FINANCE BILL

HC Deb 03 July 1951 vol 489 cc2149-200

Order for Third Reading read.

3.32 p.m.

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

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

The Bill emerges from a somewhat extensive discussion which has been distinguished by the mental and physical staying power of my right hon. and learned Friend the Attorney-General, itself no less tenacious than the Government's majority; has been enlightened by a number of constructive contributions from various parts of the House; and also enlivened, but not perhaps enlightened, by some rather less constructive interventions by the Leader of the Opposition. Leaving aside the right hon. Gentleman and his interventions, we can agree that in some respects, if not very major ones, the Bill has been improved by our long debates.

Nevertheless, the essentials of our original Budget proposals stand preserved in our Bill and, in our judgment, the policy enshrined in them stands confirmed by events. The first principle of our Budget and our Finance Bill this year has been this: that, at a time of rising prices and profits, some restraint must be placed on home demand, and the main extra revenue required for re-armament must come from increased taxation on profits. Therefore, we raised steeply the percentage of profits paid in taxation by increasing the Profits Tax on distributed profits, as well as the -standard rate of Income Tax, and by the withdrawal of initial allowances.

In reply to those who feared that this might denude industry of necessary working capital, I gave an estimate in the Budget debate that profits were going to be high enough, after allowing for depreciation, and for the purchase of materials at higher prices, to pay the higher taxes and to maintain existing dividends. Company reports since April have Sully confirmed that view, and have shown that the increase in taxation we made was certainly not too large. Indeed, if it fails in its purpose of restraining further increases in dividends, we shall be compelled, in order to restrain the inflationary pressure on living costs, to find some other method of keeping dividends down.

Secondly, we believe that the defence programme required the disinflationary increases in taxes included in the Bill on certain of the less necessary consumer goods, such as motor cars, television, and wireless sets, as well as on profits and higher incomes. That view has also been fully confirmed by the obvious upward pressure of the cost of living since then, which has given no support to those who thought that we should have had an easier Budget and Finance Bill.

Thirdly, we took the view that we ought to make a major attack in the Bill on evasion of direct taxes, and of Profits Tax in particular. We are as firmly of the opinion as ever that this is absolutely right and necessary, even though the Opposition may appear at times to be more opposed to these evasion devices in theory than in practice. Surely a campaign against evasion is not merely a matter of collecting extra millions from the narrow Revenue point of view; but is also a matter of maintaining the confidence of the great body of the public that incomes in this country are fairly distributed and fairly taxed.

If asked why it is that both our production and productivity have been much higher since the war than before, I would guess that there are two main answers. The first is that full employment has removed the impulse to go slow and a great deal that went with that, and secondly, that the mass of the people have greater confidence than they had before in the justice of the system by which the fruits of their labours are distributed.

Mr. Churchill (Woodford)

Is this part of the October Election campaign?

Mr. Jay

No, Sir; this is the Finance Bill, which the right hon. Gentleman does not seem to have studied so closely as some of his colleagues. Many people forget how great is the redistribution of incomes carried out by the taxation embodied in this Bill, compared with that of 20 years, or indeed of 40 or 50 years ago. It is worth recalling for instance, that in 1913–14 a married man with two children and an income of £30,000 a year had £27,575 left after paying tax. In 1938–39, he had £13,684 left. With the taxation imposed by this Bill he has £4,191.

Mr. Jennings (Sheffield, Hallam)

We did not have a spendthrift Government then.

Mr. Jay

When figures like those are presented to the ordinary wage earner or salary earner, he is inclined to say that they are all very well on paper but that those with large incomes manage to evade their paper obligations. That may not be as true as.he thinks, but it is because we want to maintain the confidence of the people in the fairness of the system that we attach great importance to the Clauses in the Bill designed to defeat evasions and avoidance of taxation.

