BUDGET PROPOSALS AND ECONOMIC SURVEY

HC Deb 21 April 1950 vol 474 cc475-564

11.16 a.m.

Mr. Oliver Stanley (Bristol, West)

I am grateful to you, Major Milner, for giving me this opportunity to intervene before the regular business of the Debate to ask the Chancellor of the Exchequer a question on the wording of the Resolution which you have just read. Naturally, everyone in the Committee is concerned with the amount of discussion that it will be possible to have in later stages on the important subject of the Purchase Tax. Last year, by a Resolution of a different kind, the House was prevented from any discussion of Purchase Tax during the passage of the Finance Bill. That was deeply resented by my hon. Friends on this side of the House, and I do not think it was altogether welcomed by hon. Members opposite. The Chancellor, at any rate this year, has made some improvement in the terms of the Resolution. As I understand it, it will give us some opportunity during the Committee and Report stages of the Finance Bill for a discussion on Purchase Tax.

My object in raising the matter this morning is to ask the Chancellor of the Exchequer what are the Government's intentions under these words. I quite realise that when the time comes the matter will be in the hands of the Chair, and that it will be for the Chair to decide, under the wording of the Finance Bill, what range of discussion can be allowed. However, it would be of service to all of us if we could find out from the Government what they had in mind when they drafted this particular form of words.

As I see it, there will be a considerable opportunity for debate although very little for Amendments. It would be possible to put down Amendments to each of the three classes asking for reductions and during the Debate upon those Amendments it would be possible not only to offer general arguments with regard to a particular class, but also to cite individual cases in that class as one of the reasons why a reduction is asked for. I should be glad to hear what the Chancellor has to say, because, of course, it must guide our decision.

We recognise and welcome the improvement since last year, but we cannot regard this as satisfactory. It is quite true that the Chancellor of the Exchequer said on a previous occasion that I referred to the Debate on the Purchase Tax as "a Dutch auction." That, of course, was in rather different circumstances and under a different Chancellor of the Exchequer, because hon. Members will recollect that on that particular occasion the then Chancellor of the Exchequer announced that he had something like £20 million to spend upon reductions of Purchase Tax, and asked all of us to make the best case for any particular reduction we had in mind. That is a procedure which is unlikely to be copied by the present holder of the office.

Whatever decision we may take this year, I would impress upon the Chancellor the very bad precedent of depriving Members of their ordinary rights in regard to taxation of the subjects they represent. Whatever he has done this year, could there not be, between now and the next Budget, consultations with a view to finding a procedure which would preserve the rights of Members, and, at the same time, do away with some of the practices which I and those hon. Members behind me who took part in these Debates over the last four or five years, and the discussions on Purchase Tax, thought undesirable and which certainly curtailed the Debate?

11.20 a.m.

The Chancellor of the Exchequer (Sir Stafford Cripps)

The latter remarks of the right hon. Gentleman fill me with optimism for the state of the health of the two parties in the House at the moment. He is clearly contemplating that the Labour Party will be introducing the next Budget, and that at that time he will consult with me as to the form of the Resolutions.

Mr. Stanley

I do not like to interrupt the right hon. and learned Gentleman, but what I meant was that when, by next year, the right hon. and learned Gentleman is in opposition, he will already have been committed to that which we shall then be proposing.

Sir S. Cripps

The right hon. Gentleman will have to read again what he said just now, perhaps somewhat incautiously. I should like to say this: whichever side of the Committee we are on, we think that it would be a very good thing to have a discussion through the usual channels or a meeting to see what can be done about this rather difficult problem. Quite obviously, it is a very difficult position both for hon. Members and the Government if every item in the very long Purchase Tax Schedules can be brought up—and no doubt there are people interested in almost every item from one point of view or another—and discussed and voted upon as to whether there should be a reduction or not. We therefore think that on this occasion we have arrived at the best sort of compromise by putting down a Resolution in this form.

I know that you will not think that I am in any way trying to commit you or the Chair, Major Milner, which I could not do in any event, in saying what I understood was the purpose of the Government in setting down the Resolution in this particular form. It will be borne in mind that the charge of the Purchase Tax is now made under the Finance Act, 1948, which sets out in a rather fresh form the actual charging sections and the Schedules and in Part I of Schedule VIII it will be found that the list of the chargeable goods was ranged in numbered grades. That is to say, the word "first," "second" or "third" was put against each article which was chargeable, and in Section 20 (2) of the Act the charge was made in these terms: In the said Part I of Schedule VIII the words "first," "second "and" third "indicate the first, second and third rates of Purchase Tax which are respectively one-third, two-thirds and 100 per cent. of the wholesale value of the goods, so by that form of charging the goods were brought into three categories —33k, 663 and 100 per cent. The Resolution we are now debating permits the moving of an Amendment to the Finance Bill to reduce the rate on the first, second or third as a group.

As the right hon. Gentleman said, I should imagine, if I may put it this way, that in that Debate it would be quite legitimate to illustrate the desire to get that reduction on particular articles contained in the Schedule; that it would not be in order to get a reduction for a particular article, but only for the group as a whole. I think that gives a very wide range of possible discussion without the continual necessity for having Divisions on each item.

Mr. Selwyn Lloyd (Wirral)

I take it that it would be impossible to put forward any Amendment with regard, for instance, to the definition of materials, or with regard to the question of rebates, which has been discussed more than once.

Sir S. Cripps

I think that human ingenuity might easily discover a method in which the question of rebate might be brought into the discussion. On the other point, I should not like to try to anticipate what the Chair would say, because that is a matter for the judgment of the Chair.

Mr. Butcher (Holland with Boston)

The Chancellor has made a proposal to the Committee to remove luxury cars from one group of taxation on the ground that doing so will advantage our export trade. It may be that members of the Committee through their personal knowledge or knowledge from their constituencies, will be aware of other commodities which should be treated in a similar way. Can the right hon. and learned Gentleman give an assurance that those cases could be brought before the Committee during the course of the discussion?

Sir S. Cripps

All I can say is that by moving the reduction of 100 per cent. to 75 per cent. or 50 per cent. the hon. Member could make the point he desires to make about reducing the rate of these other articles.

Mr. David Eccles (Chippenham)

Surely this is a very unscientific way to do it, because what the Committee desire to do is to assist the export drive, by employing the principle which has been chosen by the Government to apply to Rolls Royces and Bentleys. If there are such cases, surely we should not wait for 12 months before they can be brought into another Finance Bill. The Chancellor of the Exchequer would be right to seek some way in which to take advantage immediately of such a case made out either by his hon. Friends behind him or by hon. Members on this side.

Sir S. Cripps

I should not seek such an occasion.

Mr. Stanley

Is it not a fact that the right hon. and learned Gentleman already possesses power to make alterations in the Purchase Tax without waiting for a Budget, and that if a case were made out, although it would not be possible to vote on that case, it would be possible for him to amend the Finance Bill to carry out the change by Order.

Sir S. Cripps

Certainly it is possible and, as the Committee knows, that has been done. They can be carried through by Order, as was done the other day with regard to Christmas cards. That can be done. I think that it has been stated in the House, and that both sides will agree, that that procedure should not be used as the normal way of altering the Purchase Tax but used only as an exceptional way. If there were some exceptional case, as the hon. Member for Chippenham (Mr. Eccles) has stated, it would be possible to do it.

11.38 a.m.

Mr. Douglas Houghton (Sowerby)

We are entering on the third day of the Debate on the Budget. During the election is was alleged by the Opposition that the stewardship of the Labour Government was such that we rushed into a General Election before the truth was revealed to the nation. I do not know how right hon. and hon. Gentlemen opposite feel about that now. It is difficult to say at the moment, what is their mood about the Budget statement and the Economic Survey. It seems to me that they were visibly taken back that the Chancellor of the Exchequer had such a favourable report to give of our dollar reserve position and the balance of payments just before Easter.

The ever gathering evidence that things were nothing like so bad as the Opposition believed, has robbed them of any opportunity of going to the country now with the slogan, "We told you so." Last evening, we listened to a speech by the hon. Member for Flint, West (Mr. Birch), which had little content except entertainment value, and which, in my opinion, was an irresponsible contribution to a discussion on the Budget. In some respects, it was lacking in taste and scarcely deserving the attention of anyone except the Commissioners of Customs and Excise, who are responsible for levying Entertainments Duty.

The hon. Gentleman found much cause for merriment in certain passages of the Economic Survey and in one in particular which drew attention to certain assumptions underlying its construction, saying that if the assumptions were different, the conclusions would be different. I really do not know what the hon. Gentleman has to complain about, because little glimpses of the obvious, even in the Economic Survey, will do no harm, especially when they are drafted for a very wide circle of readers, including hon. Members opposite, whose grasp of affairs is not quite so good as ours.

There are two assumptions in the Economic Survey which are perhaps more important than all the others. The first is that the world keeps the peace. I am sure that the cause of keeping the peace would be in no safer hands if Members opposite were in power. Another important assumption is that we keep the industrial peace. Despite the troubles which confront us at the moment in the London Docks, the Labour Government have a record of maintaining industrial peace which is in striking contrast to that of Tory Governments between the two wars.

We are bound to proceed on certain assumptions, unless we are to give up the task of recovery and reconstruction in despair. I hardly think it is possible to exaggerate the external dangers to Britain, although I think it is possible to exaggerate our domestic difficulties, as was done in a number of speeches we heard yesterday. No sensible person in Britain today can have any peace of mind about the future. We can do no more than our best to grapple with the complexities and dangers that confront us and endeavour to get over them with statesmanship, imagination and courage.

When we come to the domestic front, I think it can be said that a number of the speeches that were made yesterday exaggerated and exploited the minor discontents of social Britain today. How long have Members opposite been discovering what makes for a happy home? How long have they taken to realise that security of employment, regular wages, the amenities of home life, and a decent house in which to live with well cared for, well fed and educated children, make for a happy family life? What a pity it is they did not realise that between the wars. What a pity they were not able to grapple with our social problems in the way this Government have done, to bring about the universal well-being we now see on every side.

Some of the speeches from new Members opposite were further examples of the split mind of the Conservative Party. They want it both ways, they face both ways and they talk both ways. It does not take any Member opposite long to get from the perils of Britain to the refunding of Post-war Credits. It did not take the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) long to get from the dire perils overhanging our affairs, to a bustling mission through the corridors of Whitehall, terrifying the shorthand typists and amusing the charwomen with his cries of waste and extravagance. The descent in some cases from the major problems in our affairs to inconspicuous details of our administration was in striking contrast to many of the speeches we heard from these benches.

If there is one epithet more than any other which applies to Members opposite, it is that they are inexplicit men. Whenever we ask them to say what they would do, they hide their policy as if it were a closely guarded business secret. We can assure them from this side that we shall not steal their policy because we have one of our own. All we want to do is to compare it with our own, and, incidentally, we should like the public of Britain to know a little more about it. It is a striking thing that in their propaganda during the election they promised, in successive pages, a drastic reduction of Government expenditure, substantial reductions in taxation and, at the same time, to give consideration to matters involving very large expenditure.

I wonder whether Members realise that on the comparatively small matter of refunding Post-War Credits of deceased persons, bearing in mind that there would have to be a refund in the case of all those who have died in the past, it would cost, in the first year, some £50 million. That is a very large sum to come out of revenue, and it would make little contribution to the problem of incentives,. however desirable we all regard it to be to refund Post-War Credits in the case of those who have lost their husbands.

I doubt whether some of the analyses. of our economic problems that we have heard from Members opposite reveal comprehension of the true nature of Britain's difficulties. We have inherited these continuing crises from the industrial development of the 19th century. We surely comprehend and understand that Britain became an efficient converter of raw materials, and in return for the export of manufactured goods imported large quantities of food and fresh raw materials for her industries. Our population increased four times over in 100 years.

The hon. and gallant Member for Bedford (Captain Soames), who spoke so eloquently yesterday on agriculture and the need for fresh capital equipment, did not seem to realise, in his quotations of the change that overcame agriculture from 1875 onwards, that it was from then on that the Tory Governments began to neglect agriculture, so that the industry got into ruin and decay, because they thought that Britain held the clue to permanent prosperity in the export of manufactured goods and the imports of large quantities of cheap food.

Bringing the account of our industrial difficulties more up to date, we find a very clear statement of the position in the second volume, "Their Finest Hour,' of the memoirs of the right hon. Gentleman the Member for Woodford (Mr. Churchill). He describes how Britain started the war with £4,500 million of dollars, gold and investments which could be converted into dollars, and he tells of the drastic drain on our dollar reserves that was necessary during that period of our relations with the United States which is so infrequently referred to when we are told that we are now in receipt of American charity.

Mr. Spearman (Scarborough and Whitby)

Is the hon. Member aware that the amount of our investments sold during the war was just about half of what we have received from the United States since the war?

Mr. Houghton

That may be, but nevertheless our difficulties were seriously aggravated by the liquidation of our dollar investment resources in the United States during the time when we were getting essential weapons of war under the system of cash-and-carry. In his book, the right hon. Gentleman says: When war exploded into hideous reality in May, 1940, we followed a simpler plan, namely, to order everything we possibly could and to leave the future financial problems on the lap of the eternal gods. The "lap of the eternal gods" on which those financial problems fell, was the lap of the Labour Government.

If any hon. Member wishes to read a very clear analysis of the problems confronting post-war Britain he will find it in a letter written by the right hon. Member for Woodford to the President of the United States on 8th December, 1940. The conclusion of the letter was that not only should we in Great Britain suffer cruel privations but that widespread unemployment in the United States would follow from a curtailment of American exporting power. I beg hon. Gentlemen opposite to give attention to the last part of that quotation when viewing the future in relation to the continuance of American aid.

Now I would turn to the Budget Statement made by my right hon. and learned Friend the Chancellor of the Exchequer, and I will try to put it into the context of the present situation. First of all, let me refer to the Income Tax remissions which my right hon. and learned Friend proposes to make. I have detected in some speeches the possibility of misapprehension as to the import of those changes. I listened with attention to the broadcast of the right hon. Member for Bristol, West (Mr. Stanley), and even there I thought he might possibly be under the misapprehension that these Income Tax changes related only to earned income. We should all appreciate that these tax remissions will benefit all taxpayers, whether their income is earned or unearned, who are paying any Income Tax at all at the 3s. and 6s. rates. The reduction made will apply to both intermediate zones and differential rates of tax, irrespective of the type of income and of the total income of the taxpayer. That is the first thing to be clear about.

The concessions make working overtime a little more attractive to many workers than do the present 3s. and 6s. rates. To that extent it is to be welcomed as an additional incentive to workers to work overtime and to earn production bonuses. There is, therefore, in those remissions, a net wage increase for all workers of up to 4s. a week. Perhaps I may now put that matter in its relationship to the tax changes that have been brought about by the present Government in the last four years.

I wonder how many hon. Gentlemen opposite realise, when they are talking of the present level of direct taxation, that since 1946–47, the Income Tax paid by a single man earning £8 a week has been reduced by 43 per cent., and for a married man with no children and earning £8 a week, by nearly half. A married man with one child and earning £8 a week has had his tax reduced by nearly half and a married man with two children and with £8 a week has had his Income Tax reduced by two-thirds. Even a man getting £700 a year and with a wife and two children has had his tax reduced by two-thirds and the man with £1,500 a year and a wife and two children by one-third.

Other interesting comparisons could be made between the level of taxation today and the level of direct taxation before the war. In 1938–39, a married man with no children and earning £8 a week paid only £4 less in taxation than he is being asked to pay today. A married man with two children and earning £8 a week paid in 1938–39 only 27s. less Income Tax than he is being asked to pay under the current Budget proposals.

Those rather remarkable comparisons are not taken into. account when hon. Members are making general and exaggerated statements about the level of direct taxation. Those figures reveal that there is still a reserve of taxable capacity over a large proportion of the British people if it is necessary to meet a crisis in dire need and to make still further sacrifices. Alongside those figures of taxation we must put the increases in wages and salaries, and the fact that total earnings have increased to a larger extent than has the cost of living.

Another factor is that owing to the reduction in hours of work the rate per hour increased by 10 per cent. in each of the years 1946 and 1947, and that therefore the hourly wage rate has increased in excess of the index of the increase in weekly wages. Those are important considerations to have in mind when gloomy pictures are being drawn of the state of the workers of Britain. Their burdens, which are grievous enough, are nothing like so grievous as they were when confronting and experiencing large-scale unemployment between the two wars.

Now I would refer to the statement which has been made by hon. Members opposite, and by some of my hon. Friends on this side of the Committee, that the Budget proposals do nothing for the lower paid worker. It is true that one cannot relieve a lower paid worker of Income Tax which he does not pay or of Purchase Tax upon articles which he does not buy. One cannot reduce his cost of living except by increasing the food subsidies, and thereby benefiting all alike while substantially increasing the financial burden which the Chancellor of the Exchequer has to meet. Therefore, we must recognise that the Budgetary instrument has its limitations in distributing increased purchasing power and in the redistribution of income. Lower paid workers outside the range of Income Tax who do not get any direct or indirect benefit from the Budget proposals, will have to seek their remedy through the normal machinery of wage negotiation.

That, I think, entails some reconsideration by my right hon. and learned Friend of the White Paper on Personal Incomes, Costs and Prices, published in 1948. A standstill arrangement is all very well for a short period in order to meet a particular need and for a limited time, but it is no basis for the carrying on of our normal trade union affairs and of the normal relationship between trade unions and employers on the adjustment of wages and rewards for effort.

In the consultations which, I understand, my right hon. and learned Friend is having with the Trades Union Congress, it should be made clear—because I believe there is some misunderstanding on the point—that an increase in productivity in particular industries, and an increase in profits in particular industries, can scarcely be held to justify distributing the increased productivity over the limited area of the workers engaged in them. Such an increase in particular industries is an increase for the nation as a whole, and must be fairly distributed over the nation as a whole because, otherwise, those industries which are enjoying a measure of prosperity—often due to Government policy, especially with regard to capital investment—will press their claims for increased wages against those, equally strong, by workers in other industries who are playing their part in our national recovery, but who are not so favourably placed to demand wage increases. That would mean that the engineer could claim his £1 a week extra, but that the railwayman would get nothing at all. That is something about which we must be careful when reviewing wages policy, and when conducting discussions with the trade union movement.

