will not get any credit out of Russia, he cannot buy wheat from Russia. The only place he can get the things we can live on is the hard currency countries, and that is what the Government will have to do. I believe that if these points were put to the British people, and they realised the consequence of this free and easy nonsense, the people would say, "I did not vote for this."
    It is easy enough to see the rocks ahead, but I see no reason whatever why anybody on this side of the Committee at any rate should have any ultimate lack of faith in the future of our country, because our problems are far from insoluble. If only those in power would give up hit-and-miss methods, if they would show a little foresight and be willing to make some adjustment between means and ends—call it planning if the name smells sweeter—if they would realise that the immediate essential is to catch the train—then there would be hope, and much suffering could be avoided. What the country needs is
    "A daring pilot in extremity,
    Pleased with the danger when the waves went high."
    What it has got, is a nigger minstrel.
    9.28 p.m.
    The Financial Secretary to the Treasury (Mr. Glenvil Hall): Hon. Members on all sides of the Committee will

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    agree with me that we have just listened to a very humorous speech, though how much it amounted to in real solid criticism is perhaps another matter. Although later on in the Debate, if I have time, I shall do my best to answer the points which the hon. Gentleman put to me, I must say, so far as his speech was concerned, that, although I thoroughly enjoyed it and congratulate the hon. Gentleman on its form and lightness, I did not find it very helpful to the country at the moment, nor very enlightening in regard to the Budget or the financial situation. The reply I am making now is merely an interim reply to some of the questions that have been put mainly from the other side of the Committee. My right hon. Friend the Chancellor of the Exchequer hopes to answer the Debate tomorrow night; and he will sweep up, in his own inimitable way, the outstanding queries that may be left to which hon. and right hon. Gentlemen might still desire an answer.
    The speech of the right hon. Gentleman the Member for the Scottish Universities (Sir J. Anderson) contained a very large number of criticisms, but all of them—I do not think I do him any injustice— were, without exception, completely destructive. The right hon. Gentleman had no constructive criticisms or suggestions to offer. That is a pity, because the right hon. Gentleman has, very properly, a great reputation in this field. He has been a Chancellor of the Exchequer himself, and a very distinguished one. He has spent many years inside the financial machine. He was at the Board of Inland Revenue. It would have been interesting and profitable if one who knows so much had been willing to place his knowledge at the disposal of the Committee at this juncture in our history. He did not do so, and I for one regret it. As a matter of fact, if I may say so without offence, having watched the right hon. Gentleman for some years, I have come to the conclusion that although he has, up to now, described himself as "an Independent," he is moving more and more, quite definitely and openly, towards the ranks of the party opposite. There is no reason whatever why he should not do that, but he was more partisan than on any previous occasion I remember in the speech he made.
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    He said that the figure of £292 million, which is entered as miscellaneous receipts in the accounts of this year, could not be regarded as genuine revenue. I can assure him there is nothing fictitious about that sum, and that it is genuine in that it does exist. It is true that much of it is non-recurring, but my right hon. Friend was quite frank yesterday and indicated that to the Committee. Many arguments from Members opposite have been based on the assumption that this money is, in some way, a bookkeeping entry. It is nothing of the kind. These are balances which have been recovered and brought in, and there is nothing fictitious about them in any way. The right hon. Gentleman the Member for Warwick and Leamington (Mr. Eden), speaking of the same miscellaneous receipts yesterday, said that there was evidence of some pretty slack accounting here and there. By that he meant that the fact that these receipts had been gathered together in 1947, when many of them applied to the war years, was evidence that the Treasury had in some way been slack. I have only to remind the Committee of the fact that after a war of the magnitude of the one through which this country and others have passed, you are bound to have some time-lag in connection with balances of this kind. For one thing, it takes time to bring the troops home. It is not the case there has been slackness on the part of the Treasury or any Government Department in not having retrieved these balances earlier, or in not having brought them into the accounts before the present year.
    Although it is partly the case that this £292 million is a non-recurring item, we must remember that there are items on the other side of the account which are also terminal and non-recurring. When Members opposite harp on the fact that we are getting this money once and for all they should, in common fairness, remember that on the other side we have large items. [An HON. MEMBER: "Above the line?"] Yes, payments to troops coming out of the Forces on release leave, and gratuities. I agree that these terminal items form a diminishing amount but, nevertheless, there are terminal payments which are non-recurring on the expenditure side, just as there are receipts, to which so much reference has been made today. on the Revenue side.
