HC Deb 10 July 1950 vol 477 cc963-1060

Order for Third Reading, read.

3.35 p.m.

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

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

We now reach the final stage of this annual marathon. Counting in the Debate on the Budget Resolutions, we have already spent 13 Parliamentary days upon these matters and quite a substantial amount of overtime, including two all-night sittings. So I think most of us would agree that fiscal policy has certainly had its fair share of Parliamentary time in these last few weeks. Also, I think most of us would agree that it is not easy to think of anything startlingly new to say at this stage.

Since the Bill was introduced a number of changes have been made of which I think the most important are the following. There is the new Clause on double taxation which was generally welcomed by the Committee and the House. There was the change in the administration of the Purchase Tax on commercial vehicles so that it is to be levied now on the chassis and not on the vehicle complete. There is the new Clause on tractor licences which, again, was generally accepted by the House. There are the changes in Entertainments Duty and, finally, a number of Amendments to the Clause on restrictive covenants which equally were welcome to almost everybody. In addition there were a fair number of small Amendments which met the points of view put by different persons in the Committee or in the House.

So far as the financial position is concerned, the changes made in the Bill during its progress through the House have now absorbed completely the £23½ million extra which the de-rationing of petrol is estimated to bring into the Budget, when one takes into account the additional supplementary funds required for National Assistance and for the provision to enable farmers to receive relief on their farm vehicles. Nevertheless, the Bill with these modifications still remains one which relatively to most of its predecessors, and certainly of its recent predecessors, involves few changes in our fiscal system. That is no reason for criticism because, clearly, the merits of a Finance Bill depend on whether it is good or bad in the light of the circumstances prevailing at the time.

I claim that this Bill is a good Bill because in the prevailing circumstances it was not appropriate or desirable to make widespread changes in taxation, and I claim that for the following reasons. In the years following the end of the war we had a situation in which defence expenditure was declining and national income was rising. Therefore the Chancellor of the Exchequer of that time was in the happy position of being able at one and the same time to provide increased social services—and these increased notably from £600 million-odd in 1946 to 1947 to over £1,200 million in the current year—and to make substantial reductions in direct taxation. The House will recall that since the war there have been increases in the personal and children's allowances, in the earned income allowance, and reductions in the standard and in the reduced rates of Income Tax.

At the same time as achieving this expansion in social services and the reductions in direct taxation, it was also possible to achieve a very substantial surplus, which was necessary in order to combat inflation and to assist the country to restore its balance of trade. Whereas in 1946–47 there was still an above-the-line deficit of £569 million, in the three years ending last April the total above-the-line surpluses were over £2,000 million. That is really a very substantial achievement, although, as I have emphasised, an extremely necessary one in order that the economic situation of the country should improve in the directions we all wish.

Lately, of course, the situation has been gradually changing, because while the national income has continued to rise at a satisfactory rate, defence expenditure has not merely not fallen, but has risen again slightly. It rose this year from £741 million to £781 million. In these circumstances it has not been possible to achieve all three objectives of reduced taxation, increased social services, and a substantial surplus.

In the circumstances, my right hon. and learned Friend came to the conclusion that what he had to do was to continue the policy of a Budget surplus and that he could not either increase social service expenditure further beyond what we were already committed to or for the time being make any net reduction in taxation. In coming to that decision, which was obviously the least popular decision compared with an expansion of the social services or a reduction of taxation, I think there is no doubt that my right hon. and learned Friend was absolutely right, because of the continuing need to combat inflation at a time when Marshall Aid was declining, and because it was essential that we should make the last final effort to achieve, unaided, a balance in our trade.

It is for those reasons that the Bill whose Third Reading I am now moving contains so few changes. The outstanding one, of course, is the switch from Income Tax to Petrol Duty. This has been already thoroughly discussed on a number of occasions and it is not necessary for me this afternoon to go over all the arguments. I would, however, briefly mention some of the considerations which my right hon. and learned Friend had in mind when making this change.

I do not think there will he much dispute that the reduction in these particular rates of Income Tax was especially desirable. The peculiar merit of this policy is, first, that these are the rates which are likely more than other changes to reduce the tax which is paid on overtime. It has been stated on many occasions that to relieve overtime payments from taxation altogether, or even specifically, is not possible. I recall that when my right hon. Friend the Minister of Town and Country Planning was Chancellor of the Exchequer, he explained most convincingly why that was so. This change in the initial rates of Income Tax is the nearest one can get to reducing tax on overtime.

In the second place, in contrast with other charges in the sphere of Income Tax and other direct taxation, this change produces the same absolute relief to all who are paying the maximum amount on the 5s. range, so that the amount of relief granted is proportionately larger for the lower income range. Thirdly, it will not be denied that this is a relief which is clearly felt and clearly apprehended, since as soon as it came into force from 8th June it meant an immediate reduction in P.A.Y.E. payments.

The Petrol Duty, imposed in order to raise the funds necessary for the remission of Income Tax, has several features to commend it. My right hon. and learned Friend in his Budget Speech, explaining what he proposed to do, laid considerable emphasis on the dollar-saving aspects of this tax. Since Budget day, however, the position has, of course, changed, but it has changed in two ways. Since the special arrangements which were finalised were come to by my right hon. Friend the Minister of Fuel and Power with the American oil companies, additional supplies of petrol do not cost 100 per cent. dollars as they did prior to those arrangements. They now cost only a smaller proportion of dollars. One might put the figures at about 30 per cent.

That is one change, and to that extent admittedly the case for the Petrol Duty, so far as the dollar saving is concerned, is not so strong as it was.

Mr. Geoffrey Lloyd (Birmingham, King's Norton)

Does the right hon. Gentleman mean 30 per cent. of the total amount in respect of petrol, or 30 per cent. of the proportion of petrol which is supplied from British oil sources?

Mr. Gaitskell

Thirty per cent. of the petrol supplied from British oil sources—that is perfectly clear. It is not quite so easy to say, under the arrangements discussed with the American oil companies, whether there would be a small dollar element. There probably would be under those arrangements, but I think that the figure of 30 per cent. is, roughly, right. I am not in a position to give precise figures but am conceding the point that whereas previously the additional petrol certainly cost 100 per cent. dollars, now that is not the case.

On the other hand, the de-rationing of petrol means that there is no other way than taxation, at any rate of which I know, of controlling consumption. Therefore, if it is still desirable, as we should contend, to keep a brake on consumption, partly because there is this dollar element in the imported oil and partly because it is an import which has to be paid for by exports, to that extent the tax is more than ever necessary. In other words, although the dollar loss sustained from an uncontrolled expenditure is less than before, nevertheless the main instrument which prevented that uncontrolled consumption has been done away with and, therefore, another instrument—taxation—is necessary.

It cannot be denied that the effects of the Petrol Duty are spread very wide throughout our whole economy, so that the influence on any one individual is extremely small. Its influence on the final price of commodities is, indeed, negligible. Some of it, of course, will be absorbed out of profits; some of it will be offset by efficiency; some of it, admittedly, will be passed on, but only a very small amount, I think, to final prices. The important issue in a matter of this kind is how heavy the actual tax may be.

I do not think any serious-minded person would argue that all taxes on commodities which are used in production and distribution, however small, are necessarily bad. The argument seems to turn very largely on how large they are. I would be prepared to concede that a very heavy tax on raw materials or anything of that kind would undoubtedly be bad. What matters is the percentage of cost. I do not suppose that hon. Members opposite would disagree that in so far as a tax causes an increase of 1 per cent. in cost, it is more serious than if it was one-half of 1 per cent; that if it is 4 per cent., it is more serious than 2 per cent., and so on.

During the Committee stage, I ventured to use the argument that the position in regard to the increase in the Petrol Duty was now a little different from what it was before, because the levels of costs, of incomes, and of prices have, broadly speaking doubled in comparison with prewar; the Petrol Duty is, therefore, in proportion to the total cost, very much the same as it was then. During the Budget Debate I asked the Leader of the Opposition if the Opposition were opposed in all circumstances to an increase in the Petrol Duty. The right hon. Gentleman was at pains to point out that this was not so; they merely thought that the present was not the right moment to do it. I do not know whether they think that the export trade of the pre-war years, when this tax was originally imposed and increased, was really in a more flourishing condition than our export trade today. The figures would not sustain any argument of that kind. I submit that in all the circumstances and bearing in mind the benefits obtained by the reduction in Income Tax this was a wise move which my right hon. and learned Friend took.

The other main point of controversy in the Bill has been the imposition of Purchase Tax on commercial vehicles. This, as has been pointed out many times, has not been imposed for revenue purposes, but to achieve at one and the same time some slowing down of investment in this field and at the same time an increase in exports. I am surprised, and have been throughout the Debates, at the strong objection which the Opposition have put forward to this change.

As I understand it, they base their criticisms on two main arguments. They seem to be to some extent against any attempt to control investment at all. I am never quite sure whether they are serious about that, or whether it is a sort of smoke screen; or they are against any attempt to control investments by fiscal methods, and I am not sure how serious they are about that. Their second main argument is the belief that decreased sales at home will reduce exports and correspondingly that to expand exports we have to expand sales at home. That may be over simplified and I am not desiring to over simplify it, but I will explain what I believe to be the truth in this complicated matter.

Taking the first argument about the control of investment, surely hon. Members opposite will not deny that if no attempt were made to control the level of investment in this country and everything else remained the same, there would be a very strong tendency towards inflation. I do not know whether the right hon. Member for Aldershot (Mr. Lyttelton) will give us his views on that. If they really believe that it is all nonsense and quite unnecessary to attempt to restrict expenditure in this field and that we can let people spend as much as they like without regard to consequences—

Mr. Speaker

These matters are outside the Third Reading Debate which deals only with this year's Finance Bill.

Mr. Gaitskell

I am sorry, Sir. I was trying to elaborate an argument in connection with the duty on commercial vehicles but, in view of what you have said, I shall confine myself to the Government point of view and the reason for imposing it.

The plain fact is that if there were to be no control in this field there would be a serious inflationary consequence. It is not in our view possible or desirable to rely simply on interest rates to achieve the necessary restriction in investment because that has been shown to be far too crude and dangerous in its consequences. Thirdly, we have found from experience considerable difficulty in this field in doing the job by physical methods and, therefore, we have imposed this fiscal control, the imposition of Purchase Tax. I submit that if other sectors of investment are to be subject to one control or another—and this applies both to the public and private sectors—it is not in the least unreasonable, failing any other method of control, to adopt this one in the case of commercial vehicles.

As regards the argument about exports, our view is quite simply that in present circumstances in that industry it is desirable that we should do something to restrain the home demand for these vehicles in order that more may be sold abroad. I would submit to the House these arguments in support of this point of view. In the first place, can it be really seriously argued that the enormous increase of sales of private cars abroad has been in any way hampered by the existence of Purchase Tax on private motor cars?

Viscount Hinchingbrooke (Dorset South)

The Government seem to think so in the case of Rolls-Royce.

Mr. Gaitskell

I am coming to that in a moment. That is a case where there has not been an increase in the number of cars sold abroad, but, taking it generally, there have been. Secondly, is it really contested that the larger the home demand the less there is for export? I find this argument singularly unconvincing. It seems to be a case of saying that two plus two equals five and in that case it would not be necessary to boost exports at all. All we would have to do would be to increase home demand.

It all turns on whether output has remained unchanged or not, because, if the total output is unchanged and less consumed or purchased at home, more is sold abroad. This makes it clear that the real issue turns on whether there is or is not spare capacity and unemployment in the industry. I would concede that the criticisms of the tax would have some relevance in the case of an industry which is starting up and working below capacity, which has had some difficulty in getting to full capacity, but I cannot see that it has much relevance to an established industry working to capacity when we cannot afford, and clearly cannot afford, to put more resources into the industry. Therefore, in present circumstances, where the relative pull of the home market and of the export market is of the utmost importance in deciding where sales should take place, I think the Purchase Tax is fully justified.

In conclusion, I wish to turn to some rather more general matters. During the Debates on the Budget Resolutions and on the principles of the Bill during Second Reading, some hon. Members took the view that my right hon. and learned Friend's policy of the Budget surplus was too severe. Others, perhaps not very explicitly, took the view that it was not severe enough. It may be worth while to see how the background has changed in the last few months before making up our minds whether the policy indicated in this Bill is or is not the right one. In his Budget speech my right hon. and learned Friend indicated that he believed the estimates in the Economic Survey of Industrial Production were rather conservative. So far, I am glad to say, this has proved to be the case. In the first four months of this year industrial production has increased by approximately 9 per cent. over the corresponding months of the previous year. That contrasts with 6½ per cent. for the whole of 1949 over 1948.

Mr. Oliver Lyttelton (Aldershot)

It is very doubtful.

Mr. Gaitskell

The right hon. Gentleman says it is very doubtful, but the same indices which showed the increase of 6½ per cent. show an increase of 9 per cent. this year.

Mr. Lyttelton

I quite agree that there has been an increase, but I would rather the right hon. Gentleman would say there had been an increase than seek to base an argument on actual figures which I do not think are correct.

Mr. Gaitskell

This is a background point and I do not want to pursue an argument we have had on a number of other occasions any further, but I think what I have said is perfectly clear; it is 9 per cent. over 1949 compared with 6½ per cent. for the whole of 1949 over 1948.

This in part is due to the high level of investment which the country has been able to afford during the previous years and that is a matter of great satisfaction to us all. It might be held to justify a rather less severe policy than my right hon. Friend indicated, that as there was so much more being produced we could afford an increase in the total monetary expenditure. On the other hand, we should then have expected to find that the employment figures would not be holding up quite so well without an increase in monetary demand. But the fact is that employment is still high and unemployment still remains on the low level of last year and preceding years.

In the first place, we have of course all had the satisfaction of learning of the striking increase in our gold and dollar reserve last week and although my right hon. and learned Friend very properly underlined the uncertainties in the situation, nevertheless it marks a very great improvement. As far as exports are concerned—

Mr. Osborne (Louth)

I take it that the right hon. Gentleman is not asserting that the improvement in our gold and dollar reserves is due to our improvement at home, and that he will allow that a good deal of it results from the sales of raw materials from the sterling area?

Mr. Gaitskell

I am considering whether the financial policy of the Budget surplus which is embodied in the Bill is justified or not by what has taken place. Some people would argue that because there is this increase that policy may possibly have been wrong, that it might have been too severe. I shall in a moment come to the reasons why I think that is not so, and I shall take account of the point which the hon. Member has raised. The progress of exports seems to be pretty satisfactory. They reached a post-war record in March, and the figures for May were nearly as high. So far as the stability of prices is concerned, the interim retail price index has risen two points only since devaluation. That is on the whole a pretty remarkable achievement. Here I must at once refer to the fact that the wholesale index has risen a good deal more than that—by about 10 per cent.—largely due to the increase in import prices.

All this is a matter for considerable satisfaction, but lest there be any thought of dropping the policies which have in our view materially assisted this substantial improvement, I must draw the attention of the House to the following less favourable features. In the first place, there has since devaluation been a substantial increase in import prices, amounting in all to some 20 per cent. whereas our export prices have risen only by about 5 per cent. That means a big change in the terms of trade against the United Kingdom. This is in large part a reflection of the high level of income in the United States and the active buying of raw materials from elsewhere, including the sterling area, by that country, which plays a large part in helping to solve the dollar problem of the sterling area as a whole. But in doing so it creates something of a problem for the United Kingdom because of the change in the terms of the trade against us.

In the second place, although the United Kingdom may now be just about in balance—perhaps with a very small surplus—we must not overlook the fact that we need a surplus.

So far as the general point made by the right hon. Gentleman in the Budget Debate is concerned, we need a surplus for overseas investment in the Colonies, for some repayment of Debt and the building up of our gold reserves, and we cannot be satisfied with just a balance of trade in the United Kingdom.

In the third place, our dollar reserves are obviously still very low compared with pre-war and compared with the needs of the sterling area, and that at a time when Marshall Aid is declining. In the fourth place, the very removal of controls over consumption and to some extent over imports—a policy we are pursuing in regard to Western Europe—entirely desirable though it is, means that we have to place more reliance relatively upon fiscal and monetary policies as instruments of guarding us against inflation. From that point of view therefore, it is all the more necessary that we should err on the side of a strict policy as regards the Budget.

Finally, we must all in present circumstances have in mind the events in Korea, with the possible consequences which they may have for us in this country, in particular as regards defence expenditure and related expenditure. In all those circumstances it seems to me that the policy embodied in this Bill of a Budget surplus was clearly right in the present world situation. Some further expansion of our exports is still needed, and to achieve that it is essential we should keep in check our consumption at home. This in turn means that any rise in money incomes, must be very moderate. We must continue to save as much as we can and both public and private expenditure should be kept down as far as possible.

In short, the situation calls for the continuance of those policies which my right hon. and learned Friend has pursued so steadfastly and courageously in these past few years, and which have brought us so far on the road to recovery. Because the measures in this Bill are designed to assist this process still further, I commend this Bill to the House.

4.6 p.m.

Mr. Oliver Lyttelton (Aldershot)

I begin by taking up a point which the right hon. Gentleman was discussing at the end of his speech, namely, that since the Second Reading of the Bill, the impact of world events may have led some of us to think that there was an air of unreality in our discussions. Such a feeling is quite unjustified because discernible through and behind everything in the Bill is the fact that we have no reserve of taxable resources with which to meet emergencies. This is the lesson which we must draw from the right hon. Gentleman's concluding remarks.

That is the cloud which hangs over the Finance Bill—no reserve of taxable resources to meet emergencies. That is written into every line of the Bill. We have not to look far to see that this criticism is correct. To give reliefs in Income Tax, which are sadly overdue, we have to raise taxation in other directions which are unsuited to to-day's economy, and when we are faced by an ever-rising cost of living.

I described the Budget as unimaginative. When we look at the Bill we must agree that that criticism is borne out. We have had to maintain Purchase Tax and double the Petrol Duty and the sinews of re-equipment merely to give this small relief in Income Tax. The Government know of no other means by which a relief in taxation can be given except by raising it elsewhere. The Financial Secretary to the Treasury was very frank about it. He said: Therefore, anyone in the House who opposes these new taxes will also be opposing the Income Tax reliefs, because if the one is abandoned the other must also be abandoned."—[OFFICIAL REPORT, 16th May, 1950; Vol. 475, c. 1025.] What he said in effect was that there are no reserves of taxable resources.

Our general view on this side of the House, which I cannot pursue, is that there must be a reduction in Government expenditure in order to provide reliefs. Whether it be a 1 or 2 per cent. rise or any other of these little percentages which the Treasury Bench regard as nugatory, we think they are intolerable when we are so heavily taxed. I apologise for repeating that we are by far the most heavily taxed country in the world, with one minor exception. The percentage of our national income which is taken by taxation is 42½ in Germany it is 36½; in France 33⅓ in Italy 29; in the United States 28; in Canada 27; and in Switzerland 19.

I turn to the measures contained in the Bill. The right hon. Gentleman was in the usual dilemma which faces the Treasury Bench. He could not make up his mind whether he would defend the petrol tax as a fiscal measure or as a revenue tax. He differed from the Financial Secretary, who said that the Government had to impose the increased tax or they could not give the Income Tax reliefs. When it suits the right hon. Gentleman he shifts his ground and says that is has nothing to do with the revenue, that it is to prevent the road haulage industry from ordering more lorries.

The petrol tax and the tax on commercial vehicles are taxes on production and distribution. So far as they are taxes on production they are evils if we are to believe Ministers when they say that the crying need of our time is to cheapen the costs of production and for making British goods increasingly competitive in the world markets. These taxes raise the costs of distribution. Doubling the petrol tax will be reflected directly in the cost of distribution, an increase in the cost of our goods for which our hard-pressed people have to pay.

I think it is true to say that, apart from the ever-present dread of unemployment, which is the greatest social evil we can have except disease, war or famine, the two greatest anxieties of our time relate to housing, which is outside our discussion this afternoon, and the cost of living. Yet the petrol tax will bear particularly heavily on those light type of goods which form so large a part of the household budget of every family. In other words the petrol tax in this particular sector is yet another form of Purchase Tax levied particularly on the light goods distributed inside the country.

Both the direct cost of production and the cost of distribution from the centres of production to the seaports will be handicapped. "One or two per cent., what does it matter?" That is the argument put forward, and that is the sort of slippery slope which extravagant people get on to. On several occasions we have heard of this business of the incidence being very small. But the examples add up and become a serious matter indeed, and I do not think that the right hon. Gentleman did full justice to the argument which we have advanced on this side of the House.

