HC Deb 22 June 1949 vol 466 cc217-39

Motion made, and Question proposed, "That the Clause stand part of the Bill."

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

Perhaps I can forestall speeches which might otherwise be made if I indicate what this Clause does. The pre-Budget Excise Duty on beer was £8 18s. 10½d. per 36-gallon barrel plus a surcharge of 6s. 7½d. for every degree above 1,027 degrees. The basic rate has been reduced by 21s., and that will show itself in a reduction in the price of the pint of beer. Part of the reduction of 1d. per pint which has now taken effect will be borne by the brewers out of their profits. It is expected that the brewers will provide something like £4 million during the coming year out of profits which would otherwise accrue to them.

Mr. Birch

I want to raise one or two points on this reduction in taxation. What I really want to ask is what the Government's anticipations are. The taxation of beer is a melancholy tale. In 1914 it was 2½d. a pint, and the tax now ranges between 6½d. and 10¼d. a pint, depending on the specific gravity. When the Chancellor was introducing this he said that there had been a marked falling off in consumption and the conclusion he drew was that a remission of duty was practicable. I should have thought that it showed that we were reaching the limits of disinflation by direct taxation. What the Chancellor really meant was that it was not practicable to hold the duty at its old level if the revenue was to be maintained.

In the first quarter of this year the production of beer was down by 18 per cent., and it was down a great deal more compared with 1946. The 1947 figures were disturbed by the fuel shortage. In March there was a very steep fall indeed, from 2,300,000 barrels the year before to only 1,900,000 barrels. In April, the month in which the Budget was introduced, there was a fairly sharp revival in consumption, though it was still not up to the level of the previous year. Whether that revival was caused by people drinking the Chancellor's health in order to celebrate his Budget or whether it was caused by the hot weather at Easter, I do not know, but evidently the Government's anticipation is not only that consumption will stay at its revived level—something like what it was last year—but that it will actually increase. It is difficult to work this out, but the Chancellor assumed that there would be a loss of £20 million in revenue as a result of the change in tax. I have calculated that, if consumption stayed the same, there would be a loss in revenue of £29 million. Therefore, I think we can assume that the Chancellor is thinking that there will be an increase in the consumption of beer, and I should like to know if I am correct in that assumption.

4.0 p.m.

When we are talking about beer we should not think too much about intoxicating liquors. I see the hon. Member for West Ealing (Mr. J. Hudson) looking as if he is about to let off a broadside. In the old days one saw notices outside the pubs, "Drunk for one penny, dead drunk for twopence, straw for nothing." Those days are over. It would take a great deal of money and cubic capacity to get drunk on beer. It might be interesting if the Chancellor himself tried; he might draw some useful lessons from it. Last year, when the hon. Member for Southampton (Mr. Morley) was protesting against an increase in the beer duty, he said: There was some excuse for placing the extra duty on tobacco. The excuse was that it was necessary to diminish smoking in order to save dollars. But we do not spend dollars on the manufacture of beer. Beer is now mainly composed of water and we do not import water, so that excuse in regard to tobacco cannot hold in regard to beer."—OFFICIAL REPORT, 1st June, 1948; Vol. 451, c. 855.] Of course, when it is nationalised we may, but it is still true that we do not do so.

The question I want to put to the Government is, do they think that their estimate of consumption will be fulfilled by the present trend? It seems to me that at the moment, overwhelmingly, the interest of this country is that we should raise the maximum tax from beer, and if beer is taxed at what the Chancellor described as an impracticable level, we shall not do so. I am not at all certain that even with this reduction of 1d. a pint it is not still at the impracticable level which will cause a net reduction in the revenue being raised. I end by emphasising once again that this is proving that we are reaching the limits of disinflation by taxation, and that will be the theme of our speeches on this subject.

Mr. James Hudson (Ealing, West)

The right hon. Gentleman the Financial Secretary addressed the Committee with an air of sweet reasonableness when he endeavoured to excuse the tax we are now discussing by reminding us that £4 million would be extracted from the pockets of the brewers by the proposal now being made. One would have felt more satisfied about that if one were sure that that was about the limit which the brewers' profits might have borne. However, as the profits of brewers have been in the neighbourhood of £30 million to £40 million during the last few years, and, indeed, have mounted considerably in the last eight or 10 years, there was a case—if it is a question of a taxation of brewers' profits—for proceeding much more vigorously than this proposal has done and in some other way than that which it has taken.

I do not pursue that any further because I want to draw attention to another aspect of this matter. I agree with what has been suggested on the other side of the Committee that it is probably the case that the Chancellor has allowed himself to be persuaded by the Treasury officials to take off this tax on beer because he believes that as a result there will be a considerable increase in consumption and, in consequence, a considerable increase in revenue. That might be satisfactory from the point of view of the Revenue, but from the larger point of view, with which I should think he is concerned as Minister of Economic Reconstruction, to persuade the people to engage in a greater consumption of beer is bad, both from the point of view of the effect which the beer has on the persons who consume it and——

The Deputy-Chairman (Mr. Bowles)

The speech of the hon. Gentleman is going rather wide. This is a financial Bill, not a moral Bill or an economic reconstruction Bill. The hon. Gentleman must realise that this is a substitution of a certain number of figures for those in an earlier Act of Parliament, and the discussion is, therefore, rather restricted.