We have accepted quite a number of minor improvements in the Bill from hon. Members on both sides, and not only from hon. Members opposite. My hon. Friends have mainly preferred to make their suggestions by correspondence and consultation and rarely by putting down Amendments on the Order Paper. That explains both why they have more often convinced us, and why the Government have put down so many Amendments on the Committee and Report stages. I should mention my right hon. Friend the Member for West Lothian (Mr. Mathers), who had the distinction of putting down two Amendments and of adding one word, "aesthetic" to the Bill, and, I believe, to this branch of the law.

Among the main changes made, the tax evasion Clauses have been amended so as to involve the minimum of work for industry and for the tax collector, while preserving the powers which are essential. In the case of Clause 33. which affects companies seeking to transfer abroad, we have now provided that the Treasury shall have power to give a dispensation—to use my right hon. Friend's own word—in certain circumstances which are shown to be reasonable. In the case of Clause 34, which really does no more than continue the normal double taxation practice, the powers will now only apply where the Commissioners of Inland Revenue specify that they should. Under Clause 24, as a result of the Amendments we have made, the overseas recipient has been given the right to obtain exemption from the return of his bank interest as taxable income.

On the side of Customs and Excise, further reliefs have now been given by way of both Entertainments Duty and Purchase Tax. The amended Entertainments Duty Schedule, which the House approved last night or early this morning, will at once keep down the price in the cheaper cinema seats, to the advantage of the old age pensioner and the children and the small country cinemas in particular. It will supply added revenue to the British film producer, as well as £6,500,000 of revenue towards the cost of the re-armament programme. In the case of the speedways, my hon. Friends will have noticed that the Schedule will actually involve a reduction of a id. in the duty on the ls. 9d. ticket.

The exemption of household goods from Purchase Tax, to which we have added tooth brushes and some boot and shoe materials in the course of the debates on the Bill, were intended particularly to assist the ordinary housewife. Therefore, in consultation with my right hon. and learned Friend the President of the Board of Trade, I have been following up these reductions to see if prices to the public have gone down. I find that where the goods are price-controlled this has occurred, unless there were other offsetting increases in costs; but it has not happened in by any means all cases where there was not price control. That might sometimes be due to the fact that they were old stocks which had already borne the higher tax, but it is a reminder that reductions in the tax do not automatically involve reductions in the price to the public. I propose, therefore, to consult further with my right hon. and learned Friend the President of the Board of Trade to try to ensure that wherever possible these reductions are passed on to the public.

Altogether, the tax concessions made since the introduction of the Bill will cost, so far as we can estimate, £4,700,000 in a full year. That is without allowing for the drawback for oil on exported goods and the concession on the initial allowance for ships, which is difficult to put into figures. There have also been increases made by my right hon. Friend the Minister of Pensions on the allowance for war pensioners running Ministry of Pensions cars, as well as of course, much larger increases for old age pensioners and National Assistance. But they are not included in the Bill, and therefore I will leave them out of the argument.

As against the change of £4,700,000, which seems to us to be about as far as we can go if the essential disinflationary purpose of the Bill is to be maintained, I find it a little hard to understand the attitude of the Opposition. The right hon. Gentleman the Member for Aldershot (Mr. Lyttelton)—I regret that he is not with us on the last lap—estimated, no doubt giving himself the benefit of the doubt, that another £50 million—not more —could be saved on Government expenditure. But, even neglecting the Amendments which the Opposition have not pressed to a Division, and which may perhaps be regarded as just part of the annual parade, the Opposition have pressed to a Division Amendments, including those relating to Petrol Duty and the undistributed Profits Tax, which would cost £70 million or £80 million this year and well over £100 million in a full year.

I presume that when the Opposition press a proposal to a Division they mean to imply that in their view the proposal ought to be carried into effect. Therefore, on their own showing, the measures for which they have voted would have stoked up the inflationary pressure by about £50 million a year and thereby added to the pressure on the cost of living from that source. I am not allowing there for the fact that the Opposition voted against the initial allowance, which would have lost us a great deal of revenue, not this year but in two years' time.