My personal belief is that before long we shall come to embrace a wages policy which may entail the setting up of a national wages board, as, otherwise, I feel that the hazards and inequalities of normal trade union negotiations activities may worsen and aggravate the relativity between workers in particular industries, and between one industry and another, so as to make the maintenance of good will and peace in industry much more difficult.

I think that here we have a Budget based on the realities of the Economic Survey and adjusted in a way which will give that encouragement over a very wide field of workers—wage and salary earners alike—through the Income Tax remissions which have been given, and in other directions where additional taxes have been levied—for purposes fully explained by my right hon. and learned Friend—the consequences of which will, I believe, turn out to be far less serious than many of the gloomy prophecies now suggest. I trust that when the time comes this House will approve the proposals made by the Government for the financial year 1950–51.

11.54 p.m.

Mr. Osbert Peake (Leeds, North)

Yesterday's Debate dealt mainly with the economic situation; today we revert primarily to discussion of the Budget. On the economic side, we all rejoice at the increase which has begun in the gold and dollar reserves and the signs that we may at last achieve a balance in our foreign trade, and even in our dollar trade also. I share and welcome the Chancellor's note of caution in this matter. I agree with him that six months' experience is too short upon which to form a definite judgment as to the future trend.

I want to deal primarily with the Budget and with its underlying principles, since I believe that here is the weapon which is the key to the solution of our economic and financial troubles. But before coming to my main theme—which is once more the need for substantial reductions both in taxation and expenditure, and the means to achieve them—I wish to say one word about the Budget speech itself. I must confess—with all due respect to the right hon. and learned Gentleman—that I thought it a very dull speech. It brought to my mind that limerick, attributable, I think, to Sir Max Beerbohm, about the Old Man of Aulla. This gentleman, it was said, had read all the works of Max Muller, and when asked, "Are they dull?" replied, "Very dull, and get dulla and dulla and dulla." I have listened to all the Budget speeches of the right hon. and learned Gentleman, and I share that experience in common with the gentleman who had read all the works of Max Muller.

Let us also at this point shed a silent tear of sympathy for the Minister of Health. He is not here today, but as the Budget was unfolded it explained, if it did not altogether excuse, the expression of frustrated mortification on the features of the right hon. Gentleman. There had been great trumpetings in the "Tribune," and even reports by the political correspondents of some of our more responsible organs that, in the opinion of the Minister of Health, this Budget ought to be an election manifesto for full-blooded Socialism—it ought to be a challenge. In fact, if he had his way, it was to be a "Do or Die" Budget. Nay, more, as it was likely to be the only Budget introduced by this Government in this Parliament, it was a case of "Nye or Never," and we on these benches waited anxiously the other day, just as we now wait, owing to the close division of parties in this House, when a Division is called to see whether Mr. Speaker announces that the "Ayes have it" to see whether the "Nyes" had it. What we in fact found was that the "Nyes," in military parlance, "had had it."

This Budget is the evidence of the right hon. Gentleman's total defeat, but, of course, he has some very substantial crumbs of comfort. It is no little thing to have secured that all the cuts made on 24th October last which affected the Ministry of Health, and which were announced in the atmosphere of crisis over the B.B.C. by the Prime Minister, have apparently been cancelled and repudiated. The housing programme is restored to 200,000 houses a year, and all those brave words of the Prime Minister's have now been eaten—they appeared in a leading article in the "Daily Herald" of 25th October headed "The People's Hour," in which the right hon. Gentleman announced that there was to be a saving made in the Ministry of Health of £10 million a year on current account by charging everybody ls. for every prescription issued on the National Health Service, owing to the fact that the service had been the subject of abuse. The Minister of Health can comfort himself with having secured a complete repudiation by the Prime Minister and the Chancellor of the Exchequer of everything they said and did affecting his Ministry in the crisis of October last. [HON. MEMBERS: "Oh ! "] It is something to have a Government sometimes which announces a policy and adheres to it.

The Budget itself, like the speech that introduced it, is dull, drab, pedestrian and unimaginative. Whilst there is nothing in it, on the one hand, designed to soak the new poor, and thereby raise the spirits of the supporters of the Chancellor—

Mr. Harold Davies (Leek)

We are still courageous.

Mr. Peake

—there is likewise nothing in it to give a ray of hope and inspiration to the country. There is one detail of the Budget proposals I should mention, the question of charging Surtax upon those large payments made to business executives under what are known as res- trictive covenants. I heartily disapproved of those payments, and consequently I approve of the action of the Government in this matter. It would, however, be a little unfortunate if by charging Surtax on the grossed-up value—

The Minister of State for Economic Affairs (Mr. Gaitskell)

What is that?

Mr. Peake

Adding the Income Tax back to the value of these payments at the time they were made. If, in the meantime, the securities which were the subject of the gifts have depreciated in value, it would be unfortunate if the result were that a substantial fine should be found to have been inflicted upon either or both of these gentlemen as a result of the misguided enthusiasm of the shareholders of the companies to show appreciation of their services.

Whilst saying that, at the same time I welcome the fact that the Chancellor apparently now recognises that professional men of all kinds—whether they be highly paid business executives, barristers earning large fees, surgeons, or whatever they may be—only earn high salaries for a comparatively short time, and they are of course using up their capital, which is their brains and their skill, just as much as the business which obtains a depreciation allowance from the Inland Revenue. Therefore I welcome the reference of this question of professional earnings to the Committee which the right hon. and learned Gentleman announced in his Budget speech.

I have no time to deal with the other rather small alterations which the Chancellor proposes in this year's Budget, but I want to deal with the major fallacy which underlies his policy. In his speech the right hon. and learned Gentleman turned aside to explain his theories regarding public finance, in this statement: On the other hand, taxation, by drawing off part of the incomes of persons and business firms, reduces their spending power, and therefore the total of private expenditure. Of course it is perfectly true that taxation reduces spending power, but it does not follow that it thereby also reduces the total of private expenditure. That generality overlooks completely the fact that there are vast amounts of savings in the hands of a large number of people—£6,000 million of small savings alone—which may at any moment be thrown into the pool of possible expenditure and, of course, even larger sums not comprised in the small savings total. Then the right hon. and learned Gentleman went on: If the voluntary savings of individuals and firms are insufficient, then the Government must itself make up the deficiency in the nation's savings by accumulating a Budget surplus, which in effect helps to pay for capital development, such, for instance, as that provided by loans to local authorities. This is the theory of what has come to be known as the overall surplus. I will deal more fully with the fallacy contained in that in a few moments.

The third statement to which I want to draw the attention of the Committee is on the question of the overall surplus, when the right hon. and learned Gentleman asked: Should anyone be tempted to argue against the need for us to have such a surplus, I would ask him to consider whether, if we remitted taxation so as to do away with the above-the-line surplus "— I think he must have meant below the line—

Mr. Gaitskell

No, it is above the line.

Mr. Peake

we should get an equivalent rise in personal savings to make good the loss. Quite obviously that is not what would happen. The great bulk of the remissions would be spent on current consumption."—[OFFICIAL REPORT, 18th April, 1950; Vol. 474, cc. 62 and 63.] I do not believe that it is anything but an assumption that remissions of taxation would go into personal consumption. It depends a great deal upon what taxes are affected by the remission, but every citizen in this country still retains the liberty of deciding whether he shall spend or save, and the extent to which he shall do it. How he will exercise that option depends upon a variety of human motives and circumstances. I am sure about one thing, that the people of this country much resent being driven. They do not like compulsion applied to them and if they think compulsion to save is being applied to them, they can adopt a mulish attitude.

There are a number of taxes—and a number of classes of persons who, if remissions were made, would certainly not use them in expenditure upon what the Chancellor calls current consumption. The first and most obvious is the Profits Tax at present levied upon undistributed profits. Ex hypothesi, if that tax were remitted, it could not possibly go into current consumption because it is a tax upon profits retained in the business, not passed on to the shareholders. It is perfectly clear, therefore, that the remission of that tax could not possibly increase the demand for consumer goods.

Again, there are many people who desire to save but are quite unable to do so owing to the present high levels of taxation. I believe that professional men who are not in pensionable employment under the Government or the boards of nationalised industries or the local authorities, would certainly save the greater part, if not all, of any tax remissions they might receive. Today there is a further large class of person who are known, through no fault of their own, by the economists as "disinvestors," persons who have commitments which compel them to live beyond their current income and to spend the savings they have put away.

If tax were remitted, those people would not increase or augment their standards of living; they would become disinvestors to a smaller extent than they are at the present time. I believe it is a complete and utter fallacy, a basic Socialist fallacy, to imagine that remissions of taxation will automatically go into expenditure in current consumption. I will say later what I think is necessary to restore the spirit of thrift in this country, but there is a very strong spirit of thrift which has been much discouraged in recent years.

The Chancellor should further realise that high taxation is in itself inflationary. It stimulates demands for higher wages and higher salaries, and it encourages extravagance on the part of all those whose personal expenses are charged against profits before arriving at their tax liability. Let anybody who goes down to his constituency in the country tonight look around at his fellow travellers—and I use the word in its ordinary sense—in the first class restaurant cars and speculate as to how many of them have paid their own fares in full. I do not take this example as a reproof to any particular class of professional men but clearly, if we were a surgeon to whom a motor-car was a necessity and if we were paying tax at the rate of 15s. or 18s. in the £, should we not make sure that we had as good a car as money could buy? Would not that be human nature?

This is exactly the same thing as the extravagance local authorities went in for, as I found when I sat on the Public Accounts Committee. As soon as the Government grant was in excess of 50 per cent. local councils began to say, "It is almost our duty to spend as much public money as we can because we shall receive a grant of 75 to 80 per cent. of it from the National Exchequer." So it is with professional persons of all kinds whose expenses are a charge, at the present high rates of taxation, before the ascertainment of their tax liability. Taxation is now so high as to be very definitely an inflationary influence.

I turn now to the theory underlying the Chancellor's overall surplus. He has again provided out of current taxation for the whole capital outlay of local authorities and nationalised undertakings and this capital outlay is nearly all productive in its character.

Mr. Gaitskell

Not all nationalised undertakings; only those which borrow from the Treasury.

Mr. Peake

If the right hon. Gentleman will look at his own list below the line he will find the capital outlays of the nationalised undertakings.

Sir S. Cripps

But the right hon. Gentleman will appreciate that a number of them do not borrow from the Treasury but on the market.

Mr. Peake

I will accept that correction, but the right hon. and learned Gentleman has provided a considerable sum below the line—the figures are all in the statement—for capital outlays by nationalised undertakings. Do not let us quibble about whether it is the whole or only part—it is a substantial part.

Sir S. Cripps

But the right hon. Gentleman said it was the whole and I am only trying to put him right. I do not want him to appear to have said the wrong thing.

Mr. Peake

When I said "the whole "I think I was referring to the capital expenditure of the local authorities.

Sir S. Cripps

That is not right, either.

Mr. Peake

The right hon. and learned Gentleman must not split hairs on this matter. He is providing below the line, out of current revenue, something like £500 million for capital outlays by local authorities and nationalised industries.

Sir S. Cripps

The right hon. Gentleman will find that amongst the items below the line is war damage, amounting to £100 million, which is paid neither to local authorities nor nationalised undertakings.

Mr. Peake

I quite agree. Let us then agree to take £100 million off the figure of £520 million below the line and say that the right hon. and learned Gentleman is providing £420 million.

Sir S. Cripps

That is near enough.

Mr. Peake

He is providing that for capital expenditure out of current taxation—and he says the figure is "near enough." I think the Committee should consider whether this is desirable or necessary, both in theory and in practice. So far as the theory is concerned, no private citizen would think it necessary to provide for building his house, for example, or providing any other permanent asset of his business out of the current income of the year. It is perfectly wise and sensible and prudent either to invest one's savings, or to borrow on mortgage, for part of the cost of a permanent productive asset, but the Chancellor today is providing this money out of current revenue. What he is doing is in theory unnecessary and, from a strict accountancy point of view objectionable; and what we have to ask ourselves is whether, in practice, what he is doing is necessary at the present time and if so, why is it necessary?

The Chancellor's justification, of course, is that there has been a falling off in recent years of personal savings and that this tendency continues. At this point let me disabuse anybody's mind of the idea that personal thrift has diminished as a result of the growth of social security. Nothing in the whole history of this century is more remarkable than the steady growth of private thrift in combination with the development of our social services. None of the social services which has grown up in this country since 1911 has, in my view, done anything to diminish personal thrift. It is very remarkable to note the enormous growth in the sums put aside by means of industrial assurance, for example, at the same time as we have been providing against the misfortunes of existence by social security measures.

Let me also point out that there is no logic whatever in the Chancellor's attitude in providing part of the national requirements for capital outlay out of current revenue. There would be just as good reasons for providing the capital needs of industry as a whole by means of current taxation as there is for providing only for the needs of local authorities and part of the needs of the nationalised undertakings. Indeed, if the right hon. and learned Gentleman's present policies are pursued, we shall undoubtedly find ourselves faced, in the course of a short time, with the unpleasant necessity of imposing further taxation to the tune of another £400 million or so to make good the disappearance of personal savings.

The fact is, of course, that the Chancellor is in a vicious circle of his own and his predecessor's creation. The Government have first created conditions in which, for the last five years, saving has been both difficult and disappointing —difficult on account of the high rates of taxation and disappointing because the value of the savings has steadily diminished. Has anybody forgotten the famous declaration of the right hon. and learned Gentleman's predecessor, the present Minister of Town and Country Planning in one of his Budget speeches, when he boasted "There is plenty of purchasing power now; that has been our aim "? It had been the aim of the right hon. Gentleman to create purchasing power. Is it surprising, in those circumstances, that we have had a large measure of inflation, a falling value of the sterling and a growing disinclination towards thrift and saving? It is not surprising in those circumstances that personal savings have diminished; but, instead of blaming himself, the Chancellor blames the public and imposes ever heavier taxation to make good the short-fall of savings, and this in its turn makes saving even more difficult.

There is really no way out of this vicious circle until we have a Government whose primary objective it is to maintain the value of money, and who are prepared to avow that that is their primary objective. I deplore the necessity, under Socialism, for the overall surplus, and I am confident that, under a Conservative Government, we could reverse this policy and could encourage saving and make it again worth while; we could abandon the Chancellor's policy of compulsory saving and forced irredeemable loans; and I am convinced that we could thereby release very large sums for the reduction of taxation which, in their turn, would be saved by a thrifty people for the general advantage.

Since I have been referred to by two hon. Members opposite, the hon. Member for Chesterfield (Mr. Benson) and the hon. Member for Blackley (Mr. Diamond), I wish to say a word or two about the work of the Public Accounts Committee. The hon. Member for Chesterfield said that in one of my speeches in advocating economy in public expenditure, I had given some instances from a report of the Public Accounts Committee and he totalled them all up, and they amounted in toto, he said to a sum of a quarter of a million pounds. One thing I never do is to read my old speeches. [Laughter.] That is very wise.

But the hon. Gentleman was making a very false point. If the Comptroller and Auditor-General draws the attention of the Committee and the Committee draw the attention of the House to an instance of one dentist under the National Health Service who has made £25,000 in one year, it may be said that the waste of public money involved there is only of the order of £20,000. But these things are only instances and examples, and that runs through the whole of the work of these Committees. They pick out the most glaring examples to which to draw the attention of this House. During my chairmanship of the Public Accounts Committee, I am convinced that we drew attention to waste of public money at any rate running into tens of millions, and, I should say, hundreds of millions.

One glaring example was the £70 million or £80 million which went down the drain in those black market transactions in North-Western Europe which the then Secretary of State for War apparently had not the will, or the inclination, to stop. But when we come to look at other little things, like the Groundnut Scheme and so on, we can quickly get past the £100 million mark. Of course it is true, and I concede it, that the really large economies lie in the field of policy; and questions of policy are rightly excluded from the purview of these two Committees. How could an all party Committee of this House function if questions of policy came before it? They would be in a constant state of friction and division. I will concede further that it will not be so easy now to find large scale economies as it would have been three or four years ago. A great deal of water has passed under the bridges since then, and it would have been very much easier to balance the Budget at a much lower figure if it had been resolutely tackled three or four years ago.

We know there are big economies which could be made on questions of policy—food subsidies, the National Health Service—the right hon. and learned Gentleman has said in one Budget speech anyway that there has been abuse. Then there is groundnuts—

Mr. Harold Davies

Defence?

Mr. Peake

Defence is another. Does anyone believe that we are getting the best value for this sum of £780 million? If anyone says that economy on a large scale is not possible, we have to take that with a grain of salt since last October. We had many denials that that was possible, and then the Government came forward in one fell swoop with a programme for saving £90 million. I see that the Financial Secretary to the Treasury was stating the Government's record in this matter on the night before last, when he said that the economies made last autumn over and above those in the investment programme, included many administrative economies of the kind which my hon. Friend the Member for Wimbledon (Mr. Black) had urged in a very excellent maiden speech, and reduced the total of the estimates in 1950–51 by £90 million below what they would otherwise have been.

I do not think they could quite do that, because everything the Ministry of Health were to economise on has been scrapped and the £90 million has now to be revised a little in a downward direction. The Financial Secretary, however, went on to say: In addition, against the Supplementary Estimates for 1949–50 of £170 million, we, in fact, made savings in other Departments of £114 million, which do not seem to have attracted so much notice."—[OFFICIAL REPORT, 19th April, 1950, Vol. 474, c. 254.] The hon. Gentleman was claiming £114 million in the past year apparently over and above the £90 million which is to operate in the course of next year. This all makes very ridiculous the repeated statements that no economies are possible. The Financial Secretary does not like this quotation being used, but we must use it from time to time: The idea that tens of millions of pounds can be saved by administrative economies without changes in policy is sheer moonshine." —[OFFICIAL REPORT, 23rd June, 1949, Vol. 466, c. 520–1.] I have admitted that it is much easier to make big economies by changing policy than by economies in administration, but I would like to know if the £90 million envisaged for the current year's savings is on questions of policy.

The Financial Secretary to the Treasury (Mr. Douglas Jay)

The changes which gave rise to this were stated by the Prime Minister in October.

Mr. Peake

Then how does the hon. Gentleman account for the £114 million for which he took credit on the night before last?