    Mr. Bracken: Can the right hon. Gentleman tell us how much they amount to
    Mr. Glenvil Hall: I have not got the figure now, and although I do not wish to pledge my right hon. Friend I will ask him if he will mention this matter tomorrow in reply to the right hon. Gentleman opposite, who, I understand, intends to speak. It is a relatively large sum, and we must take it into account. I want to point out—because I think it is in the Government's favour—that although we are budgeting for, and will get, as a result of this so-called windfall, a Budget surplus, that will be used, all being well, for debt reduction. My right hon. Friend, as the Committee knows, has made tax reliefs, but he has also put on other taxes to take their place, and make up the gap there would otherwise be. Although he has these miscellaneous receipts surplus, they will, we hope, be used, not as tax relief, but for the reduction of debt. I say that guardedly and advisedly, but that is our expectation and our hope. One never knows what may happen during the coming year. [HON. MEMBERS: "Hear, hear."] We never do. But, as we have at the Treasury a Chancellor—
    Mr. Birch: Who never knows anything.
    Mr. Glenvil Hall: —who knows his job, we may hope, and have every expectation, that the year will end well.
    The right hon. and learned Member for Montgomery (Mr. C. Davies) suggested that this surplus of £292 million, or, at any rate, £270 million of it, was "phoney." His argument, if I understood him aright, was that it had to be set off against the items which appeared below the line, and that the difference meant that we were in the end running a deficit, and not a surplus. [HON. MEMBERS: "No."] If I have done him an injury there I apologise, but that was the argument used by some Members opposite during the Debate. I think that the hon. Member for Flint (Mr. Birch) dealt with these items of expenditure which are below the line and, in particular, referred to the postwar credits which are to be paid to the old folk, those over 65 in the case of men, and 60 in the case of women, for the last two years that postwar credits ran. The hon. Member asked me, very pertinently, how we could construe those as items which were of the kind that could
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    be borrowed. I think that what tie said had a great deal of truth in it. It is true that we are borrowing the whole of this £460 million, and, in our view, the money will be very properly borrowed, because it is money which is to be used, or the majority of it, in the creation of capital assets.
    Mr. Bracken: What about war damage?
    Mr. Glenvil Hall: Quite a lot of it is to be turned into assets of a capital kind as payment for damage created by the war; and just as, during the war, we thought it proper to borrow money for the prosecution of the war, we can say that, in times like this, it is not unfair to borrow a certain amount of money to assist us to reimburse those who suffered in the war by losing furniture, etc. Certainly E.P.T. refunds can be looked upon as items of a capital nature. Therefore, we have done what the Party opposite would probably have done if they had been in our place. They would have considered practically all these items as below the line as a good subject for borrowing. They are for rebuilding and the re-equipment of businesses of one kind and another, and most of it can quite definitely he said to be money for rehabilitation and re-equipment.
    The right hon. Gentleman the Member for the Scottish Universities said that it was no part of the Chancellor's duty to prod Departments to spend. That may have been a mere aside on his part, but if he holds that view, and other right hon. Members and hon. Members opposite hold that view, and believe that it is a cardinal virtue of the Chancellor never to prod or never to want to see a Department spend, I say quite frankly that this Government does not hold that view at all. First of all, when my right hon. Friend used that phrase, he was talking of the development areas, and he pointed out that there might be pockets of unemployment where essential factories should go up, so that the manpower available could be used. He went on to say that the President of the Board of Trade, with his help, was doing what he could to prod those responsible. For the right hon. Gentleman the Member for the Scottish Universities to take exception to that, and to consider that it was never a Chancellor's duty to do it, even in a case of that kind struck me as

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    peculiar, and, so far as this party is concerned, we are not ashamed of the Chancellor for doing it; we applaud it. It is what the money is to be spent on that matters.
    Mr. Bracken: The Chancellor's own constituency?