Mr. Stanley

May I raise a point of Order, Mr. Bowles? Surely we are entitled to discuss whether the object of this reduction is to increase the consumption of beer, and whether that is a worthy object, which is what I understood the hon. Gentleman was doing?

The Deputy-Chairman

I am not sure that the hon. Gentleman is allowed to go too far in discussing how worthy is the object.

Mr. Stanley

Are we to understand, Mr. Bowles, that if we are told, or if we assume that a financial change has a certain object, we are then not to consider in some detail whether that object is a worthy one? Surely that goes to the root of whether the taxation change proposed is a good one or not?

The Deputy-Chairman

I will see how wide the Debate goes, but I would point out to the right hon. Gentleman that this is really not a Clause on which we can pin a Debate on whether teetotalism, prohibition and so on would be desirable. So far, I think the hon. Gentleman is just about within the Rules of Order. Mr. Hudson.

Captain Crookshank rose—

The Deputy-Chairman

Mr. Hudson.

Mr. Hudson

On that point of Order, Mr. Bowles, I submit to you earnestly that I was not really engaged in giving a moral lecture when you interrupted me. I was dealing with the economic consequences of a tax, and I felt that the Chancellor had made a great mistake from that point of view. I am anxious to preserve that position, and I hope you will permit me to proceed because I want to get away now from the point that was raised—and which you did not contest when it came up from the other side of the Committee—to the following further point. If it be true that this tax leads to greater consumption, which I believe was the intention of the Treasury when the Chancellor was advised to take this step, the consequences on our economic arrangements in many other ways are likely to be extremely serious.

At this time there is no justification for the diversion of raw materials into the brewing trade when they are so much needed elsewhere. For example, there is the issue of the cereals. If it is a question of increased beer, there will be an increased use of cereals and a diversion of them from livestock feeding. That is an issue which we have been discussing recently in the House. The Chancellor seems to have disregarded entirely his duty with regard to that matter in order to meet the Treasury view that the only concern he need have is to raise the amount of revenue whatever the consequences. I will not discuss that any further, Mr. Bowles, since you have been nervous about the matter.

Whatever the consequences to the moral condition of the country, I say that the consequences economically, from the point of view of the rebuilding of our economic structure, are thoroughly disastrous. I believe that most people understand this. I am in the happy position on this Finance Bill of being able to argue the question of beer, and the taxation upon it, without being charged with pushing my own fad, as people like to think it is. I am speaking now for what I am quite certain is the point of view of drinkers as much as it is the point of view of teetotallers.

The resentment expressed about the Budget generally was engendered more by the Chancellor's willingness to lose revenue on beer and to take the risks I have referred to than by anything else in the Budget. I am not proceeding any further with the general criticism I have already voiced about the Budget, but I say that this proposal was from the beginning a very dangerous one. Nothing has been said by any of the representatives on the Treasury Bench to justify it. I wish that the matter could have been reconsidered, but I am afraid that it is too late now.

Lieut.-Commander Gurney Braithwaite (Holderness)

From time immemorial the Committee stage of the Finance Bill has included a Debate on this subject, certainly for all the time I have been in the House of Commons. Invariably there is a discussion on the merits and demerits of beer, both from the moral and from the financial standpoint. No one would complain for a moment of the remarks just uttered by the hon. Member for Ealing, West (Mr. J. Hudson) who has put forward a very important point of view, but I would make one comment upon his opening sentences which dealt with the contribution being made to this problem through the medium of the brewers' profits. The hon. Gentleman told us that in recent years the industry as a whole had made a profit of between £30 and £40 million. For once he rather under-stated his case, because I find that in the financial year 1947–48 the profit was, in fact, £49 million.

One aspect of this matter is apt to be overlooked: namely, that the brewers receive no allowance for the depreciation of their public houses and other buildings which they can set off against their taxable income. They are, of course, already bearing a very considerable burden, because those depreciation allowances would, in fact, be very heavy indeed. I believe I am correct in saying that compared with pre-war figures—the hon. Member for West Ealing is probably also well aware of this comparison—the total of brewery profits after taxation are up by some 33 per cent., which, of course, is a considerable increase; but at the same time the cost of renewing and maintaining their property—public houses in particular—is up by something like 50 or 75 per cent. This aspect, therefore, must be borne in mind when we are discussing that particular contribution to the problem.