Sir Arthur Salter (Ormskirk)

Surely the hon. Gentleman realises that some of the Opposition's proposals were alternative ones and that when the Opposition voted for certain of the later Amendments, they knew that some of the earlier Amendments which would have cost money had been defeated. The hon. Gentleman cannot possibly argue on the basis of the sum which he has just mentioned.

Mr. Jay

The right hon. Gentleman is always very ingenious, but I assume that the Amendments for which the Opposition voted were ones that they put forward seriously.

Sir Peter Bennett (Birmingham, Edgbaston)

The hon. Gentleman has again made a statement about the depreciation allowance. Surely he knows that this was claimed by Sir Stafford Cripps to be simply an Income Tax-free allowance, but what has happened is that as the Income Tax has gone up it has been a fine on industry. My company is having to pay £17,000 more in tax than it would otherwise have done it the depreciation allowance had not been instituted. How can the hon. Gentleman claim that there would be any loss to the Government? It is only a postponement of payment.

Mr. Jay

As the hon. Gentleman's company is going to pay more tax, it shows that if the change were reversed, the Revenue would get less.

We again commend the Bill to the House. It is, after all, primarily designed to finance the defence programme and to face squarely the undeniably great economic difficulties—do not let any of us forget them—which still confront us, as a result of the huge increase in import prices and the renewed pressure on our balance of payments. For that reason, we fully agree that the Bill claims to be an austere and honest—to use the words of the Leader of the Opposition just after the Budget speech— rather than a popular Measure. Clearly, this is not the year in which we can make the reductions in taxation which we should like to make.

Although that is so, however, perhaps I may be allowed to make this final observation. We have listened for some hours in this Chamber to eloquent and even heartrending stories by hon. Members opposite about struggling Surtax payers, the sorely oppressed motor car owners, and the company directors almost begging in the streets, and all the rest of it. Yet when one goes out of the Chamber on to the Terrace, as I confess I do from time to time and look across the river, or at the launches on the river, or if one goes anywhere outside and sees the real British public, it certainly strikes one that they are better dressed, and in better heart, and more able to enjoy themselves than I can remember for a very long time.

The economic difficulties that face us are very real, and some of them are likely to get greater. But if one turns away for a moment from the sometimes exaggerated gloom of hon. Members opposite, and contemplates the British nation as it really is, one is filled I find with renewed confidence that those difficulties will nevertheless be overcome.

3.49 p.m.

Captain Crookshank (Gainsborough)

I rise to make the last speech from this bench on the Finance Bill, and it will not be like that of the Financial Secretary, an election speech. I agree with what he said in compliments to the,Attorney-General for his courtesy and lucidity and his endurance all through one night during the passage of the Bill when "through the night of doubt and sorrow" the led the pilgrims opposite into the Division Lobby while the other Ministers were taking a rest, whether earned or not. I want to thank the hon. Gentleman for his reference to my right hon. Friend. We regret the absence in the later stages of the Bill of the right hon. Member for Aldershot (Mr. Lyttelton). And here Oliver to Oliver succeeds, just as on the Front Bench opposite Wykehamist follows Wykehamist in these financial matters.

Now we come to the end of the journey. We have passed through all the trees and we can now have a look at the wood. It is just on three months since the right hon. Gentleman opened his Budget, and the basic facts of the situation, as he then expressed them, remain unaltered. I must remind the House of one thing. The Finance Bill, of which we are taking leave today, is the legislative form of the Budget proposals. The supply has not yet, of course, all been voted, but here, through this Bill, we are authorising the raising of the necessary tax revenue for the purpose. And the figure of tax revenue for this year is £4,015 million. I want to remind the House that that figure is one-third higher than the figure in the most expensive year of the war. It is a figure which shows an increase of just about £1,000 million since the first Budget introduced by the first predecessor of the right hon. Gentleman.