It is quite easy to point to the export figures and the striking rise in gold and dollar reserves. I make no bones about it; when I feel a bit depressed I read those figures again and feel encouraged. But we must not let these recent figures divert our minds for a moment. The right hon. and learned Gentleman could not have stated the difficulties more clearly than he did last week, and the Minister for Economic Affairs has repeated them. We must not let these increases divert our minds from 1952, when Marshall Aid ends. The bad effects, the debits, of devaluation have not yet made themselves fully felt, whereas the good effects, the credits are clear. This is the sequence. In the first place there are stocks of commodities bought at the old rate of exchange which can be exhausted before the full impact of the higher costs of our exports in hard currencies are felt. The stocks of old commodities, which are in the pipe line as it were, can act as a buffer against the rising costs of imports. But the moment these buffers disappear and we have to buy our current imports at the current rates of exchange, we begin to have to pay back, so to speak, the advantage we have gained earlier. In face of those facts the Minister in charge of Economic Affairs should be very careful not to laugh off 1 or 2 per cent. increases in the cost of production, and it is for those reasons that in framing a Budget and Finance Bill for this year the last thing which we should have done was to impose further burdens and handicaps upon productive industry.

There is a tendency to regard the petrol tax as essentially a consumer tax, but to do so is not to follow the figures. The consumption of petrol on so-called private motoring is about 10 per cent.—10.3 per cent. I think, is the accurate figure. Even in the semi-twilight of a Socialist State, more regard should be paid to a healthy pleasure, such as the simple one of taking out the car into the English summer. But I had better not pursue that any further, because it might be thought that some people were enjoying themselves.

There is also contained in the figures of private motoring a certain appreciable percentage of consumption necessary to the life of the community, which is not private motoring at all, in the superficial sense of the word. There are doctors, midwives, school teachers and commercial travellers who use petrol in providing services, some of them irreducible and essential, such as the medical examples which I have given; so that the true proportion of what is used for production or services is still greater than a first glance at the figures would show. Does the hon. Member for Ealing, North (Mr. J. Hudson) wish me to pursue the question of how much petrol is spent in the delivery of beer?

Mr. James Hudson (Ealing, North)

No, the right hon. Gentleman was making a great point about the nurses who use petrol; the difficulty is that the nurses do not seem to be able to get the cars.

Mr. Lyttelton

That is another difficulty and it is, of course, a question which should be addressed to the right hon. and learned Gentleman who is exporting the midwives' cars and justifying it on other accounts. That is a subsidiary point.

The same general arguments apply, perhaps with redoubled force to Purchase Tax on commercial vehicles. Here again, even in the emollient tones which we expect from the Minister of State for Economic Affairs, the arguments were extremely thin indeed. Commercial vehicles have been called the machine tools of industry. I think it would be nearer the truth to describe them as the conveyor belts of industry. Who would support a tax upon conveyor belts which took the components of one department of a plant into the assembly lines of another? Such is the construction of our industry that this is just the service which is often performed by commercial vehicles between the manufacturers of the components and the manufacturers of the finished article who assemble them and embody them in the finished product. There is also the more readily discernible increase in the cost of the transport of raw materials from the ports to the plants where they are processed and out to the seaboard again if the finished product is designed for export.

This tax falls at a time when railway rates have been raised by no less than 3s. 4d. in the £, or l6⅔ per cent. Nor has anything been said which has convinced me—in fact on the Treasury Bench silence is thought to be golden on this subject—that these taxes are not intended as a hidden rescue party for the nationalised railways. If they are, I think the Government had better face up to it, and say so. The right hon. Gentleman smiles, but I think it would be quite an understandable excuse for the tax, and it is one which we should receive with that sympathy which candour always tends to receive and in a rather less hostile manner than this smoke-screen, to use a favourite phrase of the Government, which is continually allowed to waft its way from those Benches.

Now I turn to the Purchase Tax. I will not repeat the arguments I endeavoured to deploy during the Committee stage. It is quite slavish to imagine that the deflationary or disinflationary effect of taxes continues whatever the size or incidence of the tax may be. It is partially true that if a Government taxed the consumer and used the money so raised for productive purposes or for repaying debt, that is in effect compulsory saving. Money in those circumstances tends to be turned away from its quickest and most spendable form into a form where it is slower spent and where the demand it creates is different. All that is common knowledge, and was known to some of us even when we were at school; but if we get taxation on our scale, at 42½ per cent. of the national income, and if we levy a Purchase Tax which raises £303 million a year, we have passed the point at which these measures become deflationary and have entered a field where they become positively inflationary.

Much of the demand for increased wages has not yet been seen, because the rise in the cost of living, which is yet in its infancy if I may use that term, will continue as a result of deflation. The housewife, who has largely to find the £303 million in Purchase Tax and pay the increased cost of distribution of consumer goods due to the petrol tax, will find the family budget increasingly difficult to balance. If anyone wants further proof of this, he had better ask the housewife and not take it from me. She it will be who will tell her husband that there must be more housekeeping money if the standard of comfort, or even of subsistence, in their home is to be sustained. And the husband will go to his union meeting and insist that he must have higher wages.

These are the human forces which form at least one side of the inflationary spiral. We must recognise that the effect of devaluation and the effect of these new taxes is part of the process which we have witnessed for the last year or two of the continual writing down of real wages by means which are not at first visible to those who receive the wages. I make no bones about it. I would rather have a rise in the cost of living and a decrease in real wages than unemployment, but it is an economic fallacy, frequently put up by hon. Gentlemen opposite, to imagine that these are necessarily alternatives. I am shocked by the silence of the Government on the subject of Purchase Tax.

Mr. Gaitskell

Apart from the tax on commercial vehicles, there is nothing about Purchase Tax in the Bill, and I presumed that it would be out of order to discuss it.

Mr. Lyttelton

Purchase Tax was discussed at great length during the Committee stage.

Mr. Gaitskell

On an Amendment.

Mr. Lyttelton

I prefer to leave myself in the hands of Mr. Speaker rather than those of the right hon. Gentleman in this matter.

The Chancellor of the Exchequer (Sir Stafford Cripps)

The right hon. Gentleman accuses us of not having introduced this matter in my right hon. Friend's speech. My right hon. Friend gave a perfectly good reason for not doing that.

Mr. Lyttelton

I am sorry. The right hon. Gentleman misunderstood me. I was not complaining of his speech this afternoon. I was merely complaining that no relief in Purchase Tax had been given in the Bill, and that the reliefs which we suggested, were not at all well received by the Government.

Mr. Speaker

We cannot discuss reliefs, because no reliefs are given.

Mr. Lyttelton

I hope that I shall be in order in referring to those matters which the Bill omits.

Mr. Speaker

I think not. What the Bill omits is certainly out of order.

Mr. Lyttelton

Of course, I accept your Ruling, Mr. Speaker.

As far as I know, the argument is that no relief can be given, although the number of goods in the lower range of Purchase Tax is very small. That is a double-edged argument. The right hon. Gentleman is becoming very tender on these matters of order, but I think that he allowed himself considerable latitude in the hope that you, Mr. Speaker, would be more than usually indulgent. The truth of the matter is—and we can see it throughout the Bill—that the Government have overspent themselves, and are overspending themselves, to such an extent that they are forced to continue hardships which are inflationary in tendency in order to raise the necessary Revenue. The tax on undistributed profits is an instance. That, and others I have referred to earlier, is a tax upon the sinews of production.

We must have more measures to modernise and to keep modern all the apparatus of industry, and to expand it. I do not think that the Bill as it is now framed provides any incentives to expand and modernise British production. It contains deterrents. I should have thought that to expand it was to follow the exhortations which assail our ears whenever Ministers attempt, far away from elections, to deal seriously with our trade problems.

In all these matters the Bill acts in the opposite direction. Wherever these taxes are imposed, as they are in the Petrol Duty and the tax on commercial vehicles, and so on, they are direct taxes on production. Wherever we look we find that, for example, the trade unions are increasingly restless, for it is impossible under our present fiscal system and under the provisions contained in this Bill to deal properly with the capital equipment of industry in which their members work. They are right to do so, because we cannot secure full employment—[Interruption.] If the right hon. Gentleman wishes to talk, he should do so outside.

Mr. Gaitskell

I was discussing the right hon. Gentleman's speech.

Mr. Lyttelton

So was my right hon. Friend the Member for Woodford (Mr. Churchill) at the time when he received a rather severe rebuke from the right hon. and learned Gentleman.

We cannot secure full employment, good wages and working conditions unless we are prepared to improve the tools which our uniquely skilled body of workers use in the course of their daily work. The aims of these fiscal measures, the petrol tax and the tax on commercial vehicles, are designed in the opposite direction.

I must say, in parenthesis, that capital assets become obsolete much quicker in 1950 than they did in 1900, and that the fiscal provisions are insufficient to keep up with the increased rate of depreciation of all the implements of industry with which we have to deal today. Every day scientific, technological and industrial technique gathers momentum. It is necessary to have a far greater rate of depreciation, in some form or another, if we are to maintain our plant in its proper condition and if we are not to see tool rooms which would be much better put into South Kensington Museum.

We must face the truth, that unless Government expenditure is pared—and there is no sign of that in this Bill and therefore it is out of order to discuss it —and if it should prove that social services have been expanded too rapidly, then the slack must be taken up, as it has been in the last two years, by a decrease in real wages. That is exactly what has happened. If one who, like myself, believes that our economy, if properly run, can sustain the present level of social services, it is important to see that overspending and extravagance at the beginning do not continue this writing down of real wages. That that decrease in real wages is not at first readily discernible is a political advantage to those who are the authors of it; but, as time goes on, the decrease in real wages cannot be concealed, and will recoil with redoubled force on its authors, because the population will feel that they have been deceived.

It is true to say that, as a result of this Bill and others which are the responsibility of the present Government, those who stuck the stamps on their cards three years ago are having the value of those stamps in today's values appreciably reduced. Entirely new methods of finance, internal and external, are called for. I say that the Finance Bill which we have discussed during these 13 days, in one way or another, shows no sense of enlightenment, no sense of imagination and no sense of any financial philosophy or theme. It is a poor Measure to deal with the discontents of our time. It is all the poorer because we may well be faced, as the right hon. Gentleman mentioned, with an international situation in which a reserve of taxable resources will be necessary for our strength, and necessary if we are to make our full contribution to the maintenance of peace.

4.28 p.m.

Mr. G. Beresford Craddock (Spelthorne)

I had the privilege of addressing hon. Members for the first time on the day after the Chancellor of the Exchequer introduced his Budget. Now that we are getting to the end of a long and weary journey, it may not he inappropriate on the last lap for me to make my second speech in this House. Before I come to any specific points about the Bill, I should like to make one or two general observations.

I was pleased to see that when the Third Reading was moved there was the trinity on the Government Front Bench which we have seen throughout the whole of the Committee stage. I trust that it will not be considered disrespectful or offensive for me, as a new Member of this House, to say that I have been astonished at the smug and complacent attitude which right hon and hon. Members on the Front Bench have adopted when specifically addressing their views on this Bill to hon. Members on this side.

Indeed, I go so far as to say that it would not be unreasonable to describe their attitude as "holier than thou." When the right hon. and learned Gentleman and his henchman the Financial Secretary have been at the Despatch Box, I have wondered whether we were not really in an Oxford tutorial on economics composed of all the members of the Fabian Society. I would respectfully remind them that some hon. Members on this side of the House have a theoretical knowledge of these matters at least as good as theirs and, above all and more important than anything else, a sound practical experience built on that theoretical knowledge.

May I now turn from what I might call the shadow of this Bill—one might even call it the red shadow—to its substance? I have no hesitation in charactering this Bill as the height of midsummer economic and financial madness. Indeed, I go further and say that this Bill is typical of the intellectuals who dominate the party opposite. It is a further clamping down and strangulation of the genius, enthusiasm and zeal of the British people, and, in my view, it contains certain elements of an almost fraudulent prospectus. Might I just explain that?

The Minister for Economic Affairs has said again today what he told us during the Committee stage, that the Petrol Duty was brought in to make possible the reliefs of Income Tax under P.A.Y.E. Is that really true? It seems to me that what has happened is that the Chancellor has given with one hand and taken away with the other, and that seems to me to be the general tenor running through the Bill. We were also told during the Committee stage that the private motorist would not grudge this imposition, but, as my right hon. Friend the Member for Aldershot (Mr. Lyttelton) has pointed out, the amount borne by the private motorist is really a very small percentage when compared with the amount that is going to be imposed on industry generally, tending all the time to increase its costs. This is such an important matter at this juncture that I make no apology for enlarging upon it.

It will be agreed that the Petrol Duty must increase the cost of transport, must increase the cost of coal and cause increases also in the costs of those various services which we cannot do without. For example, to take a very simple one, on the question of delivering laundry, if it is done by van, more cost will be incurred because of the increased petrol charges, and that will have an effect upon the individual. But there is another very important aspect of this increase in petrol charges and that is the effect which it will have on municipal and county rates.

May I give some figures on this very important point? I take them from my own constituency of Spelthorne and the three urban districts in it. In Staines, this increase in petrol costs means an increase in the rate of 1d.; in Sunbury, an increase of nearly ½d.; in Feltham, also an increase of ½d. This is particularly interesting, because I was asked to draw the attention of the right hon. Gentleman opposite to this very point by the Feltham Urban District Council. and it is significant that that council, which has a Socialist majority, specifically wrote to me to draw attention to the effect on the rates which this increase will have.

Let me now take together the two matters which have been mentioned so much this afternoon—the Petrol Duty and the tax on commercial chassis. There is one aspect which has not yet been mentioned, and that is the effect which these two taxes will have on the small garage proprietor and small trader. I have had a number of letters since these two proposals were introduced showing what their effect will be on the small dealer who has found that many of his orders have been cancelled and who has, as a result, suffered loss. It may well be that, so far as the small trader is concerned, right hon. Gentlemen opposite do not worry very much about it, and I am reminded of a verse which appeared in "Punch" some time ago, and which in one stanza illustrates the actions of the Chancellor so far as traders making losses are concerned. This is the stanza: Oh, Sir," I said, "you are very kind To a sinner such as I; But how can I hope to pay my debts, If I cannot sell and buy? They said I misunderstood them And they sounded a trifle cross; I could buy and sell as much as I liked, As long as I made a loss. That may very well sum up most aptly the attitude of the Government towards the small traders of this country.

Here is one point which I am bound to say I cannot understand. When the right hon. Gentleman repeated this afternoon what he had said at various times during the Committee stage of the Bill—that this tax on commercial vehicles would not affect the export trade—I am bound to say that I did not understand him. Surely, the more we can produce of a particular article, the lower the costs will be? In the motor industry, for example, if we are now producing 600,000 vehicles, which is roughly the amount produced last year, and the motor industry has a capacity of 800,000 vehicles, is it not reasonable to assume that, by producing 800,000 vehicles, the costs will go down? If that is so, surely, that is an encouragement to the export buyer to buy the vehicles when he can buy them at smaller cost?

I have never been able, try as I might, to follow the argument of right hon. Gentlemen opposite that this Purchase Tax on chassis would not have any effect on the export trade. In my humble opinion, it may very well have a bad effect. I have never been able to find out, although I asked a question when I made my maiden speech in this House inquiring whether we could be told why, during the last year, so many commercial vehicles were sold on the home market that there were not enough for export. I have never had a cogent reason for that given to me. Why was it, for example, that other countries did not buy our commercial vehicles last year? Was it because the prices were too high? I should be very grateful if whoever is to reply to the Debate tonight for the Government would be kind enough to answer that specific question.

Finally, I come to the broad picture of this Bill. I find it most disturbing that today in this Bill we are having to raise the colossal sum of £4,000 million, and I want to know whether we are expected to face the fact that this is going on for ever. We are in a most dangerous position, with absolutely no margin of taxable capacity. The right hon. Gentleman who moved the Third Reading mentioned the question of gold and dollar reserves. I would ask if it is not possible to get the breakdown of these figures within the Sterling Area, because if we could get that it would be almost certain to show that the bulk of the credit for this rapid increase—and indeed I welcome it—in our gold and dollar reserves which was announced the other day was very largely due to the efforts of the other members of the British Commonwealth, and that the position of this country is by no means as favourable as it would appear inside the global figure.

I believe that we in this country are a very long way from solving the real problem of paying our way, apart altogether from the Sterling Area. Again, I need hardly remind hon. Members how necessary it is to get into that position as quickly as possible. The dangers that confront us today have already been mentioned, and if we have to embark again on an intensive rearmament programme, where is the money to come from in view of our present financial position? I sincerely hope that there will be no question of trying to cut down housing still further in order to do it, because, if there is, I think there would be a revolution in this country. We are in the very dangerous position of having no taxable margin.

What is the result of this policy which has been consistently pursued since 1945? In my view, it is one of the factors which has prevented us from playing our rightful part as leaders in the world since 1945. I sincerely hope that it will not come to war, in which we might have to assume leadership. That, indeed, would be a tragedy. I am much more interested in leadership in peace, and it is because I feel so strongly that finance is one of the sinews of peace as of war, that I deprecate this Bill, and condemn it as a very bad one.

4.42 p.m.

Mr. Leslie Hale (Oldham, West)

I do not think that in the course of a few minutes I have ever heard so many surprising statements as in the last few. We have heard a most lugubrious account of this exceedingly prosperous country We have heard from the hon. Member for Spelthorne (Mr. G. B. Craddock) that people are being compelled to make a loss. Does he deny that profits are higher today than ever before in history?

Mr. G. B. Craddock

That is not quite correct. What I said was that as a result of this Petrol Duty and the tax on commercial vehicles, many small traders were having orders cancelled. That, according to the letters I have received, is a statement of fact.

Mr. Hale

The hon. Gentleman quoted laundries. I am a director of a laundry. We do not use petrol vehicles; we use electrical vehicles, which are much more suitable. Does the hon. Gentleman deny that more profits are being made today than ever before? Does he deny that profits have gone up much more than wages? Professor Barna's survey shows that profits have overwhelmingly increased.

Mr. Osborne

According to "The Times," whereas profits have gone up by 31 per cent., wages have gone up by 135 per cent. Does the hon. Gentleman dispute that?

Mr. Hale

The hon. Member for Louth (Mr. Osborne) always puts the same point, and the trouble is that he never considers what is the meaning of his point. I am talking of profits before taxation. If the hon. Gentleman's words have any meaning at all, they mean that profits are a bearing an unfair proportion of taxation which should be transferred to wages.

However, I wish to refer to some of the cheerful things. The hon. Member for Spelthorne made a quotation which was not original to the effect that we were stifling initiative. Does he deny that wages and profits are higher than ever before? Where does the stifling come in?

Mr. G. B. Craddock

According to statistics, more bankruptcies have taken place during the last six months than for a very long time.

Mr. Hale

My experience has been rather diverse. During the years 1917–22, I was employed in the bankruptcy office in Leicester, and I remember the picture then. We had people queuing up for form OR7. Things are really quite different now.

Mr. Craddock

I am sorry I did not know the number of bankruptcies for 1917, but I was serving in the Forces then.

Mr. Hale

I said bankruptcies during the years 1917–22, when people were going bankrupt by the thousand. But let us leave these gloomy statements. If the right hon. Member for Aldershot (Mr. Lyttelton) wants to talk about losses—

Captain Waterhouse (Leicester,South-East)

I did not know that the people of Leicester were going bankrupt by the thousand.

Mr. Hale

I say that there was a higher number of bankruptcies in Leicester during those years than at any other time in history. I remember the many hosiery firms who passed through our hands. We made a lot of money out of it.

I want to dismiss from our minds the somewhat lugubrious speeches we have heard from time to time, and dwell on some of the more cheerful things. I am sorry that the hon. Member for Chippenham (Mr. Eccles) is not present because I wish to refer to him in terms of some praise. In his speech on the Budget proposals and the Economic Survey there emerged for the first time in six years a gleam of light. He said: The discovery of this horizon without limit is an important guarantee that, provided we can pay for our essential imports, we shall he able, year in year out, to maintain stable employment, because we have ready to hand this unsatisfied demand for expenditure on both consumer and capital account which can be brought in when there is a falling off in domestic spending."—[OFFICIAL REPORT, 19th April, 1950; Vol. 474, c. 240.] That is precisely the plan which my right hon. and learned Friend the Chancellor of the Exchequer has been putting forward since 1947; precisely the doctrine he has been preaching to the Opposition, and precisely the doctrine which has been criticised time after time from the benches opposite. At long last, the Cassandra of Chippenham has accepted a small part of the Marxian doctrine. There is more joy in this statistical Valhalla over one economic sinner who repents than over the 99 righteous who assiduously keep left, and it is right that we should register our joy.