    Mr. Glenvil Hall: It is not only the Chancellor's constituency; it is quite a number of constituencies. It has to be somebody's constituency, and the fact is, although I believe that the Chancellor sits for an area which is partly a development area, it is only one of a very large number, and it became a development area long before the Chancellor had any means of influencing what should go there or should not go there, and whether it should or should not become a development area. I think that these innuendoes are not up to the usual high standard of Debate.
    The right hon. Gentleman the Member for the Scottish Universities, if I may finish the questions which he put to me before I pass on, made reference to Resolution No. 15, which refers to benefits for directors and employees. He very pertinently and properly asked a question about the wide terms in which this Resolution is drawn, and asked me to give some explanation. The Resolution provides for the inclusion of a Clause in the Finance Bill on which we can discuss the matter at greater length. The Clause will be designed to prevent evasion of Income Tax under certain circumstances. I do not want to go into any greater detail now, because a period must elapse before the necessary legislation can be passed, and we do not want to put any ideas into people's heads concerning evasion of tax. I can say this, however, that it has come to the knowledge of the Inland Revenue that there is a certain amount of tax evasion in certain directions which is at present legal, and that we propose, with the consent of the House, to stop that gap if we can. It has been necessary to draw this Resolution as widely as we have drawn it in order to cover the various types of cases, some dealing with Income Tax and some dealing with capital. I think that the Committee would like to have the assurance that the legislation we wish to bring in, and which will be incorporated in the Finance Bill, will not, 'in any way, alter the existing law affecting
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    the payment of benefit for lodging, board, or necessary business expenses which certain people are able legitimately to draw under Rule g of Schedule E of the 1918 Act.
    Mr. Oliver Stanley: Can the right hon. Gentleman go further with the assurance in regard to a matter which is worrying some of my hon. Friends very much? Will he give us an assurance that this legislation will not make illegal a common practice in the Coal Board and other boards, of paying salary plus so much for expenses?
    Mr. Glenvil Hall: I do not want to say anything now that would cause any of the friends of the right hon. Gentleman the Member for West Bristol (Mr. Stanley) or the right hon. Gentleman the Member for Bournemouth (Mr. Bracken) to pass any sleepless nights. I hold no brief, of course, for the Coal Board. It is not my job to defend it. The Coal Board has, in the Minister of Fuel and Power, a person more than able to hold his own when the Coal Board is under discussion in this House. It would be quite out of Order for me to attempt to answer the point put by the right hon. Gentleman. All I will say is that expenses under Rule 9, which have existed for a long while, and which are definitely wholly and exclusively incurred in connection with an occupation, will be allowed by the Revenue. I will add this. If we are going to make this a party matter and if these expenses were really abolished the squeal would come from the friends of Members on the other side of the Committee and not from the friends of Members on this side of the Committee.
    Mr. Bracken: And from the Coat Board.
    Mr. Glenvil Hall: As I said when I began, it was a great pity that the right hon. Gentleman the Member for the Scottish Universities who opened the Debate this afternoon did not give us some idea as to what he would do—
    Mr. Henry Strauss: He did.
    Mr. Glenvil Hall: Oh, no. I listened very carefully to what he said, and took fairly full notes. I will not repeat them to the Committee, but I hope that those who doubt me will read his speech tomorrow. They will find that his criticisms

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    were almost completely destructive. He said again today what he said in the Budget Debate last year—namely, that if he had been in charge he would have reduced public expenditure. But he did not then, and he did not this afternoon, tell us what we should have liked to have heard. We, too, would like to reduce public expenditure. [Interruption.] We do not want to increase public expenditure for the sake of increasing it, nor to impose taxes for the sake of imposing them. If the right hon. Gentleman or any of his friends on that side of the Committee—and there will be an opportunity tomorrow for the right hon. Gentleman the Member for Bournemouth to take up this challenge—would give us any indication of where and what they would cut down in public expenditure we should be glad. Is it on the Defence Services? [HON. MEMBERS; "Yes."] Is it on the social services? [HON. MEMBERS: "Yes."] Is it on education, housing and old age pensions?
    Colonel Stoddart-Scott: Civil servants and food subsidies.