That is the measure of the extra taxation which has been imposed upon the nation by the Socialist Government—over £1,000 million. In parenthesis, it is interesting to remember that it is just about the same figure as the total tax revenue which was estimated for the last year before the war. It is a staggering thing when one reflects that that is what the taxpayers of this country are invited by us, through the passage of this Bill, to shoulder as their burden.

Mr. Douglas Houghton (Sowerby)

Will the right hon. and gallant Gentleman give way?

Captain Crookshank

No, I would rather make my speech, as it is the last one I shall make on this Bill. At the time of the Budget a great number of people, on first reaction, said, "This is not so bad," in spite of the staggering figure. I think that was really because they had expected that different taxes would have been put on, and because the taxes did not happen to be put upon any of the things in which they were directly interested. They forgot, or overlooked the fact, that this great increase over last year was cumulative over the enormous rise which has taken place in the last five or six years. We are, in fact, piling up Pelion on Ossa not for the third time but for the sixth time.

The basis of the whole level of taxation is already so high that just because the impositions this year were not an enormous increase on last year, people forgot that they were an increase on something which was already almost intolerable. And the views of the two sides of the House were well reflected by something which occurred during the Budget Statement itself. The Chancellor had reached the stage of his speech when he was explaining that there was a gap between what we would get on last year's taxes and what we wanted to get, and how was he to fill it up? He said: We have a gap of £150 million.… No doubt he remembers saying it— There are obviously two ways we can set about closing it—either by cutting down Government expenditure—(Opposition cheers)—or by increasing taxation—(Ministerial cheers). That was a vocal comment on his need to fill up that gap which was certainly revealing. It put quite clearly once again the complete rejection by all Socialists of the old Gladstonian theory that the best place for money to fructify is in the pockets of the people. They think that the best place for it to fructify is in the coffers of the Treasury. We have seen how, instead of fructifying in the last year, it has been squandered all over the place.

During these days we have debated the Clauses of the Bill in detail and, in spite of the Financial Secretary rather brushing it off, important changes and concessions have been made. It is a fact that the right hon. Gentleman has accepted many of the suggestions which have been made from this side of the House. We know nothing about those other pressure groups behind, to which the hon. Gentleman referred. Though we did have an exhibition by the hon. Lady the Member for Blackburn, East (Mrs. Castle), the other day with which I dealt at the time. But the fact that so many concessions were made—and I do not apologise for referring once again to something I said last night—makes it most disgraceful that the Prime Minister should have sent that election message to Westhoughton saying that we, the Opposition, do all they can to hamper the Government by means of sham fights and late Sittings.… They were not sham fights. If they had been sham fights they would have had no results, but they did have results. It was all the more discreditable of the right hon. Gentleman that he should have said that at a time when he was motoring to Glasgow—not using the British Railways which he nationalised—[HON. MEMBERS: "Cheap."]—but on a four-day pair provided for him by the kindness of the Opposition Chief Whip.

The Chancellor of the Exchequer (Mr. Gaitskell)

The right hon. and gallant Gentleman cannot. be allowed to make aspersions of that kind upon my right hon. Friend without retaliation. Does not the right hon. and gallant Gentleman realise the purpose of my right hon. Friend's visit to Glasgow? He did not want to go particularly, but he was asked to go by the Glasgow Corporation. [An HON. MEMBER: "Why should he go to Glasgow? He ought to have been here] Because he was—[Interruption.]

Viscount Hinchingbrooke (Dorset, South)

This is the biggest Bill of the year.

Mr. Gaitskell

If I may say so, it was an extremely cheap observation, and I am surprised that the right hon. and gallant Gentleman should have made it.

Captain Crookshank

I am sorry that I seem to have set off the Government supporters, but we felt it very strongly that to accuse my right hon. Friends and myself—when we were doing the public duty which we were sent to Westminster to do, of dealing with the finance of the year—of waging a sham fight, is something which we resent very much. It is not only the Prime Minister who gets invited by corporations and other bodies and sometimes have to refuse on the ground that they have to be here. [HON. MEMBERS: "Cheap."] The proof of the pudding is in the eating, but we did get concessions as a result of the debate that took place; and if hon. Gentlemen opposite can contain themselves, I shall tell them about one or two as I go along, because they are of great importance.