It is natural that the hon. Gentleman should take exception to this proposal—we all know his views. Clauses 2, 3 and 4, of course, are all designed to benefit those who consume alcoholic liquor—if beer can still be described as coming within that category; it certainly cannot any longer be described as intoxicating. Here we are up against a very old problem, as to how far revenue is to take precedence over social habits. Beer has become such a strong supporter of the Revenue over a number of years—it has beaten a number of records since the war—that not even the present Chancellor of the Exchequer, with all his ascetic and austere outlook, can be expected to withdraw such a prop. What we are discussing, therefore, is whether, from the revenue point of view, the reduction of 1d. per pint in the duty will be an efficient instrument with which to stem the decline in consumption. It is my opinion that it will do very little, if anything, in that direction. I say that in support of the observations of my hon. Friend the Member for Flint (Mr. Birch), who pointed out what is happening.

4.15 p.m.

With beer at its present price it is very unlikely that a man will be attracted to it by the reduction of 1d. per pint. Before 1939 a reduction of 1d. was a considerable item—indeed, it affected the price of a pint of beer very considerably—but at the present price of a pint of beer I am very doubtful whether the reduction of 1d. will stimulate consumption in the way that the right hon. and learned Gentleman evidently hopes that it will. We shall see as we go along, but so far—the new financial year is nearly three months on its course—there is very little indication that this proposal will have the effect desired. The right hon. and learned Gentleman has fallen between two stools, one of which is occupied by the consumer of this beverage and the other by the hon. Member for West Ealing and his friends. The Chancellor has got the worst of both worlds and, even at this stage, he might do well to reconsider the whole question.

Dr. Segal (Preston)

Can my right hon. and learned Friend assure us that there is no possibility of any evasion on the part of the brewers of the payment of the £4 million for which he has budgeted? Is it not within the bounds of probability that the brewers may, even now, reduce still further the specific gravity of the beer that is made available? Many of us may doubt altogether whether the term "specific gravity" is correctly applicable to the present type of beer that is sold and whether the term "specific levity" might not, perhaps, be more appropriate. Is not this an obvious opportunity for evasion on the part of the brewers by still further lowering the specific gravity of the beer available for consumption?

Mr. Erroll

I should like to deal partially with the point raised by the hon. Member for Preston (Dr. Segal). It seems a very unfortunate form of taxation whereby brewers' profits alone of companies' profits are singled out for a special and extra tax in this oblique manner. It has been claimed that the reduction in duty will be met partly out of brewers' profits to the extent of £4 million. That is really an additional form of tax on profits.

The Chancellor of the Exchequer (Sir Stafford Cripps) indicated dissent.

Mr. Erroll

The Chancellor may shake his head but it has been introduced with that very purpose in mind.

Sir S. Cripps indicated dissent.

Mr. Erroll

It is surely a very bad type of fiscal device to employ, to insist on the draining away of £4 million worth of profits by means of a duty on beer. If profits are to be taxed more, then all company profits should be taxed and not just the brewers' profits.

If there is scope for evasion by altering the specific gravity, that, of course, will alter the yield from the tax itself. What we have to do is, surely, to find out from the Treasury the purpose of the reduction. Is it to maintain approximately the same sort of yield from the consumption of beer, or to get an increased yield, which seems unlikely in present circumstances; or was it designed to stave off a steep falling away in the yield from this tax?

What is wrong with beer today is the present gravity which is permitted. I am glad to see that the Parliamentary Secretary to the Ministry of Food is here, because I understand that the Ministry of Food have a good deal of control over the permitted gravities of beers which may be produced. We might, in fact, get a greater yield from the tax if beers of a heavier gravity were now permitted to be brewed and sold, because people would rather have one pint of a really good, strong beer than two pints of a lighter beer. Brewers, however, are prohibited from producing the really strong pre-war beer. If stronger beer could be made available, not only might sales be higher but the yield in duty per pint would be greater, and the Chancellor might thereby be able to secure the revenue which it is his purpose to try to obtain.

The manner of presentation of the case was singularly inept on the part of the Chancellor. To reduce the subsidies on food and at the same time to cheapen beer was certainly not a way to give the country the impression that taxation was intended to be fair. If the purpose of reducing the duty on beer was to secure revenue to maintain the food subsidies, it was an accounting transaction. The hon. Member for West Ealing (Mr. J. Hudson) might perhaps have gone to the people who complained to him and pointed out that it was merely an accounting transaction such as we have been told the tea duties were an accounting transaction, and they might have been satisfied. That is hardly likely and there is no doubt that the presentation of the case has been inept and has made a poor impression on the country.

Mr. Norman Smith (Nottingham, South)

I think the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) was probably right when he said that there is yet no indication that the tax reduction is likely to lead to increased beer consumption and thereby fortify the revenue, but he should not overlook the fact that the former decline in consumption has been arrested. I find evidence of that in my constituency, where I am in the habit of getting it at first hand.