    Mr. Glenvil Hall: From the number of interruptions it is clear that the request I have made is going to bear fruit. The hon. Gentleman the Member for Harwich (Sir S. Holmes) asked me a number of questions, which I will answer because I think they are of general interest as well as of particular interest to him. He asked me whether the Capital Issues Committee were an independent body or worked under the instructions of my right hon. Friend the Chancellor of the Exchequer. They are an independent advisory body who make recommendations to the Treasury, under the terms of a memorandum of guidance which may be obtained from the Vote Office. I think my right hon. Friend knows it very well and certainly the right hon. Gentleman the Member for Bournemouth does. It is published as a White Paper and anyone can obtain it.
    That document lays down the general Government policy as to the priorities which are to be followed. That is the answer to the hon. Member's first question. Then he wanted to know why, when applications were made to the Capital Issues Committee, a number of Government Departments were always consulted. A number are not always
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    consulted, but it may be that the particular point which has been put to the Capital Issues Committee, or the demand which comes to them, is best dealt with by consulting more than one Department. Normally, however, the Board of Trade is consulted. If it is a question of a factory in a certain area for instance, the Board of Trade would be able to tell the Committee whether it would be worth while using the national resources to put that factory there and advancing the money. I can find no harm in that, and I think I can say without fear of contradiction that the Capital Issues Committee does work fairly quickly and that there is no undue delay in giving an answer to the questions that are put to it.
    The hon. Gentleman then asked me whether, when land is handed over to the State in payment of death duties, the full sum is paid to the Inland Revenue. He gave as an instance an estate where £75,000 was due in death duties and where land to the value of £50,000 was handed over to the National Land Fund. If I may use that example, the answer is that the executors would pay over £25,000 direct to the Inland Revenue as part of the death duties. The other £50,000 would come from the National Land Fund and would be paid by that body to the Inland Revenue, and therefore, the £75,000 would be made up. In other words, the Inland Revenue does not suffer; the nation gets its land and everybody fills the role allotted to him.
    Lieut.-Commander Braithwaite: Except the dead man.
    Mr. Glenvil Hall: The hon. Member for Orpington (Sir W. Smithers) made a speech which many of us found interesting if not very relevant to the matter under discussion, but before he was pulled up by the Temporary-Chairman he put one question which I should answer. He asked how much of the civil element of the Ministry of Supply expenditure is hidden in the figure of £1,698 million which hon. Members will find in the Financial Memorandum circulated yesterday. The answer is that out of a total expenditure of £135 million, the defence element is £100 million and the civil element, the one the hon. Member wanted—though I do not quite know why—is £35 million. We have had a very large number of very interesting speeches from both sides of the House—
    Mr. Boothby: Could the right hon. Gentleman say one word about sterling balances? That is very important.
    Mr. Glenvil Hall: I will; I was not going to forget that. I hate doing that, because we are all extremely fond of the hon. Member who sits for East Aberdeen (Mr. Boothby) and we would like, if we could, on all occasions to answer the queries that he puts; but I am sorry to say that I cannot do any more than refer him to what the Chancellor of the Exchequer said on this subject yesterday afternoon. What he said was very carefully phrased. [Laughter.] I see nothing funny in that.
    Mr. Bracken: Look at the Chancellor. He is smiling.
    Mr. Glenvil Hall: If hon. and right hon. Gentlemen opposite were equally eager to phrase their pronouncements so that they gave all the information that was possible in the shortest number of words, this House would get on with its Business very much quicker. All I can say to the hon. Gentleman is that the statement made by my right hon. Friend yesterday was as far as one can go at the present time. He indicated very clearly that he realises what the situation is and what is the view of the majority of people in this country on this matter. Hon. Members in all quarters of the House can rest assured that my right hon. Friend is not likely to make a bad bargain on behalf of this country so far as those sterling balances, and the debt due to this country by many of those who now hold these sterling balances—which we at any rate do not forget—are concerned.
    I would like to refer to the speech of the hon. Member for Smethwick (Mr. Gordon-Walker). Before I do that perhaps I may say what I began to say earlier. We have had a number of very interesting speeches, particularly from this side of the House. My hon. Friend the Member for Chesterfield (Mr. Benson) made what I thought was an extremely fine speech and one which it would do hon. Members on the other side of the House good to read. It would enlighten them on many of the matters upon which at the moment they seem to need guidance. My hon. Friend the Member for Buckingham (Mr. Crawley) also made an interesting speech.