Of course, we disapprove of the increases in the Purchase Tax. I appreciate what the Chancellor tried to do, but we are sorry that our united endeavours have not yet succeeded in finding a good way of dealing with these annual discussions on how the Purchase Tax itself, granted there has to be one, can be better arranged from the trading and industrial point of view. We are sorry that this year has not brought success, but I am sure that all concerned will go on thinking about it.

We also disapprove of the increase in, the Petrol Duty because that means a rise in prices, since the cost of transport enters into the price of almost everything. The result is that this tax, which is the deliberate act of the Chancellor of the Exchequer, makes him deliberately responsible to some extent for the rise in the cost of living. We are glad that the anomalies and absurdities of the Entertainments Tax are to be reviewed, and yesterday we welcomed the new Clause dealing with changes in the cinema taxes.

When I heard the Financial Secretary just now explaining how first of all it would benefit the old age pensioners and all those who use the cheaper seats, and then that it would benefit everybody in the cinema industry and that, at the end of the day, it would bring £6 million to the Exchequer, it seemed to me that at last we had found a perfect tax which would not hurt anybody and would do good to all the people who might use the cinema. I do not suppose it is really as wonderful as all that, but it is certainly an improvement on what originally appeared in the Bill.

Our greatest anxieties, of course, have been the fresh imposts and restrictions that are placed by the Bill on industry—the rise in the Profits Tax and in Income Tax. We took, and continue to take, grave exception to Part III of the Bill, and especially to Clause 29 and later to Clause 33. Why did we do that? It is because the great need of the hour is greater production and greater productivity. It was noted at the time that the Chancellor of the Exchequer did not make reference to that in his Budget speech. But the need is there, and that should mean, surely, that more, not less, money should be retained in various businesses. Less will be retained as a result of the grabbing policy of the Chancellor of the Exchequer.

We object—we have argued it, and I shall not go over it now—to the abolition of the initial allowances, and also to the containing within the jurisdiction of companies which for their own business reasons might wish to change their domicile. We find it very hard to understand this ringed fence theory of the Chancellor—the financial iron curtain—because we believe that in doing this in this way this year, he is sowing very dangerous seeds. I do not understand how it squares with the general international Socialist conception.

I should have thought that the Government wanted to spread our effort as far as they could. In fact, they are never tired of boasting what they are proposing to do under the Colombo Plan, yet here their action, in deliberately setting about to compel people to stay in this country—and incidentally, as a result, making it more difficult for foreign people to come here should they want to do so—is quite contrary to common sense. I do not see why we should want to build for ourselves this financial straitjacket.

Of course, we have to admit the argument—but only up to a point; not all the way with the Government—that 'the re-armament programme obviously requires some restraint in the industrial capital expenditure for other purposes. Even British industry, splendidly though it is reacting to the cause of the hour, cannot do everything at once; that is obvious. But we cannot overlook that the effect of initial allowances serves to offset the ever-increasing cost of replacement, and that is where the difficulty will come.

No argument that we have heard yet—and time is running very short to hear one—can justify the disappearance of the initial allowances and the increased Profits Tax at the same time. We feel that the Government have taken a short sighted view. We try to look at the picture for a rather longer period than the next 12 months, and as we look at it, as far as we can discern its outline for the future, we think that in two or three years' time the result of this cumulative effort on the part of the Government will be very serious to industry.

We made proposals for reducing the Profits Tax on profits put to reserve which are required for re-equipment and modernisation. It would not have affected the right hon. Gentleman's Budget programme to the extent that the tax represents a transfer from private to public savings. In fact, on that point I should like to take up a point that the Financial Secretary has just made. He was quoting figures to show how, as a result of successive Finance Acts, what was left to a person who had a high nominal income after taxation had dropped and dropped and that over a period of 30 years what was left to the Surtax payer to whom he was referring had dropped from £27,000 net to about £4,000 net. That is true, but it is nothing necessarily to be very happy about in the industrial sense, because of the £27,000 which was left to the taxpayer, say 30 years ago, a considerable proportion went back into investment.