I wish to correct one wrong impression which may have been made on the Committee by my hon. Friend the Member for Ealing West (Mr. J. Hudson) about the effect of beer taxation on production. My hon. Friend seemed to think that to increase beer consumption would reduce industrial production, but the expectation of being able to consume beer in the near future is an important factor in the morale of workers in factories and other places of production. I wish the Chancellor could have seen his way to go a little further in the reduction.

Mr. Eccles (Chippenham)

I am not sure, but I think £40 million-odd brewery profits, if averaged over pints, would run to between one eighth of a penny and one farthing per pint profit. If so, it is quite clear that the scope for taking profits is limited. I suspect that brewery charges have gone up very much during the last few years. Their costs of all kinds, like other costs, have gone up and the very large profits, which I fully agree they earned in the peak of the boom, really represent that maximum turnover which they are not having any more. The run down in brewery profits, which we shall see over the next two years may be severe. One or two balance sheets have already come out reflecting this big change. Even a 10 per cent. or 15 per cent. drop in the amount of beer consumed might have the effect of wiping out half or more of the profits of a brewery. I have no objection to making arrangements whereby the profit charged for any article like beer is a reasonable profit. If we can make arrangements of that kind it is all right. The whole principle of the Monopoly Commission is right, but I do not think that applies in the case of an article where the profit has been between an eighth of a penny and one farthing per pint. If those figures are not right, no doubt the Government will say so.

What is more interesting is the argument of the hon. Member for Ealing, West (Mr. J. Hudson) about the principal reason for which we are asked to vote this reduction in the duty on beer. We must know from the Government whether their only object is to maintain the expenditure of money on beer, because the pattern of spending in the British household is already very distorted. I can imagine the housewife saying that she does not want so much money to go on beer every week. Here is the Chancellor of the Exchequer, with all the attributes of sanctity, using the revenue to maintain the amount taken out of the weekly wage packet to be spent in the pub. I wonder if that is not topsy turvy and whether it would not be better spent on food, or, for that matter, on rents.

This is a very important question because, owing to food subsidies and the social policy which Governments have built up over the last 10 or 15 years, the way in which a British family lays out money every week is far different from that in any other country. We spend far more on alcohol and tobacco than any other nation. What is clear is that the habit of smoking tobacco is much more difficult to break than that of drinking beer. Tobacco revenue keeps up and the Chancellor does not have to reduce the Tobacco Duty, but he is worried about the revenue from beer. What has brought about the reduced consumption of beer? Is it recent high taxes, or the general decline in earnings? Is it a disinflationery policy that has caused it? If so, what is the good of the penny per pint reduction?

Does the Chancellor seriously think that the penny reduction will maintain his revenue? Is it wise at this moment to do that? Would it not be better, if the general interests of the country are that we should reduce costs of production and maintain as far as possible a disinflationery financing, to see that the amount of money spent on secondary necessities was somewhat restricted? This method may keep up the consumption and, if not, I cannot see what is the purpose for reducing the duty. We should have from the Chancellor a more fundamental explanation of what is his social policy in regard to beer drinking at this moment in the trade cycle.

Mr. Beswick (Uxbridge)

There may be another reason why the amount of beer consumed is falling. It may be that the amount was artificially increased during the excitement of the war and that we are now naturally quietening down and the amount is decreasing. It would be appalling if the Chancellor endeavoured fiscally to try to get us back to the artificially excitable state there was—[Laughter.]—certainly, during the war and just after the war. I ask the Chancellor on what basis he calculates that the brewers will contribute £4 million out of their profits? Has there been some agreement by which £4 million will definitely be set aside, or has that figure been reached by calculating on the basis of the pre-Budget consumption and maintaining that sale at a penny a pint less than the pre-Budget rate? If that is the case, I do not follow my right hon. and learned Friend's argument that by reducing taxation he hopes to maintain the income to the Revenue.

I understand that in 1948 the brewers made a profit of £49 million as compared with £29 million in 1938. When some criticism was made in the country of that excessive rate of profit, it was stated in the monthly bulletin of the brewers which I and, I suppose, most hon. Members receive, that the increased £20 million was, "after readjusting the profits for taxation." In other words, the whole of the increased tax on profits had been paid for by the consumer and the shareholders had not contributed anything to the general revenue of the country. In my view they should have made the reduction of one penny a pint entirely out of their inflated profits. I can see that the brewers may have an interest in stimulating consumption by reducing the price of beer, but I think it quite wrong for the Chancellor of the Exchequer of this Government to endeavour to increase consumption by reduction of taxation.

4.30 p.m.

Mr. Selwyn Lloyd (Wirral)

I wish first to answer the argument of the hon. Member for Uxbridge (Mr. Beswick) about brewers' profits. The principal benefactor from brewers' profits is the Chancellor. He gets 10s. 1d. in the £ out of undistributed profits and 11s. 9d. in the £ out of distributed profits. He also receives Surtax from certain people. Therefore, it is probable that of this £49 million which has been mentioned the Chancellor receives £25 million, probably more. When there is this sort of talk of grossly inflated profits it should be borne in mind that the principal benefactor is the Exchequer; the Chancellor is a partner as to more than half the profits made.