    May I say a final word about the Tobacco Duty? These Debates are ex-
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    tremely interesting—[Laughter]. Hon. Members laugh—
    Hon. Members: The Chancellor is laughing.
    Mr. Glenvil Hall: Why should he not? He is sitting facing the Opposition. The increase in the Tobacco Duty is not, as my right hon. Friend was at pains to point out last night, designed to raise revenue. Its prime duty is not as a revenue-raiser but as a deterrent; and it is our patriotic duty, in whatever quarter of the House we sit, to point that out in season and out to all the people we meet.
    It being Ten o'Clock, the Chairman left the Chair to make his Report to the House.
    Committee report Progress; to sit again Tomorrow.

  CONTROL COMMISSION, GERMANY (STAFF)
  Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Snow.]
  10.1 p.m.
  Mr. William Wells: I wish to raise a certain number of questions regarding the selection and conditions of service of the British staff of the Control Commission in Germany. Before I reach those questions it will perhaps be desirable for me to outline the background against which they must be viewed, No hon. Member of this House, I am sure, would underestimate the greatness and the difficulty of the tasks which the staff of the Control Commission have been set. These tasks may be defined as to win the respect of the German people and to attract them to a peaceful and democratic way of life. The great demands, human and technical, which this task imposes cannot easily be overestimated. Quite clearly men who have to do work of this character must have the quality of leaders. They must be tactful, they must understand the character of the people with whom they have to deal, and they must earn their respect. They must, too, have technical competence in performing a great number of very difficult tasks in restoring the shattered economy of the defeated country, and in making life tolerable for its inhabitants

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  before they attempt to teach the lessons which our occupation is intended to do.
  The Government themselves have recognised the importance of these tasks and the importance of attracting to them the right type of men. Last summer a sub-committee of the Select Committee on Estimates, of which I have the honour to be a Member, went to Germany and investigated on the spot a number of points relating to administration there. I quote two paragraphs from its Report—Nos. 49 and 50—in which it said:
  "The quality of the staff is at least as important as their quantity, and the Control Commission are fortunate in having a number of capable and devoted men and women at present employed, but the quality of the staff ultimately depends, to a very large extent, on their conditions of service. The chief obstacle to the building up of the proper kind of staff seems to lie in the sense of security due to the short-term engagement offered.
  "Young, efficient men and women imbued with proper tradition of service and fired with the moral purpose required, cannot be obtained if their future is to be jeopardised by uncertainty as to their ultimate position. A decrease in number must also be balanced by a very high standard of quality."
  And the recommendations which the Committee ultimately made, in paragraph 59 of the Report were:
  "That the general policy of the Control Commission should be to reduce the number of their staff, whilst taking every possible step to increase their quality.
  "That, with the object of improving the quality of the staff, the following lines of action should be followed—(1) more careful selection; (2) the creation of a new branch of the public service, integrated as far as is practicable with the Civil Service, in order to offer better security of tenure;
  "That a survey of the Control Commission be made by the Treasury through their Organisation and Methods division."
  Speaking in the Debate on this Report on 29th July last year my hon. Friend the Chancellor of the Duchy said:
  "Obviously I have not time to deal with the recommendations made with regard to the staff of the Control Commission, but I would tell the House that we are in complete agreement with the conclusions reached by the select Committee."—[OFFICIAL REPORT, 29th July, 1946, Vol. 426, c. 641.]
  On that speech, I would ask the Chancellor three questions. First, what has been done towards the creation of a new branch of the public service? Second, has any survey been made by the Organisation and Methods division? Third, how is the present recruitment of the Control Commission Service organised? On pre-
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  vious occasions I have put down several Questions in the House about question No. 1, the creation of a new branch of the public service. The answers I have received have broadly amounted to this, that the position is very difficult because we do not know how many staff we have to recruit, and how long we can keep them. I wish to urge upon the Chancellor that the situation is of a kind that calls for urgent action. It cannot wait whilst nicely balanced minutes meander through the registries of Whitehall and St. James Square. Eight months have elapsed since the Committee published its Report, and I would like to quote from an article in the current issue of the Fortnightly," written by Dr. Friedmann, who has just been appointed to the Chair of Public Law at Melbourne, Australia, after being associated with the military government of Germany for nearly two years in a number of capacities, and finally as director of the Organisation Branch of the Economic Sub-Commission in the British Control Commission. Speaking of the genera] problems of the occupation he says:
  "For the first year of occupation the British alone seemed to have won the genuine respect of the Germans. They were, on the whole, reserved but humane and seemed essentially intent on keeping the rudiments of life going or restoring them. There was little corruption. The last year has brought a radical change; this is due to four factors."