Mr. Osborne

Is the hon. Gentleman now saying that his right hon. Friends on the Front Bench are full-blooded Marxists?

Mr. Hale

I said it was part of the doctrine accepted by the hon. Member for Chippenham. I am very happy to say that I am one of the fortunate people who have never found it necessary to read "Das Kapital." All I said was that a particular portion of the hon. Gentleman's speech really belonged to Karl. It is true that in the rest of the speech there was some that belonged to the Harpo School of Marxism, including one brief reference to myself.

Mr. Lyttelton

Is this in the Bill, Mr. Deputy-Speaker?

Mr. Deputy-Speaker (Colonel Sir Charles MacAndrew)

The hon. Member must be allowed to develop his argument.

Mr. Hale

I was endeavouring to deal with the speech of the right hon. Gentleman who had discussed our economic position at some length and with the speech of the hon. Member for Spelthorne who discussed it in more lugubrious terms than did the right hon. Gentleman. I shall be happy to bring a little of the spirit of consolation and encouragement to the House in the course of the next few minutes. After all, we have a right to say what we think on the Third Reading of the Finance Bill when we are considering whether to pass it or not. As a matter of fact, this is the first time that the Finance Bill has been referred to for the past half hour. We have to consider what is the present economic situation, what has happened since the Bill was introduced in April and whether it is now sufficient and adequate. The hon. Member for Spelthorne has certainly said he has a right to consider what he describes as the state of things now. If we are going to envisage what the state of things may be in 12 months' time we shall have to refer to the present state of things.

I should like to remind hon. Members of the prophecies made in the Debates in October on the proposed economic cuts. The most dreadful prognostications were made then. [HON. MEMBERS: "By the Chancellor?"] My right hon. and learned Friend warned in carefully studied words that we should have to watch carefully and be prudent and sensible and not think the corner had been turned too suddenly. When he announced the dollar surplus for the first quarter he was only once cheered by the Opposition and that was when he warned the House not to be over-confident. When he made a like announcement a few weeks ago there was joy on the faces of the Opposition only at the end of that announcement when he said something similar.

The right hon. Member for Warwick and Leamington (Mr. Eden) said another crisis was not many months away. The right hon. Member for Woodford (Mr. Churchill) said: It is not only devaluation but bankruptcy which confronts us now. … The Government have devalued the pound and devalued the British nation, but most of all they have devalued themselves and brought us to bankruptcy."—[OFFICIAL REPORT, 27th October, 1949; Vol. 468, c. 1626.] We have been told at great length about the increase in the cost of living. The figure is less than 2 per cent. between the time when devaluation was introduced and the time the Budget was introduced.

Mr. Osborne

What has it been since?

Mr. Hale

How can we give the figures since the Budget? I will give the hon. Member, in a moment, the latest figures that are available. I was speaking in response to what the hon. Member for Chippenham said, referring to me: We have heard from the hon. Member … that it is quite easy to pick out figures to show that, in spite of the burden of taxation, Britain's recovery has gone a very long way. Let those who will take comfort in those statistical selections. Like a human being, an economy, by indulging in a stimulant can for a time disguise how sick it is in mind and body. We all know in our hearts that there is something very wrong with our wages, prices, savings, taxation and foreign balance."—[OFFICIAL REPORT, 19th April, 1950; Vol. 474, c. 242.] I was referring on that occasion to the extraordinary vindication of the Chancellor's policy in the United Nations Experts' reports on measures for national and international full employment. But the points made by the hon. Member for Spelthorne are completely dealt with in a much more recent publication, the report of the economic survey in Europe in 1949 by the Research and Planning Division of the Economic Mission for Europe, which gives comparative details showing precisely the effect of the economic policy of my right hon. Friend. There are figures which also show precisely the effect of the sort of unplanned and uncontrolled economy which still prevails in some parts of Europe.

My hon. Friends on this side of the House will remember that, for some reason, we had Belgium quoted to us as a special example of the sort of economy we ought to pursue and seek. The hon. Member for Chippenham wanted fuller figures, and they are now available. They are a tremendous vindication of the policy of the Chancellor of the Exchequer. They show beyond question that this country is the most prosperous in Europe; and I should like to see a time when hon. Members opposite would look pleased at our being the most prosperous nation in Europe. It is really sad that even the right hon. Member for Aldershot—who always speaks with sincerity and whom one always expects to use a straight bat when we remember the distinguished name he bears—only gives a sort of wintry smile when he is able to say in his speech, "We have still not turned the corner, and there are still troubles ahead." He tolds us in a most lugubrious way that he had heard the figures for our dollar balance with relief, but he went on to say that the relief was not sufficient to offset his apprehensions on other grounds.

But I am trying to deal with what was said by the hon. Member for Spelthorne. We were told that our workers were being starved to death, and that soon they would be unable to produce at all. These are the figures right up to 1949 given by the Economic Survey—United Kingdom, calories 3,030 a day, Belgium and France, 2,730—and France is an agricultural country—and Italy 2,350. The figures for protein in grammes per day are: United Kingdom, 40—

Mr. Lyttelton

On a point of order. We have been kept fairly closely to the Bill during the earlier stages. May I ask whether measures relating to proteins and calories are to be found in the Finance Bill?

Mr. Deputy-Speaker

They are certainly not to be found in the Finance Bill, but I think the hon. Member was answering a previous speaker.

Mr. Hale

It is true that the right hon. Member for Aldershot was called to order when referring to a Clause on the Purchase Tax, but apart from that, in your absence, Sir Charles, the Debate ranged over Korea, Washington and America. I am trying to keep it strictly to the Bill and the observations made by the hon. Member for Spelthorne, who predicted that this Bill would bring about a further increase in the cost of living. The point I am making is that a precisely similar Bill did not do that; and I am giving the results of a precisely similar Bill as an indication of what would happen under this Bill.

Mr. Deputy-Speaker

May I draw attention to page 496 of Erskine May which says: … debate is confined strictly to the contents of a bill, and cannot wander afield as on second reading.

Mr. Hale

I am dealing with Clause 49 of the Bill, which provides the basic structure of our economic policy for the immediate future. As to the cost of living, there is really only one way in which one can effectively assess the cost of living, because of devaluation, revaluation, rates of exchange and so on. It cannot be done in terms of money. It can be assessed in terms of working time. The number of minutes it takes to earn a loaf of bread is a very real comparative figure, and a very effective basis for comparison. In the United Kingdom it takes 11 minutes of work to earn one kilogram of bread. In France it takes 28 minutes, and in Italy 38. To earn one kilogram of potatoes, not subsidised, it takes seven minutes in the United Kingdom, 12 minutes in France, and 13 in Italy. In the United Kingdom it takes 16 minutes of work to earn a litre of milk. In France it takes 27 minutes and in Italy 28.

Mr. Beverley Baxter (Southgate)

Do not the calories taste better in those parts?

Mr. Deputy-Speaker

We are going very far from the Third Reading of the Finance Bill.

Mr. Hale

I am much obliged to you, Mr. Deputy-Speaker. I will not labour the point. I will not waste time arguing that, though I should have liked to do so. Perhaps you will permit me to give the final comprehensive figure, which shows the gross total to obtain a single measure of each commodity. I was about to list the ordinary range of commodities, meat, butter and so on of standard quantities. In Britain the total requires 217 minutes work. In France it requires 937 minutes. That is a fantastic difference. Indeed, in all the figures as given by this Economic Survey—with the possible exception of one or two items for Sweden, a Socialist country which did not take part in the war, and Denmark, a small agricultural country—Britain leads the world. We ought to rejoice that it does lead the world, and we ought to say to the Chancellor, "Thank you for ensuring that that position should come about." The right hon. Member for Aldershot laughs, but it is only as recently as last July—

Mr. Lyttelton

The hon. Member mentioned that these figures were comprehensive. He omitted all reference to the United States. If he included them he would get a very different result.

Mr. Hale

The figures for the United States are very near to ours. For bread they are worse, for meat they are better, but the general difference is nothing like so substantial as the difference between Britain and the European countries. I have the figures here and I will pass them over to the right hon. Gentleman with great pleasure.

Mr. Osborne

Then it is strange that they send us Marshall Aid.

Mr. Hale

It is a little hard when interjections of that nature are made, for they could be answered so simply, Mr. Deputy-Speaker, if I were allowed to go beyond the Rules of order. After all, we were the arsenal of democracy and we did transfer all our factories to war production while they had peace-time production. If the right hon. Gentleman the Leader of the Opposition had had the sense at that time to demand that Lend-Lease should continue for a year or two after the war, as of course should have been done, then the question of Marshall Aid would never have arisen. It was part of the obvious terms which should have been laid down in that connection.

I am sorry, Mr. Deputy-Speaker, if I am getting a little further away from the speech of the hon. Member for Spelthorne than I intended and I hope I shall not be tempted again by hon. Members opposite.

But that is not the only thing which has happened since the Budget was introduced. Last week my right hon. and learned Friend was able to give us the figures for the second quarter of the gold and dollar reserves, and they showed that our gold and dollar reserves now stood at nearly twice as much as at the time of devaluation. That is a matter of great congratulation, and I am surprised when we hear speeches from hon. Members opposite who say that we have no taxable reserve of any kind and who do not talk about the tremendous increase in our staple, financial reserves which my right hon. and learned Friend announced.

My right hon. and learned Friend was able to say last week that we have now a European Payments Union and that the problem of the hard currency countries in Europe is being effectively dealt with. Again, that is something which has happened which will make this Bill a really workable and really effective Bill. If I were called upon to coin a novel phrase in this connection, I should have been tempted a few days ago to refer to my right hon. and learned Friend at this time as a lighthouse of economic liberty, but it appears to me that there might be something a little jejune about the use of those words in that connection at the moment.

At any rate, on reading all the reports from 1947 to 1950, I think they show that in the teeth of opposition from hon. Members on that side of the House and, indeed, in the teeth of criticism often from ourselves, and of complaints from us that he is not granting enough, of demands by us for increasing benefits and so on—which he has, in the main, resisted—my right hon. and learned Friend has been able to put over a policy which is now proving to have made this country stronger in Europe than ever before, more powerful and more prosperous in Europe than ever before and more powerful and more prosperous at home. I think the time has come when someone from these benches should say that we all owe him a very considerable debt for the integrity he has shown in those years, for his courage in resisting pressure and for the success of his policy; and I am quite sure the time has come when that should be said, too, from someone opposite.

I remember that on a previous occasion when I embarked upon economic waters—and I always embark on them with a measure of uncertainty about the navigation—I resuscitated the ancient ship of State and wrecked it in the first two or three minutes. I do not like to set forth on the waters again except to say that there are passengers in the ship of State and that it is time they stopped simply standing and watching and criticising; it is time they tried to do something to help.

We heard and remembered the speech of the right hon. Member for Woodford last July—and the right hon. Member for Aldershot challenged me about this; we heard the right hon. Gentleman's speech at Wolverhampton when he referred to "Weary Willies" and "Tired Tims." What is the answer to that? The answer is this. Unchallenged at the head of the production of Europe stand the workers of Britain; their increase over pre-war is greater than that of any other nation in Europe. That has been made possible by their initiative and energy and co-operation and by the prudent finance of my right hon. and learned Friend. As we are about to give the Third Reading to this Bill, I must say with what pleasure we on these benches have seen the change in our economic situation during these years and with what courage and confidence we now look to the future.

5.4 p.m.

Captain Waterhouse (Leicester, South-East)

The hon. Member for Oldham, West (Mr. Leslie Hale) referred to his right hon. and learned Friend as a lighthouse of economic liberty. I think that is rather an apt description, for we are all aware that a lighthouse is generally to be seen not in the middle of a comfortable haven of rest but on top of jagged rocks and in the midst of breakers. It is a warning, and if the hon. Member meant it in that sense, as he probably did, then I am perfectly certain that the House will entirely agree that the right hon. and learned Gentleman is a lighthouse to economic liberty because his policy, and the policy of his party, is a warning to all other nations of the world of what would happen were they foolish enough to adopt the same Socialist policy as that of His Majesty's Government.

Mr. Hale

The right hon. and gallant Gentleman seems to be thinking not of the lighthouse, of which I spoke, but of the lantern on the donkey's tail when the donkey was led along the Cornish coast in days gone by. The lighthouse, of course, is placed where there are rocks, but it marks the channel for the future.

Captain Waterhouse

I will not follow the red light on the donkey's tail along the Cornish coast or anywhere else.

The hon. Gentleman started with a series of very wild statements. He began by comparing profits which have been earned and which were being paid in industry with the wages which are being paid, and he said that taxation did not matter. What an extraordinary comment! Profits were being discussed, and if profits mean anything to the shareholders surely they mean the profits which can be distributed—the amount which is left when right hon. Gentlemen opposite have had their pull at them. That is what really matters to industry and to the shareholders, not simply the profits which are earned.

Then the hon. Gentleman made a reference to my constituency and said that in Leicester there were more bankruptcies after the last war than in any other town in the country.

Mr. Hale

No; I said more bankruptcies than ever before in that town.

Captain Waterhouse

That is a very different matter because it means comparatively little. During that time, during the black years between the wars, Leicester was for a large number of years by far the most prosperous town not only in England but in the whole of Europe. In taking Leicester as an example for the number of bankruptcies, the hon. Gentleman should equally have taken Leicester as an example of the low number of bankruptcies, of increasing prosperity, and of the momentum of industry at the time.

The last point the hon. Gentleman mentioned was the cost of living which, he said, had gone up by only two points since the Chancellor's speech. But the prices of things which make up the cost-of-living index are to a large extent pegged as, for instance, utility clothing. There have been some small modifications recently, but they are not comparable to the increases we get in ordinary commodities which go to make up our real cost of living. As all hon. Members know full well, prices have increased, are increasing and are likely to increase more and more over the vast range of goods which we have to buy from the shops.

The Minister of State for Economic Affairs, who moved the Third Reading of the Bill, referred to it as a good Bill and said that it involved few changes. If one is in a very happy state, a very good and sound state, and if there are few changes, then one may say that the good state would continue; but if one is not in such a sound state, and there are few changes, then the unsoundness remains. I suggest that in spending this vast sum of money, in taking this vast amount from the taxpayer year by year in times of peace, we are jeopardising our liberties; as my right hon. Friend the Member for Aldershot (Mr. Lyttelton) said, we are leaving nothing at all for any eventuality which may beset the nation.

You have given a very narrow Ruling Mr. Deputy-Speaker, that on a Third Reading Debate we may refer only to things which are in the Bill. I think if you had been in the Chair earlier, you would have probably called the Minister of State for Economic Affairs to order for mentioning prosperity, because there is certainly nothing about prosperity in the Bill. No Measure that he has introduced is likely to bring prosperity to any section of trade or any part of this country. Very much to the contrary. It is true that there have been remissions of taxation, which are welcome, but they have been obtained at a very severe price.

It has been stated that the two new taxes—on petrol and on petrol vehicles—may amount to about 1½ per cent. in the case of one and about 1 per cent. in the case of the other. I wonder whether that figure like the figure in the Economic Survey is just a guess, or whether the right hon. and learned Gentleman really made any calculations in order to arrive at that figure; because I have at least one case which has come to my own personal knowledge—the case of a quarry from which is obtained gravel which is used in the building trade. It is a fairly expensive sort of gravel, costing about £2 a ton.

There, the transport charges are comparatively small compared with the proportionate charges on cheaper forms of raw material, but in that particular industry, which does not employ its own transport, a notification was received from the Road Haulage Executive that there was to be an increase of 7½ per cent. in rates on account of the petrol charges. Here is the letter giving the notification: The Road Haulage Executive has announced that the increase of 9d. per gallon on fuel means an increase of 7½ per cent. on all Road Haulage Executive rates as from 15th May.

Sir S. Cripps

That was not the statement put out by the Road Haulage Executive, which stated that that and other matters were taken into account in arriving at the 7½ per cent.

Captain Waterhouse

This notification is headed, "British Road Services." It is the right hon. and learned Gentleman's own Government show. I am not talking about private enterprise. I will read the whole heading: British Road Services. Road Haulage Executive. Route No. 66. Is the right hon. and learned Gentleman satisfied?

Sir S. Cripps

No. If the right hon. and gallant Gentleman will look at the original document put out by the Road Haulage Executive at the time he will see it explained the reasons that led to the 7½ per cent.

Captain Waterhouse

I am not dealing with any circular. I am dealing with a letter to a particular firm, signed by a gentleman who is a group manager of this nationalised industry. Surely we need not go further than that. The right hon. and learned Gentleman must accept the dicta of his own servants or else get rid of them or else resign. There are several alternatives. However, as long as he remains there and they remain where they are he must stand by that bit of paper. That is what they say in that connection.

They go on to say that, in addition to the cost of fuel, tyre and service charges have enhanced operating costs, and they take the opportunity the right hon. and learned Gentleman has given them through the petrol tax to put up the whole lot. I have another letter—and I have it here, so the right hon. and learned Gentleman cannot catch me out. They say that it will be about 15 per cent.—all these increases together. In the few weeks that this has been in operation the actual increase has worked out at 19 per cent., and it is anticipated that when all the rates and increased charges for the various needs of this gravel company are added together the increase will be between 20 per cent. and 25 per cent. It is not too much to assume that out of the petrol tax and because of the petrol tax something like a 10 per cent. to 12 per cent. increase arises.

What does that mean to this particular trade? The haulage charges are about a third of the total delivery costs. That surely means that for petrol alone there will be an increase of some 3 per cent. and 4 per cent. Added to that will be the further increase of 1 per cent. or 2 per cent. on the cost of road vehicles in this industry. The increase is not going to be merely 2 per cent. or 3 per cent.; it is to be 4 per cent., 5 per cent. or 6 per cent. It is not a small matter—and in this industry, too, there is only one haul from the quarry to the consumer.

I wonder if the right hon. and learned Gentleman considered, before he produced these proposals, how many times some commodities have to be picked up by petrol driven vehicles. Let us have a look at the great wool industry. The wool arrives at Hull. It is very often—if often used to be—put on lorries and taken to a wool comber in Bradford. When combed it is taken in another lorry to a spinner; and when it is spun the yarn is taken in another lorry to the manufacturer, and thence to a finisher, and then it has to be sent to the various merchant houses by train or road. In such a case that material—valuable material—has to be carried in a lorry four or five or six times. For each one of those journeys this extra charge for petrol has to be paid, charges will mount up, and the cost of that material will rise by a matter of several pence by the time it becomes cloth.

Let us examine what happens after that. The cloth goes abroad, and this increase of 6d. or, perhaps, 1s. or whatever it is, is to be taxed. It has to bear import tax. It has to bear distribution costs. So by the time that that piece of cloth gets on to the market in America or Canada its cost bears the 6d. or 1s. that the tax has added, which means that the price may go up by 1s. 6d. or 2s. or even more.

It is absolute nonsense, and we are just deluding ourselves if we pretend for one moment that that is a negligible factor. It is true that industry may be able to carry these costs now, but for how long will it be able to do so? It is true that devaluation has given us a great advantage in world markets, but the right hon. and learned Gentleman himself admits that this will be a short lived advantage, and that the disadvantages of devaluation—rising costs, rising prices—will remain with us while the advantages in our international currencies are going to be transitory. When the transitory advantages are gone, these small additional costs will be a burden which may tip the scales against British manufactures and put more people into that court the hon. Gentleman the Member for Oldham. West, spoke of—the bankruptcy court.

My right hon. Friend the Member for Aldershot earlier in our discussions on this Bill spoke of the new peril of guessing. He asked on what basis had the right hon. and learned Gentleman decided that we were making too many lorries. Was it guessing, he asked? Of course it is guessing, and now this guessing has become a new jeopardy in business. No longer is it just a turn of the market that may put one out of business; no longer is it just a change of fashion that may put one out of business. The right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) can plan one out of business, and now the Chancellor of the Exchequer can guess one out of business. We do not expect His Majesty's Government to impose these perils in days such as these. We have perils enough in the world without adding to them ourselves. and I think the Government will stand condemned when the country considers the effects of this Bill.