Mr. Jay

That is in changes in policy already decided on when I made my speech last summer.

Mr. Peake

If they had been changes in policy amounting to £114 million, I think the House and the Committee would have heard of it before now. Over and above all these figures the Lord President of the Council in an oft repeated and now famous statement promised a further list of economies. A further list was to come. That was in October and we have waited ever since during the election and since the election, and the Lord President's list is now apparently like many of the Government's other proposals, abandoned. Nevertheless, there was a Government plan for economy on a very substantial scale which has never been disclosed in this House.

It would certainly be our intention if we were in a position to form a Government to achieve very substantial economies both in the major fields of policy and in the minor fields of administration. It would of course be necessary when making large cuts in food subsidies, for example, to provide some compensatory increases in other fields to help the lowest paid worker and in family allowances. When hon. Members take up our statement of policy, "The Right Road to Britain "and pick out certain items, they are only small matters compared with the enormous savings which we can and shall achieve. They are necessary in order to compensate for hardships which those savings might otherwise inflict.

We welcome the Income Tax changes which the Chancellor proposes. We think Le could go further and extend his proposals to cover the standard rate. I believe also that indirect taxation, notably the tax on beer, is being maintained on a level higher than that which would give the greatest yield and I believe this is being done because the gentleman in Whitehall really does think he knows better what is good for people than the people know themselves.

It would be possible substantially to reduce public expenditure. Even apart from that, I am convinced that under a Conservative Government it would be possible, and indeed sound policy, substantially to reduce taxation. This could only be done by a Government determined to maintain the value of the £ and make that its primary objective, and by an appeal to our people by a leader whom our people trusted. We had our last warning last year. We cannot stand a second devaluation. We are apparently to continue with the policies which, in the words of the Economic Survey, we have pursued during the last three years. I deplore that. Like my right hon. Friend the Member for Aldershot (Mr. Lyttelton), I believe that these policies can only lead us to further expedients and to further crises.

12.31 p.m.

Mr. Pannell (Leeds, West)

The right hon. Member for Leeds, North (Mr. Peake) referred to the Chancellor's speech as having been dull. That is scarcely the type of epithet that ought to come from the right hon. Gentleman. We never find his speeches particularly bright. I think that term might have been used by the hon. Member for Flint, West (Mr. Birch), who is entertaining. That expression might have been used in that way, but I can hardly think that the right hon. Member for Leeds, North, is entitled to refer to anyone else's speech as dull. I have always found him to be a courteous opponent across the Floor of the House, but he is not exactly one of the brightest of the Members of the Front Benches in addressing this House. If the Chancellor's speech was dull the right hon. Gentleman answered it with a like speech.

I am glad to know that the right. hon. Gentleman agreed with the Chancellor in the matter of what is known as the Sir John Black and Mr. Lord case. It would have been indefensible had that sort of thing been allowed to go on at the same time as my own people, the engineers, were being asked to exercise a policy of wage restraint.

Captain Ryder (Merton and Morden)

"My own "people?

Mr. Pannell

I need not apologise for the fact that the roots of my being are in engineering. I was brought up in engineering centres and I am as proud to say that as other Members are to say that they come, for example, from the legal profession. I repeat that they are my own people.

Captain Ryder

No.

Mr. Pannell

I cannot understand why the hon. and gallant Member should intervene in that way.

The right hon. Member for Leeds, North, spoke about the comparatively short term of life of professional men. I can remember the time in the old days, before this Government were in office, when my people, skilled engineers, were too old at 40. When we are told that "everyone decides how he shall spend and save," I invite the right hon. Gentleman to read his old speeches and see how ludicrous that sounds.

We also heard during his speech the statement that local authorities were rather encouraged to be lavish when the grant rose above 50 per cent. I do not know what experience the right hon. Gentleman has of local authorities. As one who introduced 11 budgets as the finance chairman of a local authority, and who was the spokesman for 56 of them in financial matters arising out of the loss of rateable value due to enemy attack during the war, I submit that that aspersion is thoroughly unwarrantable.

Mr. Peake

I think the hon. Member will find that view expressed in a report of the Public Accounts Committee as the view of the Committee, and not as my own view.

Mr. Pannell

The right hon. Gentleman cannot divide his responsibility. A few minutes ago he was claiming credit for terrific savings. Now he repudiates the point of view of his Committee. Speaking from my own experience of both county and borough local authority work, I say that the time devoted by ladies and gentlemen in a voluntary capacity in an attempt to keep a watchful eye on public money is beyond all praise. The right hon. Gentleman suggested that because funds—for education, etc.—happen to be grant-aided, they are necessarily wasted. That is ridiculous; it just is not true.

I have not however risen today to deal with the points made by the right hon. Gentleman, but to differ with certain points in the Budget, in particular the 331 Purchase Tax proposed on commercial vehicles. I very much doubt whether such a tax is justified over the whole range of commercial vehicles. Unless we have a great and expanding home market I very much doubt whether that point of production can be maintained at which mass production costs can be forced down to the lowest possible level. The commercial vehicle industry, the employees of which I may class among my own people because I served my apprenticeship in that industry, today exports its products in the main without vehicle bodies—they export the cab and the chassis. The question of the export of commercial vehicles is an entirely different proposition from the export of private cars.

I appreciate the arguments of the Chancellor in suggesting that sales in this country have reached the point when they must be curbed, but I doubt whether this is the way to curb them. I very much doubt whether the great transport fleets of this country have been completely replaced since the war. I know from personal experience of the terrific waste in manpower which is involved in the reconditioning and maintaining of old fleets. In a fleet of vehicles with which I was personally concerned before I came to this House the number of vehicles has been increased by something like 40 to 50 per cent. compared with pre-war. What is the reason for that? It is not the reason adduced by the Chancellor. I will deal with the point as to whether the commodities concerned could be carried by the railways or not.

The Ministry of Town and Country Planning, for example, insist that shops should be properly sited on new estates. It would be generally true to say that on these estates, people have to go further and further to do their shopping, and the service of delivery to one's door is not so much a luxury as a physical necessity on these new estates. Not only has there been a restriction in new businesses which are allowed to be put on new estates but the mobile shop is now by no means an innovation, and that has added to the number of vehicles required. It seems to me that here is a strong case for approaching this question in some other way than by this tax proposal.

Even admitting that the Chancellor has a case in regard to commercial vehicles generally, although I do not at this moment concede it, there is an aspect of the problem about which Members have received notice this morning but which I had already taken up officially previously. I refer to the special position of electric vehicles. Whatever case there may be in regard to the petrol vehicle, there is surely in respect of the electric vehicle a case for exemption. This vehicle has been developed largely because of the lack of petrol, and it is interesting to note that between 1945 and 1948 the number of such vehicles on the roads of this country increased from 7,250 to 15,750.

Surely, therefore, different considerations must prevail in this case. The electric vehicle might also be considered as a dollar saver, although it cannot be exported, because it is built for the British market. I know that there are two of these vehicles, one lying in New York and one in the Argentine, which will never go on the roads at all, because they have a coasting range of only about 40 miles a day. Therefore it is not exportable to dollar countries, but it is charged when electricity is off the peak load, and it has other desirable features.

There is another point too about the electric vehicle; it costs twice as much to buy as a petrol vehicle and therefore the tax of 331 seems excessively harsh. On other grounds also, apart from the Budget, the use of an electric vehicle is desirable. We all deplore the noise of our cities, and with this vehicle there is no noise. We all deplore the smells of our cities, and with this vehicle there is no smell. With a cruising speed of 16 to 18 miles per hour the element of road safety is far higher than with a petrol vehicle. All the best people—and by that I mean the best people in the sense of food distributors—have adopted this vehicle because of its essential cleanliness. In local authority work we often talk about clean food campaigns, but we ought to furnish the essential means of distribution for clean food.

The co-operative societies have played no unworthy part in this development. This morning I received a letter from one society from which I will quote: It may be interesting to you to know that during the past three years we have spent about £120,000 to electrify our delivery rounds on bread and milk and this is only a part of a long term policy. Generally speaking it can be said that this policy has been in the interests of the employees who for many years used the ordinary hand barrow involving a strain on the men concerned. The policy of electrification does mean considerable casement in the work and of strain imposed on this type of labour. I have had the medical records of at least two firms—rHoN. MEMBERS: "Where was it? "1 I was quoting a letter from the Royal Arsenal Co-operative Society which is, of course, the largest distributor of food stuffs in South and South-East London and of whose engineering staff I was a member before I came to this House.

They are good employers. I am not saying they are the only good employers, and the point about strain on the men is a very real one. I have examined the medical records of a number of men suffering from hernia due to drawing hand-carts and trucks. These sickness records have to be seen to be believed. Many hon. Members, particularly on this side have, in their more flamboyant moods of oratory, drawn word pictures of women who, a hundred years ago dragged trucks in the pits of this country with a guss round their waist. I consider it just as undignified that a youth educated in one of our many schools—as chairman of an education authority I know of many such cases—should be put on the road to do this donkey work. It is a form of labour which we should not despise but which we should disparage.

The consequences of the tax will fall not only on the vehicle which a man drives through the street, but also upon the hand-propelled truck which a person operates through pressing the handle. I have seen how useful are these hand-propelled vehicles because one is operated by the boy who delivers bread every day to the place where I live. After coming up a hill he usually stops there for the morning cup of tea. We ought to encourage such a form of transportation which does away with an undignified type of work. Therefore I hope that some consideration will be given to the points I have made. In their letter to me the Royal Arsenal Co-operative Society also ask: What distinction will there be if a chassis is purchased and then a body is built for it, as against a vehicle purchased with complete chassis and body? That again is a case of a commercial vehicle where the chassis is very much separated from the body. If we look at the Financial Statement, page 17, under "Purchase Tax," there is a list of: Vehicles of the following descriptions constructed or adapted solely or mainly for the carriage of passengers. which the Chancellor envisages will be excepted from the tax. I hope he will add to it the electric vehicle.

A point has been made that as much stuff as possible should be transported by the railways. Although I am a road transport man, broadly speaking I agree with that view. But if we take the whole area served by the Royal Arsenal Cooperative Society, or the area served by the London Co-operative Society, there is no possibility of an alternative transportation of merchandise by rail. This question of increased transport has a very curious analogy with an argument used recently by the Minister of Health, who maintained that one of the reasons why there was a shortage of houses was because more people had money and there was a greater demand for houses. The need for increased transport for goods and services is a reflection of the full employment policy.

I would put one other point with which I feel sure the Minister for Economic Affairs will agree. During a demonstration in Leeds Town Hall in the course of the election, where I followed him and we returned five out of seven seats—when the hon. Member for Leeds, North (Mr. Peake) was in the minority and found it a very dull day I may say—the Minister said that when canvassing he was amazed at the number of women who were at work, and the number of empty houses he found.

Mr. Selwyn Lloyd

Perhaps they knew the right hon. Gentleman was coming.

Mr. Pannell

No, there is in Leeds the highest level of employment ever known and the hon. and learned Gentleman cannot get away with that sort of alibi. I think that the point mentioned by the Minister emphasises the point which I am making; that it is not possible for men and women to go to shops to get their food. Their purchases have to be delivered to the door. I consider there is a specific case for the exemption of the electric vehicle from this tax. If the tax is imposed on a vehicle costing between £600 and £700 we shall find it reflected, not necessarily in an increased price for food, but rather in a tendency to stick to old and antiquated forms of transport which are unhygenic and unclean and derogatory to the best standards of human health. What really matters is not only the figures in this Budget, but the effect on the men and women in the country; and for that reason I would plead to some differentiation in tax between the electric vehicle and the petrol vehicle.

12.50 p.m.

Mr. Martin Smith (Lincoln, Grantham)

In rising to speak for the first time in this House, I ask for that indulgence which is always shown to new Members. One of the many lessons I have learned since my election has been about the different interpretations put by hon. Members on the word "non-controversial." I will try not to overstep the bounds of controversy, but if I do, I hope the Committee will understand that I do it in a sincere attempt to be constructive. The hon. Member for Manchester, Blackley (Mr. Diamond) stated, two days ago, that he was tired of always hearing the same arguments from this side of the Committee. In as non-controversial a manner as possible, I should like to say that we find that sometimes it is necessary to repeat arguments before their full wisdom is understood.

Perhaps I might repeat one or two of those arguments, but I will also bring to the notice of the Committee one or two matters which, rather surprisingly, have not yet been mentioned. When I come to the Chancellor's proposals, I immediately find myself out of bounds. I regard them as unimaginative, unhelpful and, in many cases, unfair. Of these three points, the most serious is the lack of imagination and urgency. The year 1952 might be in the next century.

This spirit of complacency has -also been shown in the speeches of many hon. Members opposite. There is a great need for urgency. Production, we know, is rising. We need not argue about the exact percentage. We have full employment, and for that we are all happy; but no one will admit for one moment that we are all fully employed. Nor can we ever be fully employed while we suffer, as we do today, under a penal rate of taxation and under that well-intentioned but wholly impractical policy of wage freezing.

Many people in industry rightly consider themselves underpaid in view of the present high cost of living. Many others consider themselves underpaid in view of their skill. In both cases, I think, they are right. We cannot expect people to work as hard as possible when we tell them that they can have no extra reward. They cannot give of their best unless they are given a proper reward. If anyone believes that they can, then his faith in human nature far transcends my own. We are told that the wage freeze must not be broken. I agree that if it were broken we should have a grave measure of inflation, but we on this side of the Committee feel that the wage freeze policy will break down.

We consider that the only action to take is to have a definite reduction in taxation and to devise some scheme whereby skill, energy and hard work can be given its just reward. Not only can we not get full production, but that policy of wage freezing will ruin one of the most valuable things in the trade union movement, and that is the differential. We should be happier if we thought that there was somebody in the Government who had a full knowledge of our financial position who would work out the equation and apportion sums among the various Ministries, always keeping in mind that production must be the first charge and the Government's own needs the last. Today, the opposite policy seems to be working. We want production, yet the needs of the Government come first. That makes no sense. It might perhaps be described by the word "infrastructive." It seems to me to make about as much sense as the word "infrastructure" did yesterday.

Taxation is now so high that the old economic law of diminishing returns is rapidly starting to work. If the Chancellor took a brave step and reduced taxation considerably on certain articles, he would find that production would go up and that revenue would not decrease. Production is up today, and that redounds greatly to the credit of all who work in industry; but I consider that a great proportion of that improvement has been due to capital development. We should encourage more capital development. There is an overwhelming need for it all over the country, yet undistributed profits are not encouraged. There should be no tax whatever on undistributed profits. Industry should be encouraged to plough back as much as possible by way of further capital development.

I do not know whether it is the word "profit" that is to blame. Perhaps this money should be described in the balance sheet as "undistributed assets." That might make the job slightly easier. Let us encourage more capital development and not tax lorries which, of course, are a form of capital development. Last year we had what was described as our annual crisis, the crisis of devaluation. The £ was devalued, and that allowed us a short respite. Our export figures are up as a result. That came as no surprise to many on this side of the Committee. Devaluation enabled many of our exporters to sell goods which they had had to finance in warehouses unable to sell them because of high costs. It allowed them to get rid of this onerous burden.

I feel that a further devaluation will be necessary. That is not a damaging rumour: it is merely facing the fact that the value of the £ is below the official rate. It is a cliché to say that today we are suffering a crisis of confidence. It is lack of confidence in the £ which is damaging our foreign trade. I advise the Chancellor again to take what some of his supporters might call an over-brave step. I should like him to seek American help. I should like him to seek a solution to the sterling balances position. That is not an insoluble problem. It only appears insoluble today because there is no policy whatever on sterling balances. If they were considered in the light of how they were first accumulated many of these balances might be found to be our assets. Let us find some solution there—seek American help, seek the co-operation of the Empire, and then free the £ altogether.

That may sound to be an over-brave step, but if devaluation is to come again —which is a real danger—do not let us devalue to a certain figure. It is impossible, in present-day conditions, to find die right figure at which the £ should be valued. Let us free the £ completely. I believe that the immediate reaction will not be a flight from the £ but a restoration of confidence by the foreigner in sterling. In time it would be found that the £ would increase in value. Confidence would return. That is not a revolutionary idea. It is merely a return to sound financial commonsense.

It was our boast a short time ago that London was the centre of world finance. I am afraid that it is no longer our proud boast. One of the reasons is this lack of confidence due, perhaps, first of all, to the purely political but extremely damaging action of the nationalisation of the Bank of England. One used to hear the phrase "As safe as the Bank of England." Now it is turned into" As safe as the Government." I leave hon. Members to judge which is the best. Another reason is—and I say this, even though it may be controversial, in a spirit of non-controversy — the misguided speeches of hon. Members opposite about the City of London. Many of their statements may have caused a certain amount of excitement among the uninitiated, but each of these statements has damaged our foreign credit.

I appeal to the Chancellor to keep politics out of the City of London. It is one of his most valuable assets, and if we can be rid of these damaging speeches, if we can carry out the measures I have suggested, he will find it a very real asset indeed. If hon. Members opposite do not yet understand what goes on in the City of London, I should be delighted to show them. I work there myself. I might even regale them with that famous City of London dish, fish and chips. I appeal to the Chancellor for further urgency; for further tax reduc- tions. I am certain that if those tax reductions are made there will be no loss of revenue; I appeal to him to keep production as the first charge and the Government's needs as the last; and to free sterling, which will bring back a return of confidence in this country.

1.1 p.m.

Sir Richard Acland (Gravesend)

It is a very great pleasure to have an opportunity of congratulating an hon. Member on his maiden speech, and today I do most sincerely congratulate the hon. Member for Grantham (Mr. Martin Smith) on having stated the Conservative case with such drive, and on the brilliance of his approach; and I congratulate him on never having been bunkered from beginning to end. I can use these terms because I am instructed that he is the only known amateur golf champion who has ever been elected to the House of Commons. We shall look forward to hearing him again. Particularly we shall hope that he will develop his theme that the City of London was never connected with politics until the present Government came along; and when he does so, we shall see whether he is able to get himself out of the rough.