I seek to extract from whoever is to reply to this Debate a definite statement as to whether the purpose of this reduction is to seek to increase the yield of the tax or to maintain its yield. That is a simple question to answer. The Chancellor did not exactly say that in his Budget speech. I hope that the Financial Secretary will do so quite frankly because it will constitute a very important precedent for other Debates which we shall have in the course of our consideration of the Finance Bill.

Mr. Hollis (Devizes)

I only intervene to reinforce one point which the hon. Member for Uxbridge (Mr. Beswick) raised, about which I should like to be clear. Before I come to that, I must, in passing, comment on the most extraordinary charge which I have heard levelled against the Chancellor that his purpose is to create artificial excitement. What did the hon. Member mean exactly by artificial consumption during the war? I am not quite clear as to what is the precise distinction between the natural and artificial consumption of a glass of beer.

I do not think that I need delay the Committee longer about brewers' profits. Several of my hon. Friends have adequately answered what has been said on that subject. What is forgotten in these charges is that the brewers receive no allowance for depreciation of their public houses, and therefore the mere quotation of figures does not get us very far. What is the basis on which this figure of £4 million as the cost to the brewers is calculated? It must be calculated upon a certain assumption about consumption. Is it calculated on present consumption, or on the assumption that there will be such an increase in consumption that the same revenue will come to the Exchequer despite the tax reduction, or on what assumption is the calculation made? It seems to me that it is an arbitrary guess at a figure rather than an exact estimate, unless it is based on a much more definite criterion than has so far been revealed to the Committee.

Captain Crookshank

We have had an interesting discussion. Not the least interesting point was the Ruling which you gave earlier, Mr. Bowles, when you pointed out that this was a financial and not a moral Bill. I take it, therefore, that you meant that this is an immoral Bill; I could not agree with you more. Most of the Government supporters appear to take the same view. The Debate on this Clause opened with a very neat, elegant little speech by the Financial Secretary, which was purely factual. It told us this and that about the money but nothing about the reasons for the Clause, and it is those reasons which are material to our consideration of the Bill as a whole and of the financial policy of the Government in that regard.

It is clear, in spite of the desires and hopes of the hon. Member for Ealing West (Mr. J. Hudson), that throughout the history of the beer duties, they have never been put on by any Chancellor of the Exchequer in the form of a punitive duty directed against those who like to drink beer; in other words, it has never been a temperance tax. It has been an unfailing and bountiful source of revenue. I imagine—never having been Chancellor—that all Chancellors have, when the time has come to discuss their proposals before producing them in this House and placing them before the country, looked at the Beer Duty and said, "Today it is so much; I wonder what will happen if I increase it by 1d. or 2d. a pint? Shall I still get the same revenue, increased revenue or will a rise in the price be a deterrent, and therefore mean a loss to the Revenue?"

That seems to me to have been the viewpoint of Chancellors, setting aside the period of artificial excitement to which the hon. Member for Uxbridge (Mr. Beswick) referred. I think that the period of artificial excitement to which he was referring was those few brief fleeting weeks just after the last General Election, when right hon. and hon. Gentlemen opposite were so elated, just as they are deflated today. That was when the artificial excitement was most noticeable. Setting aside that possible consideration, Chancellors have had to weigh up what was likely to be the effect, in terms of pounds, shillings and pence coming into the Treasury, as a result of any change in the duties on beer.

This year we have had this reduction. I understand that it is expected in the long run to mean a reduction in gross beer revenue of £20 million. The Financial Secretary agrees that that is what it will cost the Treasury; it will get that amount less in a full year as a result of this reduction. The question arises, why is the Chancellor doing it? It is a question which I imagine has been asked particularly by those behind the Chancellor. At a time when he has checked the rising cost of food subsidies, people have asked, "Is it not rather strange that that should happen at the same time as the cost of beer is to go down?" That was the case of the hon. Member for West Ealing.

That particular aspect of the argument has nothing whatever to do with the financial or budgetary aspect, which is that it is not worth maintaining a heavy rate of tax if as a result, the Exchequer will not get the money it wishes to receive. In spite of Socialist economics there is still such a thing as the law of diminishing returns, and a rate of tax can be kept high while less and less gross tax is obtained as a result. Is that what has moved the Chancellor in this case? If that is the reason, it has, as my hon. Friend the Member for Flint (Mr. Birch) pointed out, a great bearing on the whole of our financial position, if we have reached the stage in which the disinflation has had such an effect. Or is there an entirely different reason? I have not thought of a third reason; there may be others. Is the reason the fact that the right hon. Gentleman, contrary to all his apparent traditions, has thought that he would like to make a gesture to those who like a pint, and that it would be nice to reduce the cost of their favourite beverage—a little less austerity in the public house or elsewhere? Is that the argument?