5.19 p.m.

Mr. Grimond (Orkney and Shetland)

Reference has been made today to Karl Marx. I have the advantage of the hon. Member for Oldham, West (Mr. Leslie Hale), in that respect at any rate, because I have read him. The situation which Marx foresaw has never arisen, because we have gradually built up in this country the welfare State, and we have gradually built up in this country a mixed economy. I think every one will agree that to support the sort of services which we now expect—and rightly expect—in this country we have got to have a very large sum of money raised by Finance Bills. That, I think, will be common ground. But there must also be a limit.

There must come a time when the advantages to the ordinary man of the services given by the State may be more than offset by the taxation or other burdens imposed upon him to enable those services to be provided. Further, although we have a mixed economy we still rely primarily on private enterprise in all sorts of forms, from the very smallest shop to the greatest industries, to give us the life-blood and wealth which enables us to supply the money for such things as this Finance Bill.

When do we reach the stage when the advantages from having heavy Government services are outweighed by the disadvantages? Surely we reach it, first, when we begin so to limit the choice which a consumer has, that his liberty is seriously diminished, when he is told that he can take this but cannot take that, and freedom of choice, which is an important freedom, disappears; and secondly, when the ordinary man who is anxious to improve his way in the world, or to build up his business, does not think that he gets sufficient out of his effort to compensate him for the risks he takes and the work he puts into it.

I think we have come near to that situation today. We are told that productivity is rising. Apart from the doubts which must arise over particular figures for productivity, I have never been able to understand how one compares the quality of different periods, or the types of goods made at different periods; how, for example, one compares the output of cars today with the output of cars prewar. I therefore think that statistics about productivity must be viewed with the gravest suspicion. But, after all, science and technical processes advance, and there is no doubt that, on the whole, more wealth is always being produced. I am sure we all welcome the fact that it is being produced in this country, that we have made the most remarkable recovery since the war, and that during that period of recovery we have been able to continue expanding the welfare State.

But, of course, it would be a disastrous thing if by any chance productivity did not increase, because in many respects, the State will need far bigger Finance Bills in the future than we have had today. For instance, we have heard talk of the Korean war. We know that more money will be needed for the social services. Furthermore, though there is no doubt that in many parts of the economy inflation is still a grave danger, there is also no doubt that to some people in this country today money is much tighter, and all through the economy there are sections in which there is real difficulty for people to keep up an ordinary standard of life which is decent by what we expect today.

We know that we shall be faced with increasing difficulties in all those industries which depend on foreign trade. We have heard it said during these debates that the policy of very high budgeting and high taxation is one of the means by which we keep full employment. I have never been able to understand how we can keep full employment in this way in industries dependent on foreign trade. We may have great difficulties in getting raw materials from abroad or in selling the products abroad in foreign markets while keeping up a very high cost economy in this country. I do not believe that in a country which depends on world trade one can do what can be done in a Communist country, or in a more or less self-sufficient country, where a level is fixed at which the people have to live—a level which can be supplied from indigenous resources. We cannot do that.

I suggest that, in so far as the Budget is an instrument of planning—which of course it largely is—the Chancellor must strike a balance between providing for the services which the State must provide and hampering and hindering the creation of wealth which makes those services possible, bearing in mind that he has got to draw some of that wealth from foreign markets. The new proposals in this Budget are all striking at the production of that wealth. Those costs, small as they be, will influence and increase the cost of living of every person in this country from the poorest upwards; they will increase the pressure for higher wages, and they will increase the difficulties of pensioners and the poorest people in making both ends meet.

Let us see some of the results of the extreme bluntness of this planning weapon. A tax is put on petrol and then the Government have to bring in a most remarkable Bill to enable them to pay back this tax to some of the farmers. A tax is put upon commercial vehicles, ostensibly to cut down the number sold in this country, but at the same time that hampers and hinders the export trade which we thought the Government were always trying to encourage. I do not think that this Finance Bill is of the slightest help in solving the immediate problems we have in view—the cutting down of costs and the increasing of real wealth.

The taxation of company reserves is not only a matter for the company owner and the capitalist; it is very much a matter for everybody whose livelihood depends on the technical and scientific progress of this country, on the fact that we make certain things better and cheaper than other countries. Our natural resources are very inadequate for the standard of life which we have come to expect, and there is no doubt that we are getting near the stage when the very high taxation on profits is making it very difficult for us to build up the new machinery, and to keep abreast of new advances in order to compete in world markets.

We welcome the very good figures which have been given for our overseas trade, but there again, is it realised throughout this country that—I think I am right in saying—the amount we are now earning in dollars from our exports is actually less than we were earning before devaluation, and that the balance is made up by reduced imports and increased exports from other parts of the sterling area? Is that realised by all our people, whose food, pleasure and livelihood depend upon these dollars?

The same sort of argument applies to the Purchase Tax. It may be that the amount added to the cost of living by the Purchase Tax of 33⅓ per cent. on things which are very nearly essential, such as floor covering and household utensils, makes very little difference to the cost of living as a whole; but the ordinary person judges very much by the price ticket on the individual article, and a great psychological effect would be produced if people could see the prices on even a few of those price tickets being reduced instead of increased, particularly on those things which they must buy, things which are in no sense luxuries, which not even the Chancellor could describe as things the ordinary household could do without. Owing to the bluntness of this planning instrument, this Purchase Tax is put on a whole range of goods which should be freed from tax.

Another result of all this is to hamper our high grade handcraft industries. At earlier stages of the Bill telling references were made to the effect this is having on, for instance, hand-woven tweed. This tax is killing certain industries, not because anyone wants to kill them, not because money is being raised by doing so, but because owing to the instrument which is used the good is bound to be caught with the bad.

Finally, I want to say a word or two on retrospective legislation. Those of us who believe that all retrospective legislation is bad have made our point. The strongest arguments are needed to justify it. But a new, and I think very serious, precedent is apparently being set up—and set up by both the Conservative Party and the Labour Party—that if a warning is given, at least in tax matters. it is all right, and that a Bill can be brought in years later to introduce a tax retrospectively.

As I understand it, the ordinary citizen of this country is supposed to be able to look up statutes and other regulations to find out the law made by Parliament. He will now, presumably, have to look up a whole lot of other things. Is it to be said that any Minister can give a warning which is effective? Or is it only to be Cabinet Ministers, or only Chancellors of the Exchequer? Is the Opposition to be allowed to give a warning and to bring it into effect if they get into office? I suggest that the Government should publish these warnings in official form, as they do with statutes, for that is the only chance ordinary people will have of knowing what the law is.

5.29 p.m.

Mr. Douglas Houghton (Sowerby)

There is one matter on which I disagree with the hon. Member for Orkney and Shetland (Mr. Grimond), and that is on retrospective legislation. I think that the Chancellor is perfectly right to check retrospectively, obvious abuses of our taxation system, especially when they are perpetrated at a time when the whole of the community is asked to restrain itself in making fresh demands upon consumer goods, increased wages, higher dividends and so on. I am sure that the Chancellor has been right in introducing into the Finance Bill this year Clauses which check what I think all reasonable people will agree are obvious and purposeful abuses of our taxation system.

In another respect the Chancellor has introduced into the Finance Bill a proposal to check another form of tax avoidance. He has proposed to give the Inland Revenue the power to recover Income Tax charged on a wife's income from the wife's estate where they fail to collect it in the normal form of assessment on the husband. In the course of the Committee and Report stages my right hon. and learned Friend, in order to meet objections from hon. Members opposite on the inclusion of a retrospective element into the matter, deleted that reference in Clause 26 in the original Bill which would have enabled the Inland Revenue to take advantage of the new power to collect tax assessed on a wife's income in the past and which up to now has proved irrecoverable.

I hope my right hon. Friend, in sacrificing the power to recover tax assessed in the past on a wife's income, which so far has proved irrecoverable, will not hesitate to come to the House on a future occasion if need be and apply for this power with retrospective effect in order to recover tax which is obviously due to the Revenue and which in some cases cannot be recovered, except perhaps by making the husband bankrupt.

Mr. Henry Strauss (Norwich, South)

I should like to give the hon. Member a chance of making a correction for the sake of the OFFICIAL REPORT. I think he talked about Clause 26. I believe he is thinking of a former stage in the Bill. Is he not now referring to Clause 32 as the Bill is now printed?

Mr. Houghton

I am much obliged to the hon. and learned Gentleman, but if he had been listening he would have heard me say that I was referring to Clause 26 in the original Bill.

Mr. Strauss

I am sorry.

Mr. Houghton

I am now referring to Clause 32 in the version of the Bill which is now before the House. My point is that it is obvious that my right hon. and learned Friend the Chancellor introduced this provision into the Finance Bill this year because of accrued arrears of tax assessed on wife's income in the past which he has not been able to collect. He desired in Clause 26 in the original Bill not only to guard against failure to collect these arrears of tax in the future, but also to take these new powers to recover tax which stands unpaid at present. All I am doing is to suggest that my right hon. and learned Friend should not hesitate in future to ask the House again to apply these powers retrospectively if continued efforts to recover these arrears of tax should fail.

In cases where a wife declines to pay Income Tax and Surtax assessed on her income, and where the husband has not the resources in his possession to pay that tax, then the wife is frustrating the obvious course of the Revenue in requiring her to pay a proper share of tax. I disagree with the hon. Member for Orkney and Shetland who said that all forms of retrospective legislation are bad. There are cases where it is good in the interests of equity as between one taxpayer and another.

I should also like to refer to the general question of tax avoidance and underassessment. I am sure that hon. Members in all quarters of the House will appreciate that following the dislocation and redistribution of business activity during and immediately after the war, a considerable amount of Income Tax has slipped through the net of the inspectors and collectors of taxes. I am convinced that the time has come for a tightening up of the whole administration. Hon. Members will understand that in another capacity I am closely connected with a very large section of the staff of the Inland Revenue, and there is no doubt about their view that additional powers are necessary in the hands of the Chancellor to check tax avoidance and under-assessment.

Additional skilled staff is needed also so that the administrative side of this task may be undertaken without delay and with effectiveness, because the longer this matter is left the more difficult it will be to recover tax which has been under-assessed or has not been charged at all owing to the difficulties of the last few years. I sincerely hope that the Chancellor will have something to say to us later about the steps which the Inland Revenue may, I hope, soon be in a position to take, so as to carry out the assurance which was given by my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) when he was Financial Secretary to the Treasury, that the days of the tax evader were numbered. I trust that we shall get an assurance on that point from the Chancellor.

If I may dwell for a moment on other remarks which were made by speakers on the opposite side of the House, I should like to deal for a moment with this recurring suggestion that the Budget embodied in the Finance Bill now before us shows that we have no margin of taxable capacity, or, in another version of the same thing, that we have no reserve of taxable capacity, which I suppose really means—and it has been said categorically by hon. Members opposite, especially during the election—that we have reached the limit of taxable capacity.

I should like to ask: how do we discover when we have reached the limits of taxable capacity? I think the only sensible and certainly the most conclusive answer to that is: Nohow, because it all depends on what we mean by "capacity." Does it mean that we have reached the limit of taxable capacity without suffering, or with much suffering? Does it mean that there are no further sacrifices which can reasonably be made by the community if need be? I am sure that if the dark clouds which at present hang over us, needing possibly the diversion of more production and consumer goods towards defence purposes, grow and darken, we shall soon have to show that we have a reserve of taxable capacity.

Mr. Spearman (Scarborough and Whitby)

Does the hon. Gentleman recollect that the Chancellor of the Exchequer in, I think, his Budget speech last year referred to the fact that there is very little further scope for additional revenue through increased direct taxation?

Mr. Houghton

My right hon. and learned Friend was, no doubt, referring to the situation as it appeared to him then. I do not for a moment accept the suggestion that the British people are not capable of further sacrifice if it is needed, to preserve our economic structure and to maintain and preserve our freedom and our place in the world. I am sure that we shall respond to any additional demands that may be made for this purpose.

I conclude by putting this suggestion: that we have not reached the limit of taxable capacity in the context of the favourable Exchequer returns which hon. Members will have seen published in the last few days. There is a very encouraging and enlightening paper in the Bulletin of the Oxford University Institute of Statistics for May, 1950, which carries the expectations and hopes of the Economic Survey a stage further with regard to the increase in the national productivity this year, and shows that the cautious estimates in the Economic Survey are likely to be exceeded, certainly on the showing of the first quarter of 1950.

I think that hon. Gentlemen opposite must put their gloomy analysis of our situation in the context of the fact that retail sales are higher than they have been for a long time past, and generally that there is a greater spirit of buoyancy about our internal economy than we have known since the war. I am sure that in the light of these facts, hon. Gentlemen opposite must concede that the policy of the Chancellor of the Exchequer in regard to finance and his high standard of integrity and wisdom in financial policy, are assuredly showing great advantages and bearing fruit at the present time.

5.42 p.m.

Mr. Osborne (Louth)

I would not dare follow the hon. Member for Sowerby (Mr. Houghton) into the question of taxation administration. All I will say to the Chancellor of the Exchequer is that most laymen find the tax structure far too complicated, and we would like him to do his best to simplify it, so that we can understand it, instead of having to pay experts, like the hon. Member for Sowerby, to interpret it to us.

One other point which the hon. Member made was that, in his opinion, trade today is more buoyant than it has been at any time since 1945. I would tell the Chancellor that in the two industries of which I have some knowledge—boots and hosiery—we are having a very difficult time at present. Prices of raw materials have gone up, and part-time is being worked, especially in the boot industry. I assure the hon. Member for Sowerby that, if he thinks that we on this side of the House are cautious and at times a little doubtful in our attitude, we base that attitude on economic realism, which is what the country requires at the present time.

Mr. Leslie Hale

The last speech which I heard the hon. Member for Louth (Mr. Osborne) make was in the nature of an appeal for longer hours of work in the boot and shoe industry. How does he reconcile that with his statement now that people are working part-time?

Mr. Osborne

I must not carry on that argument, Mr. Deputy-Speaker. I was quoting the hon. Member for Bosworth (Mr. A. Allen) who is, I think, the P.P.S. to the Chancellor of the Exchequer at the present time. He himself told us that a 51-day week in the boot industry is the only way to cut down the cost of production. I will not pursue that further.

I assure the hon. Member for Oldham, West (Mr. Leslie Hale) that we on this side of the House are just as delighted as hon. Members opposite when the Chancellor of the Exchequer can announce good results. We want the poorer people to have a higher standard of life and for things to be better, because many of us on this side have known poverty even keener than hon. Gentlemen opposite, and we speak from personal knowledge of these matters. I assure him that we want to see things improved, but we do not want to tell the people that things are better when we know that they are not.

I want to ask the Chancellor of the Exchequer two questions. The Minister of State for Economic Affairs announced—and I was pleased to hear it—that in the quarter just ended, the industrial productivity of the nation had increased by 9 per cent. as against the 6½ per cent. forecast in the Economic Survey. We are all delighted to hear that, even though we may be doubtful about the accuracy of the new figure. But does that 2½ per cent. increase in production more than make up for the loss which we are to sustain under Marshall Aid? This year we are to have less from America by way of free gift. Does the 2½ per cent. increased production more than bridge that gap? If it does not, there is no cause for the hon. Member for Oldham, West, to rejoice. I think that we are entitled to have that question answered.

My second question is this: When the Chancellor of the Exchequer announced last week that our gold and dollar reserves had been increased by 180 million dollars I asked—and I think that the House and the nation should be told the answer—how much of that 180 million had resulted from the trade of the United Kingdom and how much had resulted from activities of the outside sterling area. How much has been the result of the sale of rubber and of wool from Australia and the base metals, all of which come in the global pool of sterling resources. I put this to the Chancellor of the Exchequer: It is quite possible that the total figure of sterling resources has increased by 180 million dollars and for the home position to have deteriorated at the same time. I am sorry that the Chancellor scowls at that idea, because it is quite possible. I should like to know what is the share of the United Kingdom in that 180 million increase in our dollar and gold reserves. We are entitled to know that, because if we have made no contribution to it, it ought not to be a cause of complacency at home.

My third question is this. The Minister of State of Economic Affairs said that it was administratively difficult to free overtime earnings from Income Tax. During the weekend, I have been reading seven of the Reports of the Anglo-American Productivity Council—these are reports by trade unionists and managerial representatives—and every one stresses the importance of reducing taxation and points out that the taxation in this Bill is one of the main causes of our smaller productivity over here. I should like to know that the Chancellor has carefully gone through those reports, which are made by men who are politically with him, and whether he has any comment on them to make to the House.

When the Financial Secretary introduced this Bill on 16th May he said: In substance, however, this Bill is based on the same general aims of economic policy as previous Budgets of the last few years, and the House will make a truer judgment of this Bill if it regards it as one of a series, because the nation's economic problems have been much the same … I think that is perfectly true. If we are to examine this Bill, we have to look at it as one of a series. He went on to say: Our supreme economic aim in these last years has been to close the dollar gap and to achieve economic independence at the end of the Marshall Aid period. We shall stand or fall as a nation by whether we are able to do that or not. I would like to remind the House of the enormity of that task. It is useless glossing over our troubles and saying that they do not exist. Paragraph 33 of the Economic Survey for 1950 sets out the task to which the Financial Secretary referred. it says that last year Marshall Aid gave us 13 per cent. of our imports. It gave that to us entirely free. They included one-third of all the wheat and flour, one-third of sugar, one-fifth of cheese, one-tenth of bacon, one-quarter of petroleum, just over one-quarter of copper, one-third of zinc, four-fifths of virgin aluminium, one-sixth of lead, two-fifths of raw cotton and one-half of the tobacco that we consume. They were all given to us last year for nothing. We shall not have these supplies in two years' time, and we shall be fools as a nation not to face that reality.

The question I want to have answered is whether we shall be able to close that dollar gap in two years' time. If not, we shall have to go without some of these things. If our earnings are, not increased, we shall have to reduce our foodstuffs or our raw materials, which may mean unemployment. We ought to know by how much United Kingdom production has gone up.

The first aim mentioned by the Financial Secretary was that the Bill sought to establish the stability of incomes and prices. If this Bill, as one of a series, has sought to establish the stability of incomes and prices, it has failed miserably, because in the last four years there has been a great rise in both incomes and prices. Wages went up by no less than £670 million in 1947–48, and in the following year by £340 million. I am not complaining, but it is proof that the first objective of this Bill and the previous Finance Acts has failed on the Chancellor's own showing. The demands by the trade unions at the present time, which are justified fully in regard to the lowest-paid workers, for high wages make nonsense of this claim of establishing stability over incomes and prices.

The Financial Secretary also said: We have sought to restrain the pressure for a rise in the cost of living."—[OFFICIAL REPORT, 15th May, 1950; Vol. 475, c. 1023.] The Chancellor has failed just as much here, because he has told the House that the pound in April was worth only 16s. Id. in purchasing power, as compared with August, 1945, when the Socialist Government came into power. Since this series of Finance Bills has been introduced by the Government, there has been a deterioration of 20 per cent. in our position.

Mr. Houghton

Is the hon. Member suggesting that world prices have had no effect on his figures?

Mr. Osborne

I did not say that. I am pointing out that one of the aims of this Bill is to restrain the pressure for a rise in the cost of living. I am not saying why the cost of living has risen, but I am trying to point out that if the Chancellor had that object in mind. he has failed miserably.

Mr. Deputy-Speaker (Major Milner)

The hon. Member seems to be giving a dissertation on the general economic situation. He is entitled at this stage only to discuss what is in the Bill.

Mr. Osborne

With great respect, Mr. Deputy-Speaker, may I point out, as you have not been present for very long, that a great deal of latitude has been allowed in the Debate up to now? I am merely trying to answer some of the points that have been raised, and I shall find it very difficult if I am not allowed to do so. However, I shall keep as close to the Bill as possible. These are some of the things the Financial Secretary said when introducing the Bill, and I should have thought that I was entitled to refer to them.

Mr. Deputy-Speaker

The hon. Member will recall that it is permissible to say many things on Second Reading which are not permissible on Third Reading, when we are confined to what is in the Bill.

Mr. Osborne

It is rather unfortunate. I now turn to something that is in the Bill, and, with respect, I shall be the first to have done so.