On the subject of the Budget itself I can shorten what I would say by reference to speeches made already by other hon. Members, and by saying that I completely agree with the speech of my hon. Friend the Member for Birmingham, Stechford (Mr. Jenkins) on the long-term need for a rather steep capital levy sometime in the coming Budgets, and that I also agree completely with the speech of my hon. Friend the Member for Manchester, Blackley (Mr. Diamond) in which he suggested that a doubling of the family allowances would have been a better and wiser concession than that which has been made to the Income Tax payers in the income bracket of from £7 to £12 per week. It would have done more to support the present policy of wage restraints.

Having dealt with those points in this quick way, I want to turn to a thoroughly difficult subject. I hardly want to contribute at all to the Debate upon the subjects which divide the two parties in this House. I want rather, if I can and if the Committee will bear with me, to challenge the fundamental ideas which, as I understand them, are assumed to be agreed between the two main parties on the opposite sides of the Chamber today. When people say that the two main parties are, after all, agreed on all points of fundamentals, and that they only differ as to the methods by which the agreed purpose is to be pursued, I think it will be agreed that the purpose which is supposed to unite us can be stated in these words, "It is the purpose of British political endeavour to maximise British material prosperity."

Along with that common purpose, on all sides of the Committee and among vast numbers of people outside we share a common daydream which is called "British material prosperity." We envisage this daydream in terms of happy days ahead of us when all sections of the community, rich and poor, will be able to buy all that they want in all the shops at nice, easy prices which everyone can afford, and when all British unhappinesses will be washed away in a nice warm flood of British material plenty. We know, of course, that this daydream will not be realised under any Government either in 1951 or 1952, but we all have a feeling that we ought to be seeing some signs of its breaking out sometimes in the later 'fifties and that it ought to be in more or less full working order sometime in the later 'sixties.

I want to put the serious thought to the Committee that unless the British people are able to wake up from that daydream, unless we can abandon our almost unanimous but "phoney" purpose, unless we can face the real world and accept for ourselves the much more arduous purpose which this world imposes upon us, then, to put it bluntly, it is four chances out of five that this country will go to hell. Or it could be put more widely—four chances out of live that Western civilisation will meet total and absolute social and economic disintegration on the widest possible scale this side of 1975. Because of the facility with which the Conservative Party's "Speakers' Notes "quote single sentences from speeches made on this side, I must hasten to add that, in my opinion, if the party opposite had been in power since 1945 we should not now be going to hell: we should have got there. To give a single example of what I mean, under the Indian policy that would have been pursued by the right hon. Gentleman the Member for Woodford (Mr. Churchill), such slender chance as there may be of saving Western civilisation from total disintegration would have already disappeared.

I must make one other controversial point—I say one other because most of my speech is intended not to have a controversial but a unifying effect. I must make this one other controversial point, because hon. Members opposite may think it is not necessary for them to listen to me on the grounds that they think themselves possessed of a policy which would enable this British daydream to come true—as I say, not in 1951 or 1952 but sometime in the later 'sixties. Very briefly, let us examine their policy, which was so cogently stated by the hon. Gentleman the Member for Grantham. Indeed, we must thank such hon. Members as those Members for Scarborough and Whitby (Mr. Spearman) and for Chippenham (Mr. Eccles), and now the right hon. Gentleman the Member for Leeds, North (Mr. Peake), for having been so honest as to tell us that it is their policy to make economies by substantial changes in policy, by cutting down expenditure on the social services and food subsidies; and that through these economies they would give such remission of taxation as would provide incentives for ambitious types among the business community and among workers, to make people work harder. On top of that, the policy of the party opposite is to hand back the economic and industrial destiny of our country to those people who, in their view, are the best people to look after it, namely, the businessmen and merchants of all shapes and sizes. I do not think that that is an inaccurate, though it is a brief summary of the main items of policy which the party opposite would pursue.

I want only to ask them one question about it: What would they do about German and Japanese competition?

Mr. Nigel Birch (Flint, West)

What would the hon. Gentleman do about it?

Sir R. Acland

I know that that is a question which hon. Members opposite quite often ask of us. I am only asking it back again. They have the idea that their policy would enable this great British daydream to be fulfilled in the 'sixties. I am sure, however, that under their policy they have got no answer to the question, what would they do about German and Japanese competition.

There is one other point which I wish to put, not only to hon. Members opposite but also to hon. Members on this side of the Committee, because it concerns the demands which are likely to be made on our economic and material resources in the next five, 10 or 20 years. What are we going to do about the Colombo Conference? We have committed ourselves to a policy in principle which is meaningless unless, in the next few years, it is going to make ever increasing demands upon our material resources. I shall return to that in a moment.

If the situation is truly as difficult and as challenging as I believe it to be, what are we going to do about it? How are we—and by "we" I mean the political leaders of both sides of the House—to be able to carry the people with us, and retain any form of enthusiasm and confidence in our country in the next couple of decades? On both sides of the House the only hope for doing so is to start with a confession in three quite simple words —"We were wrong." We were wrong in inheriting unchallenged from our individualistic ancestors of the 19th century a wildly over-optimistic view about the world in which we are living.

I want to make this confession for myself. I happened—I was almost tempted to use the phrase "because of circumstances over which I had no control"—to have the privilege of being one of the minor political broadcasters in the 1945 General Election. When I was called to fight a by-election under much more arduous circumstances in 1947 I looked up the relevant copy of the "Listener," expecting to find, in that broadcast of mine, that I had used some words to warn listeners of the dangers and difficulties lying ahead. I did not find a single sentence in my speech in that sense, and I was bitterly disappointed.

But here is my confession. I find it in the Conservative Party's "Campaign Guide" on page 557: The biggest mistake the Labour Party made was being too optimistic in 1945. Though warnings were uttered by some of our leaders, the general impression of all our propaganda was that we were on the brink of a wonderful, comfortable and cosy time all round. That was a quotation from a speech I made on 14th February, 1948. Quotations could have equally been taken from any of the speeches I made during my by-election campaign. I always thought, during the last Parliament, that the Labour Party was at a real disadvantage vis-à-vis the Conservative Party, because of our optimism in 1945. I am glad that since 1950 we are quits; for the over-optimism of the Conservatives in 1950 was at least equal to, if not far surpassing, the over-optimism of which we ourselves were guilty in 1945.

Therefore, I think that all the political leaders of all parties are to blame in this matter. We should tell the people we purport to lead that we have been wrong about this, and that this world is a much harder and tougher place in which to live than we thought. Why? Can it be said that it is because of Communism? That could be said, but it would be the wrong way to put it. It is too easy to put it that way. It encourages our own self-righteousness. Put that way it gives us a moral get-out and places the blame upon other people. It suggests, too, that military re-armament at whatever financial cost must be the right, and, indeed, the only way of dealing with the problem.

I think it is better and tends more to encourage humility if we say that the world is a worse and tougher place than we supposed because of the inveterate habit of wealthy people which leads them utterly to ignore the poverty of the poor. That habit, 100 years ago, was most noticeable within the boundaries of our own country. If the bishops and the main body of respectable middle-class churchgoers of the 19th century had given any noticeable support for the demands made (among others, by the Christian Lord Shaftesbury), for the poorest of the poor, Marxism would never have flowed from the pen of Karl Marx in its aggressive and atheistic form. But whereas 100 years ago this bad habit was most noticeable within our own borders, today it is most noticeable in the thoughts and outlook of the whole of the British people to the poverty-stricken millions of the world. In these last several decades we, in this wealthy nation, have insufficiently considered the needs and the claims of our coloured brothers, and it is for that reason that we are now finding this world so very much tougher than we supposed it was going to be.

We have such a dreadful habit of describing world tendencies in abstract and not in human terms. When we say that one of the major causes of our present difficulties is that the terms of trade are moving against us, what does that abstract phrase really mean? It means that hundreds of millions of coloured people, who used to sweat their guts out for a handful or two of rice, to produce the foods and raw materials for the industrial nations will not do it any more. I cannot at all doubt that the lord of history intends that those terms of trade shall continue to move against us in that way.

Consider all the people in the great sweep of territory embracing the East Indies, Indonesia, Malaya, Burma, India, Pakistan, Ceylon, the Middle East, Africa and the West Indies. That is the great undecided area of the world and it is there that the contest in the second half of the 20th century will be fought out. The question is whether we can hold the peoples of those great and widespread lands in any form of moral or material partnership with ourselves, or whether they must go down into social chaos or into Communism. Rejecting, therefore, the "phoney" purpose of promoting our own material prosperity, I would offer to right hon. and hon. Gentlemen on both sides of the House a better but much harder alternative, and that is that it must be our purpose to help, encourage and sustain those millions of poor people in all their righteous aspirations and—this, of course, is the part of it that hurts—out of whatever resources may be available to us it must be our dominant and common British purpose to give, year by year, an ever increasing material contribution to their social well-being in the widest sense of those words.

In the long run this is a policy which will be of benefit to us as well as to them. But in the short-run it would be dishonest to disguise from ourselves that the co-operation between wealthy countries like ourselves and poverty-stricken peoples such as I am speaking about must be one in which we give to them. Giving is either hypocrisy or it is costly. That is my only complaint against the otherwise admirable speech which my hon. Friend the Member for Oldham, West (Mr. Leslie Hale) made the other day—that he did not make it clear to the Committee that the policy he proposed would be bound to be costly, at least during the next decade.

May I put the matter more brutally, and in a form which makes evasion less possible? We are at war. I repeat that we are now at war. I wish that it were possible to put the word "war" in inverted commas to signify that it is not a conventional war that now exists nor is it fought with conventional weapons. But I should like to bring the financial cost of conventional defence into perspective, by saying that the unconventional war which is now being fought may be converted—I do not think that it will, but it may be—into a conventional war. We must, therefore, spend part of our treasure in preparing for that possibility, but it is always a fact for us to remember that every pound spent on military preparations is being spent in preparation for a war which is not now being fought, and is, therefore, being subtracted from the resources available to prosecute a war which is being fought. Perhaps the German word "Kampf" would be more appropriate to describe what is going on in the world today. Perhaps the word "contest" would describe it better. I recall the words of the late American Ambassador to Moscow, General Walter Bedell Smith, when he said "We must face the fact that we are engaged in a contest of indefinite duration." I invite any hon. Member who disagrees with that statement to say so now. They remain silent.

We are, then, apparently unanimous, and I suggest that there are two things that we can do in that contest. We can either make it our top priority to win or we can lose it. I do not suggest, of course, that we have to ignore our own standard of living; nor did we ignore our own standard of living during the years 1939 to 1945. In those years our top priority purpose was to win a quite obviously military war. The British standard of living was kept at the level best calculated to serve that purpose. I think that we have to keep our whole material well-being in the same relationship in the contest which is now going on.

Is this a very sombre prospect which I am putting to the Committee? I hope not. When we are in cloud cuckoo land, any week in which we stay there is obviously a more comfortable week than any week when we come out of it. It is only by coming out, however, that we put ourselves in terms of reality with the world and that is something which should lead us not to darkness but to light. What I am putting before the Committee gives us the chance of something which is very dear to us if we can achieve it. It gives us the chance of national unity. It gives us a chance of achieving a common purpose.

I have always been impressed by the words of Professor Carr in his book "Conditions of Peace" in which he says: Our civilisation is in danger of perishing for the want of something with which we have dispensed for 200 years but with which we can dispense no longer, namely, an avowed sense of moral purpose calling for common sacrifices for a recognised common good. I think that the purpose which I have put before the Committee, though not based exclusively on Christianity, should win more response in an allegedly Christian land than the purpose which, for the moment, the two main parties are agreed together in pursuing. It does not seem a Christian thing that the second most wealthy nation in the world should be absorbed primarily today in maximising its own material wealth. In any case the things which I am putting before the Committee give us a chance of avoiding the total social disintegration of the Western world which, otherwise, is virtually a mathematical certainty.

I wish to make only one comment on the otherwise very entertaining speech of the hon. Member for Flint, West (Mr. Birch), who accused us on this side of re-thinking some of our 1930 ideas in order to see if they would fit in with the conditions of 1950. If that is a political crime, I am a candidate for a political prison. He himself revealed his 1930-mindedness by a single word; when, comparing tax levels in different lands, he referred to the U.S.A. as our principal "competitor." I put it to him that under any Government there is no way whatever in which this little, tightly-packed island can conceivably compete with the U.S.A. If he thinks there is, I can only say, "God bless his innocence and preserve him from all harm." Surely our task is to see how we can work out a partnership with the U.S.A.

There is really no hope for the world except in the rapid and dramatic develop- ment of President Truman's fourth point. At the moment we are in a thoroughly illogical world situation in which the wealthiest nation in the world is maintaining a precarious world stability by giving—not by loaning, but by giving—enormous sums of credit and enormous quantities of material goods to a group of peoples who are the second richest group of peoples in the world. That is an illogical situation, temporarily justified by a reference to the war damage inflicted on the Continent where this group of relatively weathy nations happen to be living, but it cannot proceed as a permanent feature of world policy of this half-century.

The only policy for the second half of the 20th century which makes logical sense is that the richest nation in the world shall maintain world stability by giving material help to the poorest of the poor, namely, to those people who live in the vast range of territory which, as I have said, is the great undecided battle zone for the great conflict of our time. If the Americans would do that they would make each year great resources of goods and of credits available to the poorest of the poor, and then those people could buy their needs from the industrial nations, including our own, the German and the Japanese. Only by thus tackling the job of raising up the living standard of the backward people can we find enough work to keep the industrial nations in that state of employment necessary to avoid social collapse.

But it may be asked how any Englishman dares to make these suggestions in relation to America. May I put it in this way? So long as our purpose is to maximise our own material standard of living we cannot put any such suggestions to any Americans, nor can we enter into partnership with them in trying to carry it out. Only after we have adopted as our primary purpose the bringing of all the material aid we can to the poorest peoples of the world can we enter into such a partnership. The aid which we can give will at all times be smaller than the aid that the wealthier United States will be able to offer. But we can only enter into a partnership with them if within our limits we make it our top priority to give all the material help we can.

I will not trespass further on the time of the Committee in suggesting the detailed changes of policy that would be involved if we were to reject the purpose which at present unites us and accept the harder course I am proposing. There is no detailed item in the policy of the Labour Party which I would not be prepared to re-examine with an open mind in company with Members in any part of the Committee who accepted the major purpose which I propose.

I say to Members opposite, however, that if we were to adopt this purpose the idea of returning to a laissez faire economy, the idea of leaving our destiny substantially in the hands of business men and merchants, would seem much less attractive than when we are pursuing as our purpose the maximisation of our material prosperity. If, as General Bedell Smith tells us, we are involved in a contest of indefinite duration and if it must be our primary purpose to make to it the greatest material contribution we can, then, in the words of the Amsterdam Conference, which, almost by accident, happen to reflect the fundamental aim of the Labour Party: the coherent and purposeful ordering of society has become"— more than ever a major necessity.

1.33 p.m.

Major Hicks-Beach (Cheltenham)

As is customary in making a maiden speech, I ask the indulgence of the Committee. I wish to raise three matters which, to a large extent, are non-controversial. I wish to begin by putting in a plea for one class of taxpayers, and that is those who have spent their whole working life in the service of the Government and are now attempting to eke out an existence on their pensions. These people, owing to the very high increase in the cost of living and to the high rate of taxation, are in very dire circumstances.

I can assure the Chancellor that unless something can be done to assist them it will lead to the inevitable result that Government service will not be able in future to recruit the right type of man. They will not be able to recruit the right type of man unless he can look forward on his retirement to being able to live up to a reasonable standard of living. It must not be forgotten that many of those who have retired have a position to keep up. I am not asking for any tax concesssions, but that Members should bear in mind that something must be done for these retired people or the Civil Service is bound to deteriorate.

I want to turn to the ordinary taxpayer, the taxpayer who finds himself at variance with his local inspector of taxes. Such a man is often faced with having to decide whether to go to the courts and attempt at great expense to take on the Crown with all its might. There are many cases where there is plenty of authority and the taxpayer, if he seeks advice, can find out whether he has a reasonable chance of success. There is clearly no hardship in these cases, but there are many cases, owing to the present difficulties of interpreting the Income Tax laws, where the Crown want a decision by the courts. In these, the un- fortunate taxpayer finds himself in the position of having to fight a case to enable the Government to interpret their own Acts.

I ask the Chancellor to consider whether some procedure could not be laid down whereby it would be possible in suitable cases to apply to the Attorney-General to give a fiat that the expenses should be paid by the Crown where an important point of law is to be brought before the courts. From my own professional experience, and I am sure it is the experience of other members who belong to the same profession, great hardship can easily arise in these cases. This concession would cost very little and would be a great blessing to many people.

My next point is perhaps a rather more controversial one, and arises from the Chancellor's proposals to increase the price of petrol and the tax on commercial vehicles. I hope the Government will give fresh consideration to this matter, particularly from the point of view of the small retail trader. The small retail trader is not having an easy task today. He can survive only by running his business economically and on quick delivery lines. It is essential for him to have an up-to-date and economic vehicle for his business. This proposal to increase the Purchase Tax on commercial vehicles and the taxation on petrol will put a great number of small traders out of business. I hope the Chancellor of the Exchequer will see whether he cannot give some rebate to this class of the community.

I wish to refer to the statement of the Chancellor of the Exchequer about housing. He has assured us that the Government now intend to give special preference to housing in their capital investment programme. We all welcome that, but I hope that the Chancellor will ask the Ministry of Health to give preferential treatment to the building of houses in their Department. I am convinced that unless we provide this social service of housing and houses in reasonable quantities, we are opening wide the gates to a further increase of Communism in this country.

1.40 p.m.

Mr. Jack Jones (Rotherham)

I welcome the opportunity of saying a few words in this Debate. I have listened with very great care and attention to all that has been said, but I am bound to say that, despite the attacks made from the other side upon the Budget proposals, I have failed to notice one constructive and positive proposal to put right all the evils of which the Opposition have complained.

I am reminded of a person who, having a big problem to solve, went for a very long walk. When he left home the way was downhill. Taking the downward path that person made decisions about how the country would spend its income. On the return journey, which was the awkward part, he considered the question of how to meet the outgoings. That is the problem that has to be solved. I make no excuse for being one of those who support to the full all that the Budget is doing to keep fully intact and completely in being our social services, which were long overdue. They were badly needed; the country deserved them and should have had them long before it got them, but we find that they are enormously expensive. We must keep them, and the problem of how to maintain their high cost now confronts the Chancellor of the Exchequer. I always speak with pride about the industry I represent. I wish that the example which has been set by that industry had been followed in other industries.