I hope that we shall be told whether the reason is the first which I mentioned, the law of diminishing returns, whether the tax has reached too high a figure, whether the Chancellor feels that it is the effect of the disinflationary policy which is responsible for the reduction in the consumption of beer. I should like the Financial Secretary to address himself to the question of whether he is quite satisfied from that point of view that the 1d. is any good. Ought not the reduction to have been 2d. for it really to have had some effect? The hon. Member for South Nottingham (Mr. Norman Smith) is more knowledgeable on this matter than I am; perhaps he could have told us whether he thinks this drop has caused any increased consumption in the circles in which he tells us he is accustomed to move. I have no personal evidence, but from what I have been told this reduction does not seem to have made much difference.

If the Chancellor is trying to bolster up the Revenue from this duty he has a very difficult problem before him, because the figures I have been given show that in the first quarter of this year compared with the same period last year the drop in consumption was as much as 18 per cent. Has there been any change in that trend? Some little time has elapsed since the Budget, and it might have been possible for the Treasury to have got some figures to show what has happened in the meantime. We should all be grateful to receive such figures from the Financial Secretary, because, while all of us who have been engaged in these financial Debates for a long time know that the subject of beer is apt to be one of the topics frivolously treated, it still remains one of the great pillars of the Revenue. It is not one of the things about which the Chancellor or the Treasury can afford to make any mistakes, because they rely so enormously upon the consumption of beer for the money which is required for their grandiose and somewhat stupid plans.

If this penny drop in the price of beer has had any effect in checking the drop on consumption already setting in, it would possibly be some justification for it. even at the cost of 20 millions in a full year, but if it has had no effect it seems to me that it is a comparatively stupid proposal, because it has not gone far enough in satisfying those who require, desire and are entitled to enjoy their drink of beer from time to time; nor does it satisfy the West Ealing brigade who want to prevent anyone drinking anything at all: nor does it satisfy the needs of the Revenue. Therefore, it is not only a question of falling between two stools but of three stools or as many stools as one can think of and then double the number.

I hope the right hon. Gentleman will tell us—he did not do so in his opening speech, but perhaps he wanted to hear what we had to say on the subject—exactly what is the purpose of this reduction. Perhaps he will tell us, whether it has had any effect whatsoever upon consumption, because that is a very material consideration to the whole financial position and the plans enshrined in this immoral Bill.

Mr. Glenvil Hall

Apart from my hon. Friend the Member for West Ealing (Mr. J. Hudson), many members have changed their point of view since we discussed this matter last year. When my right hon. and learned Friend the Chancellor of the Exchequer put an extra penny on the pint, I remember the speeches that were made from almost every quarter of the House, and certainly from the Benches opposite. They would have led a listener to believe, that he had done an extraordinary thing. If I understood some of the speeches made today, they mean that by taking the penny off he has done something which will have no effect whatever, either on the working man, his pocket or in any other direction. The reasons why my right hon. and learned Friend has reduced the excise rate on beer were very simple—he wanted to reduce the price of beer as beer itself enters into the cost-of-living index, and it would help to keep the cost of living steady, and because, according to the view expressed last year from the benches opposite, it was much too high.

I was asked whether in the figures that have been given my right hon. and learned Friend was banking on an increase in consumption. If nothing had been done to change the rate it was expected that consumption would continue to fall. During the last six months it began to fall, but I am told that now, due to the fact of the action of my right hon. and learned Friend, that fall has stopped. Whether it will mean that consumption will begin to go up, it is too early to say, but what does appear to be plain is that the drop which was certainly beginning to show itself has now been stopped.

4.45 p.m.

In 1948–49 the revenue from this duty was £307¼ million, and the pre-Budget expectation for the current year was £297 million. This figure will now, we expect, because of the reduced rate in operation, come to about £279 million, making the cost to the Exchequer during the current year £18 million, and in a full year, as the right hon. and gallant Gentleman the member for Gainsborough (Captain Crookshank) said, £20 million.

The only other point of any substance which was made was whether it would not have been possible for the brewers out of their profits to make a reduction of 1d. a pint, with my right hon. and learned Friend making no change at this time. The hon. Member for Chippenham (Mr. Eccles) dealt with this point in particular. Although I cannot off-hand check the figure he gave, I can say from all the information at my disposal that it would have been impossible for the brewers to make a reduction of a penny in the pint out of their profits. Therefore, it was necessary, if this reduction was to be made, that my right hon. and learned Friend should make some change in the incidence of excise duty so that the Exchequer and the brewers between them could give to the consumer this relief of a penny on the pint. That is the story and nothing more. On reflection hon. Gentlemen will agree that this concession will mean money in the pocket of the working man who will be grateful to my right hon. and learned Friend for it. I also hope that with other things it will help to keep the cost of living steady.