I should now like to refer to the taxation on undistributed profits. I think this is about the most foolish tax that a wise Chancellor could have continued. The subject has been debated many times from the point of view of re-equipment of industry, but not, so far as I know, from the point of view of stock values. I want to deal with it from that point of view, especially as the Minister for Economic Affairs has warned the House that our raw materials have gone up in price and are likely to go up still further. I wish to deal especially with the position of wool, to which he must have been referring.

In the trade with which I am associated, we are now buying wool single,24s., which is used for the hosiery trade, at 16s. a pound, whereas before devaluation we were paying 10s. and before the war 2s. 9d. The bulk of the profits we are earning we put to reserve against depreciation on our raw materials, but the Chancellor comes along and takes a large slice out of that money, knowing full well that when there is a fall in the values, we shall need the money he is taking away.

Sir S. Cripps

That is not in the Bill.

Mr. Osborne

If it is not in the Bill, it ought to be. This taxation is just about as unwise as it could be. The Chancellor says that it is not in the Bill, so apparently he does not want to discuss it. I am convinced that the surest way to bring unemployment is to ruin the small businesses, which will not be able to meet the depreciation on their raw materials when the fall in prices comes. I will not pursue that matter any further in case I get out of order; it is a great pity I did not get in on Second Reading.

Finally, the Financial Secretary told us that we have sought to stimulate productive effort and savings through the provisions of the Bill. The Chancellor will agree that he has not been very successful, when he looks at the returns of the National Savings Movement and reads the speeches of responsible leaders of that movement.

Sir S. Cripps

They are better than they were before the war.

Mr. Osborne

It does not matter whether or not they were better before the war; two blacks do not make a white. The Chancellor has not been very successful, and the proposals in the Bill will not do what the Financial Secretary says they will do, namely, stimulate production and savings. The fourth aim of the Bill, as stated by the Financial Secretary, is this: We have tried to use taxation where possible to encourage economy in the consumption of imported commodities."—[OFFICIAL REPORT, 16th May, 1950; Vol. 475, c. 1023-4.] If the Chancellor succeeds in discouraging the importation of commodities, he may stifle the trade upon which the whole of his financial structure depends. After all, the Budget proposals in this Finance Bill will successfully produce the results he requires unless private industry makes the profits. If his policy is to stop the importation of the things that we require, then we are not going to keep our people fully employed and he is not going to have the profits that are necessary to sustain the welfare State. I regret I have been out of order so much, and I must leave it at that.

6.0 p.m.

Mr. Benson (Chesterfield)

I should like to congratulate the hon. Member for Louth (Mr. Osborne) on a fine piece of bluff. When he thought he was out of order he announced he would talk about something in the Bill, and then, very firmly, he referred to the taxation on undistributed profits. I do not think that undistributed profits appear in the Bill from one end of it to the other. However. the hon. Gentleman got away with it.

I had not intended to speak in this Debate, but I have been goaded into it by some extraordinary arguments which have been used by right hon. Gentlemen and hon. Gentlemen on the other side of the House. I am sorry that the right hon. and gallant Gentleman the Member for Leicester, South-East (Captain Waterhouse) is not in his place, because he took an extraordinary line of argument. In dealing with the Petrol Duty he mentioned its effect upon the price of gravel. Everybody knows that so far as gravel is concerned, haulage is a very high percentage of the cost, and that anything that in any way affects the cost of haulage will reflect itself very seriously in the cost of gravel.

Having dealt rather eloquently with that matter, he switched on to wool and by a series of assumptions he arrived at the conclusion that the probable increase in the cost of yarn wool by the time it got to the export market might be 1s. I think I have the figure right; it certainly was a high figure. I may be wrong, but I know it was a very high figure which he claimed resulted from the increased cost of petrol on the price of wool.

Mr. Osborne

It depends upon the weight of the cloth.

Mr. Benson

Yes, of course it does, but 16-ounce cloth is fairly heavy cloth. I have worked out the cost of running 16 ounces of wool 200 miles in a five ton lorry, and as a result of the increased cost of petrol the increase on this price of wool would be one-thirtieth of a penny per yard. In any case, how many yards of wool cloth are running 200 miles by lorry before they get to the export market?

Mr. Maudling (Barnet)

My right hon. and gallant Friend the Member for Leicester, South-East (Captain Waterhouse) referred to the cost of transport on the wool through its various stages, through one set of manufacture to another until the finished cloth reaches the merchant, which is something different from what the hon. Gentleman is referring to now.

Mr. Benson

In the cloth I instanced there are only 16 ounces of wool in a yard.

Mr. Maudling

But there are different hauls.

Mr. Benson

We have to take all these different hauls into account. I challenge the hon. Gentleman to prove that the average piece of cloth goes 200 miles by road, whether it is in the form of raw wool, undyed wool, or any other wool.

Mr. Osborne

In my particular trade the wool may go considerably more than 200 miles. The material occasionally goes from Leicester to Scotland for dyeing and back again, while it has to be brought from the ports to Bradford as well. It travels backwards and forwards, and 200 miles is not above the average.

Mr. Benson

But this 200 miles is not steadily and invariably done by road haulage. At Bradford goods are hauled by railway just as much as by road. I will double the mileage if the hon. Gentleman wishes, and suggest 400 miles for the haulage of a piece of cloth. It still only makes one-fifteenth of a penny per yard difference; it is really silly to exaggerate as hon. Members are doing. The cost of this increased tax on petrol is calculated to affect industry by something like £40 million, and that is spread over the whole of the productive value of British industry. It is ridiculous to pretend it will have any disastrous effect.

Mr. Osborne

But the marginal amount is the last straw that breaks the camel's back.

Mr. Benson

I am fully aware of the hon. Gentleman's view on the matter. What is the value of our industry—£5,000 million?

Mr. Osborne

No, about £8,000 million.

Mr. Benson

And £40 million is to be the straw that breaks the camel's back? I thank the hon. Gentleman for his figures.

I want to leave that and turn to a remark made by the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) about the global effect of this and other Finance Bills. The right hon. Gentleman should be more careful. He speaks with the authority of a Front Bench Member, representative of the Opposition, and it may be that some of his own back benchers will take him seriously. We do not. For example, he raised the case that owing to the possible imminence of war or the remote danger of war we were putting ourselves in a very grave position because there was no reserve of taxable resources. My hon. Friend the Member for Sowerby (Mr. Houghton) dealt with it, and I also want to deal with it. In war-time, what is wanted? We want to transfer from private consumption to public consumption—that is, Government consumption—labour and materials.

Mr. Lyttelton

The hon. Gentleman has made a very discourteous remark about the frivolous nature of my argument—

Mr. Benson

It was frivolous—

Mr. Lyttelton

—but it may perhaps interest the hon. Member to know that no country has ever been able to divert more than 50 per cent. of the national income. I have some expert knowledge of the matter, and I put it in front of the House absolutely sincerely.

Mr. Benson

I am fully aware of that, but what I have said is what we did during the last war.

Mr. Lyttelton

We will never get more.

Mr. Benson

Nobody suggested we would, but I am trying to point out to the right hon. Gentleman that the level of taxation at these times does not in any way hamper the transfer of that 50 per cent. of the national resources from the private individual to the Government in war-time.

Mr. Lyttelton

That is absolute nonsense.

Mr. Benson

Is it?

Mr. Lyttelton

Go on.

Mr. Benson

I am certainly going on. Take the last war. We had a fairly high rate of taxation.

Mr. Osborne

On a point of order. I was called to order very sharply for not speaking previously to what was in the Bill.

Mr. Deputy-Speaker

The hon. Member for Chesterfield (Mr. Benson) is responsible to the Chair.

Mr. Benson

I am sorry I was misled, but I suggest that it is an economic fallacy to say that our level of taxation today in any way limits or hinders the material transference of goods and services from the private consumer to the Government in time of war. It does not. It is merely another red herring. The right hon. Gentleman also said that owing to our taxation the standard of living was falling, and prices were running ahead of earnings. They are not.

Mr. Lyttelton

I said real wages.

Mr. Benson

Earnings are not falling—

Mr. Lyttelton

I said real wages.

Mr. Benson

It may be perfectly true that basic wage rates are falling in relation to prices.

Mr. Lyttelton

If the hon. Gentleman chooses to challenge me, he must listen to my argument. I said that real wages had fallen in the last two or three years, which is a fact that everybody knows.

Mr. Benson

What does the right hon. Gentleman mean by real wages? Does he mean the earnings of the manual worker?

Mr. Lyttelton

I mean what a given rate of wages will buy.

Mr. Benson

What a given rate of wages will buy! In other words, what the right hon. Gentleman is saying is that prices have risen. We know that, but earnings have risen very rapidly. Perhaps the hon. and learned Member for Norwich, South (Mr. H. Strauss) did not know that. It is not a question for argument but one of fact. Earnings have risen more rapidly than prices within the last few years.

Squadron-Leader A. E. Cooper (Ilford, South)

In the eight years before the war small savings, which are savings by the man in the street, increased by £1,000 million, which indicated that the man in the street had a surplus over what he earned. Last year, small savings decreased by £68 million, indicating that he did not have a surplus.

Mr. Benson

One of the reasons for a reduced rate of saving is that the man in the street can buy more.

Mr. Osborne

Why do we still have coal rationing and things like that?

Mr. Benson

I do not say that conditions are perfect, but they are better than they were two years ago, and that that is one of the reasons why savings have decreased. Another thing which the right hon. Gentleman said is that the fiscal policy of this Bill was cramping the re-equipment of industry. There is no limit at present to re-equipment, except the availability of the physical resources. The reason for factory difficulties is not this Bill but the fact that the Ministry of Works cannot grant building licences. What prevents an increase in the rate of re-equipment of industrial plant is not taxation but the fact that the machinery manufacturers cannot deliver. Hon. Gentlemen opposite have been preaching disaster for the last five years on every Finance Bill that we have had. Facts now prove that they were wrong on every point.

Mr. Lyttelton

What about de-valuation? I suppose that that is not wrong.

Mr. Assheton (Blackburn, West)

Is that a disaster or not?

Mr. Benson

Devaluation is not the result of our finance. [Laughter.] Hon. Members laugh, but I will tell them what, among other things, devaluation was caused by.

Mr. Deputy-Speaker

I am sorry to interrupt the hon. Member but I hope hon. Members will appreciate that this is the Third Reading of the Finance Bill. The hon. Member now addressing the House is endeavouring, I presume, to reply to other speeches, but I must ask him to confine his remarks to the contents of the Bill and not to go into wider ramifications.

Mr. Benson

Hon. Members opposite find that there is very little in the Bill to attack. They may not realise that the Third Reading Debate is much narrower than the Debate upon the Second Reading or Report stage. We can now discuss anything which is in the Bill, but much that hon. Gentlemen have said shows that they could not succeed in attacking the Bill without getting out of order. I have very great difficulty in dealing with what they said without also getting out of order, so I think that I had better sit down.

6.13 p.m.

Mr. Higgs (Bromsgrove)

I hope to give you a more comfortable 10 minutes, Mr. Deputy-Speaker, because I am going to talk about something which is in the Bill. I want to talk again—this is not the first time I have done it—about the Clause which deals with restrictive covenants. In moving the Third Reading, the Minister of State made reference to the difficulty of finding something new to say and, I might add, something which is also in order. I make no apology for reverting to an argument which I used upon the Report stage, in the hope that it may lead to something new from the other side of the House.

I invited the House on the Report stage to consider what was then Clause 23, not what the Clause intended to do so much as what in fact it does. I turn to that because it is important that this House should not forget that side of its duty. It is true that the duty of those who are expert economists—I am not one of them—is to look at the Finance Bill as an economic Measure, but there is a duty upon those who have the right kind of experience to consider how its Clauses affect ordinary individuals. A comment to make in passing is that if any sign were needed that taxation is too high, it is the length to which people are going to try to avoid it. We try to end tax-dodging, but taxation at the rates now ruling, which are carried on by the Bill, only adds an incentive to tax dodging.

If ever a Clause were designed to give ample scope for tax-dodging it is the very Clause to which I am asking the House to give attention. The Clause is in difficulties from the start because it does not take the honest method of dealing with the evil at which it is aimed. We are trying to track down income which we find dressed up as capital, but instead of being honest, bringing that income out and stripping it of its disguise, as it were, we accept it as capital. We accept a subterfuge and we try to meet it by another subterfuge. Perhaps it is pertinent to remark here that it would have been very much better to deal with it in the way which was suggested at another stage of the Bill. We should not have found the difficulty which we now find, and to which I am going to refer.

We were told that we were driven to deal with it in this way. The Solicitor-General said that to deal with income as income in this Clause, would have involved putting upon the Commissioners of Inland Revenue a task too onerous for them to carry out. In other words, the tax which the Clause seeks to impose cannot he imposed justly and therefore we must impose it unjustly. Some hon. Members may think that if the tax cannot be imposed justly, there is very good ground for saying that it ought not to be imposed at all.

It was in that field that I asked questions on the Report stage and I feel that I shall still be within the scope of the Debate, if I now ask for a little guidance at this very late hour from the Treasury Bench, on the subject of the effect of the Clause upon ordinary business people, some of them in very humble circumstances. The duty is imposed by law, and enforced with very severe penalties on every one of us, to return upon our Income Tax form all the sums which we have received and which are liable to tax. That duty is recognised in the proviso to the Clause which says that we are excused if we did not foresee this Clause two years ago, for not having included it, but that we have to include from now onwards every transaction which comes within the scope of this restrictive covenant Clause.

I should like the Chancellor of the Exchequer to give us some guidance as to what sort of transaction will be caught by the Clause. On the Report stage I gave examples taken at random. We then had the Law Officers of the Crown on the Front Bench and I asked them to tell us whether those were the sort of transactions which would be caught. I mentioned the manager of a business who is taken into partnership, or. if it is a limited company, added to the board and given some shares; a professional footballer transferred from one club to another. and an outworker who receives National Assistance. One could add to those examples which are far removed from the transactions at which the Clause originally aimed.

We ask to be told what will be the position of those people when they fill in their Income Tax return form for the current year. They will get precious little help from the Clause. They are told that if they hold an office or an employment and have given any undertaking in connection with it, the effect of which is to restrict their future conduct or activities, and if any money or value has passed in connection with that undertaking, they are prima facie within the Clause and must enter the transaction in their Income Tax return.

I hope that the Chancellor will tell us where the limit is to be drawn and what are the transactions of whichI and all other taxpayers—that is the great majority of us now—have to give particulars to Somerset House when we fill in our Income Tax returns. There is a great danger that in dealing with the Clause the House, and particularly those on the Government Benches, may have in mind that which led them to introduce the Clause, and may forget the thousands, and possibly millions, of people who will be affected and penalised by it and will have to do what, so far, no one from the Government Front Bench has been able to do—explain what the thing means.

6.23 p.m.

Mr. Emrys Hughes (Ayrshire, South)

I want to confine my remarks to what is in the Bill—

Mr. Benson

Hear, hear. We all wish that.

Mr. Hughes

The first argument I wish to put forward is based on Clause 22 (1) which says: Income Tax for the year 1950–51 shall be charged at the standard rate of nine shillings in the pound, and, in the case of an individual whose total income exceeds two thousand pounds, at such higher rates in respect of the excess over two thousand pounds as Parliament may hereafter determine. I agree with the general argument put forward by the Opposition that the level of taxation is too high. I want to argue from the point of view not of the manufacturer but of the lower-paid wage earner. The rate of taxation contained in Part II of the Bill bears very heavily on the low-paid worker and is one of the reasons why we have industrial discontent and even strikes among the coal miners of Scotland at present. I believe that we cannot continue this very high rate of taxation without losing our export trade. The Opposition have pointed out that this level of taxation is crippling us in the export trade, and I entirely agree that if this high level of taxation is to be maintained, we cannot possibly hope to meet the competition which is inevitably coming from Germany and Japan.

Mr. Houghton

As a Scottish miner who gets £10 per week and is married and has two children pays only 8s. a week Income Tax, is my hon. Friend suggesting that that is crippling the export trade?

Mr. Hughes

No, Sir, but the hon. Gentleman has not quite followed my argument. I have left the Scottish miner for the present. If necessary, I can amplify and elucidate that part of my argument, and I can even argue that 8s. a week is a rather heavier tax than a poorly paid Scottish miner can be called upon to bear. However, I want to deal with the effect of this upon the export trade, and I want the Opposition to follow my arguments. I was in Germany recently, and I want the Parliamentary Secretary to the Treasury to answer this question: How can we possibly compete in the export markets of Europe with a Germany which is making amazing economic recovery when we have this very high level of taxation?

What we have to ask ourselves, when we are considering the Bill is whether we are imposing a level of taxation which the economic conditions of the country can bear. When I see the revival in the Ruhr and even in Berlin of industries such as the machine tool industry, I ask myself how we are to compete if taxation steadily increases or even continues to be imposed at the present rate. I cannot answer that. I cannot see how we can compete with the machine tool industry, the heavy industry or the coal mining industry of the Ruhr in a few years' time if we annually add burdens of Income Tax in the Finance Act. The same applies to Japan.

The trouble in relation to this high rate of Income Tax is that we have crippling burdens of expenditure which Japan and Germany do not have. I should be going outside the scope of the Bill if I went into details of those items of expenditure, but before we pass Part H of the Bill, I ask hon. Gentlemen seriously to consider whether we can continue to sanction this rate of expenditure. We must keep this in mind not only when we deal with the Finance Bill but also when we come to deal with Supply. A nation which is carrying £800 million a year expenditure on armaments has to pay for it in its Finance Bill, and the time to object is not when the Finance Bill comes along, but when Supply is voted.

Mr. William Ross (Kilmarnock)

if my hon. Friend will allow me to interrupt, he has based his arguments about the export drive on Clause 22 and has read out subsection (1) and talked about what was paid by the lower-paid workers. How would it affect export prices if lower-paid workers, though still getting the same wages, paid less in tax?

Mr. Hughes

I would like to answer that but it would take me outside the scope of the Bill. As my hon. Friend represents a neighbouring constituency, we shall have abundant opportunity of elucidating these difficulties at some other time or place where we shall not be circumscribed by the rules of order. So I ask my hon. Friend to have patience for the time being.

Now I turn to Part V of the Bill. In drawing the attention of hon. Members of the Opposition to page 48, I ask them why they have not submitted constructive proposals for reducing the burden of taxation itemised there in Clause 49 (1)—

Mr. Speaker

Any proposal for increased taxation is out of order on the Third Reading.

Mr. Hughes

I am not asking hon. Members to supply the answer, Mr. Speaker; I am leaving the thought with them. I am really surprised that hon. Members opposite have not raised arguments on this Clause, which says: The permanent annual charge for the National Debt for the financial year ending with the thirty-first day of March, nineteen hundred and fifty-one, shall be the sum of four hundred and ninety million pounds instead of the sum of three hundred and fifty-five million pounds. This represents a substantial increase in the National Debt about which we ought to be perturbed because, if we follow the argument of the right hon. Member for Aldershot (Mr. Lyttelton)—that in view of the difficulties ahead we must watch carefully the effect of taxation—we should call attention to Clause 49. So I ask hon. Members opposite to join with me in urging upon the Chancellor the necessity of reducing the National Debt. This is one of the heaviest burdens outlined in the Finance Bill and represents a substantial increase of £135 million.

What comprises this heavy burden? One of the additional items which is causing much alarm to me is the increased burden of the National Debt due to the substantial sums payable in compensation to the shareholders of nationalised industries. The other day I put a question to the Chancellor about the rate of interest. When the Coal Industry Nationalisation Bill was passed, the rate of interest suggested at that time was 3 per cent. or 2½ per cent., but it has now gone up to 3½ per cent. and this year, comprised in this permanent charge of the National Debt, we shall have to pay £13 million to the coal shareholders of this country. I submit that this burden is getting very heavy and that some steps should be taken to consider whether it should not be reduced. Why should the coalowners receive 3½ per cent. whereas, if they had settled their affairs a year ago, they would have received only 3 per cent.? The financial correspondent of "The Times" recently drew attention to the fact that by holding out, the coalowners had suc- ceeded in getting the rate of interest increased from 3 per cent. to 3½ per cent.—

Mr. Speaker

The hon. Gentleman had better not pursue that point further. I think he has gone far enough.