I am concerned with one or two of the proposals which have been put forward. The lack of attention to the very lowest paid workers in the country is the first matter that merits the attention of this Committee. We ought to give serious attention to it. I know the difficulties of trying to arrange an increase in wages by means of fiscal policy. I know that it cannot be done, but I sincerely believe that where a surplus of money can be disbursed, we should disburse it where it is needed most and that is among those who have the least. I consider that the Chancellor was faced with a very awkward job.

On the one hand, the Chancellor found himself with a sufficient Budgetary surplus to be able to give remission of taxation. I am all for that. I believe that the rate of taxation upon those who really earn their money has been high, although one can appreciate that high taxation was necessary in the years that followed the war in order to enable us to pay for the war, to enable us to get ready for what may happen tomorrow as well as to carry the huge cost of social services. It is a vast problem, but I am all for the remission of taxation. The question that concerns me, is: What will be the psychological effect upon the minds of the lower-paid men?

I claim to know a little about the ordinary working men and how their minds work, being one of them. I know from my long experience in industrial workshops that on the day the tax remission comes into operation the lower paid man will find that the actual money received by him, as compared with the actual money received by the fellow on the next rung of the ladder, will show a larger difference. Be it only a few pence or a few shillings—it will not be pounds—the difference will be greater than before the Budget became effective.

Working men consider not what is in Budgetary proposals or Acts of Parliament but what is in Bill Smith's pay packet. The psychological effect upon the lower-paid man will be pretty serious. The Chancellor could not increase wages by fiscal policy. I know it is suggested that the Chancellor could easily have adjusted the matter, but it would not have been an easy matter at all. One could talk about an idea that has not been heard yet in this Debate, that something should be given in the form of a restraint bonus. The men who are below a certain level could possibly, through fiscal policy, be given a bonus pending the time when the T.U.C. and the Government arranged their policy and got some form of wages policy to get rid of wide differentials. I know something about it, having been dependent for my living on the activity of those at the very bottom. It is the people at the foundation who count. No structure can succeed unless the foundation is all right.

One could make all sorts of other suggestions. The suggestion has been made that children's allowances could have been improved in the case of those who need them most—being stepped down for those who need them least and stepped up for those who need them most. That would bring in some form of inquiry into wage earning and assessment of income. [An HON. MEMBER: "The means test."] No, but a needs test. It would not be a question of means but of taking from those who need least and giving to those who need most. If my understanding of Socialism is correct that is what it means. It means taking from those who can afford it and have the most, and giving it to those who have the greatest need. That is the type of Socialism that I expound and follow.

This problem is a grave one. I am all for industrial peace. My industry has set an example to the world in that respect. I know that it could be argued that by fiscal policy the higher paid men now receive benefits. To give incentives to the lower paid to seek improvement is difficult. That is all right in its way, but the higher paid man has got it. The lower paid man is told indirectly: "You go and get it through your trade union machinery." If he acted upon that advice he might be told: "Now is your opportunity to ask for a higher wage." If their application was agreed to, as well-founded, is there any guarantee that the higher paid man who is now to enjoy the results of the Budget proposals, will remain content to see the lower paid man coming nearer to him? I know of no such guarantee. I speak as an ex-trade union part-time official and I say that the result of all that will be that trade union officials will be expected to tell the employers, "All that we have argued in these matters of differential for years is not now quite correct ". It will mean an almost impossible task for the trade unions, the T.U.C. and the Government.

I want to say something which has not been mentioned in the Debate. I listened to the Chancellor's speech and I read and re-read it and speeches on similar lines. They recall something which I have advocated ever since I came into this House, and that is more and more production per capita of the population. That is the solution, if we are to be able to maintain our social expenditure and to increase our income from abroad. I know it is pleasant to read about increased productivity but nobody has mentioned that increased productivity has not meant increased income either in goods or in dollars from abroad. A lot of our increased productivity has been swallowed up by the increased prices of the things we had to buy from abroad, and by unrequited exports and things of that type. The time has come when the ordinary working man should he told clearly what this question of export and import really means.

I am one of those who have come to the conclusion—rightly, I believe; wrongly, possibly, in the minds and eyes of some hon. Members on this side and opposite—that the burden of our economic recovery has not been fairly distributed or fairly accepted. On the one hand, we have the steel industry working a 48-hour week—" pulling its guts out," as we say, 168 hours out of 168—providing the necessary steel with which to earn the dollars to pay for the cotton upon which another industry is working, while the people in that industry are at this moment arguing whether they should work less than 45 hours a week and should go on to a 37½ or 40 hours.

It is grossly unfair that certain industries should be allowed to get away with the idea that they can continue to receive exactly the same social benefits as their brothers and sisters in other industries and yet not give the same effort which I believe they could and should give. Some hon. Members on this side of the Committee may think that rather a nasty thing to say, but it is based on the facts, and based on truth. There are certain industries in this country—one in particular—which are not producing the same results for the Government, the country and their fellow men as others have been doing ever since the war, even though they have the ability. That is an aspect which should receive the grave consideration of the Government.

I know it is difficult to get people to accept a sense of responsibility, but I am bound to say that I recently had a horri- fying experience when visiting the textile industry of Lancashire. I visited a mill where the management had arranged by ballot a system of shift work. It had got redeployment on new machinery from America and Switzerland. There were good canteen facilities, and arrangements had been made by ballot to work an extra night shift, but, immediately that arrangement came into operation, down came the hammer from top level to the effect that, unless the extra night shift arrangement ceased, work would stop. Such a state of affairs should, I believe, be brought to the attention of this House and to the public.

I hope that as a result of this Debate a real effort will be made by the textile industry to face up to its responsibilities. The idea of being satisfied with a production that was necessary for our home needs before the war is a completely false premise. Everybody in industry should accept their responsibility of earning by their own methods and with their own capacity the highest possible amount of dollars by means of exports, and so on. That is a point which has not been mentioned in this Debate so far, and one which I hope will be taken note of.

There are other things about which one could speak. There has been the eternal cry about restriction in expenditure from hon. Members opposite. But how much, and where, and when? Speaking as an ex-junior Minister I know that by a careful ascertainment of the facts and by personal visits to factories, for the purpose of making inquiries, small economies can probably be effected. But such small economies are nothing compared with what the Opposition suggest should be done. I read with very great care what the Opposition put forward at the General Election, but were they on these benches now and had to implement the policy they then put forward and present a Budget on the lines they then advocated for the purpose of gaining power, I am wondering what the new Tory Chancellor would have done and how he would have done it. It is one thing to put out electioneering pamphlets for the purpose of vote catching, and quite another to implement the promises contained therein.

It is exactly the same with regard to nationalisation. I speak as one of the keennest advocates of nationalisation in my own industry, but I am bound to say that as one goes along with the implementation of nationalisation all sorts of anomalies and snags appear. The workers in the steel industry, who, without doubt, have given to saturation point in endeavour, skill, and sacrifice of leisure hours, week-ends, and so on, are beginning to take serious notice of the fact that the example which they have set is not being followed particularly in one industry.

Such a position cannot continue. Too much has been taken for granted. I hope that the particular industry I have mentioned will take note of the present position. The Ministry of Labour and the Board of Trade know perfectly well what is happening in that industry. The people in it are not pulling their weight 100 per cent. as are the people in, for instance, the steel, mining and the engineering industries. I hope that anything that can be done to help the T.U.C. and the trade union movement by Government policy, or by the consultations which take place, to improve the position of the bottom dog, will be done.

The Chancellor in his long speech talked about happy homes. But happiness in the home depends on what the housewife has in her purse every Friday night: it depends entirely on that.

Sir R. Acland

Oh, no.

Mr. Jack Jones

Oh, yes, plus knowing that it is going to be spent on fair-priced commodities. I will give my hon. Friend that, but one cannot be a good Christian without the material necessities of life. I will leave it at that.

I have had the privilege at the end of a long week to put forward a few ideas. I believe that we can get out of our difficulties, and that this country still has, if not a reserve of capital wealth, a reserve of capital energy and endeavour. It is on that basis that we must tackle this problem. We have to tap it at the source, that is, we have to call upon our people once again in no uncertain terms and tell them quite honestly that the maintenance of our social structure depends on what they are prepared to give, and that they can only take out of the common pool of the country what they put into it. To allow anything political to happen regarding these proposals would be to undermine our position. The defeat of this Government and the return to power of the Tories would mean that we should be thrown into a state of chaos with all the horrors that go with it.

1.59 p.m.

Mr. Fort (Clitheroe)

I will begin by asking the Committee through you, Mr. Deputy-Chairman, to show me the forbearance and sympathy which it traditionally gives to those who plunge into its dark waters for the first time. For my part, I shall try to deserve that forbearance in the remarks I propose to make. My hon. Friends on this side have told us about the sorry effects which the high rate of taxation is having on many aspects of our economic life, such as inflation and our external position, and so forth.

I shall ask the Committee to consider a more homely result of the present Government's policy of high taxation, namely, how it acts as a brake on incentive of managements, owners and operatives. Every hon. Member will agree on the need for everyone whether they work in factory or farm must now produce all they can, as cheaply as they can, of those goods which we must have for our own use and for sale abroad. We have had plenty of exhortations on this, such as we listened to from the Chancellor on Tuesday and the President of the Board of Trade yesterday, but it is strange that the Economic Survey did not once mention the word "incentive," and that the Chancellor and many speakers opposite seem singularly coy about using it. Indeed, the Chancellor argued that the indices of high industrial activity showed that industry is not over-burdened and by taxation and by implication it has plenty of incentive.

As I listened to the speeches and exhortations, I remembered a remark made by an old friend of mine, a foreman with whom I once worked. I suppose at the time we were changing wages and he said, "A pat on the back is all very nice, Mr. Fort, but sixpence a week is a lot nicer." I am quite sure that I shall carry many in this Committee with me, and that I shall have the support of the hon. Member for Rotherham (Mr. Jack Jones) when I say that there was much truth in the remark of my old friend.

Let me illustrate the result of high taxation from the difficulties which confront operatives and management alike in the textile industry, in which so many of my friends in Lancashire work, and which supplies not only the clothes that we and our customers need but the cloths which enter into a diversity of industries. A year or two ago the representatives of the trade unions and employers in the weaving end of this industry, met together under the skilful chairmanship of the hon. and learned Member for Islington, North (Mr. Moelwyn Hughes)—and here may I echo the compliments paid to him yesterday by the President of the Board of Trade. That Commission investigated and finally reported favourably on new methods of working which would produce more for less labour, give the operative larger wages, and bring down our costs of production.

The employers' representatives and the trade unions have been negotiating how best to implement the recommendation of the Cotton Manufacturing Commission but all through the weaving districts of Lancashire there is hesitation on both sides of the industry about acting on the recommendation. The trouble in part is because folk in Lancashire like to look twice at any novelty to make sure that i! is as good at second glance as it seemed at the first. But in addition to that psychological factor, there is hesitancy amongst the weaving operatives who ask what is the point of earning an extra pound or so a week up to £7 or £8 a week if as much as £1 a week is taken away as P.A.Y.E. from the wages of a single man or woman. Admittedly in the case of a married man or woman with two children the deduction is only a few shillings a week but, as the hon. Member for Rotherham will know from his experience in Oldham, in Lancashire husbands and wives often are both working, and on their joint income the incidence of tax is so heavy as to discourage them from changing from the methods of weaving they know so well to new ones whereby they work more looms. This reluctance is also shown by the mule spinners who earn similar wages.

Turning to the need for new machinery and equipment in Lancashire, much machinery has been renovated and a fair amount of new machinery has been in- stalled in the spinning and weaving sections of the industry. However, managements are hesitating to do all they would like to do and all that is desirable because with the present high prices it is difficult for most of them to calculate how they will earn even a moderate return on the capital involved. Prices have risen three and four times above those of pre-war. For example, a friend of mine considered replacing his 1,500 Lancashire looms with 1,200 automatics. These were plain automatics of a standard width of 40 to 50 inches. He found that at present loom prices he would be involved in an expenditure of £250,000, to say nothing of the large addition needed for the ancillary machinery to make full use of those automatic looms. Naturally there is hesitancy amongst the owners of what are often family concerns to lay out such large sums of money.

I have no time to go into such causes of restraint in installing new machinery as the removal of much of their undistributed profits through taxation and the more complicated matter of inadequate allowances when old machinery is scrapped at this time of inflation and high prices. Of one thing I am convinced from what I have read and heard, that management and owners will continue to hesitate about installing new machinery and renovating old machinery unless they can be certain that the new or renovated machines are worked as intensively as possible so that a return can be earned on the capital involved. And there will not be that intensive working as long as owners, managements and operatives alike are restrained, as unquestionably they are being restrained, by.the present heavy burden of taxation. I am sure that in this matter I shall carry with me all those in other industries who are confronted with similar problems.

It is quite true that in Lancashire we have seen a great increase in the production of both yarn and cloth over the last few years. That is because workers who left to go into war work, when our mills were concentrated during the war, have now returned and have been supplemented by foreign workers. That reason for expansion is now dying off. The Survey looks forward only to a very small increase in our labour force in Lancashire this year and the only future hope of obtaining more cloth and more yarn, and at lower prices, is by carrying on a process of bringing in more machinery and of bringing up to date machinery which is still very excellent and adequate but which needs balancing and improving.

The remarks which I have made and have illustrated from an industry which I have had the privilege of studying during the past years must be true of a great many other industries. It seems to me that the Government and the party supporting them fail to analyse the motives which make people give of their best. All of us, to whatever party we belong, welcome the disappearance of the worst of the old incentives, particularly the worst of all—the danger of a man losing his job. But the Government still seem to under-estimate the importance of modern incentives. One of the most important of these is the age-old and very simple incentive of giving a man more money when he does more work. It is for these reasons that I add my arguments to those of my hon. Friends in criticising the Government's continued policy of huge expenditure and huge taxation.

2.11 p.m.

The Parliamentary Secretary to the Ministry of Fuel and Power (Mr. Robens)

It falls to my lot, as one Lancashire man to another, heartily and sincerely to congratulate the hon. Member for Clitheroe (Mr. Fort) on his maiden speech. It is not very easy to make a maiden speech, but he did it with great charm and I am sure we shall look forward to listening to him on many occasions in the future. I felt that the instruction he was giving to manufacturers and workers about getting together and about the more efficient use of plant must come from his connection with the great enterprise of Imperial Chemical Industries, which, I am certain, carry out all those policies which he has been advocating to other people today. I should like also to take this opportunity to congratulate the hon and gallant Member for Cheltenham (Major Hicks-Beach) and the hon. Member for Grantham (Mr. M. Smith) who have also made their maiden speeches this morning. We enjoyed them very much indeed.

The right hon. Member for Leeds, North (Mr. Peake) accused my right hon. and learned Friend of making speeches which became duller and duller. At the same time he warned us that he never read his own speeches. One can well understand that, because the right hon. Gentleman this morning scarcely filled us with enthusiasm or left the gay spirit which he evidently expected to find in my right hon. and learned Friend. I should like to refer to one of the points which the right hon. Member for Leeds. North, made. My right hon. Friend the Minister for Economic Affairs will deal in great detail with various points when he speaks later in the Debate. The right hon. Member for Leeds, North, presented a rather different attitude in the question of the tax concerning Mr. Lord and Sir John Black from that presented by his right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler). The right hon. Member for Leeds, North, was concerned because the position might arise in which these gentlemen might be called upon to pay more than they received. The right hon. Member for Saffron Walden a day or two earlier, however, said that he objected to the retrospective effect of this tax. Perhaps hon. Members opposite will get together and will then tell us exactly what they think about this tax and what their own proposals would have been.

My hon. Friend the Member for Leeds, West (Mr. Pannell) drew our attention this morning to the position which arises as a result of the Purchase Tax on commercial vehicles, and other hon. Members have mentioned, during the Debate. the imposition of a tax of 9d. on petrol and road fuel. It is to this matter that I want to draw the attention of the Committee and, in particular, to some of the hasty, and I believe wrong, conclusions which have been drawn already. Before I turn to other matters which are more properly the responsibility of some of my right hon. Friends, may I first, therefore, deal with these two points, for which the Ministry of Fuel and Power have some responsibility?

Let us look at the imposition of the tax on what we call private motorists. The suggestion is that this will fall very hardly upon the private motorist and will make it very difficult for him to motor at all—that it will be very expensive for him. If we look at the figures, however, we find that that is not so. For example, if we take a 12 horse-power car we find that the main items of cost for 1,000 miles of motoring—which is the present standard ration without the summer bonus—amount to about £90 per annum. Roughly, insurance is £12; tax £5; garage, at 5s. a week, £13; and depreciation is, say £50. He buys 44 gallons of petrol at 2s. 3d. a gallon, which is £5, and there is maintenance, and so on—tyres and oil and things like that—say £5, making £10 in all and giving a total of £90 for his running costs per annum for 1,000 miles of motoring. That represents approximately ls. 91-d. a mile and the petrol content of that is 1.2 pence.

If we double the tax and double the standard ration, which is what the Budget proposes, the total cost rises by £13 to £103, but the cost per mile to the private motorist who does not get any supplementary petrol at all is reduced to 0⅓d.

Mr. Stanley

So that he is better off?

Mr. Robens

So that his motoring is cheaper. Indeed, in so far as he has complained that he is compelled to use other public transport, then he gets an extra saving; no longer is he forced to pay fares on public transport, for he is able to use his car for longer journeys.

Let us take the position of the man who is running his car for business purposes as well as for private purposes. Let us take the position of the commercial traveller who, as we recognise right away, must have his car so that he can earn his livelihood. At the moment the commercial traveller gets sufficient petrol to cover, on an average, 7,000 miles; he gets 1,000 miles through the standard ration and 6,000 miles through supplementary petrol. If we take the same type of car and the same kind of fixed costs, we find that those costs will be increased because his insurance will cost more and his tax will be more. We get a cost per annum for that 7,000 miles of £166, which works out at 5.7 pence per mile. If we double the tax and double the standard ration we reduce his cost per mile, so that instead of it being 5.7d. per mile it is only 5.6d. per mile.

Captain Ryder

If that is so, will it not lead to a great increase in petrol consumption?

Mr. Robens

I shall deal later with the question of consumption, but at the moment I am talking about doubling the ration.