Mr. Stanley

We have listened to the Financial Secretary give an explanation of this change which is quite staggering. Let me recall to him exactly what it is that he has said. He has told the Committee that the purpose of the reduction in the Beer Duty at the cost of £20 million is to cheapen beer, because beer enters into the cost-of-living index, and, therefore, the Chancellor feels that by giving this concession he is doing something to keep the cost of living steady. When that is combined with the fact that at the same time the Chancellor, in dealing with the food subsidies, is making a rise in the cost of living, is this not an extraordinary explanation?

If the Chancellor wanted to spend £20 million on keeping the cost of living steady, would it not have been much better and much more direct to allow an extra £20 million for the levelling out of the food subsidies which are to be cut than to use this money to reduce the duty on beer? I see the Parliamentary Secretary to the Ministry of Food sitting there. Let her advise us as to the food content which might be obtained for this £20 million. Does she think that there is a greater food content in the extra amount of beer which people will be able to drink because of this £20 million a year, or does she not see that the normal man and the housewife would much prefer to have some of the articles of foodstuffs whose prices have had to be increased owing to the decrease in food subsidies?

Mr. Warbey (Luton)

Is the right hon. Gentleman advocating that the food subsidies should be increased by £20 million in contradiction to everything which has been said by hon. and right hon. Gentlemen opposite?

Mr. Stanley

I am saying that if I had to set out to keep the cost of living steady I would prefer to do it by putting £20 million more on the food subsidies than by taking £20 million off the cost of beer.

Mr. Glenvil Hall

I have not the slightest doubt that when the right hon. Gentleman makes an assertion of that sort he has himself investigated the figures and seen just how various items in the cost-of-living index weight the figure. Perhaps he will tell the Committee how he would apportion this £20 million so that it would have a quarter of the effect on the cost-of-living figures?

Mr. Stanley

Does the right hon. Gentleman think that the increases which have had to take place in the prices of certain articles of consumption because of the stabilisation of the food subsidies, are of less importance to the housewife than a fall in the cost of beer? That is the argument which he has put to the Committee.

I started by saying that this was staggering because it is an argument which has never before been advanced in favour of this proposal, and I think that after the right hon. Gentleman has resumed his seat it will never be advanced again. Surely, it is nonsense. No one really believes that the Chancellor of the Exchequer embarked upon this reduction of the Beer Duty because he thought that it was the best way of keeping the cost of living steady.

Mr. Beswick

If it be that an expenditure of £20 million on the food subsidies would have kept the cost of living down, would the right hon. Gentleman say what would have been the effect on the index figure if the food subsidies had been reduced to negligible proportions?

Mr. Stanley

That is wholly irrelevant. I think that the hon. Gentleman must still be living in that era of artificial excitement to which he referred earlier.

This is a serious subject and I wish to ask whether some member of the Front Bench cannot give us what I believe to be the right explanation. I hope that the Economic Secretary to the Treasury will give us what I think is the explanation of this change in taxation. As far as I can see, there can be only one explanation. It is the one that we have always assumed. This has not been done to benefit the beer drinker; it has not been done as a gift to the housewife, nor has it been done, as the Financial Secretary in his closing remarks movingly told us, to earn the gratitude of the worker. It has been done because unless this reduction was made there would be a further progressive fall in the revenue obtained from the Beer Duty. To me that is a logical argument. Regarding this purely as a question of revenue, I can see that it is the sensible thing to do. Although all appearances are against it, I still prefer to assume that in this matter the Government have done what is the sensible thing.

But assuming that that is the real explanation, it presents to the Committee and to the country certain anxieties for the future. It means that one of the chief sources of revenue is beginning to fail; that desperate steps must be taken to maintain it, and that other equally important sources may go the same way. We may be faced in subsequent Budgets with further reductions in the duties on certain articles not because they bear particularly hardly on the individual, not because those reductions are necessary for some branch of the national economy, but because without them, it will be impossible to sustain a falling revenue. When hon. Gentlemen combine that fear—a fear brought vividly to our minds by the Clause we are now discussing—with the fact that when we are entering into an era of falling revenue we are going on with the process of an automatic increase in expenditure, we can see full well where the country is heading if it remains under the financial guidance and control of the Financial Secretary to the Treasury for very much longer.

Mr. Charles Williams (Torquay)

I congratulate the Financial Secretary on something quite new and original. But I wonder what the thousands of good teetotallers in Northern Cornwall who returned a Liberal who now supports the Socialist Government, will think of this reduction in the price of beer and the argument that to reduce the duty on beer helps to reduce the cost of living.

Mr. Glenvil Hall

I allowed the right hon. Gentleman the Member for West Bristol (Mr. Stanley) to get away with that, but I do not think that I should allow the hon. Member. That was not my principal point. It was incidental.

Mr. Selwyn Lloyd

No.

Mr. Glenvil Hall

Yes, it was incidental.