Mr. Hughes

I was only using that as an illustration to show how the burden of interest and sinking fund which comprises the National Debt is steadily increasing. I suggest that the time has come when the Chancellor should turn back to some of the speeches made after the last war and decide to impose a capital levy in order to face this tremendous problem.

Finally, Sir, I submit that there is a case for arguing that in this Finance Bill we are paying too much in taxation for preparing for another war. How the right hon. Member for Aldershot can argue that with this huge financial burden we can possibly finance another war, I do not know. I do not know the answer to that, and when hon. Members opposite are warning us that this country is facing possible bankruptcy, then surely they should say, "If we are practically bankrupt, there is no reason now why we should undertake policies which will impose further military expenditure and an increase in the burden of taxation."

6.37 p.m.

Mr. Mott-Radclyffe (Windsor)

It is always pleasant for us on this side of the House when we see the light gradually dawning in hon. Members opposite, and although I do not often find myself in agreement with the hon. Member for Ayrshire, South (Mr. Emrys Hughes) I must tell him that I find myself in substantial agreement with a great deal of what he has just said.

I agree that one of the main faults in the Finance Bill is that it imposes a burden of taxation that is too high. That is its principal defect. The ordinary citizen was entitled between 1945 and 1950 to expect some lightening of the load. He received a lightening of the load in one pocket, in the sense that there has been a small reduction in direct taxation in the form of Income Tax reliefs but the load was carefully weighted out of his other pocket so that he paid more in indirect taxation, and thus he is left little better off, if at all, than he was before, quite apart from the steep increase in the cost of living. No matter what his lot may be, he is extremely disappointed.

Of course the Chancellor has got himself into an almost impossible position. So long as Government expenditure increases as it has increased since 1945, the problem of how to raise the revenue to meet that expenditure clearly becomes more difficult. On the one hand, hon. and right hon. Gentlemen opposite are continually emphasising the need to reduce costs; on the other hand, the effect of many of the revenue-raising devices of the Chancellor in this Finance Bill—petrol tax, Purchase Tax and so on—will result inevitably in an increase of costs. The right hon. and learned Gentleman is trying to ride two horses at the same time going in different directions, and that is an acrobatic feat which even the Chancellor himself cannot do.

Secondly, I do not agree with the view that has been expressed that this Finance Bill will stimulate savings. We discussed this at length during the Committee stage. It will do nothing of the sort; it will have precisely the reverse to the desired effect. Of course I agree with the Chancellor of the Exchequer and the Minister of State for Economic Affairs that it is an essential that savings should be stimulated, but if we want to stimulate savings let us have rather a different Bill to the one we are now discussing. So serious are the figures for the withdrawal of savings that the Chancellor was obliged to give an artificial boost to his figures by including under the heading of "Personal Savings" both Death Duties and the Special Contribution. That is rather a wide interpretation of the phrase "Personal Savings," although it is natural that right hon. Gentlemen opposite should be rather confused about the exact dividing line between voluntary and involuntary contributions.

What this Bill does is to say to the potential saver, "You are a good citizen in the eyes of a Socialist Chancellor provided that you only save a small sum of money. If, on the other hand, you were to attempt to save, or in the past had succeeded in saving, a large sum of money, you are thoroughly anti-social. You must be ironed out." What is the effect of that? The Chancellor, in the Bill, has encouraged the man who has in the past accumulated any substantial savings to spend those savings before he dies, rather than to allow the Chancellor to spend them after his death in ways of which he would not always approve. That is human nature, it is also directly inflationary and is one of the major defects of the Bill.

Thirdly, and most important of all, is the point which was made by my right hon. Friend the Member for Aldershot (Mr. Lyttelton). Against the background of Korea, he stressed that there was no taxable reserve available with which to meet any emergency. It would be quite out of order to attempt to discuss in this Third Reading of the Finance Bill the question of Defence Estimates, nor do I propose to do so. I do not know whether the £700 million which we are now spending is sufficient or whether we are getting value for money; what I do know is that, against the international background, he would be a very brave man who would not suggest that we might shortly have to spend more.

The question which the Chancellor of the Exchequer has to ask himself is what shall he tax next if we have to increase our defence expenditure. Where is the slack that he can take up? There is no slack that he can take up, nor will there be any so long as he is Chancellor. There is no cushion to fall back upon so long as the present rate of taxation caused by Government expenditure remains as high as it is. There will be no reserve of wealth available for times of emergency unless and until the total amount of wealth in the country expands, unless the cake is allowed to grow larger before it is sliced up. But the cake cannot grow larger until such time as success in what ever kind of occupation is rewarded properly instead of being penalised.

6.44 p.m.

Mr. Hugh Fraser (Stafford and Stone)

The thought which strikes everyone in the House, and which must strike everyone in the country, when we look at this Finance Bill is the huge slice of the national income which is being taken to be spent by the Government—something like 43½ per cent. That amount of the national income, and a large part of it controlled by this Bill, is being spent by Government Departments. The thing which is alarming about the Bill is not merely that fact, but also that the rate of Government expenditure, as controlled and supplied by the Finance Bill, has gone up and is still going up. Leaving out terminal payments, the rate of expenditure has gone up by nearly 25 per cent. in the last four years, which means that we have to consider whether this Bill will lead or will not lead to a greater rate of increase in the size of the national product.

Hon. and right hon. Gentlemen opposite, including the President of the Board of Trade, have said that production has gone up by as much as 40 per cent. since the war. Hon. Members opposite, who are doubtless accustomed to reading each other's speeches in the country, will remember the statement by the right hon. Gentleman at the time of the General Election to the people of Huyton. While, as the Minister for Economic Affairs. who opened the Debate, said, these statistics are open to some speculation or doubt, in all certainty, they show that the increase is not at the rate at which our taxation is mounting.

The great achievement which has been made by this country since the war has been achieved perhaps largely through matters which are not entirely inside our control—matters like the American trade advance or boom; the slightest upset there leads immediately to trouble here. The slightest economic deviation in America immediately produces over here a financial crisis of the first magnitude. and we have to consider how the Bill and how the Government, or how the next Government, can ensure that production in this country is advanced.

I think that the economists are to some extent agreeing now that the great advance which has been made, although it is nothing like the 40 per cent. talked of by some right hon. Gentlemen opposite, has largely been achieved by the amount of new machinery and equipment which it has been possible to instal and which is now coming into production. But it is quite clear that the height of that advance has now been achieved, and we must consider the fact that the national product is not necessarily going to increase at the rate at which it has been increasing, even in terms of money, since the end of the war.

Therefore, the first thing we have to think of in respect of the Budget is whether it gives sufficient incentives to the people working these machines and industrial equipment. Clause 22, which was discussed by the hon. Member for Ayrshire, South (Mr. Emrys Hughes) gives some assistance to the middle-paid people and to some of the more highly-paid workers, but undoubtedly the incentive value of that will not be very great.

We are faced with the fact that throughout the world we are living in a moment of extreme uncertainty. America is faced with a mass of economic and financial problems which automatically follow from the Korean adventure of Russia's satellite. We are faced by various uncertainties; above all, by the general fact that the progress that we have made since the war has been made possible on the whole by the most favourable world circumstances this country could possibly have looked for, and that those circumstances may now disappear.

Another thing which stands out, and of which my hon. Friend the Member for Windsor (Mr. Mott-Radclyffe) spoke, is that at this difficult time we have scraped the barrel completely. Some 43 per cent. of the national product is going in taxation. We have already seen in certain fields of taxation a distinct diminution in return. Take just the imposition on beer. The right hon. and learned Gentleman and his right hon. Friend the Minister of State for Economic Affairs know full well that the income derived from the duty on beer has diminished and is at this moment, judging by the latest figures, diminishing. The step which the Chancellor has taken in the Budget to increase the strength of the stuff is, I believe, a good one, so that at least it may be a little more worth buying than in the past, but the fact remains that this source of income is one which is diminishing.

Right through the Budget we see this dangerous fault, that even with our present commitments it is almost impossible to find more money. Beer is one instance; there are many others throughout the Bill. The fact is that the Government can tax no more and yet have these commitments, which probably will grow very largely in the next few years. We already know the social service commitments are bound to grow, and, as hon. Members have pointed out, other commitments may grow also. This is one of the reasons why we regard the Bill as being unrealistic, not so much in its smaller detail, but in its general conception of the difficulties which face this country and the necessity of having reserves, not the reserves which could be piled up by this country and by sections of the British Empire, but by a general stable level so that there is something to go on if we get into trouble.

I wish to say a word about the Petrol Duty. The Petrol Duty and lorry tax are examples of this desperate searching round for new sources of income to meet our present commitments. I think it is perfectly clear that both these taxes, as hon. Members have proved, are entirely inflationary. Take one instance, the pottery industry in my area of North Staffordshire. There they assess the cost of these two taxes as something between 4 per cent. and 5 per cent. on the cost of pottery. Once we abandon the ordinary principles of sound finance and go searching around to drag in and scrape something for the economic wealth of the country, immediately taxation is apt to have an inflationary effect.

As far as one item is concerned, the item of expenditure on armaments, loans and the rest of the things which might be put down under the heading of the Army or the Services, we are spending only 12.7 per cent. of the national income whereas in 1939 we were spending 13.3 per cent. To believe that all is well there would be extremely foolish. The difficulties facing this House, and this Government may well be eventually to decide between various forms of expenditure, where this country is to go and perhaps the very question between a welfare Britain and saying farewell to Britain. We do not know, but those issues are very clearly arising and are one of the reasons why this House should demand at the earliest opportunity a proper review of the way in which the money for armaments is spent so that we can be sure that we get full value for money.

Another thing that the Bill makes clear, apart from the threat we may have from new inflation—and the Chancellor of the Exchequer has spoken at great length and with admirable lucidity in his opening speeches in the 13 days' Debate of the danger—is that we are faced with inflationary pressure from the Bill itself. There comes a point when taxation becomes so severe that people have to look elsewhere than to their own incomes for their living, not in any extravagant sense, or a sense of "blueing" money, but of getting hold of those few securities they have—those few pounds in the Post Office or elsewhere—and bringing those pounds out and spending them.

My hon. Friend the Member for Windsor has pointed out what has happened to the National Savings Movement. Money has been drawn out which should have been kept as nest-eggs and the nest-eggs have been spent. That does not apply merely to one class of people. I believe that throughout the country the result of this type of Finance Bill will automatically be a growth of that inflation which is so dangerous, not merely to our exports and the economic state of this country, but dangerous to the very existence of this country itself.

6.54 p.m.

Mr. Rhys Davies (Westhoughton)

I would not have intervened in this Debate were it not for one or two sentences in the speech of the hon. Member for Stafford and Stone (Mr. H. Fraser). He gave me the impression that he is critical of the welfare State, because he said that if we continue the welfare State we might reach a stage of saying farewell to the State altogether, and he was very disturbed about the money which is being spent on what is now termed the welfare State. But he seemed quite satisfied, on the other hand, with the money spent on armaments.

Mr. H. Fraser

That is exactly what I said I was not satisfied about and I wanted to know how it was being spent.

Mr. Rhys Davies

Having dealt with that point, I wish to say a few words about the Finance Bill as a whole. I have naturally heard many Debates on Finance Bills and one thing in particular has troubled me during the last few years, The Chancellor of the Exchequer is one of the ablest of all the Chancellors I have seen in this House over a long period of time. But if he fails in one thing, he fails in this: Why does he not stand up and tell the Tory Party, tell his own party, and tell the people of the country as a whole, as he ought, that we must get money by taxation if we engage in wars and pay for them? We cannot have wars on the cheap; and if I have any criticism of my right hon. and learned Friend, it is that he does not point out to the taxpayer what these heavy taxes are actually for.

I will give an illustration of what I mean. Some time ago I was asked by a club in my Division whether I would explain to them why taxes on beer and tobacco were so heavy. Being a tee-totaller, of course, I was delighted to attend and explain the reason. The House may be interested to know what I told them. I had secured figures from the Treasury to show that the taxation of beer and tobacco had gone up four or five and, I think, even seven times in my own lifetime. I said to them, "You all support every war as it comes along." They said, "Yes." Strangely enough, however, they always vote for me—one who is opposed to every war. Then I said, "The Chancellor of the Exchequer has got to have money from somewhere to pay for wars"—

Mr. Speaker

We cannot have a discussion on war or no war on the Third Reading of the Finance Bill. Perhaps on other occasions, but not on this.

Mr. Rhys Davies

I was dealing with the taxation of beer and tobacco and I will leave the problem of spending the money on war at that, except that I told the men in the club, "Now men, if the Chancellor does not tax beer and tobacco he might tax bread and water. Which will you have?" Of course, they preferred taxing beer and tobacco to taxing bread and water. I therefore ask the Chancellor of the Exchequer, once again. to take every opportunity of explaining why we must impose this heavy taxation.

The Tory Party, in criticising the Finance Bill, complained about taxation of petrol and commercial vehicles, but when all their complaints are summed up it simply means that we must find money somewhere; and they never suggest an alternative method of raising the money. The hon. Member for Stafford and Stone dealt with greater production, but the working people of this country are not satisfied to produce more merely to spend more money on war. I must avoid that problem, otherwise I shall be out of order.

I ask the Chancellor of the Exchequer to bear in mind one thing which is very seriously disturbing the minds of many people in these islands. We are taxed under this Bill; we were taxed for postwar credits, and war damage. We are taxed at every turn, and the people are beginning to believe that a new tax is being imposed by way of development charges made under the Town and Country Planning Act. It is true to say, therefore, that there is too much taxation in this country. I have come up against a little tax problem of my own. I have a small annuity for which I paid for years and years, but, lo and behold. that little annuity is now taxed to the tune of 9s. in the £. I must not, of course. say that that money goes to pay for war and to prepare for other wars, because that is out of order; we are here dealing with the raising of money for the State.

I have read many Finance Bills—I have been here for a considerable time as hon. Members know—and one thing intrigues me in every Finance Bill, and I want to ask the Chancellor of the Exchequer to tell me the reason for it.

I wonder how many hon. Members have read the Preamble to this Bill? It says: We. Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty's public expenses, and making an addition to the public revenue"— listen— have freely and voluntarily resolved"— if you please. One cannot imagine hon. Gentlemen on the other side of the House are "freely and voluntarily" raising these taxes because every speech which I have heard them deliver in the Debates on the Finance Bill goes to show that if they could they would not pay a penny piece in taxation.

Therefore, I think that this wording ought to be changed to read that: Members of His Majesty's Government have decided to impose these taxes against the will of all the Members of the Opposition. That would be a true reflection of what is happening, and a few more words could be added to say: and against the will of some hon. Members on the Government side of the House also. I should be included there.

Seriously, I want the Chancellor of the Exchequer to take note of one point, and I am sure that I can appeal to every hon. Member when I deal with this issue. I suppose that every Member has had the experience which I have had of knowing families emigrating from this country who have post-war credits due to them, and who have failed completely to get a penny piece. The Treasury just tell them to retain their scrip.

Bearing in mind what the Chancellor has been saying—I know that I must return to the subject of taxation and not deal with post-war credits—I protest against the increased taxation that is taking place from year to year in this country. The National Debt of this country 30 years ago was £15 per head of the population. It is now more than £500 per head of the population. When hon. Gentlemen say that the nation is bankrupt, I reply that it is the policy adopted by every Government in turn which has brought about this state of affairs. I wish to protest once more, if I never say a word on this subject in this House again, against the substance of this nation being employed upon adventures abroad when we ought to pay more attention to the necessities of our people at home.

7.4 p.m.

Mr. Henry Strauss (Norwich, South)

The hon. Member for Westhoughton (Mr. Rhys Davies) ventured upon matters which, as he himself recognised, were bringing him to the point of being out of order. I mention the subject which I know is very near to his heart only because it has more bearing upon this Finance Bill than has perhaps always been realised. We all know how strongly the hon. Member feels on the subject of war. Some of us believe that one of the things which might deter certain nations from running the risk of war would be the knowledge that we conduct our finances on sound principles and have a reserve should a war occur. If that knowledge existed, it might be a valuable aid in avoiding the very thing which the hon. Member most desires to avoid.

The first general argument against the Finance Bill, as was so admirably stated by my right hon. Friend the Member for Aldershot (Mr. Lyttelton), is the fact that there is no longer a reserve from which further revenue can be raised. One hon. Member opposite asked how we knew that. We know it because one has only to read the Finance Bill, and the speeches made in its support by the Chancellor of the Exchequer and his colleagues, to know that they say that no relief in taxation can be given unless a corresponding amount is raised from some other source. That is an acknowledgement, on the face of this Bill itself, that there is no longer any reserve from which additional taxes can be obtained. A point that has not been sufficiently brought to the attention of the House, perhaps, is that that in itself means that we are running into a strategic danger.

The other two matters with which I wish to deal are to be found in definite provisions in the Finance Bill. I first turn for a moment to what is now Clause 26, which deals with restrictive covenants and imposes retrospective taxation. The hon. Member for Orkney and Shetland (Mr. Grimond) made a number of points with which I found myself in general agreement, but he greatly understated the case against Clause 26 as it now stands. He thought that in the Clause we were recognising—and he blamed both the Government and His Majesty's principal Opposition for that fact—the effect of a warning, the date of the warning having been put into the Clause. He omitted to notice what is most important, namely, that the Clause, as it now stands and will pass into law, has no connection whatever with the terms of the warning given by the Chancellor of the Exchequer two years ago.

That warning was that he proposed to deal, retrospectively if necessary, with any dressing up of remuneration to make it look like a capital payment. He made it clear that he would not hesitate to look at the substance of the transaction and not at its form. Had he carried out that intention, there would have been very much less to be said against the Clause as it now stands. The Clause now taxes retrospectively payments which cannot by the widest stretch of the imagination be called payments of remuneration. It will bring within its scope every payment for a restrictive covenant where the man who makes the covenant proposes to remain in the business.

That has never been suggested at any time previously, and it could not be justified by any principle ever stated by the Chancellor of the Exchequer. This House would be making a great mistake if it imagined that the only transactions which would be caught by the Clause as it now stands were the two transactions of which the House has at any rate some knowledge, though I suggest that, even in those cases, it has insufficient knowledge to know whether they would be rightly taxable on the principle enunciated by the Chancellor of the Exchequer.

I ventured at an earlier stage in our discussion on this Clause to quote the weighty observations of Mr. C. J. Hamson, the Reader in Comparative Law at Cambridge University. I will not repeat them to the House now, but I should like to repeat, because they are of some interest, the remarks made as long ago as early in the 18th century by a very famous, though very silent, Member of this House. Edward Gibbon, as hon. Members may recall, after sitting in this House for many years in complete silence, wrote "The Decline and Fall of the Roman Empire." In his autobiography Edward Gibbon wrote of the proposal to deal retrospectively with those responsible for the South Sea Company. After the collapse of the South Sea Bubble Members proposed retrospective and vindictive action. It is perfectly true that they proposed it in a matter of the criminal law, but Gibbon makes some wise remarks on the subject: Such a pernicious violation of liberty and law can only he excused by the most imperious necessity. Nor could it be defended on this occasion by the plea of impending danger or useful example. Then, missing a few words: Such bold oppression can scarcely he shielded by the omnipotence of Parliament. I think those were wise words, and apply today as much as they did when Edward Gibbon wrote them. The retrospective provision of this Clause, when it cannot even be pretended that it deals only with the colourable transactions which were the subject of the warning of the Chancellor, are a serious blemish on this Bill and will be a blemish on our legislation.

There is another matter which, compared with the matters with which I have already dealt, may strike the House as far less important. Nevertheless I put it to the House, and I know from conversation that there are hon. Members opposite who agree with me, that what may look like a comparatively unimportant thing really has considerable importance. I would beg hon. Members who have a copy of the Bill before them to turn to the bottom of page 56 and the top of page 57. They will there find paragraph 1 (2) of Part II of the Fifth Schedule to this Bill. The paragraph reads as follows: Any reference in this Part of this Schedule to a prospective liability by virtue of this Act to purchase tax shall be taken as a reference to a prospective liability to purchase tax arising from the charge of purchase tax on certain vehicles"— then come the important words— which was provided for by a resolution passed by the Committee of Ways and Means of the House of Commons on budget day. The right hon. and learned Gentleman will agree with me that in order to construe that paragraph at all, and therefore to ascertain the meaning of this part of the Schedule, it is absolutely necessary to look outside this Bill at that Budget Resolution. Unless one looks at that Budget Resolution it is quite impossible to ascertain what the Measure to which we are giving a Third Reading means.