  I need not deal with three of them, which are not relevant to the immediate question. Dr. Friedmann says:
  "There is however thirdly, an undoubted deterioration in the British personnel, both civil and military. This is hardly so at the top level; but the trained military government officer and the disciplined veteran soldier have been replaced by a mass of second and thirdrate business men, and by young troops whose first period of active service means barrack discipline in duty hours and absolute power off duty. Lastly, initiative and improvisation have been replaced by an incredibly complex bureaucratic system handled by a conglomeration of people inferior in quality and integrity to the trained Civil Service at home."
  I understand that those words have been echoed by an hon. Member opposite to whom I am sure my hon. Friend will pay great attention. I understand that the hon. Member for Orpington (Sir W. Smithers) has said that the black market is due to the staff of the Control Commission. I would not for a moment associate myself, little though my knowledge is in comparison with that of the hon. Member for

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  Orpington, with a statement of that kind. But I submit that there is a mass of evidence that the morale of the Control Commission is declining. Although I cannot pretend to assess for myself the value of that evidence, I suggest that remarks such as those of Dr. Friedmann require serious investigation and call for a serious answer.
  I fully recognise that it is extremely difficult to enter into engagements of a fixed period when one does not know how many people one needs or how long one needs them for, but it is perfectly clear that the control of Germany will go on for a long time, and it is also perfectly obvious that second and third-raters will do more harm than good there. Only first-rate men will do. Therefore, the obvious conclusion must be that we must limit the functions which the staff have to perform, and give good conditions of service and a promise of some employment on the termination of that service to those whom we retain. The control of Germany is a matter of paramount importance to Britain and to the world. Its failure would be an international disaster, and the work cannot be done except by a staff that is first-class in quality and in integrity of spirit. I hope that the Chancellor of the Duchy will be able to answer the questions I have put, and to reassure the House that urgent action will now be taken to carry out the recommendations which he accepted so many months ago.
  10.13 p.m.
  The Chancellor of the Duchy of Lancaster (Mr. John Hynd): I am glad that my hon. Friend began his remarks by recognising the greatness of the task that we are seeking to perform in Germany. In view of the fact that he was a Member of the Select Committee which visited Germany last year, and in view of the terms of the Report to which his name was attached, I was rather surprised at the terms of his remarks tonight in relation to the staff in the British zone. I would remind him that the Select Committee itself, in its Report, on page XVI, paragraph 47, made this very pertinent comment:
  "The circumstances in which the Control Commission are at present working make it difficult to arrive at any proper estimate of the staff necessary for the efficient and economical working of the Commission."
  If I may elaborate that slightly, I would remind my hon. Friend and the House
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  that the Control Commission for Germany, which began only in 1945, with a completely new task, whose dimensions, whose scope, whose period of life, etc., were completely indeterminate, had to be recruited very quickly, and from October, 1945, had to be recruited by a Department which itself was in course of recruitment and organisation.
  It was, therefore, inevitable that the comment made by the Select Committee should have proved to be right, namely, that no firm estimate of the scope of the staff which would be required, or of the strength of the staff we would require at any particular stage of the operation, could be clearly defined at that time. Having said that, I entirely agree with my hon. Friend's comments as to the type of personnel we require for this task. It is true that we need men with the quality of leaders, and with the necessary technical competence. That is precisely what we have consistently been trying to achieve. As my hon. Friend correctly reminds us, the Select Committee made several recommendations in regard to the tightening up of the staff side of the Control Commission and its improvement. These recommendations were, first, that we should seek to reduce the total numbers of the staff, largely by the rapid devolution of duties upon the Germans themselves. I think that it will be agreed that that has been done to a remarkable degree. I do not want to go over the history of it again. I have at different times in the House, in reply to questions and in Debate, explained the extent to which we have handed over a considerable amount of the executive work in the British zone to the German authorities, work which, until a few months ago, was being done almost in detail by our own Control Commission staff.