Now, the man with the £4,000 obviously cannot do anything like as much, if anything, and the result is that the Government have to be called in to provide some of the investment capital which otherwise would have been available as a result of the savings of the more wealthy person. The result of the Government being called in to fill up that gap is that all the rest of us, including that man, have to be taxed to provide that amount of capital.

Mr. Daines (East Ham, North)

So what?

Captain Crookshank

The hon. Member says, "So what?" It is a very bad thing that the Government should get themselves mixed up in that way. I should have thought that even the hon. Member would remember, without my telling him again, about the groundnuts, the Gambia, and all the rest of it. [Interruption.] The hon. Member asked for it. This is merely an illustration that if risk capital cannot be used for ventures of that sort because it has been taken away by the tax gatherer, and if experiments of that kind have to be made, the Government are the only people left to do it; and that is the disastrous result of years and years of that kind of financial policy.

I turn now to another point, which again follows what the Financial Secretary said. I want to make it quite clear because, again, of the shocking thing which the Prime Minister, of all people, said about it. We on this side have not in any way or at any time condoned tax avoidance and when the Prime Minister —again in that Westhoughton message—said that The long debates on Clauses in the Finance Bill to prevent tax dodging are typical of their tactics, it is quite untrue, and unworthy of him to have said it. He has been in the House as long as I have, and he knows perfectly well if he charges his recollection that year after year successive Conservative Chancellors had to introduce tax avoidance Clauses because some clever person had found a way of getting out of his obligations; but they were always carried with the assent of the House. After all, if somebody dodges his tax it only means that all the rest of the honest taxpayers have to pay just that fractional amount more to make up the difference.

Mr. Jay

The right hon. and gallant Member will agree that the other side of the House sought yesterday in the Division Lobby to reverse one such Clause which was carried by Mr. Neville Chamberlain in 1936.

Captain Crookshank

I do not think anything of the sort.

Mr. Jay

It was a Clause relating to sums settled on children for education. When the right hon. and gallant Member looks at HANSARD, he will find that that is so.

Captain Crookshank

That is not a tax-dodging thing.

Mr. Jay

Certainly it was. Mr. Chamberlain himself said it was for the purpose of preventing tax avoidance. [Interruption.]

Captain Crookshank

One of my hon. and learned Friends reminds me that that was concerned with maintenance. Whatever happened yesterday has no relation to the Prime Minister's statement of 18th June. Of course, we do not condone tax avoidance in any way. It is a monstrous thing to have to repudiate that sort of allegation coming from that source.

If we look at the effect of Clause 29 on normal genuine transactions and its effect on overseas trade, we naturally felt very great anxiety when the debates in the Committee stage began. Here is the answer to the Prime Minister from the Chancellor himself. The Order Paper yesterday was absolutely cluttered up with Amendments to that Clause, one after another, all of them conceding points which we had argued; five major points in that one Clause.

As it is amended, the Commissioners have to specify transactions giving rise to directions; reductions of dividends are not to fall within the Clause, nor are issues of debentures for cash; nor is the Clause to apply when consent is given under Clause 33; besides that, the Commissioners have to notify a company that no direction will be made where particulars are submitted before the transaction and where the transaction is for bona fidereasons. We struggled for hours in Committee to try to get those very concessions, and we have got them now.

We are very glad to find that our arguments were considered sound by the right hon. Gentleman. We were sure that they were sound in the beginning, and now he has accepted our point of view. It is therefore a complete justification of the long time which had to be spent on that Clause. But even at the end of the day, or night, as it may have been—even at the end of the argument—it remains a bad Clause.