That Budget Resolution will never be found in any volume of the statutes. It would no doubt be possible to find it by looking up the HANSARD of budget day, and indeed that will be the only easy way of finding it. But as you, Mr. Speaker, have ruled on more than one occasion, HANSARD is not a legal authority. To find out authoritatively what is meant by that paragraph which I have read it would be necessary to consult the Journal of the House—not a document readily available to the public. I know that there are hon. Members in every quarter of the House who dislike legislation by reference, but legislation by reference has hitherto been at least by reference to something which could be read in a public document in a volume of the statutes. It was not something to discover which one had to indulge in researches not possible to most people.

I find this so monstrous in its effect that I have consulted the Law Officers of the Crown. In response to my request the learned Solicitor-General courteously quoted the nearest thing to a precedent that he could find—namely Section 13 of the Finance Act, 1947. If the Chancellor of the Exchequer will turn to it he will find that it is not a precedent at all, for the reason that, although that Section mentioned a Budget Resolution, the Section itself mentioned the material part which it was necessary for the taxpayer or the practitioner or anyone else to see if he was to understand the meaning of the provision in the Act. That is not so in this case. I have thought it right to call attention to something which, so far as I know, has never been done before and which it is utterly wrong to do now. To treat legislation in this way is to bring the law into contempt and to do precisely the sort of thing that enemies of the law, and of the rule of law, are always seeking to do.

What will happen when the ordinary man or woman sees this perfectly incomprehensible paragraph in the Finance Bill when it becomes an Act? They will give up all attempts to find out what it means themselves, and they will go to a civil servant and ask him what it does mean. I am bound to say, because the traditions of our Civil Service are so high, that the civil servant will give a truthful and a helpful answer. But I would suggest to the House that it is utterly wrong to put into the hands of a civil servant the power that he alone can ascertain what an Act of Parliament means; and knowledge which, unless the ordinary man is prepared to carry out difficult research, he cannot himself discover. That is not the way in which our liberties will be preserved.

I hope that the Chancellor of the Exchequer in his reply will not rely on the fact, which may be correct, that this particular part of the Bill will not concern a great number of people; and those whom it does concern will not be concerned very long, since this part of the Bill is only of temporary importance. The point is that the words affect a certain number of people and it should be the business of this House not to put words into an Act of Parliament which are in themselves incomprehensible and of which no reader, by reference to anything in the Statute Book, will be able to discover the meaning. For,that reason, and on account of the retrospective provision, there are most serious objections to this Bill. In addition, it marks the fact that we have come to the limit of our taxable capacity. We have come to that limit in time of peace, when the world is in a very dangerous state. By their conduct of our finances His Majesty's Govern- ment have run into a strategic danger which wiser management would have avoided.

7.20 p.m.

Mr. William Ross (Kilmarnock)

I do not agree at all with the gloomy conclusion of the speech of the hon. and learned Member for Norwich, South (Mr. H. Strauss). This suggestion that we are coming to the end of our taxable capacity shows a confusion of thought. It is more or less what has been said continuously since 1945, and successively, year after year, by some strange miracle we manage to raise even greater taxation. The whole point is that our taxable capacity is determined by our productive capacity. We must continue to do what the Government have set out to do since 1945, and that is to increase our productive capacity in order to support the new burdens left as a result of the war and the new social burdens which we on this side of the House have willingly taken upon ourselves.

The hon. Member for Stafford and Stone (Mr. H. Fraser) said that in the last four years Government expenditure had risen by 25 per cent. He seemed to think that that was very bad indeed. I regret that he was not a little more specific and that he did not go into the items of expenditure which had increased in that time. They include the new social service schemes—the National Health Service, the new payments by the Government towards the National Insurance Scheme, family allowances, greater education grants and higher housing subsidies. If these are the items which have created the need for higher taxation, the hon. Gentleman must recognise that by cutting them down he will not be helping the struggling wage earners on whose behalf the great plea is put forward by him and his hon. Friends. If that expenditure is cut down, people who are finding it hard to pay their way today will find it very much harder indeed. That social expenditure, much of which the people had to pay themselves, has been taken over by the Government, and it is that expense which we are now meeting.

The hon. and learned Member for Norwich, South, dealing with restrictive covenants, expressed considerable fears about the working of the Clause and talked about how the scope of it would be extended to include people who were not among those originally warned. A pre- vious speaker even thought that it might include footballers' transfer fees. If we put a stop to that racket, I do not think that many of us would be very worried. Certainly, those who support Stoke City would not be concerned. I do not think that the hon. and learned Gentleman's gloomy forecast will be realised. It would have been much more dangerous for the Government to recognise this practice rather than to risk disadvantages and doubts by introducing a Clause which the hon. and learned Gentleman, quoting from Gibbon, described as a "pernicious violation" of the liberties of the people. The Government would have been risking the future of our economy if they had allowed this business to go unchecked.

The general feeling of the ordinary people was that action should be taken. Apparently the hon. and learned Gentleman does not realise the struggle which many of us have when we are talking with lowly-paid railwaymen and workers in other industries, who are trying to get a minimum of £5 a week and are being held down because of a thing called a White Paper, which is something voluntarily agreed to by trade unions and not something statutorily laid down by any Government. The voluntary acceptance of these not very pleasant economic facts by trade unionists, and by employers in their recognition of the desirability of holding profits to their previous limits, was being threatened by this kind of violation. If no action had been taken, we should have found a considerable extension▀×▀×

Mr. H. Strauss

All that could have been safeguarded by a Clause drafted on the lines of the Chancellor's warning. If the transactions to which the hon. Member objects fell within that warning, it would have been easy, by a proper Clause, to hit them; but there is no limitation of the present Clause to such cases.

Mr. Ross

I think that the hon. and learned Gentleman objects because he just does not trust the present Chancellor.

Mr. H. Strauss

No—it is not that at all.

Mr. Ross

The action taken under this Clause will be initiated by the Treasury. I have not the legal equipment with which to battle with the hon. and learned Gentleman on the forensic plane, but I do not think that the Clause is so loosely drafted as to be a "pernicious violation" of the liberties of the people. Also, we have Parliament here to take action if his fears are realised.

Much has been said by hon. Gentlemen opposite about the savings position. They have said that people are not saving or that they are not saving as much as they saved earlier. My experience in Ayrshire is that last year the Ayrshire Savings Group had a better year than ever before. The figures were really astonishing. Of course, it may be the Ayrshire spirit and recognition of a national duty, quite apart from the material aspects of the value of their thrift, which has brought this about, but that fact flies in the face of the criticism we have heard today. That is in spite of the fact that we are living in an era of full employment. The introduction of full employment causes difficulties. Prior to this era the fear of the future, the fear of unemployment, ill-health and old age made people save. We have removed those fears by our new schemes, and we must put something else in their place. That something else is a recognition of the national duty of saving. I hope that the rest of the country will follow Ayrshire's lead in recognising that national duty.

It has been said that the new tax on petrol was not welcomed by many people. I begin to wonder whether or not it was welcomed by the road haulage industry. Figures have been quoted and not refuted. We have had more calculations today of what this increased tax will cost. The cost of this increase in one item towards the cost of transport generally has not been shown to be very material. Yet the road haulage industry throughout the country have promptly taken advantage of a much advertised increase to raise the whole of their transport charges by 33⅓ per cent., with some exceptions. And they have been supported by hon. Gentlemen opposite.

I remember that in a recent debate hon. Gentlemen opposite opposed increases in freight charges on the railways. The right hon. and learned Member for West Derby (Sir D. Maxwell Fyfe) said that before the railways were given permission to meet increased charges, a committee should be set up to discover whether or not economies could be made. If I had found one sincere voice from the opposite side of the House telling the road haulage industry of the national need to cut down the cost of living and telling them to go into the question of costs to see whether they could save, then I would have listened with more sympathy to the speeches of hon. Gentlemen opposite on the subject of the Petrol Duty.

I think there has been a ramp in the road haulage industry. They sought and found in the Petrol Duty an excuse for raising their costs in a way that was not really justified by their needs. I trust that, not only in road haulage but in every other item of our economy, people will recognise the vital need for bringing down prices and costs. We cannot bring down costs entirely by means of a Budget, but much can be done to bring down costs in industry by the people in industry increasing the productivity of industry, which is one particular way, and decreasing costs by cutting out waste. I therefore return to the point with which I started. Let us put our emphasis not upon reaching taxable capacity, but upon the fact that we have not yet reached our potential productive capacity, and let us make every effort that we can to increase it.

7.31 p.m.

Mr. Maudling (Barnet)

The hon. Member for Kilmarnock (Mr. Ross) seems to be rather cross with the road haulage industry for increasing its charges by an amount in excess of the percentage required for the increased cost of petrol. I think he would be well advised to address this complaint to the Ministry of Transport, if only for onward transmission without comment to the Road Haulage Executive, who, I believe, have been taking a most remarkable lead in this matter.

The hon. Member also said that in Ayrshire there has been recently a higher level of savings than has ever before been recorded. I am not quite sure whether he referred to gross or net savings, because there is quite an important difference; in either case, if it is true of Ayrshire, it is certainly the exact opposite of the truth so far as the rest of the country is concerned. It only goes to show what stout fellows they are in Ayrshire.

The other point to which the hon. Gentleman referred was the question of taxable capacity, and he argued that the taxable capacity of the country is related to its productive capacity. That, of course, is perfectly true, and it is part of our argument also. Our argument is that the taxable capacity of the country is being overstrained, inasmuch as the Chancellor is taking too great a proportion of our total productive capacity. The national income is the same thing as the nation's capacity to produce wealth, and the public authorities of the country are taking 43.5 per cent. of the nation's capacity to produce wealth, and that, in our submission, is too high a proportion to be borne indefinitely, and it is certainly too high a proportion in view of the possible serious additional commitments in the way of expenditure which this country might have to meet.

The hon. Member for Chesterfield (Mr. Benson) went into this question earlier in the Debate, and rather doubted that there was any truth in the argument that we are overstraining our taxable capacity at this moment. But surely the argument is against him. No nation in time of war has been successful in getting more than 50 per cent. of its total economy or its total wealth concentrated on war expenditure. If already 43.5 per cent. of the nation's income goes to the Government, there is, therefore, no reserve for extra defence expenditure, or, alternatively, the latter will have to come out of other Government expenditure.

Mr. Houghton

When the hon. Gentleman says that 43.5 per cent. of the national income goes to the Government, does he not agree that a large part of it is really re-distributed in the form of social services and is therefore being expended elsewhere in consumer goods and services?

Mr. Maudling

I was very careful not to say that it went to the Government, but that it went to the public authorities, a very different thing, which includes taxation, rates, insurance contributions and so on. But, whether it goes in one form or another, it goes out of our pockets as individuals, and it is not left to us to use.

Mr. Houghton

It goes into other pockets.

Sir S. Cripps

The hon. Gentleman has omitted the fact that a great deal of it is represented by transfer payments.

Mr. Maudling

That is exactly what I was saying. If more money has to be found for armaments, it will have to be found out of these transfer payments, I am very glad that the Chancellor of the Exchequer has been able to confirm my argument in this direction.

Sir S. Cripps

indicated dissent.

Mr. Maudling

The hon. Member for Westhoughton (Mr. Rhys Davies) was full of praise for the Chancellor, but I did not follow his argument where it was based on the idea that the taxation position was entirely due to our desire to make war. I think that he omitted the very important factor that it is the desire of certain people to make us prepare to defend ourselves. In laying stress on heavy Government expenditure on our defence position, he rather over-stated the case for the Kremlin and under-estimated the influence of Whitehall.

I should like to refer to one or two points about the Bill which I consider to be substantial defects. The first arises in Clause 26, which is that dealing with restrictive covenants. In putting this Clause before the House in the first place, the Solicitor-General made it quite clear that the Government did not intend retrospectively to impose a penalty. He said: Here we are not imposing a penalty at all in the sense in which that expression is used in these discussions, that is to say, punishing somebody. … We are not fining them or imposing any punishment on them. We are simply saying that a tax consequence will follow."—[OFFICIAL REPORT, 19th June, 1950; Vol. 476, c. 878.] If a tax consequence is not to be a penalty, surely it must not be a greater tax than would have to be borne by an individual if he had not taken the line of conduct which has attracted the tax. In other words, if I have to pay more tax as a result of taking a certain line of conduct than I would have done otherwise, then surely I am being penalised? On the Report stage of the Bill, the Solicitor-General said: It is not a question of punishment, for, as I explained when we were discussing this matter on the Committee stage, certain tax consequences follow from entering into an agreement, and we are not here talking of punishment."—[OFFICIAL REPORT, 4th July, 1950; Vol. 477, c. 399.] As Clause 26 is now drawn, the Chancellor is taking out of the combined resources of individuals affected and contracting companies some £50,000 more than he would have had if the Chancellor had not imposed this plan to deal with those who avoid taxation. This is a matter of avoidance, and not of evasion, because there is quite a distinction between the two. If the taxpayers themselves are being asked to pay £50,000 more than they would have had to pay without this device, obviously they are being penalised for attempting that device.

I wish now to turn to the Clause dealing with German enemy debts and their recovery, because I think that, if the Chancellor looks into this matter again, he will find that in some ways it will not work out in practice as he expects. It is provided in Clause 39 that where a claim against a German enemy subject has been transferred and recovery is made by the assignee, the assignee has to be taxed at the assignor's rate of taxation. If one individual who is liable to Surtax had assigned a debt for a consideration to a company, the company, when it makes the recovery, will have to pay the Surtax to which the assignor was liable. I ask the Chancellor if he will look into that point again. I think he will find that in practice it may work out unfairly.

I now want to turn to the question of taxation on commercial vehicles, because, in the course of the discussion of this Bill, the original proposal has, to some extent, been whittled down. We are not now faced with the proposal to tax commercial vehicles in toto, but only with the proposal to tax the chassis. That change has led to certain absurdities, and we are faced with the remarkable definition of a chassis-less vehicle by reference to what a chassis would not be if it had one, which it has not. I still do not understand the real reason which underlies this tax on commercial vehicles. It is said, in the first place, that people who spend too much on commercial vehicles are infringing the canons of good economic planning. There has been a good deal of infringement of the canons of good economic planning recently, and a good deal of conflict with the estimates included in our economic plans during the last few years. I cannot see why the purchasers of commercial vehicles should be singled out in this way.

It may be that the intention is to produce another example of what hon. Members opposite call the principle of "distributive justice." I quite agree that it may be galling to see long columns of the idle rich wending their wicked way to Ascot in their brand new five-ton trucks. I agree that that sort of thing should be stopped. But, what is more, the idle rich will now be encouraged to go to Ascot in their Rolls-Royces, because the most interesting feature in the proposals about the Purchase Tax is the reduction in the rate on the most expensive form of motor vehicles. I feel that this proposal must have escaped the notice of the hon. Member for Blackburn, East (Mrs. Castle)—I am sorry she is not here—who made a remarkable speech on Purchase Tax. She was so moved by spontaneous indignation that once or twice I feared she was going to depart from her brief. She said: If the Committee looks at this Motion and studies its practical effect, they will find that not only does it propose to reduce Purchase Tax on all rates, all categories, all groups of articles coming within the Purchase Tax range, but will reduce taxation most on the least essential. In other words, it is a typically discriminatory Tory Motion in favour of the rich. … If Members of the Committee vote for this Motion I propose to let the housewives of Britain know that what they are voting for is a reduction in the wholesale price of such essentials as lino or wallpaper or mats for the floor—essential items for the home—of 1s. 8d. in the pound, for a reduction of the wholesale price of gramophone records of 3s. 4d. in the pound, and for a reduction in the wholesale price of fur coats, jewellery and perfume of 4s. in the pound."—[OFFICIAL REPORT, 20th June, 1950; Vol. 476. c. 1210-11.] I hope that, at the same time, she will tell them that the people who voted for this Bill voted for a reduction in the Purchase Tax on the most expensive motor cars, and on no other things whatever. To some extent, this seems to me relevant to the contents of this Bill.

Finally, I come to the question of the tax on petrol. It has been argued on more than one occasion by hon. Members opposite that the need for the tax on petrol is in order to provide the resources out of which relaxations can be made in Income Tax. I listened with interest to the speech of the hon. Member for Ayrshire, South (Mr. Emrys Hughes). I agreed with a great deal of what he said, and I was interested, when he so rightly emphasised the effects of taxation on production and the export trade, that he was questioned by one of his hon. Friends as to how direct taxation could affect production and the export trade. The answer is quite clear in what the Chancellor has done. He has recognised, by extending the reduced rate relief—as we have often begged him to do—that the present rate of direct taxation falls heavily upon individual effort and enterprise. It is argued that in order to provide the wherewithal "to raise the wind," as I think it was inelegantly said, for this reduction in Income Tax, it is necessary to increase the tax on petrol.

I must say that some of the arguments put forward by the other side strike me as extremely dubious. It is always interesting to see the Chancellor sitting on the bench opposite with his two principal aides. As I ventured to say on an earlier occasion, he reminds me of Horatius guarding the bridge. Since then, I have listened with interest to the speeches of his two principal colleagues to see which of them merited the title of "Spurious" Lartius. I think they both do.

I am not in the least impressed with the argument that if the House wishes to support a reduction in direct taxation, it must support increases in the Petrol Duty, or that the Petrol Duty should be increased because the proportion of the nation's revenue as represented by this tax is less than before the war. If that argument is to be followed to its logical conclusion, then there are a lot of people who should be forewarned, because I doubt whether the revenue from dog licences today for example, compares favourably with what it was before the war. Are the owners of dogs to be warned that they are to he the next in line for additional taxation whenever any reduction of tax elsewhere is going to be made? That seems to be the logical conclusion of the arguments put before the House.

The fact is that this House cannot, and should not, accept the argument that reductions in tax are only possible when accompanied by equal increases. That was the argument put forward by the Chancellor in the course of the last election. The general line of the right hon. and learned Gentleman appears to be that the present levels of taxation and expenditure are with us indefinitely. I do not believe that this House or the country should or will accept that. It was argued earlier by the hon. Member for Sowerby (Mr. Houghton) when he was talking about this question of taxable capacity. He argued that in case of war there is no limit to taxable capacity. Any amount of taxation will be paid by the people of this country when it is needed to sustain the demands of war. That is perfectly true. There is no limit to taxable capacity in those circumstances because then we are paying our taxes to support the country, but we are not prepared to pay unlimited taxes to support Socialism.

7.49 p.m.

Squadron-Leader A. E. Cooper (Ilford, South)

I wish to say at the outset that I regard this Bill as a thoroughly bad Bill because, in my view, it does three things. First, it serves notice on the country that under a Socialist State the cost of living is to be deliberately increased: secondly, it serves notice that under a Socialist Government the costs of production are to be deliberately increased; and, thirdly, it serves notice that there is no hope of reduced taxation under this same regime.

I do not believe that the Chancellor, when he proposed the tax on hydrocarbon oils, had the remotest idea of its implications in relation to industry. It is all very well for hon. Members to suggest that the increase is infinitesimal, but I can assure them that the increases in the chemical industry are quite severe, in many aspects. Undoubtedly, as the months go by, they will have a very serious effect upon the export trade of the chemical industry, particularly in those industries which have their being in paints, varnishes, cellulose, linoleum and the like. Another effect is that linoleum manufacturers, who voluntarily reduced their prices by 6 per cent., are now, in consequence of the Government's decision, in a position of being forced to reconsider their prices. If they have to put them up, they will certainly be put up beyond the 6 per cent. by which they brought them down. These are the results of the deliberate policy of the Socialist Government.

Hon. Members opposite should not under-estimate the serious effect of their policy on the small savings of the people of this country. We have arrived now at a serious position, where in one year we find a decrease in our small savings for the first time; and in this financial year this decrease or withdrawal is proceeding at an even greater rate. Gradually, small savings are drying up, and the qualities of thrift, which made our nation great in the past, are gradually being eliminated from the calendar of right things to do of the British people.

7.52 p.m.

Lieut.-Commander Gurney Braithwaite (Bristol, North-West)

To me falls the honour of offering the concluding remarks from the Opposition Benches at the end of these long financial debates which have mapped the course of our fortunes from now until April, 1951. It is not unnatural that although today the atmosphere has been amiable throughout, hon. Members should have touched upon a very large number of topics. After all, much can happen between now and next March, and it is not surprising that, from both sides of the House, a very large number of important matters should have been raised. It is certainly not within my province to try and cover them, and I doubt even if the Chancellor will find time to reply to all the points raised today.