Mr. Stanley

In order to follow this example, may I ask a question? I am told that this 7,000 miles has cost £166 and that now it will be cheaper. Will the hon. Gentleman tell us what the cost will be for this 7,000 miles?

Mr. Robens

The right hon. Gentleman apparently is failing to follow this very careful calculation. It is very important not to work out the total cost for the commercial traveller but to work out what it costs him per mile. [Laughter.] That is the important thing for the commercial traveller and, as a matter of fact, I have just shown—and I understand hon. Members opposite are checking up these figures—that the commercial traveller has his cost per mile reduced by 0.1d.

Mr. Stanley

The hon. Member started to give these figures and said that 7,000 miles would cost £166. May I ask what it would cost now?

Mr. Robens

I pointed out that, taking the same kind of car as in the previous illustration, with the fixed costs of insurance £25, tax £10, garage £13, depreciation £50, petrol 292 gallons at 2s. 3d. a gallon and maintenance and oil and so on the total came to £166 and I went on to say that he would save per mile 0.1 pence.

Mr. Stanley

The hon. Gentleman has given these figures to the Committee and we are entitled to ask, as he says the cost at the moment is £166, if he will tell us what it will be after the tax has been raised.

Mr. Robens

It will be a simple matter if the right hon. Gentleman knows the amount of petrol involved, but I have some more figures which will interest him even more, and it would be a pity on a Friday when we have such a short amount of time if the Committee were to be denied some very interesting speeches.

The commercial traveller would be able to run more cheaply per mile than before. That is important for the commercial traveller I am sure because my correspondence in relation to commercial travelling is full of the argument that if only they could get more petrol they could earn more money. We have reduced the amount per mile that it costs him to move around and at the same time enabled him to earn more money. It seems to me therefore that he ought to look at this—I am not saying anything about what we shall save him by Income Tax reductions—the private motorist and the commercial traveller should welcome this as giving them cheaper motoring than they had before the Budget.

Mr. Peake

Will the hon. Gentleman consider asking his right hon. and learned Friend to give some really big benefit by arranging to increase the petrol tax to 2s. 6d.?

Mr. Robens

I should have to work that out as I have not my slide rule with me at the moment, but I do not think it would work out quite as the right hon. Gentleman thinks.

I turn to the question of the imposition of this tax on the cost of taxi fares. The Home Secretary made a statement this morning in the House in which he said he had authorised in order to cover this increase in the cost of petrol an increase of 3d. per journey. It ought to be made clear what the increased cost per mile in taxi fares is involved. I am not complaining about this, but I wish to clear the public mind by reason of Press statements last night and the day before to the effect that there would have to be a minimum of 50 per cent. increase in fares, as though that related to petrol, whereas it does not. The increase would come to a halfpenny a mile. Obviously it would be rather difficult to alter clocks to allow for that halfpenny a mile, and the advice the Home Secretary got was that that would be met by this 3d. per journey. I thought it worth while making it clear that as far as the taxi owner is concerned the increase in the cost of petrol accounts for only a halfpenny a mile.

Mr. Stanley

I am sure the hon. Gentleman has worked it out very carefully as he worked out the previous figures, but it leads to the conclusion that surprises me, that the average journey by all taxis is six miles.

Mr. Robens

That may well be, but the Home Secretary said that he is acting on the advice of the advisor he had asked to deal with this matter. I am not arguing whether the average journey is six miles or not, but I wanted to establish the fact that the increased petrol cost represents only a halfpenny a mile and the 3d. per journey is intended to cover that. As to how that is worked out in relation to taxi fares, I do not know and it is not my province, although I am advised that it is because taxis have to cruise round a great deal.

I turn to the question of hire cars and the effect on the tourist trade. The chauffeur driven hire car doing 16 miles to the gallon, would find the increase in running costs of a halfpenny a mile directly attributable to the increase in the petrol tax. It is up to the proprietors, presumably, whether they pass on this halfpenny a mile, or have it swallowed in their general expenses. It is interesting to listen to what Mr. Victor Bridgen, the managing director of Godfrey Davis Limited—which I understand is Europe's largest hire car organisation—said on Wednesday after the statement by the Chancellor of the Exchequer. He said: After very careful consideration and with the full concurrence of my colleagues, we have decided that, despite the serious uplift in our costs, we shall not increase our charges, which includes petrol, on this account. We have consulted the British Holidays and Travel Association who support our view that this is no time for our potential American guests to suspect us of intransigeance and playing as we do a leading part in the attraction of dollar tourists we hope that our decision will receive wide publicity in America. In this I have already been promised by transatlantic telephone the full co-operation of our colleagues there in the Hertz Organisation in all their 465 branches. Neither do I think that it is fair for us to lay an additional burden upon the business community here in Great Britain who make such widespread use of our services and, therefore, we intend to preserve the present level of our published rates as, indeed, we have done for over three years. He says finally: In this matter I feel sure that all operators of passenger road transport who have the interests of the country at heart will support my view. I have never met Mr. Bridgen personally, but I take my hat off to him for the very public spirited way he has met this matter. What a difference to the shrieking headlines of some of the national dailies is this calm considered view of the man who runs this vast car hire organisation and who probably knows as much about car hire business as anyone else.

So much for what we might call the white petrol class. Let us look at the commercial vehicles. Here the charge has been made that the tax of 331 per cent. on commercial vehicles and the petrol tax at 9d. has been done for quite another purpose than that which has already been indicated by my right hon. and learned Friend the Chancellor. It has been suggested in many quarters that this was an attempt to bolster up the nationalised railways. I do not think that that argument can stand for a moment. As a matter of fact, the British Transport Commission will be the largest single payers of this tax. It will cost them in a full year some £6 million.

So the effect on the British Transport Commission, which has the responsibility for its Railway Executive and managing railways, can hardly be said to be improved by the imposition of the petrol tax. I ought to add that even if the full cost of the increased price of petrol were added on to road passenger fares—and, as I shall explain shortly, that will not necessarily be the case—the average fares on long distance road transport would still be well below the corresponding ones on the railway.

Mr. Peake

I must ask how it is that the British Transport Commission do not come out so favourably in this matter as the ordinary commercial traveller does.

Mr. Robens

It is difficult to answer the right hon. Gentleman immediately because I am receiving advice from two quarters, one part of which he will not appreciate; it is that he is an accountant and therefore would not understand it. The petrol tax on passenger vehicles therefore cannot possibly be said to be an effort to bolster up the passenger traffic of the nationalised railways.

I now turn to the 331 Purchase Tax on commercial vehicles. No one suggests that it can possibly have any effect on present fleets. These present fleets of commercial vehicles appear to be adequate to deal with the freights that are offered. It is rather significant that one notices that every time there is an application for a new goods licence the strongest objections always come from the existing road hauliers on the grounds that there are sufficient carriers to do the job. Further, as new vehicles are required and the imposition of 331 per cent. Purchase Tax is felt, it will be a capital cost which will be spread thinly over the life of the vehicle. It cannot be supported in any way by argument that the increase in the duty on petrol and the 33i per cent. Purchase Tax on commercial vehicles are proposals which are in any way designed to help the nationalised railways.

What, therefore, is the reason for imposing 33; per cent. Purchase Tax on commercial vehicles? My hon. Friend the Financial Secretary gave the House some figures which I hope I shall be forgiven for repeating. He showed that the total fleet of road vehicles in 1938 was just over 3 million and in 1949 just over 4 million; commercial vehicles numbered under 500,000 in 1938 and more than 800,000 in 1949. The addition to the fleet of commercial vehicles in 1949 has been at the rate of £37,500,000 per year above the rate planned in the investment programme. The planned figure in the investment programme of £35 million has risen to the staggering total of £72,500,000. My hon. Friend said that if there is to be an expansion in the investment programme of that order it should be devoted to housing, not to commercial vehicles. Further, about 500,000 tons of steel have been used per year by the motor industry for vehicles used in the home market. If that quantity of steel is to be used the best way to use it is in lorries or other commodities that can be exported and so help us economically.

Mr. Baldwin (Leominster)

Before the Parliamentary Secretary leaves those interesting comparisons would he explain, for the benefit of livestock lorry drivers, how the increased cost of Purchase Tax and the increased tax on petrol will affect their businesses? I have to meet them shortly and they will be interested to know how it will cost them a little less to run their businesses than at the present time.

Mr. Robens

The hon. Member will be aware that they are not on the ration which we allocated to private motorists. I was originally dealing with and produced' these figures in relation to the private motorist, not the commercial user. Obviously any increase in petrol tax and the 33i per cent. Purchase Tax on com- mercial vehicles will have the effect of increasing their costs unless they do something else, namely bring about greater efficiency in the use of their vehicles. I shall have something to say about that subject later.

First let me pursue this point about exports. Hon. Gentlemen opposite have from time to time said that there is difficulty about exporting commercial vehicles, that the market abroad is drying up. That was said many times about the motorcar industry but of course the facts have belied that assertion. The reason has been that the motor manufacturers got down to the job and found markets abroad for their cars. They have done a really first class job in achieving new and high records for their exports. They have not done that by sitting still and doing nothing, but by displaying initiative and enterprise. They have gone out and have sought and fought for markets for their cars. The amazing success of the exhibition now in progress ir. New York, which thousands of persons have seen, and which has already resulted in large sales, is evidence of this type of enterprise. I hope that this example will stimulate the exports of commercial vehicles.

In any event, however, with the investment programme as high as it is, a considerable number of such vehicles is still left available for the home market. There is no desire to starve the home market of commercial vehicles. As a matter of fact, I was speaking to a friend of mine, a commercial vehicle salesman, only a week or two ago, and he assured me that it was becoming increasingly difficult to sell on the home market the commercial vehicles which he had for disposal.

Mr. Stanley

That is very interesting; it is exactly the opposite of what the Chancellor told us. He gave us to understand that there was this inexhaustible demand on the home market which could only be checked by the increase in tax. If we are now told that the home market is drying up, what is the purpose of this Purchase Tax proposal?

Mr. Robens

The manufacturers have tried to flood the home market. We want them to be reasonable, and it is right and proper that they should be.

I must say a word about passenger fares. The effect of the 9d. on petrol will be to increase the overall costs by 4 per cent. in the country and 5 per cent. in London. This is a small increase in itself and should not lead to many additional applications for fare increases. In any case, fares on provincial buses and coaches are governed by the conditions attached to the road service licences by the licensing authorities. Clearly when an application is made for an increase in fares the licensing authority will not merely look at the petrol costs but at the past, present and prospective financial position, the operating results and the traffics of the whole of the undertaking; and then, and only then, will decide its attitude in relation to fares.

In the case of small increases in cost it is impossible to make fractional increases in fares. A practical increase is generally one which will produce an appreciable increase in revenue. It is clear that an increase in fares will not necessarily be authorised because of a single additional item of cost. In some cases there may be a sufficient margin of profit to cover the additional cost. In other cases the additional cost may be the marginal item which will justify an increase in fares. In so far as London Transport fares are concerned, the Transport Tribunal are considering a passenger charges scheme which has been presented under Part V of the Transport Act. The object of that scheme is to bring into greater equality fares for journeys of similar length and for those running between common points by alternative routes so that under the scheme some fares would go up and some would go down. It would certainly give London Transport an increase of about £31 million in their receipts.

This scheme, which has been put forward by the British Transport Commission, has no relevance at all to the increase in the petrol tax. What will happen is that the Tribunal will consider all the objections which will be heard at a public hearing which they will have shortly. They will then take into consideration the increase in the petrol tax and other factors, and will then decide their policy in relation to fares. Very clearly the imposition of the 9d. tax is no justification in itself for increasing fares.

Brigadier Clarke (Portsmouth, West)

May I ask the Parliamentary Secretary if consideration has been given to the extra cost imposed on doctors and Service personnel using their cars, or are they to come under the same aspect as commercial travellers and will they be better off as a result of this increase in the cost of petrol?

Mr. Robens

One could go on all day relating increases to all sorts of people. I presume that doctors are able to put the cost of their cars against their business expenses and I think that the remission in that respect, and the advantage of the lowering of Income Tax in the two lower bands will, by and large, offset the petrol charge, and they will be better off.

May I deal with what I think is perhaps the most important point because it is a challenge to the good faith of the Government by the Opposition? It is what I might term the dollar argument. The other day the right hon. Member for Saffron Walden (Mr. R. A. Butler)—

Mr. Stanley

Before the hon. Gentleman deals with that argument, may I ask if he proposes to say anything about the complaints we are receiving from industries which are using these light oils as their raw materials and not using them for transport. Their raw material costs will increase.

Mr. Robens

I was not proposing to say anything about that, because obviously as soon as any tax is imposed, there are a hundred and one reasons why it should not be imposed, put forward by different persons who are interested; because nobody likes a tax in any way whatsoever. I have no doubt that they will make their representations, which will be met with kindness and courtesy, and a decision will be taken in due course.

Mr. Stanley

Is not the House of Commons entitled to an answer?

Mr. Robens

The House of Commons may be the place for an answer when the case has been put and the Chancellor of the Exchequer will no doubt deal with the matters raised with him when he replies on Monday. I wish to deal with this question of the dollar argument, because clearly that is a challenge by the Opposition to the good faith of the Government in respect of what has been said in various Debates in this House and in public speeches outside. The right hon. Member for Saffron Walden referred to the speech made by my hon. Friend the Financial Secretary to the Treasury during the General Election. He wanted to show, by the extract he quoted, that my hon. Friend had given an indication that there would be no increase at all in petrol. It was a controversy raised by the right hon. Member for Woodford (Mr. Churchill) which I am sure will now be familiar to everybody.

Here is a report from "The Manchester Guardian" of the speech of my hon. Friend, and I believe this bears out entirely the interjection which he made, and which was not quite accepted by the right hon. Member for Saffron Walden. The report in "The Manchester Guardian" states this: Mr. Churchill was now trying to buy votes with wild offers of more petrol. He had said the Tories would deration petrol 'at the earliest possible moment.' So would the Government. That was the point made by the Financial Secretary to the Treasury—" so would the Government." We have never said at any time that there was no case at all in any circumstances for a steady increase in the amount of the petrol supplies. Indeed, my right hon. Friend the Secretary of State for Economic Affairs, when he was Minister of Fuel and Power, made a speech in Harrogate and the "Daily Express" made a very good headline of it: Prospects not bad, says Gaitskell. The "Daily Express" has a fairly large circulation and I should imagine that most people read that headline, even if they did not read his speech. My right hon. Friend said: We shall certainly do away with rationing as soon as we can afford the extra supplies. He also said: Can we increase the ration? Obviously it all depends on how the dollar position goes. lf, as I hope, it improves steadily, then the prospects are not bad. If I may, with due modesty I would refer the Committee to a speech of my own made a few weeks ago from this Box. I said, in dealing with the question of the substitution of sterling oil for dollar oil: Are we going to throw away that chance of narrowing the gap"— that was the dollar gap— for the sake of consuming that extra petrol in the United Kingdom? I suggest that it would not be a sensible policy to do so. I doubt very much whether one could ever really seriously consider it. It is a non starter so far as we are concerned. Then I went on—[Laughter]—hon. Gentlemen laugh too quickly. I said: That does not mean to say that we shall not look at the general oil situation and from time to time make all easements we can in the light of the economic circumstances of the country."—[OFFICIAL REPORT, 29th March, 1950; Vol. 473, c. 522.] Indeed, we have never failed to do that. So there is no lack of good faith at all on the part of the Government, and no charge of lack of good faith can be levied against the Government in this matter. Constantly in this House and outside we have said that as the position improves we would certainly increase the amount of petrol available.

Of course, our rationing scheme itself does not put a ceiling on the amount of petrol we use in this country. We have never said that the amount of dollars or the total tonnage of petrol coming into this country shall be x and kept it at that. Indeed, with new vehicles coming on the road, and supplementary allowances and so on, we have had a modest but a steady increase in the amount of petrol. In 1945 we consumed 3.4 million tons and in 1949 it was 4.7 million tons. It has been a steady increase made possible all the time by the increased ability of the country to stand it.

What is the position about the amount of petrol we are now providing in doubling the standard ration in relation to what we have said about the dollar position? The fact is, as was made so plain by the Chancellor, we felt that the petrol would cost more for the commercial user, and there would be a very much greater incentive for the more efficient use of commercial transport. Transport managers in large undertakings will undoubtedly be looking round to see where they can save, and they will save. We hope that that saving, which we shall achieve on the commercial side will make up for what we are providing for the private motorist by the extension of the standard ration. That seems to me to be not a bad policy to pursue, and that is indeed the policy which is now before the Committee in relation to this Budget Debate.

I am sorry to have taken up so much time, but it has been amusing for hon. Gentlemen opposite from time to time; and I did have to spend a long time on my sums; so I hope they will forgive me for the length of time I have taken. I have tried, I hope fairly, to deal with the various arguments used in connection with this particular fiscal measure. Any increase in any tax is obviously unpopular, and one cannot complain if the Opposition put arguments against it.

It is only right and fair, I think, that when dealing with these matters we should make the public aware of the reasoning which is behind the imposition of a tax. When we have done that and when the Opposition have put their case against it, the public are able to assess the relative merits of the case, and make up their own mind for and against. My object, therefore, in intervening in this Debate has been to try to do that with regard to this particular controversial issue. I have tried to do it objectively and logically. I hope that the House will consider the arguments which I have advanced when they are arriving at their decision on the merits and demerits of the proposal.

Mr. Follick (Loughborough)

Before my hon. Friend concludes would he be so kind as to answer this question? In view of the increase in the rationing of petrol, will he take into consideration the possibility of banking coupons so that they can be spread over the whole year; and a car user who uses less in winter may have the benefit of being able to use more in summer?

Mr. Robens

That is a minor administrative matter which I am sure my hon. Friend would not wish to introduce in a Debate of this kind.

2.50 p.m.

Mr. Ashton (Chelmsford)

The indulgence of the Committee has been considerably drawn on this week, but I hope some small measure is still left for me, particularly as I have to follow the Parliamentary Secretary to the Ministry of Fuel and Power. I should like to say, with great respect, that I thought that he was on a rather sticky wicket. While on that subject, I am sustained slightly by the knowledge that hon. Members allow a maiden speaker to bowl a maiden over, however indifferent the initial deliveries may be.