Those are the points I particularly wanted to emphasise. My hon. Friends will continue the debate no doubt, and other points will be brought out. We are all conscious, of course, that the cloud which overhangs this Finance Bill, as it overhung the Budget Statement is the need of re-armament which the Government and the nation have accepted. To make it a complete success and to get the maximum amount of production as quickly as possible, surely it is important to see that the right incentives are there and that the rewards for good work, whether on the part of workmen or management, are available. That is paramount, and yet incentives are still at a discount. I think that one Minister said some years ago that incentives are "all bunk"; I do not know whether he has changed his mind.

I want to pray in aid, though I admit this is an unusual instance, the right hon. Member for Ebbw Vale (Mr. Bevan). I gather that the Government are likely to have a good many expressions of view from the right hon. Gentleman, but he was stating something of 'importance yesterday and, although we were talking of minerals, most of what he said is applicable throughout this field. The right hon. Gentleman said: I take the view, and I have always taken the view, that if there is a social purpose to be accomplished of any importance, either the State should do it or the State should make it possible for private enterprise to do it; but what the State should not do is to be inert and to surround private enterprise with such inhibitions that private enterprise cannot do it." —[OFFICIAL REPORT, 2nd July, 1951; Vol. 489, c. 1928.] That really is the whole argument. We say that in this Bill that is exactly what the Chancellor is doing. He has surrounded private enterprise with every kind of inhibition. In the field where he wants private enterprise to flourish and to get ahead to do the work and carry on with the re-armament programme, we find in various Clauses in the Bill that there are those very inhibitions. Even if he listens to nothing else which his late colleague has to say in the next few months, the Chancellor should reflect on the wisdom of those words.

It really does look as if the mind of the Government, in spite of all that has happened, were still centred on the idea that it is far more important to see that everyone has an exactly equal minute share of the cake than to see that fair reward is given to those whose effort is to make a bigger cake so that everyone can have a larger share.

We acknowledge that the Chancellor has come some way in his statement that it is foolish to ignore the function of profit as an incentive. Yet all this really amounts once more to an exhibition of the urge which is always very near the heart of most Socialist politicians to kill the capitalistic system and knock out all capitalists, small as well as great. If that is done we are satisfied that that is the road to ruin for this great industrial nation. We feel this Bill is one more step along that bad road which we have been treading for the last six years.

We take leave tonight of the Bill, for better or worse. It cannot be touched, it cannot be amended elsewhere. This will very soon be the law of the land. We have rightly pointed out this year, last year and the year before that we were reaching the limit of our taxable capacity. We have not a real margin for further taxes. We have not really got the margin which the right hon. Gentleman claimed he had this year.

We have great fears of these new and crushing burdens because of the effect they will have on our business and commercial life. We have tried, as I pointed out—and we have succeeded by our arguments—to secure certain modifications. The responsibility is not on our shoulders; the responsibility rests on the Government for having introduced these proposals and forced them through the House. While they are bound to remain responsible, as Shakespeare said: The evil that men do lives after them. Alas, that is the case—the evil will live on.

4.15 p.m.

Mr. Grimond (Orkney and Shetland)

As the right hon. and gallant Member for Gainsborough (Captain Crookshank) has said, we have now reached the last lap of this somewhat long journey on which the Chancellor and Attorney-General have led us. I have no intention of retracing our steps to discuss the general principles which lie behind the financial policy of the Budget, nor of going off into the bye-ways which were discussed on the Committee stage. I only wish to say a word or two about two matters already touched on this afternoon, which I think of some importance.

The first is the question of capital creation. I think there is some misunderstanding in the country about this question because it is so often spoken of in financial terms. What we are really concerned with is whether we are putting enough of our annual production aside for the replacement of the implements and buildings which maintain our industry and trade. That, for this country, is a most vital matter. Everyone in this country today is concerned about the continual rise in the cost of living, the continual rise in prices. Many of us think that the only way ultimately of tackling that rise is by increasing production.

The only way we can see increased production in this country is by providing more capital per worker and keeping more than abreast of modern inventions and modern techniques in industry. It is well known that, as far as inventions are concerned, this country is second to none, but I think it is also generally realised that in the application of inventions this country has sometimes lagged behind.