But from both sides of the House there has been expressed a general sympathy with the burden which is being carried by the taxpayer, with the exception of the speech of the hon. Member for Sowerby (Mr. Douglas Houghton) who, of course, speaks not as a taxpayer but as a tax gatherer.

Mr. Houghton

If the hon. and gallant Member will forgive me, I am both.

Lieut.-Commander Braithwaite

The hon. Gentleman, with his past experience, always seems to me to be putting the case of the tax gatherer rather than that of those who have to find the fruits of the labours of those in the Inland Revenue Department. Later, I shall be returning to the hon. Member on one point in which he joined issue with those of us on these Benches.

In view of the fact that nearly three months have elapsed since the introduction of the Budget, which was the chrysalis from which the present insect has emerged, it is, in theatrical parlance, the last night of the run and, I think, the appropriate moment to make some comment upon the performance of some of the principals. The Chancellor of the Exchequer has many sides to his character. This year he has given us the mixture much as before—a judicious assortment of acidity, assiduity and absenteeism. The Financial Secretary to the Treasury, whom I am sorry not to see in his place at the moment, seems to have been shaped by the potter's wheel of Parliamentary Debate. Gone is much of the cocksureness we remember when he sat behind. While he may still hold the view that the gentleman in Whitehall knows best, the Financial Secretary has somewhat watered the beer of his own infallibility.

A distinguished Poet Laureate, Lord Tennyson, once penned these poignant words: But O! for the touch of a vanish'd hand, And the sound of a voice that is still. Those lines admirably express the sentiments of those of us on this side of the House who were in the last Parliament at the departure from these Debates of the right hon. Member for Colne Valley (Mr. Glenvil Hall) whose integrity appears to have led him to the scaffold. He earned our respect as a man whose word was his bond and who invariably fulfilled an undertaking given in Committee or on Report. His replacement by the Minister of State for Economic Affairs, whose duties appear to be as ephemeral as his political pledges, has done nothing to enhance the reputation of the financial team of the Government.

Lastly, there is the Solicitor-General. Hon. Members will regret that he is not here to take a well-deserved curtain on this occasion. He returned to us recently after heavily reducing the Government majority at Neepsend, but he has been unable to extend this beneficent process to Government expenditure. Nevertheless, we pay tribute to him. He has been a painstaking and invariably courteous Law Officer. Whatever the hour of day or night his manner has remained placid and his brow unfurrowed, except during the interventions of the President of the Board of Trade and intermezzos of the hon. Member for Nelson and Colne (Mr. S. Silverman).

Thus we have reached the end of a long pilgrimage, much of which has taken place during the watches of the night. We are bound to ask just why this was necessary? After all, the House rose for a fortnight's Recess at Whitsuntide. I do not know why we had to come back to find this rush, this 24-hour day, imposed upon us. I have always believed that the House does not do good work after midnight, and I do not think the atmosphere is at all conducive to it. If hon. Members opposite respond with a retrospective tu quoque that Conservative Budgets also made progress during the hours of the night, I would remind them that there was then adequate newsprint for reporting our Debates, and this year much has been done to the taxpayer which has been inadequately reported.

There are certain Clauses in the Bill which might have been improved. I should have liked to see Clause 10 expanded. That Clause deals with spare parts and accessories of industrial plant necessary for the export drive. Then there is Clause 26, to which my hon. Friend the Member for Barnet (Mr. Maudling), and also the hon. Member for Orkney and Shetland (Mr. Grimond) referred. I find myself in agreement with much of what both of them said. I think this matter was discussed on a rather narrow basis. After all, two figures dominated the stage during those discussions; and the hon. Member for Orkney and Shetland was quite right when he reminded us that we were legislating for all cases which might fall within the ambit of this particular Clause.

It points a moral, which is that if the Chancellor of the Exchequer, or indeed any other Chancellor, finds a loophole, or is satisfied that some abuse is taking place in the realm of tax evasion, he should take action at the first available opportunity. I suggest, with great respect, that had the right hon. and learned Gentleman, on 6th April, 1948, instead of uttering a warning, stated in his Budget speech that as from that hour this particular loophole of restrictive covenants would be closed, then I do not think a word of criticism could have been uttered. Instead we have had the rather laborious process of the stable door being left unlocked, and two horses in particular being allowed to get miles down the road before being lassooed, brought back and locked up. I think it would be better in future that, when the Chancellor of the Exchequer felt there was an abuse, he should say so and act immediately.

For some years the Budgets have been vehicles of distribution or, rather, of redistribution, if hon. Members opposite prefer that phrase. This year, however, we have seen a new technique. This Budget is also the vehicle of syndicalism. The right hon. and learned Gentleman has done nothing to remove the view held on this side of the House that the Petrol Duty is deliberately aimed at assisting British Railways in their present plight. In other words, the public interest has come second and the powerful interests behind him representing the railway unions have carried the day. There have been a number of speeches this afternoon on that topic and I would commend, in particular, the views of my hon. Friend the Member for Spelthorne (Mr. G. B. Craddock) who pointed out the impact this proposal would have upon local authorities. I thought he made an admirable point which the right hon. and learned Gentleman should study.

The Clause dealing with commercial vehicles, which is, of course, another prong of the syndicalist offensive, still remains obscure and unsatisfactory and it is our belief, whatever the niceties of chassisless vehicles being deemed to possess chassis and whatever wording the Law Officers may insert, that this tax remains unwise and unworkable. We believe that the Petrol Duty and the Purchase Tax on commercial vehicles are both part of the syndicalist attack upon road transport. We believe the Government are obsessed by the difficulties of their own children—British Railways, British Transport Commission, British Waterways, British this and British that; right hon. Gentlemen opposite are, in fact, interested in everything but the British way of life.

A serious charge has been levied this afternoon by my right hon. Friend the Member for Aldershot (Mr. Lyttelton) and others—the charge that this and previous Socialist Finance Bills have left the country with no margin for an emergency, that we have spent our substance at a time when we should have been conserving our resources. That was challenged by the hon. Members for Chesterfield (Mr. Benson) and Sowerby (Mr. Houghton) who struck a chord of memory which sent me hot foot to the Library. What a valuable institution is the Library of the House of Commons. In it I found what I believed to exist in the tomes of our records—utterances on that subject by two ex-colleagues of the hon. Member and myself who have since disappeared into the dim splendours at the far end of the Royal Gallery in another place. [HON. MEMBERS: "Order."] That is in order; I should have thought it was an extremely complimentary reference. I might have added, "the goal of all true demagogues."

I refer to the noble Lords Alexander of Hillsborough and Pethick-Lawrence. In 1939 a Budget was introduced by the present Lord Simon—on the eve of the outbreak of the great war of that year. He was taken to task by the noble Lords. I will not read out their lengthy remarks but they are to be found in the Library; they both criticised the Government of that day on the ground that taxation was so high that no room was being left for manoeuvre in the case of an outbreak of war. Lord Alexander complained bitterly of a Budget which reached the phenomenal figure of £1,322 million and went on to say that with the load which was being carried by the taxpayer at this time there could be no room for emergency expenditure. He went on to say, and this will be most interesting to the hon. Member for Chesterfield, that the national debt had reached the figure of £9,000 million. Who could tell, he asked, to what heights it would be raised at the end of a second world conflict or what the consequences might be upon the social life of the people.

No one can quarrel with that remark. I remember my right hon. Friend the Member for Blackburn, West (Mr. Assheton), when he was Financial Secretary at the conclusion of the war—or when the war was nearing its conclusion—telling the House that the National Debt had then risen to the figure of £22,000 million.

Mr. Benson

I should like to thank the hon. and gallant Gentleman for bringing this excellent confirmation of what I said to my notice. I had overlooked it. It shows how foolish it is to make statements that things cannot be done because they may be done within 12 months of the statement being made. He quoted the same statements being made in 1939 as have been made today by the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) and some of his colleagues. I challenged the right hon. Member for Aldershot and the evidence which has just been produced has confirmed me in the belief that I was right.

Lieut.-Commander Braithwaite

Of course, anything I can do to soothe the conscience of the hon. Member for Chesterfield I am only too glad to do, but perhaps he will convey his views about foolishness to the two noble Lords in person. I shall certainly not do so. Surely if there was a case for that statement in 1939—

Mr. Benson

There was not.

Lieut.-Commander Braithwaite

If there was a case for that statement in 1939 how much more is there a case today, when the National Debt has risen to this huge figure and when Income Tax, which is a very good yardstick, stands not at 5s.—which was the complaint at that time—but at 9s. in the £.

I do not wish to detain the House much longer and I shall, therefore, pass from that point. Our complaint is that His Majesty's Government have for five years acted like men who have suddenly inherited a limitless fortune instead of trustees of a country grievously wounded by six years of war. They have taken no thought for yesterday and no thought for the morrow. I would say to them, in I hope agreeable language, that I believe them all to be suffering from ministerial megalomania. They have become limousine minded, as is emphasised by the relief given to the high-powered motor cars while an increasing burden is placed upon mechanically - propelled invalid chairs, the sole method of locomotion for the humble and suffering disabled.

Much has been said this afternoon about the burden of the Purchase Tax and I think hon. Members will do well to remind themselves of the circumstances of its introduction. It was a war-time impost deliberately designed to curb personal expenditure and divert the money of our people into the national savings movement. We find now an excess of withdrawals over deposits—and what bad figures are revealed for last week—typifying the increasing strain upon the household budgets of the struggling masses. The housewives of Britain in my view—and here I do not differ a great deal from the hon. Member for Blackburn, East (Mrs. Castle)—seek quality and find themselves condemned to so-called utility; they seek nylons but must make do with negation.

As the Minister of State reminded us at the beginning of the Debate this afternoon, now has come upon us the Korean affair all its grim possibilities. We are faced with fresh military commitments into which Ministers have led the nation and which seem likely to increase rather than diminish. It is small wonder that people are now asking themselves whether their still unredeemed post-war credits must now be regarded as pre-war credits.

The right hon. and learned Gentleman. at the conclusion of our longest Sitting in the early hours of the morning the other day, was good enough to pay tribute to the good temper which prevailed during the all night ordeal. Well, that is true; and I trust that this honourable House's fair play will always prevail over faction; but let not that affability be mistaken for acquiescence. If there is no Division on this Third Reading let no one say the Opposition approve this profligacy. Quite apart from the tradition that there is no Division on the last stage of a Finance Bill which contains concessions, however meagre, a hostile Vote on this occasion would be interpreted abroad as unwillingness to grant the Socialist Government the necessary supplies for war material they now seek, and that would only spread gloom and despondency, I suggest, among other members of the United Nations.

I have left to the end—for I must stop because the Chancellor has indicated that he would like to get up at 8.15—a particularly oppressive consequence of Socialist extravagance and wild expenditure which caused loss of confidence in the pound and the devaluation—or, as I prefer to call it, the debasement of our currency—last September. Incidentally, it brought down not only our currency but the French Government of the day. But let that pass. Here at home devaluation has increased the cost of maintaining a family of four by some 14s. per week.

I found it difficult to follow the hon. Member for Oldham, West (Mr. Leslie Hale) today when he said we all owe the Chancellor a debt. I should have thought that the transaction was in the opposite direction. But in consequence I have never met so many black-coated workers as I have in this year of grace 1950 who cannot afford a holiday. We make them contribute to a so-called free medical service but debar them from the health-giving properties of the sea and the moors and the mountains—such was never the intention of Parliament. And so frustrated thousands will have to spend the holiday season ruminating in their gardens while the nationalised express trains thunder past half empty. There they will sit—the owners of the railways upon which they cannot afford to travel. Thus has Socialism struck resounding blows at the welfare State, which can only wither and die unless the load of taxation is so lightened as to enable its harassed citizens to move and breathe.

8.13 p.m.

The Chancellor of the Exchequer (Sir Stafford Cripps)

The hon. and gallant Member for Bristol, North-West (Lieut.-Commander Braithwaite) told us of the midnight oil that had been burned in the course of the Debates on this Finance Bill. I must certainly congratulate him on the midnight oil which undoubtedly he burned in making the brilliant improvisations with which his speech was so fully peppered.

I hope to try to keep in order on this very narrow Debate on the Third Reading. I should first like to reinforce what my right hon. Friend said in opening this Debate, that the general policy which lies behind this Bill and the Budget which preceded it is the same policy that has been followed over the last four or five years—those years during which, as the hon. Member for Orkney and Shetland (Mr. Grimond) said, we had made the most remarkable recovery since the war—and these policies have certainly succeeded in producing a very high standard of production and productivity in this country, as measured not only by the actual figures of productivity, which have already been cited, but also by the volume of exports that we have been able to build up.

As an example I may, perhaps, be allowed to give the figures for June, which have not yet been published, as I am sure they would interest the House. The provisional value of the United Kingdom exports in June, was £175.9 million—in a month of 25 working days. Adjusted to the standard month of 26 days the figure would be £182.9 million, slightly above the record May total. Imports were valued provisionally at £238.6 million; re-exports at £6.2 million. So the excess of imports, valued c.i.f., over exports and re-exports, valued f.o.b., was £56.6 million, giving an adverse visible balance for the first half of this year of £220.5 million, compared with £199.1 million in the same period of 1949 and £230.4 million in the July to December period of 1949. The value of imports in June was the highest on record. Last year imports rose to a peak in June also, and the pattern for this year has been very similar, although the rise in the last three months has been rather steeper than it was in the same period of last year.

That records the continuing development of our export trade, which, I think, goes to confirm what I have already said as regards the general policy behind this Budget. Nor, indeed, do I understand that there has been any criticism in the course of this Debate of that general policy.

A good deal has been said, however. as regards our having reached the limit of taxability. We have, it is true, so far as peace-time is concerned—and I said this, I think, last year—reached very near the limit of direct taxation on incomes; but that does not mean, of course. that we have reached the limit of taxability. There is indirect taxation; there are Death Duties; and many other ways by which taxes can be raised. Indeed, many people have spoken of this question of what might be available in an emergency, but the situation is, of course, quite different.

We have, indeed, reduced taxation on incomes by £650 million since 1945. So, obviously, there is a reserve which could be tapped if it became necessary. Again, the very fact that this year we are imposing a new tax—although we are giving some remissions which it was not necessary to give—the very fact we are imposing a new tax shows that there is still more taxability available. So this conception that, for some reason or another, this Budget is wrong because the rate of tax is so high, is, I venture to say, entirely disproved by the facts.

The major complaints against this Bill have been three in number. First, there is the question of Petrol Duty; secondly there is the question of commercial vehicles; and thirdly there is Clause 26. Clause 26, if I may deal with that first, was so fully and exhaustively discussed in the course of both Committee and Report stages that there really is nothing further to be said about it. We believe that it would have been thoroughly wrong to disregard these flagrant challenges to the taxation system and to disregard the evasion which was being committed by a number of people. It is true two have been mainly mentioned, but there were, of course, others as well. We therefore thought it necessary to legislate, and I am quite sure that that is the view of the vast majority of the people in this country. So much, then, for Clause 26.

Then we come to the question of the Petrol Duty. There seems to be some confusion in the minds of some hon. Members opposite, for they say that to put a duty on petrol is inflationary. Well, it certainly is not inflationary unless it is going to lead to a very great increase in wages and salaries. The increase in the price of an article which is sold to the public is deflationary, not inflationary, and therefore the accusation that this is an inflationary duty is, of course, completely wrong from any economic point of view.

The complaint that is made, however, is that this increase in the cost of articles will affect adversely the trading capacity of this country. The only way in which that argument has been given any substance is by the most flagrant exaggeration of the effects of this duty upon the finished price of an article. There could not be a better example than the one my hon. Friend the Member for Chesterfield (Mr. Benson) took up about the woollen cloths, showing the gross exaggeration. As a matter of fact, as we stated at an earlier stage, the increase in the cost of using lorries is round about 4 per cent. as a result of this, and in passenger vehicles as well. What effect that has upon the price of goods carried will depend, of course, upon the value of the goods carried; but it certainly cannot be anything very large as regards the effect on the price of those goods. We believe that this small increase in taxation on an imported article—which, even though there may not now be a large dollar content, is part of the general importation of goods for which we have to pay by exports in the long-run—is a thoroughly useful way of adding to the revenue, and thereby enabling us to make the concessions which we wanted to make in the lower rates of Income Tax.

When we come to the question of the commercial vehicles, the reason was, as has been said over and over again, not because we wanted to raise more money: it was not a revenue reason. The reason was because the volume of home sales was greater than we thought was either right in proportion to the export sales or right in proportion to what we could afford to spend by way of capital investment on other things besides motor lorries. The hon. Member for Spelthorne (Mr. G. B. Craddock) asked me whether I could say why so many vehicles were being sold on the home market, and whether it might not be because the price factor was stopping them being sold abroad. The answer to that is that, certainly since devaluation, the price factor has not militated seriously, if at all, against. their being sold abroad. What was affecting the sales abroad—as far as we are concerned, anyway, and on our information—was the very heavy pull of the home market, which was meaning that the cars got into the home market and were not available to be sold abroad. We think that is proved to a very considerable extent if the recent trend as regards the exports of those articles is looked upon.

Sir Peter Bennett (Birmingham, Edgbaston)

Surely the Chancellor knows that one of the difficulties in selling overseas is the restrictions which are continually being put on by various markets, which prevent vehicles being sold, when they are all ready to go.

Sir S. Cripps

Yes, certainly: but if the hon. Gentleman will listen to the figures I am about to give I think he will see that my argument is fully justified. Taking the first five months of this year, we exported at the rate of between 5,000 and 6,000 vehicles a month, compared with 3.000 to 4.000 in the corresponding period last year, which seems to show that there is a market and that the vehicles can be sold in the market.

Sir P. Bennett

The Chancellor knows that certain markets for cars which have been closed down have just been opened up again in the last few months.

Sir S. Cripps

That seems to be an excellent reason for making cars available to be sent there.

Mr. Lyttelton

We are talking about lorries.

Sir S. Cripps

We are all talking about lorries.

Mr. Lyttelton

The right hon. and learned Gentleman referred to cars.

Sir S. Cripps

I think the hon. Member for Edgbaston (Sir P. Bennett) was talking about lorries, was he not?

Sir P. Bennett indicated assent.

Sir S. Cripps

I thought so. He used the word "cars," but he was obviously speaking about lorries—quite a different thing. I think we all appreciate that the hon. Gentleman knows the difference between cars and lorries. I accept that, anyway, although apparently his right hon. Friend does not.

As far as the commercial vehicles are concerned, I think there was a very good reason for imposing this tax in order to reduce the drag of the home market upon these lorries, in order to limit the amount of capital investment to somewhere near the figure that we could properly afford according to the plan that we had made as regards capital investment.

Those, as far as I can understand the course of this Debate, are the only points of any substance that have been raised in criticism of this Bill. It is quite true that it is neither very imaginative nor very spectacular, as indeed I stated myself, I think, when I introduced the Budget. This is not a year in which we are able to make any spectacular changes, because the circumstances are such that we must maintain the disinflationary pressure that we have generated in the course of the last two or three years. That is the central factor in the whole of our budgetary situation. That.is a thing which nobody has criticised, and I think that, roughly speaking, everybody agrees with that necessity.

Therefore, there was not room for a great deal of change. We did manage one "swap over," which had been spoken of so much, and which we believe is generally for the benefit of the country and for the benefit of a section of the people who can very well be encouraged at this stage in their work by some diminution in the tax which falls upon them. We therefore hope that this not very imaginative Bill, which will on the other hand, we believe, preserve the necessities of the present economic situation, will receive its Third Reading from the House.

Mr. Osborne

In the course of my speech I did ask the Chancellor whether he would try to "break down" the 180 million dollars increase in our gold and dollar reserves which the Financial Secretary had cited as proof of our improved position. I wanted to know from the Chancellor how much of that 180 million dollars increase was due to the trade of the United Kingdom and how much to the outside sterling area.

Sir S. Cripps

The hon. Gentleman asked me that question the other day, and I told him then that we could not get those figures. We always publish them a little later on. It takes a long time to get in some of these figures. As soon as they are in they will be published.

Question put, and agreed to.

Bill accordingly read the Third time, and passed.