A point which I do not think has received sufficient attention in this Debate is that of expenditure on local government. The Chancellor had something to say on the subject. He drew the attention of the Committee to the fact that the estimate of loans to local authorities during the past year was £220 million, but, in fact, as much as £272 million were taken by this source, at the favourable rate of 3 per cent. Then he went on to twit some local authorities that possibly they had drawn more from this source than they should have done. It is only fair to say that I am concerned with a local authority not very far from here which received a Ministry of Health circular which seemed a little bit like an invitation to a waltz with a charming lady with a tag of "3 per cent." round her neck. The alternative was that they might find a rather more ponderous partner with a tag labelled "4 per cent."

It is, therefore, not unnatural that, having the interests of our ratepayers in mind, we should get this money as cheaply as possible. The Chancellor said, in his Budget speech: As I pointed out last year, many of our social services are extending automatically, so that the cost increases every year, as, for instance, national insurance and education." —[OFFICIAL REPORT, 18th April, 1950; Vol. 474, c. 61.] He was a little bit more specific on the subject of education a year ago, when he used these words: Education must become more and more costly as more of the promised reforms come into operation."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2082.] That, indeed, is perfectly true. Some people are not aware that expenditure of local authorities today is very nearly equivalent to the whole of our Budget expenditure before the war. On the subject of loans to local authorities during the coming year, the Chancellor said: We believe, however, that with the continued co-operation of the local authorities, the sum we intend to provide for the coming year of £279 million should suffice to meet all their needs."—[OFFIciAL REPORT, 18th April, 1950; Vol. 474, c. 56.] In reply to a question by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler), the Financial Secretary said that £220 million out of this £279 million would be allocated to housing. Like all hon. Members, I am delighted that there should be this increase in housing as, in my view, this is our greatest human problem, but it leaves the relatively small amount of £59 million available for education and matters of that kind.

The Chancellor calls for the co-operation of the local authorities. I am sure that he will get it. It is always. advisable to adopt an attitude of co-operation to the very senior partner in the business. I wish to refer to the revenue which we shall get from the central Government for our expenditure on education. It has gone up from £225 million to £243 million—an increase of about £17,500,000 to £18 million. This is, of course, a material increase, and there must be certain pressure for even more expenditure. I believe that in these matters there is room for economy. There must be a certain roof beyond which expenditure must not be allowed to rise.

On that point I associate myself with the remarks of the hon. Member for Widnes (Mr. MacColl), that we local authorities are almost grown up. We hope that there will not be too much surveillance from the senior partner, because, in that way, we shall be able to avoid unnecessary delay and expense. I do not believe that people realise just how much there is of a two-edged weapon in these services of local authorities. We have not merely the loan charges to pay; in addition, we have the revenue costs.

Roads are also referred to in the Budget. The amount that we have been able to spend on roads was cut last year. An additional sum of £1 million has been allocated from the central revenue for the year ahead. In my county we have to spend less on our roads than we spent before the war. Our experts tell us that the value of that expenditure in actual out-turn of work is one-third to one-quarter of what it was. It is the case that in most counties during the war there was heavy operational traffic. We must face these facts. These roads are a definite part of our capital equipment, and it is our capital equipment of that nature which is being run down. It is worth while noting, in passing, that the buoyance of the revenue partly came from Surtax and Death Duties which, it is suggested, come directly out of capital, whereas the more important revenues, such as Income Tax, were not up to estimates. I wonder whether, beneath the surface there is not a good deal of erosion going on in the case of both private and public capital.

While on the subject of roads, I should like to refer to the question of costs in the administrative county of Essex. I listened with great interest while the Parliamentary Secretary did his sums. No doubt we shall be able to study them in more detail over the week-end, but the solid fact remains that for the cars used by one county council the additional 9d. per gallon on petrol will involve an increased expenditure of £15,000 a year. We are not sure under which category we come in regard to the 331 per cent. tax on commercial vehicles, but a preliminary estimate of additional expenditure is in the neighbourhood of £5,000 a year for new vehicles. I did not get the figures per mile given by the Parliamentary Secretary, but of these splendid people—aldermen, councillors and, in addition, many of our county employees—hundreds use their own cars on public business. This point also applies to people in the Services.

These people have allowances for the use of their cars, and it may be that we shall have pressure from them for an increased allowance in view of what has happened. All these matters together add to the administrative costs of our country. We have learned that the administrative costs of education have exactly doubled over a period of two years.

Finally, I refer to a rather more human side of this Debate. I wonder whether in the welter of Surveys, figures and estimates we do not tend occasionally to lose sight of the facts of life—the human side. I sometimes wonder whether our psychology has not been a trifle pulverised by prognostications of different kinds, whether they be purple or merely pallid. I do not know, but we have built up a huge central and local government machine which tends sometimes to be our master rather than our servant.

I sometimes picture the welfare State as an enormous basin in which we all stand round and mix, as it were, our Christmas puddings. We all push the mixture in, and somebody throws in a button or a sixpence or a ring, and we all stir, and then the whole thing is—I think this is the term—" redistributed." But how much, I wonder, is left behind on the edge of the basin—and on all the machinery and instruments used to stir it up? I do not know—I hope I amwrong—but I wonder sometimes if we shall not all get fairer and fairer shares of less and less.

The Chancellor referred to the fact that in the time of winter one must be careful not to use all the honey so carefully stored in the season of sunshine—but which, of course, has been removed from us in the first instance. I am one of those old-fasioned people who believe that honey—not a sort o. or nationalised honey—in our own larders is not only sweeter, but possibly even more securely kept. I wonder as I go about—I hope, again, that I am wrong here—whether all this policy of the Government is not, in a way, blunting the great virtues of our great nation, and whether our determination to stand firmly on our own leas, whether collectively or individually, is not being a trifle undermined. I trust not, hut, after everything has been said, it is our national character that is our real wealth and our chief asset. Let me, in thanking the Committee for its courtesy to me, ask that we remind ourselves that we should guard that with great care.

3.0 p.m.

Lieut.-Colonel Lipton (Brixton)

It is a great pleasure for me to express on behalf of the whole Committee our congratulations to the hon. Member for Chelmsford (Mr. Ashton) on his maiden speech. If he goes on at this rate, I have no doubt that he will trebly distinguish himself here as he has in a previous stage of his not undistinguished career. Anyhow, we all look forward to hearing more contributions from him to our deliberations, and I know we shall listen with great interest to what he has to say, either on our financial problems or on any other matters on which he is fortunate enough to catch the eye of the Chair.

If I may retrieve from the oblivion to which the words may be relegated by Conservative propagandists in the not too distant future some remarks that were made by the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton), I should like to draw attention to three points he made in his speech in which, very unusually for any hon. or right hon. Gentleman opposite, he referred to some of the major achievements which could be laid to the credit of the present Government. He drew attention in the first place to our rising productivity; in the second place, to our increased gold reserves; and, in the third place, to our high level of exports. It is all the more refreshing, because it is very unusual to find in a speech from the opposite side of the Committee, references made to what I consider to be a very substantial record of achievement on the part of the present Administration.

The right hon. Gentleman referred—I thought not so happily—to dividend limitation and to what he called the "wage freeze." In that respect he followed the example of other political parties in this country who are deliberately referring to the "wage freeze," rather than to more restraint whereas, in fact, there is no such thing as a wage freeze in operation. I am quite sure that hon. Members on this side of the Committee would be the first to register a very strong protest if the Government contemplated anything in the nature of a wage freeze. It has been made abundantly clear on more than one occasion that there is no such thing as a wage freeze in operation whatsoever. The very use of that expression distorts the Government's policy.

Reference has been made to the fact that this Budget has been dull and unimaginative. The right hon. Gentleman the Member for Saffron Walden (Mr. R. A. Butler) talked about a "dreamy lullaby," and various references of that kind have been made not infrequently in this Debate. I know what kind of fate may lie in store for those who speak of feather beds at present, but I must say that when I compare this Budget Debate with other Budget Debates to which it has been my privilege to listen, this Debate, from the point of view of hon. Members opposite, has been a feather bed affair. They lacked the youthful zest in attack which some of us thought would have been forthcoming, and I must confess that the method in which they conducted the Debate on this Budget is reminiscent of the genteel ardour with which a pillow fight in the dormitory at Roedean is probably conducted.

What hon. Members opposite really complain about is that they do not believe that the Budget introduced by my right hon. and learned Friend brings about that degree of disinflation, which, in their view, is considered more necessary now than it has ever been before. They have made continuous reference to the fact that the Government are spending 43.5 per cent. of the national income as a result of which the wage earner cannot spend that money. That, too, is a somewhat dishonest argument, because the bulk of our population do not pay anything like 43.5 per cent. of their normal income in the form of taxation. It is an average, but the impression which hon. Members opposite are trying to create is that the lowest income scales are being penalised to the extent of 43.5 per cent. of their income in the form of direct or indirect taxation, which, of course, is not the case. My hon. Friend the Parliamentary Secretary to the Ministry of Fuel and Power gave us some interesting calculations on the subject of the cost to the consumer of the increased tax on petrol. If the hon. Gentleman the Member for Southend, East (Mr. McAdden), wants to ask a question I will give way.

Mr. McAdden (Southend, East)

I should like to ask whether the hon. and gallant Gentleman has worked out what percentage is spent in taxation by the lower income groups?

Lieut.-Colonel Lipton

All I am capable of working out is the percentage of my own income that goes in taxation. I have not had time to go into—

Mr. McAdden

The hon. and gallant Gentleman has not worked it out?

Lieut.-Colonel Lipton

—into other cases.

Mr. Braine (Essex, Billericay)

rose—

Lieut.-Colonel Lipton

I am sorry I cannot give way. The time is getting short, and a lot of sums have been worked out during the last week.

Mr. Braine

Especially by the old age pensioners.

Lieut.-Colonel Lipton

I find it most revealing to see the growing interest displayed by hon. Members from the other side of the Committee in the welfare of old age pensioners. It shows that we are educating them, and making them take an interest in a not inconsiderable section of the population, whose needs have to be considered in this House. The Labour Party were pioneers in bringing their claims to the forefront, and we have no apologies 10 make. We are pleased to see how interested hon. Members opposite now are in the welfare of old age pensioners.

Mr. Braine

Would the hon. and gallant Gentleman not agree that old age pensioners and persons of fixed income, who may not be paying direct taxation, are heavily taxed by indirect taxation on almost everything they purchase?

Lieut.-Colonel Lipton

But to nothing like the extent that hon. Members opposite indicate.

Mr. Messer (Tottenham)

Seven and a quarter per cent.

Lieut.-Colonel Lipton

My hon. Friend quotes the figure of 7¼ per cent.

Mr. Braine

rose—

Lieut.-Colonel Lipton

I am sorry I cannot give way further on this point. It is a matter that can easily be brought up again, and no doubt will be the subject of further discussion in our Debates.

On the subject of taxation I have attempted to go into the calculation of one class of person—a married man with a wife and two children. He is drawing food subsidies to the extent of 14s. a week. If that man is paying Income Tax at the rate of 9s. in the £, it will be found that he would have to invest over £2,000 at 4 per cent. interest to gain a net return equivalent to the value of the food subsidies he is at present drawing. The assumption is always made by hon. Members opposite that anything that is taken from the general public by way of taxation is not returned to them. Of course, it is. The large amount of taxation imposed on our people redistributes the wealth of the country and gives everybody something in return for it, even those who pay the highest rate of Income Tax.

The crux of the budgetary problem, in my view, depends upon the extent to which national production increases during the next year. It is upon the accuracy of the calculation of this increase that many of the other calculations in this Budget depend. There is, in this respect, a disparity between the figures submitted by the Government to the O.E.E.C. in January and the more recent figures in the Economic Survey of 1950. I do not know which of the two estimates of the increase in national production is the more accurate. The only point that I make is that the disparity between these two estimates involves the difference of many millions of pounds in the amount that may be available for such fiscal provisions or concessions as are necessary.

If the increase in the national production is under-estimated, then, of course, less is available for essentials like food subsidies, social services, and housing. Last year, the Chancellor took credit for having brought about a comfortable and not excessive degree of disinflation. Hon. Members opposite want more disinflation. I suggest that so far as a large number of people in this country is concerned disinflation has become both uncomfortable and excessive. However, if the Budget is based upon an under-estimate of the extent to which national production increases then, of course, we shall find ourselves with the equivalent of a hidden reserve, which will enable the Chancellor to make provision for wage increases in respect of the lower income ranges which might not otherwise be possible. On the subject of hidden reserves, I do not suppose that hon. Members opposite can have any complaint to make because in that respect we are following what is, I believe, the regular practice in the City of London, and the regular practice of whoever is responsible for the Conservative Party funds, because that party does not publish any accounts at all.

I believe that this under-estimate of national production—and it may be that the Chancellor is right in being conservative in estimating that—will provide that margin in our economic affairs which will enable the Government, in association with the T.U.C., to provide for wage increases where such increases are necessary.

The question of the national wages policy is a very difficult one, and I am not surprised that right hon. Gentlemen opposite have not referred to it. It is, nevertheless, something that has to be tackled by the people who are responsible. I would emphasise that the responsibility for economic stability rests with the authority which assumes the responsibility for maintaining a high level of employment. That point was effectively made in an article that I read in the last issue of "Lloyd's Bank Review," because the prevention of inflation is not the duty of the trade unions but the duty of His Majesty's Government.

I have no doubt that that will continue to be one of the objectives to be pursued. The problem of making wage restraints acceptable depends on the extent to which we can keep down the cost of living, even if it means subsidising the farmers; there is no doubt that the British farmer is more affluent under the present Administration than ever before, but the Income Tax authorities should be able to look after that aspect of the matter.

It is worth noting that the American policy of subsidising agricultural prices means that more dollars have to be paid for the food supplied under the Marshall Plan. It is surely preferable for us to reduce the dollar gap by means of subsidies for home-grown food than by directly or indirectly paying for the American food subsidies. It is preferable for us to reduce the dollar gap by subsidies of this kind, even if it means a higher Surtax, which is a sacrifice Members opposite and their not yet completely impoverished supporters outside should be glad to make for the purpose of helping British agriculture and narrowing the dollar gap.

We are all very pleased to note that the Chancellor does not propose to cut the capital investment programme in relation to housing. In my view, it would be disastrous if there was any departure from the policy of expanding the housing programme to the limit of the labour force available. If we can only get an all-party agreement on what seems to me to be the fundamental principle involved, we could lift the housing problem out of the realms of partisanship into which it was plunged in Conservative propaganda during the last election. The housing needs of the people are far too serious and great to be made the subject of political stunts and propaganda, either at election time or between elections.

It is, however, most regrettable that, according to the Monthly Digest of Statistics, building expenditure on shops and commercial premises has increased from £31 million in 1948 to £39 million in 1949, while expenditure on the construction of permanent houses has gone down by £3 million during the same period. This diversion of labour and materials is an undesirable trend which ought to be checked. If it is as a result of an accident it is a planning fault, but if it is deliberate the planning is wrong.

In my own constituency, where large numbers of people need houses, the Ministry of Works propose to grant a licence of £200,000 to a property company for the purpose of reconstructing shop and office premises. I find it impossible to reconcile this proposal with the much more urgent housing needs of my constituents. There is no doubt who has a prior claim on our resources. One way to get better value from our capital expenditure on housing, without hurting the public interest, is to deal with the monopolies now operating in the building industry which are deliberately keeping up the cost of materials and thereby penalising the community as a whole.

Let me quote one example. It is a recent incident affecting my own local authority and proves my point. A building firm quoted a price for the supply of sand to Lambeth Borough Council from 7d. to 2s. 7d. per cubic yard less than the price laid down by the Association of Producers and Merchants of Sand and Ballast. The Association instructed producer pits not to supply this building firm with the necessary materials. When the firm appealed against the decision of the Association they replied that the firm would not be permitted to resume business as sand and ballast merchants.

It is that kind of price-raising by privately operated controls that holds the community to ransom. It calls for the speediest action by the Monopolies Commission. A Socialist Government, working to a Socialist plan, must not hesitate to replace privately operated, profiteering controls of this kind by public controls for the protection of the general public and of the consumer. This particular control is an unnecessary and undesirable restriction upon the housing programme, and ought to be dealt with at the earliest possible moment in order to ensure that capital expenditure on housing is not unduly inflated by such devices.

In our post-war recovery, it has been due to the maintenance of full employment that this country has bridged the dollar gap to a greater extent than has been the case with any other country receiving Marshall Aid. That is a remarkable record of achievement for which we get no credit at all from right hon. and hon. Gentlemen opposite, apart from such infrequent references as were made by the right hon. Member for Aldershot yesterday to the achievements of the Government. I hope that he will not be too severely reprimanded in the inner conclaves of the Conservative Party for what, I fear, will be regarded as a deviationist attempt on his part to pay some credit where credit is due.

We know only too well that the problems of keeping down the cost of living and of providing homes for the people have not been fully solved. No Budget can be regarded as completely satisfactory unless it ensures that those objectives are pursued by the planned direction of all our economic and financial resources into such channels as will benefit the community as a whole. Any hasty or ill-considered relaxation of controls or unnecessary concessions to the higher income groups which seems to be the principal feature of the Conservative programme, will make the policy of wage restraint impossible and will only benefit the few at the expense of the many.

3.24 p.m.

Mr. Vaughan-Morgan (Reigate)

In addressing, in this Committee, the House of Commons for the first time, I would ask for that kindness which has been shown to so many of my colleagues today to be extended to me, although I hope that at this late hour of the day the patience of hon. Members is not entirely exhausted. In an endeavour to be brief I shall confine my remarks to the Budget and, in particular, to the Purchase Tax.

I appreciate that after 10 years of this levy there may be nothing very new or original which can be said about it. I hope that the Committee will forgive a new Member who is fresh, or fairly fresh, from a General Election if he makes a few remarks about the iniquities, anomalies and absurdities of this tax. The feelings of the public on this matter run very high, but they have received very scant consideration in the Budget, apart from those of that limited section of the public who are contemplating the purchase of shiny limousines. I do not think that in the country there is any misunderstanding as to the unpopularity of the tax, and I feel that I ought to add to the many protests that have already been made about it before it is accepted as a permanent part of our fiscal system.