  The second recommendation they made was that in reducing the staff we should seek to improve the quality. That, of course, is the key to the remarks that have been made by my hon. Friend tonight. There has been a considerable amount done in both directions, not only in the matter of reducing staff. I would remind the House that from the original rough estimate of the amount of staff we would require in 1945—a figure of 42,000—we came down in stages to an establishment of 26,000 in the Estimates last year, which was reduced by 1st April this year to 20,000. Of course, we hope that control

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  will be a gradually dwindling process, assuming that the development of the German situation proceeds along the present lines. That is what I wish to say so far as reductions in the number of staff is concerned.
  In regard to the quality of the staff, I am astonished to hear my hon. Friend suggest quite firmly that the quality has deteriorated during the last several months.
  Mr. W. Wells: I was only quoting from Dr. Friedmann and asking my hon. Friend for his comments.
  Mr. Hynd: I am very glad to have that correction. It is the first suggestion I have heard from an hon. Member of this House during recent months that there has been deterioration of the staff. The contrary has been the report that has been given by every impartial and competent observer who has visited the Zone during the last six, eight or nine months. As for Dr. Friedmann, I have not seen his comment before, or heard of it. Certainly he was not a director of organisation, so far as I am aware, and his competence to judge is a matter on which I can make no comment. The remarks with which he is credited by my hon. Friend are rather startling. He suggests that the competent soldiers are now being replaced by incompetent civilians and business men. I do not know whether I am misquoting. I think that approximately that was the wording.
  The fact is, of course, that the soldiers were a necessary element of the Control Commission. They were necessarily the primary element in the Control Commission at the beginning, because it was then a question of extemporising, a question of getting a job done at all costs, ruthlessly perhaps, because it was an urgent job and conditions were desperate. The scene is changing. These methods would not do now. Since that period we have established some form of order in Germany. We have sorted out the population. In general, the Nazis have been removed from controlling positions and we have established democratic authorities of various kinds in local government, Land government and in trade union and other activities. It would not do now to have a Commission run on what are euphemistically termed the extemporising methods which were appropriate at the
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  beginning of the occupation. Far from the civilians and business men being generally incompetent, I think there is sufficient evidence to show that they are becoming more and more of the efficient. capable type which it is so necessary for the Control Commission to have.
  I think the reasons for this are fairly clear. The Control Office was established in October, 1945. We had to set up a staff, to organise a recruitment machine, and to set up all the necessary machinery for managing this very complex task in Germany. We had also to face the fact that the soldiers who were largely running the business at that time were running out under demobilisation, or were on shortterm extensions pending demobilisation, so that in a very short time we would find that, unless we replaced a very large staff very rapidly, we would be entirely unable to cope with the situation. Therefore, we had to get on with an improvised job of recruitment.
  An illustration of the speed with which this developed, and of the numbers that had to be handled, can he seen from the fact that in January, 1946, the number of applications that had to be considered was 5,000, by June, 1946, it was 15,000 a month, and it had dwindled by December to 2,000; and as we are overcoming the main part of that problem, the numbers, are, of course, falling very rapidly, and they are now, I believe, being dealt with at the rate of about some hundreds a week. The progressive reduction in the handling of applications since June last, indicates that we have been in a very much better position since last June to select our people. We have had fewer people to deal with, we have had a more experienced machine, and one which has had all the experience of handling these masses of people, filling the jobs, finding out how the situation developed, and, therefore, being able to foresee the type of officer required for a particular branch of activity. There is, therefore, a more efficient machine, having more experience, and with fewer vacancies to fill, and plenty of applications coming forward; and, therefore, we are in a position to be much more selective in the appointment of people to their respective jobs.