Mr. Williams

If it was not the right hon. Gentleman's point, all I can say is that his remarks were almost meaningless. I assumed that he had a point because I saw that he read his speech. It must be right to assume that somehow or other between reading what was handed to him and the delivery of his speech he made a mistake. At any rate, in some way or other the cost-of-living index is a point which weighs in the reduction of this beer duty. I think I have the right hon. Gentleman's assent to that. It is a most extraordinary position that when the Government propose to reduce the duty on alcoholic liquor they must consider whether it will affect the cost-of-living index.

I have always taken the point of view that the duty on beer was too high. In consequence, I agree with this Clause, but there are large numbers of teetotallers who think that beer drinking is extremely wrong. I entirely disagree with them. They are wrong in their idea. However, many of them supported Socialists at the last election. For instance, Plymouth returned three Socialists. Had any one of the teetotallers who voted for them the least idea that the Socialist Government would reduce the duty on beer because it had something to do with a reduction in the cost of living? This is a most remarkable position. I really am extremely sorry for some of the hon. Gentlemen opposite when they have to go back to their good constituents and explain the position to housewives and people of that kind.

5.0 p.m.

There is a further point, and it is that I assume that this reduction was made on this high moral basis of reducing the index figure of the cost of living, and that it was done as a sort of preliminary—nothing to do with electioneering purposes, of course—for that high moral standard which was produced at Blackpool the other day. It really is a new one on me and on the Committee that this high moral outlook is ultimately based on the reduction of the price of beer in order to bring down the cost of living. That is something on which the hon. Member for Ealing, West (Mr. J. Hudson) will now be able to make an entirely new speech, in which he will be able to tell his astonished constituents in future that we are now starting upon a new Socialist campaign based upon cheaper beer—not better beer, but cheaper beer—as part of a plan for a new high moral standard based, as someone once said of the Socialist Party, on the type of speech made by certain Nonconformists.

That is the new outlook of the Socialist Party, and the largest plank in its platform is cheaper beer to produce a lower cost of living. That aim is still not quite clear in the mind of the Financial Secretary, though it is in our minds. I notice that the right hon. Gentleman the Member for Dumbarton Burghs (Mr. Kirkwood) is listening to me with great attention, and I am wondering whether he could not make a wonderful speech on the subject of the Spirits Duty, asking the Government to reduce the taxation on whisky as part of their movement for higher moral standards, because it would definitely help to reduce the cost of living in Scotland.

We have had a remarkable speech from the Financial Secretary. Every time the right hon. Gentleman speaks, he makes me think of "Alice in Wonderland," and I assure him that he has not in any way departed from the position which he has taken up or from the character with which I have always associated him—the Mad Hatter.

Mr. Pickthorn (Cambridge University)

The right hon. Gentleman the Financial Secretary intervened just now and used the word "incidental," and I thought that that intervention went very far towards muddling what he previously said. If it did not make it more muddled, it went some way towards inspissating the blackness. I think it went so far that the Committee is now really entitled to ask him to explain what "incidental" means.

The Committee will permit me to remind the right hon. Gentleman that he was asked what was the reason why the Treasury, or the Ministers responsible for the Treasury, wish to reduce the Excise Duty upon beer. That was the question put to the right hon. Gentleman—what was the reason? We have now been given two reasons: (a) to reduce the price of beer, and (b) to lower the cost of living, that is, the official formal index figure of the cost of living. If these words mean anything at all, they mean that, in the language used by persons other than himself, he wants to regard the desire to do something as a reason for having the desire to do it. These words can convey nothing else than that the reason was to reduce the formal cost-of-living index figure. That was all, and that was the only reason he gave.

But now, he gets up in the middle of somebody else's speech and says that he only meant to say that it was incidental. Surely, he ought now to tell the Committee what he means by "incidental," and, if it was incidental, what is the reason for the reduction? If the reason for the reduction is not what he told us before, that is, to cut down the official cost-of-living index figure—if that is not the reason, but is merely incidental in the ordinary sense of the word—what is the reason? We have had so far no answer at all, and it really is due to the Committee that we should be told what it is.

On the other hand, if what the right hon. Gentleman first said is right, that is to say, that the reason is that it is worth spending £20 million in order to lower the paper figure of cost of living, then, is it to go on being done in this way? It does not, on the face of it, seem to be what the ordinary common sense of the community would take for granted that the best way of keeping down the cost of living is to make sure that people do not spend less on beer. If that is the reason, does he mean to go on doing it? Does the Chancellor mean to go on, I will not say staggering, but pottering round after the pub crawler, reducing the duty by a farthing or a penny every time the pub crawler looks as if he is going to stop crawling? Is it really the best possible way to keep down the cost of living to spend £20 million on keeping up the consumption of beer, because that is really what the Financial Secretary told us? If that is not the best possible way of keeping down the official figure of the cost of living, then surely we are still entitled to some explanation from the Treasury Bench.

Question put, and agreed to.

Clause ordered to stand part of the Bill.