This tax had its origin in the needs of war, like the Income Tax, and it, too, has been prolonged into peace-time. But we hope that the history of the Income Tax will not be repeated, for that tax, with one short gap, has now been with us for 100 years. I trust I am not too optimistic in hoping that history will not repeat itself in the case of the Purchase Tax. The Purchase Tax was first introduced to deter spending, but it is quite clear that its only object now is to raise revenue, and that it has become a major prop of the Budget.

To my mind, this tax has no virtues, but has many most dangerous faults. It was substantially improved in 1948 by the action of the Chancellor when he reduced the rate on many articles, and when, in particular, he consolidated the rates of the tax to three. He did much on that occasion to simplify the structure, but many anomalies now remain which only serve to illustrate the inequity of the tax. I appreciate that it is very easy to point to these anomalies. but they certainly serve to illustrate what I call its inequity.

In this Chamber recently our attention was drawn to the fact that 100 per cent. Purchase Tax was being charged on certain kinds of Christmas cards, and how that compared with the rate of tax charged on the furnishings of the game of roulette, which, I understand, is against the law, even if played in a private house. The layman asks himself what is the guiding principle behind this difference in rates; why, for instance, a tooth brush is charged at 331 per cent. while there is no tax at all on a shoe brush; why a tooth-brush rack is charged at 331 per cent., while, if I may quote from the Schedule, a tooth-brush holder, personal to the user, is charged at 100 per cent.? Most strange of all is that a pair of hand-operated hair clippers is charged at 333 per cent. while electric hair clippers are exempted altogether.

I realise that it is quite impossible to avoid certain of these discrepancies, but the general public are bound to feel that, in a way, it involves a moral judgment on the part of the powers that be who must seem to them to have come to the conclusion that it is better to clean one's shoes than to clean one's teeth, and that it is better in times of national economic difficulty to have one's hair clipped by electric rather than by hand-operated clippers. It appears to result in a distortion of the spending pattern covering all these commodities.

The uncertain incidence of the tax inevitably creates a false sense of values, and, finally, the effect of the tax is inflationary. I was depressed by reading in HANSARD certain words uttered by the right hon. Member for Bishop Auckland (Mr. Dalton) some two years ago, when he said: The Purchase Tax is gradually evolving into what I have always considered it ought to be—a substantial revenue yielder not to be swept away in a hurry, yielding revenue from luxury articles and from things which lie between the field of semi-essentials and luxuries."—[OFFICIAL REPORT, 7th April, 1948; Vol. 449, c. 198.] I think we can at least recognise that the Chancellor has now appreciated the harm that can be done to the export trade, and that he has therefore eliminated the tax on expensive cars. But that applies also to many other articles at the other end of the scale.

I am more concerned with those which come at the lower end of the scale and which still include many articles essential even to the modest standard of living of this austere generation. We can all agree that a tax on essentials is inflationary, and if we accept the definition of the right hon. Gentleman which I have just quoted, at least both sides of the Committee will agree that a tax on semi-essentials is semi-inflationary.

I regret that the Chancellor did not find it possible to propound any solution for the problem of the retailer who finds his stocks devalued by the reduction of the Purchase Tax. I understand that the Chancellor expressed the hope a year ago that he would be able to do something about it, but nothing has been done. It should be appreciated that the total abolition of the tax would cost the retail trade of the country between £60 million and £90 million. While it is improbable that such an event would happen and that the tax would go in one fell swoop, it gives an idea of the loss which the trade will incur over a long period.

We must remember how fortunate the Chancellor is in the collection of this tax. Although, in theory, it is levied on the consumer, in practice it is paid in the interim by the retailer, and so the Chancellor receives Purchase Tax as an interest-free loan from the shopkeepers, these unofficial, unacknowledged, unrewarded taxgatherers. I should have thought it was not beyond the wit of man, and in this case the Excise man, to devise some way of recompensing the trader for the loss he incurs if and when the tax is reduced or, alternatively, that some rebate might be paid to him in recognition of the services he renders to the Exchequer as a tax collector. We are all disappointed that so little has been done towards getting rid of this unpopular tax. The Chancellor has taken one faltering step and we can only hope fog better luck next time. I would conclude by reminding the Committee of the old saying that it is the duty of a good shepherd to shear his flock and not to flay them.

3.32 p.m.

Mr. Marlowe (Hove)

I am sure I shall be expressing the view of all hon. Members of the Committee when I extend our congratulations to the hon. Member for Reigate (Mr Vaughan-Morgan) for his interesting and well-delivered maiden speech. It was a model in that it was clear, concise, and expressed in a comfortably limited measure of time. I know that after that speech the hon. Gentleman can look forward to adding considerably to our counsels in the future, and we shall always be glad to hear any expression of opinion he may give us. I wish him the best of luck in his Parliamentary career.

I undertook to occupy the time of the Committee for only a few minutes. I did so because I want to refer only to one point which has come under discussion in this Debate. It relates to what I consider to be the inequitable levy made upon Sir John Black and Mr. Lord. I particularly wish to express my protest in this matter because I can approach it in an entirely disinterested way. I want to warn the Committee of the dangerous path they are pursuing when they enter upon retrospective legislation of this kind. It is only that aspect of it upon which I wish to comment.

I do not know Sir John Black or Mr. Lord, I have never met either or had any contact with them, and I have no interest in their tax affairs. The only thing I am sure about is that extraction of tax from them causes them considerably less pain than extraction of tax does from me. What I am concerned about is the principle involved, and I think it is necessary that the Committee should realise what is being done. There was a decision in the House of Lords some seven or eight years ago which made this form of remuneration legal and, in the light of the law as it stood as a result of that decision, what was done by the Standard Company and the Austin Company in relation to these payments was a quite legal transaction. The Chancellor now seeks to declare that what they did was, in fact, illegal; he is altering the rules in the middle of the game. That is a principle to which I cannot subscribe.

I feel that it is important for the Committee to understand the danger of this kind of retrospective legislation. I do not for a moment seek to defend the transaction itself. In many ways I think it is not a desirable form of transaction. The point is, however, that it was legal, that the law allowed it, and that these two gentlemen are now being fined about £95,000 each for having done something which was perfectly legal when they did it. That is a dangerous process of law. I speak purely from the lawyer's point of view; that is why I can speak as a disinterested person. I am not a director of any kind, nor am I ever likely to have the benefit of a transaction of this kind. It is, perhaps, more difficult for those who are directors of companies to refer to this matter because it might be thought that they had some self-interest.

It seems to me a grave affair that we should alter the law to meet particular circumstances which have occurred in the past. That is a form of procedure which occurred in the Nazi regime and which occurs regularly under any Communist regime.

Mr. Jay

rose—

Mr. Marlowe

I will give way in a moment. I want first to develop this point. That is exactly what happened; although something was perfectly legal, according to the law of the country at the time, the leaders of the party said, "We do not approve of it and, therefore, although it is legal we shall penalise you for having done it." That is exactly the attitude which the Nazis adopted and which the Communists are adopting, and I warn the Committee and the right hon. and learned Gentleman against the danger of legislating in this way.

Mr. Jay

If the hon. and learned Member wishes to state the facts fairly I think he should mention that a year ago the Chancellor gave a clear warning that if this were done he would take action and that the action would be retrospective. I am sure that, as a lawyer, the hon. and learned Gentleman knows that there are well-established precedents in this country for acting in this way.

Mr. Marlowe

The mere fact that the Chancellor indicated ahead what he intended to do does not alter the law. I am dealing with the time at which the law was made; and this new law will not be made until the Finance Bill has passed through both Houses of Parliament. It will then penalise these men who did something which was perfectly legal when they did it.

Throughout his speech the Chancellor referred to his faith in democracy—not once, but a dozen times. I must comment that this is a clear indication of an abuse of democracy. Far from being democratic, it is the most undemocratic action which the Chancellor could have taken. The shareholders of the companies, with all the knowledge of the facts to which the Financial Secretary to the Treasury has just referred, and with all the knowledge that what they were doing was legal, decided what they would like to do with their money. The Chancellor now seeks to step between them and the recipients and to say, "I do not believe in this democratic way of dealing with your own money; I shall come between you and take it myself." How the Chancellor can defend that as a democratic action is entirely beyond my comprehension.

I have always felt that there are two extremely bad criteria for legislation. One is ad hoc legislation—legislation for particular cases without any regard for the public weal. I believe that to be a bad form of legislation, and it is what has taken place here. I also believe it to be extremely bad for this House to legislate out of mere vindictiveness. The howls of delight with which that announcement was greeted were a sad reflection on this House. The ghoulish delight expressed by hon. Members opposite at this vindictive action—which, they know, has no effect on our Budget situation but is being taken merely to penalise men who entered into a transaction which was per- fectly legal and who had observed the law as it stood—is abhorrent and is something against which I make my protest.

3.41 p.m.

Mr. Harold Davies (Leek)

On this side of the Committee, far from there being ghoulish delight in the action the Chancellor took in connection with Sir John Black and Mr. Lord, we felt that any such transaction as that in which they took part, was out of keeping with the tone and temper of the struggle of the mass of the people of this country at that time. It was one of those things that, although there was a possibility of doing it, no decent businessman could have done at that time.

Mr. Marlowe

The hon. Member will realise that that is exactly the point I am making, the Nazi and Communist habit of saying that although a thing is legal it will be made illegal because it goes against the party line.

Mr. Davies

That, of course, is a mere Fascist approach to the problem. I will now proceed with my speech in my own way.

I have sat through this Debate for three days and it is very difficult to say much that will be fresh and to bring forward many new ideas at this late hour. We have heard the Chancellor accused of being dull, but I was not dazzled by the effulgence that emanated from the Opposition benches during the Debate. What I did realise was that the picture of living in Britain—as it very simply says in an illustrated and simple explanation of the Economic Survey—is part of the world canvas and that irrespective of the remarks of politicians, our economic possibilities are now limited by exterior forces over which no Chancellor of the Exchequer, be he Conservative, Liberal, or Labour can have complete control.

During the General Election the disgusting display of promises made by the Opposition to allow petrol ad lib, to reduce taxation and increase the social services were a distinct proof to everybody that they were merely trying to grab votes in order to get into the seat of power. It would be very interesting if the Opposition party would tell us what they would do if they were on this side of the Committee, bringing the Budget before the nation at this moment. In fact, they have had three days in which to tell us. The right hon. Member for Woodford (Mr. Churchill) once said "When I get into power I will tell you."

The people of Britain once objected to the South Sea Bubble, and local and national electors do not put their votes into an organisation which is going to promise fortunes in the future. They want to see a constructive policy. All we find in reading and listening to speeches from the Opposition is that there is such a difference of opinion on the benches opposite, that were they in power, far from any policy we would again "spiv" our way to chaos by the old-fashioned system of progress through misery and unemployment. We all agree that devaluation was nothing more nor less than a "shot in the arm" during a transitional period. The Opposition were divided about this, but that is exactly how we looked at it. There is not the slightest doubt that the pressure on incomes is indicated in such simple examples as the falling off in cinema takings, in railway receipts, in small savings and in the consumption of ale: I notice that champagne has increased in consumption by 2,800,000 bottles. All those decreases indicate that the lower income groups are feeling the pressure, even if we allow for the fact that there are more consumption goods in the shops

One of our jobs in this Budget is to make an allowance for an increase in productivity, with the possibility of distributing that increase to the lower income groups via their voluntary organisations. The problem now confronting us is for the trade union representatives who are in what is called productive industry, to be prepared to agree to our making some concerted approach to this problem of the distribution of the cake of national production among some of the lower income groups.

More than four years ago I raised in this House, on the Adjournment, the issue of the need for a national wage policy. Whichever party was in power now, in this transitional period, the Chancellor of the Exchequer would need to know what amount of the cake of national production was to be distributed among the various income groups in the year ahead. That can only be done if we evolve a concerted or national wage policy. It is not for us on the political wing of the Labour movement, to suggest to the industrial wing of the movement what should be done in their industries, but I have not the slightest doubt that had there not been, at this difficult period, the magnificent loyalty of the trade union leadership and of the rank and file of the trade unions, Britain would have been in as chaotic a condition today as France and some other European countries as a result of the eternal struggle for wages on a catch-as-catch-can principle. In stating that I have stated one of the essential differences between the two sides of the Committee. We on these benches know that we can plan and organise society rather than allow the modern economic system to make mankind slaves

All of us on both sides are delighted to find that there is to be an extension in the housing programme. The basis of civilisation is undoubtedly housing, and I sincerely hope that this figure of 200,000 will not necessarily be stabilised if, in the future, the situation justifies an increase, that is, if there is easing up of the raw materials position—softwood, dollar commodities, etc. I believe it to be essential, if we wish to make a base for a decent civilisation, to begin, as Dickens said, with housing.

We have not applied a scientific policy to housing. Why is there all the time the need to build three-bedroomed houses? If we could build thousands more two-bedroomed houses it would increase the speed of building and would meet the crying demand of young married couples. I believe that that should be done. I believe that local authorities ought now to be evolving a much more scientific approach to the methods of building and the type of house they ought to build.

A modern Budget is different from one of 20 or 30 years ago. More and more it becomes a dissertation on world economics. In this Budget we see how we are tied to world affairs. It points out that, with other countries, but most with Europe and America, we are all in this thing together. I am wondering if Paul Hoffman was right when he said that European countries supplied only one per cent. of the national consumption of America 20 years ago; only.5 per cent. 10 years ago and that they should be able to supply 1.5 per cent. In "The Times" he is reported as saying: American tariffs today are as low as in 1914 and much lower than 1922. As the Cambridge Economic and Statistical Survey pointed out the other day, it is not so much the lowness of the tariffs as the arbitrary method by means of which they are used in the United States that prevents goods entering and jumping the tariff wall in the United States. I believe we should make an appeal to the United States to simplify and clarify the administration of their tariffs, rather than ask for reductions. Many business men have told me that one of their difficulties in entering the American market is the arbitrary way in which goods are classified and the arbitrary way in which labelling is attacked if it does not suit the American standard.

So far as the solution of the dollar problem is concerned, I do not think we can solve it unless we can achieve a reorientation about this question of defence. Health and hospitals have been mentioned, but the 20th century world must face this issue squarely. If we choose to arm like Sparta, then we shall have to live like Sparta. The problem confronting 20th century man is this problem of the comparable burden of defence and rearmament. I do not wish to be Utopian but merely realistic. At least we British people are entitled to say to the Americans and the other Atlantic Pact countries on this issue of defence, "Let the ratio of your national income bear the same burden on your people as the ratio of defence bears on our national income for our people."

We were told the other day at the Conference at The Hague that, so far as the Atlantic Pact and Western defence are concerned, we are now moving into the issue of fair shares for defence. That would mean that 8 per cent, of our national income need not be spent on re-armament, while only 1.5 to 2 per cent. of the Canadian national income or the Belgian national income is going on defence. I think we are entitled to push that forward so far as Western defence is concerned.

We are spending quite a lot of money on British agriculture. The British agricultural worker, the small farmer and farmers generally have been our fourth arm. On both sides of the Committee there are differences of opinion. The party opposite has split about the issue of the approach to grants and subsidies. But so far as farming is concerned, consumers all over Britain are growing sensible to high food prices. The realistic position is that whatever the result of the next General Election, whoever the consumers of Britain may put into the seat of power, those in power will have to listen to the consumers. If British farm prices and food prices are at an artificially high level, whichever party is in power will have to discover a method of reorientation.

The mechanisation of agriculture is of importance. The small farmer is not able to make both ends meet today. He has not enough power at the focal point of production, and the machine manufacturers have not sufficiently investigated the use of the small tractor. It is no good using a howitzer to kill a rabbit. If we over-mechanise tiny British farms that is what could happen. As over 70 per cent. of British farms are less than 100 acres in size, the real truth about the high prices of British commodities is that we must develop some system, maybe of cooperative farming, where units of machinery can be distributed among a large number of farms.

That would mean pushing ahead with capital development in electricity to put focal points of power in the fields so that the farmers can plug in to operate new types of power machinery There is a great field for scientific research into the production of machinery for the small British farmer at small cost. He seems to have been neglected. Another question which must be investigated is that of distribution. It may be right and it may be wrong to have 12 per cent. of our people engaged in distribution, but there is not the slightest doubt that the question of the cost of commodities caused through distribution must be investigated. We must try to discover whether too big a burden is put on the cost of a commodity before it passes over the counter.

To sum up, most speakers in this Debate have been afraid to discuss the issue of re-armament and defence. Neither Europe nor Britain will solve their problems unless we get a saner approach to collective defence via fair shares for all. We must demand the free and full production of sterling oil. A question which I cannot develop now—it is one about which I have asked Questions from time to time—concerns the control and the power of the United States of America to dictate how much sterling oil we shall produce. The case of machinery for the small British farmer has not yet been fully investigated. Lastly, in the 20th century system of society, a national wage policy is needed.

3.58 p.m.

Mr. Spearman (Scarborough and Whitby)

I feel that the hon. Member for Leek (Mr. Harold Davies) may be a very appropriate person to have office in His Majesty's Government, but after some of his remarks he is hardly likely to be the Prime Minister's choice to succeed someone like the hon. Member for Wednesbury (Mr. S. N. Evans). I was interested to try to find anything with which I could agree in what the hon. Member had to say. For most of his speech I rather despaired of finding any point of agreement, but I was interested in what he said on the question of housing.

There is a very strong case indeed for trying to get a large number of smaller houses as a temporary measure, both for the young people to whom he referred and also for the old. One very often finds people living in larger houses than they need. I believe it would help if more small houses were built, but I do not think that the hon. Gentleman will find his right hon. Friend the Minister of Health in entire agreement with what he said. I hope that the hon. Member will continue to press that point.

The only other point in the hon. Members' speech to which I wish to refer was his comment on the dullness of the speeches made on both sides of the Committee. I understood him to say that he thought that we had been out-rivalled by his own side of the Committee. If he made a careful survey of the general opinion of hon. Members on the opening speech by the President of the Board of Trade yesterday and the closing speech by my hon. Friend the Member for Flint, West (Mr. Birch), I cannot help feeling that he would find that the majority would think that the latter was the more sparkling speech.

It being Four o'Clock, The CHAIRMAN left the Chair to report Progress and ask leave to sit again.

Committee report Progress; to sit again upon Monday next.