  The procedure also has been very much improved. It can be imagined that, in a comparatively improvised Department

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  dealing suddenly with this tremendous flood of applications, for rather vague contracts of service which could hardly be foreseen at the time, at the rate of 15,000 a month, the machine had no opportunities of building up a perfect procedure. Following on the Select Committee's recommendations, which, as I said at the time, we were preparing to put into effect, we have been putting the recommendations into effect in detail in this direction, as in others. We have now a regular system of selection and appointment to posts in Germany.
  There is, first of all, a preliminary interview by the recruitment section at the Control Office. There is, then, an interview by the head of the appropriate division in Germany, or by a representative of the head of the division. The candidate then has to go before an independent selection board with a chairman appointed by the Civil Service Commission, a senior military officer, and an experienced civil servant, so that he has to go through a pretty close sieve before he is even considered for appointment. There is, then, the new factor in our recruitment, the operation of the training scheme, through which all our recruits have to pass, by which they are, as it were, conditioned for the new task in Germany, instructed in the problems that will face them, and in the type of reactions that will 'be found in the German people in different situations and in relation to the various activities going on, in the technical work which the person has to do within Germany, in the set up of the Commission, and so on.
  That is something which did not exist before, and all the evidences we have are that it has been a remarkably fine contribution towards the improvement of the standard of our people in Germany. I should say that of course this does not include the whole of the appointments; there are certain special appointments at the top level which are personally selected or specially selected according to special qualifications, and they do not necessarily go through that procedure. Similarly with some of the junior grades, they do not have to go before the selection board, but they have to go through the rest of the treatment.
  After that has been done, after all this processing and training, everyone now has
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  to go through a period of three months' probation overseas, and I can assure the House that there is no hesitation whatever, now that we have so much material at our disposal, in dispensing with the services of anyone who proves either inefficient or unsuitable in any other way for the very responsible work that has to be done. Our problem today is not having too few but too many applicants for the posts that are available, and too many of a very good type in most cases; I can therefore assure the House that only the best are taken, and there are many disappointments.
  In so far as the recruitment of civil servants is concerned, of course we are very conscious of the necessity for that. We have, as I have assured the House on many occasions, tried to work out some kind of a scheme with the Treasury which would give an assurance of long-term service by integrating the Control Commission with other branches of the public service. I am sorry that up to date it has not been found possible. We still have an establishment of 20,000 people, and on top of that other activities are going on in Germany which have been superimposed on the Control Commission, and the total numbers are rather larger, so it is just not physically possible to do it. We are, however, still examining the possibility of finding some kind of assurance that we could give, at least to those people who will be there for the longest time. As I have said, this is a job in which the staff will dwindle; we are withdrawing from the detailed executive work in Germany and will eventually be left, I hope, with a staff of highly skilled, highly reliable and responsible experts at the top who will carry on a purely supervisory function. We have to ensure that those men will be attracted to remain and will be of the very best quality we can find, in Germany or elsewhere. We must therefore offer them the most attracttive possible conditions. Those conditions have not yet been worked out and I am not in a position to state what they are likely to be. We are still continuing with that job.
  So far as the rest of the staff is concerned, realising the difficulties, we have been recruiting as much as possible from the established Civil Service. A Treasury circular was sent out a little while ago to

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  Government Departments inviting volunteers, and it produced over 5,000 applications, in spite of the fact that the clerical and typing grades were ruled out because those are now full up. So far as temporary staff of the Commission are concerned, they are in the same position as the temporary staff in the Control Office or of the Civil Service generally, and they have as their only avenue to the permanent Civil Service the various reconstruction schemes—if they are eligible for them. Beyond that it is difficult to see what more we can do in regard to security of service, but as I have said we are continuing to examine that possibility because we are so keenly conscious of the necessity of finding a solution.
  One further point raised by my hon. Friend was the question of a survey by the Treasury Organisation and Methods
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  Division. In that connection we have set up an inspection staff which now ensures that the numbers of the Control Commission staff are not excessive, and we are now proposing a new organisational advisory section which will work in the closest possible contact with the Organisation and Methods Division of the Treasury. I think, therefore, that my hon. Friend can rest content that the recommendations of the Select Committee have not been ignored, but that, so far as is possible within the bounds of this large, important and responsible task we have to perform, we are faithfully and diligently carrying them out.
  Question put, and agreed to.
  Adjourned accordingly at Twenty-nine Minutes past Ten o' Clock.