The setting of this Budget is that of re-armament. As the Chancellor and the Financial Secretary told us, it was bound to be an unpleasant Budget given that historical setting and present-day world conditions. The Chancellor told us that in these conditions he was bound to reduce the amount of our resources which go to civilian capital investment, and I think he also said that in his view the rate of capital investment was, if anything, too high in present conditions. On the other hand, from this side of the House we have had one Member after another rising to point out that the industries of which he has experience are finding it difficult to raise risk capital.

What is the explanation of the difference between these points of view? I very much doubt whether we can say that the capital creation in this country at any time is too high or too low. I think we are inclined to look on the economy of this country as static, or at least we are inclined to look at it as expanding rather slowly and regularly, whereas I think it has always expanded irregularly and, at its best, extremely fast, and always that expansion has relied on the rapid creation of capital.

As a layman, I am inclined to agree, on the figures put before us, that the Chancellor has a strong case for saying that the rate of capital investment at the time of the Budget was probably as much as we can afford, given his premises. But the two questions which arise are these: Are his premises correct, and are we putting the amount of resources we can put aside for investment to the best possible use? On both these heads, I feel that the planners have not sufficient knowledge. I further feel considerable doubt whether the Chancellor's answer is the correct one for all industries. My own feeling is that an established industry can raise all the capital it wants—if C. I. C. permission is obtained, of course. There is, however, considerable doubt in all parts of the House whether the experimental industry can get the capital it requires.

Mr. Dailies

Would the hon. Member say that before the war the railways, being an established industry, found it easy to raise capital?

Mr. Grimond

No, I do not think they did, but I am talking about an entirely new technique in industry. I do not know whether we can be satisfied today that the capital for that sort of purpose is forthcoming.

My second point about the question of raising capital is that it has almost become a dogma of all parties in this country that we have to raise the standard of living not only in this country but throughout the world. It is often said that this is one of our main defences against the menace of Communism, and there is a great deal in that contention. What I feel doubt about is whether any of us pays sufficient attention to the magnitude of the task. To make even the slightest dent in the poverty of Africa and Asia would require on the part of the combined Western European countries an immense effort which I very much doubt whether they alone are capable of undertaking. If America is called in aid, admittedly the situation improves considerably, but it is undoubtedly true that if we are to do battle with world poverty it will have to be by a very long-term policy of investment.

Some of us have been a little worried in the course of the debates on the Finance Bill by the restrictions which are being placed on the raising of capital abroad and the movement of capital abroad. We quite see and admit the necessity in the circumstances of today to deal with tax evasion by companies which seek to move assets purely to escape taxation. But having discussed this matter again and again over detailed points during our consideration of the Bill, I feel it necessary to draw attention to the broad conclusion that if we are sincere in our professions about intending to do something for Asia and Africa, we have to face the fact that we can do so only by putting capital into those areas.

While Government agencies have a part to play in putting in that capital, we shall still have to rely to a great extent on private enterprise and we shall have to do that for some time. I do not think the Chancellor would disagree with that statement. I think that he would agree that the Government cannot do all the saving and investment which is necessary in Africa and Asia today. But if the tendencies contained in this Budget were to continue we should be placing serious obstacles to the process to which so much lip-service is paid throughout this country.

I turn now to the thorny question of tax evasion. It has been said by a member of the Conservative Party that it is a matter on which no gentleman should have an opinion. I have no doubt that it is a matter which is liable to misinterpretation.

From the great part which the Attorney-General has played in our discussions on the subject it is obvious that questions of tax evasion—which is a phrase that I do not very much like—are as, much moral, constitutional and legal questions as they are financial. It has been suggested that it is time that we took such questions out of the Finance Bill altogether because the Chancellor, in the Clauses of the Bill which deal with tax evasion, is not concerned with the raising of revenue. It is a defensible view that these questions could be better discussed separately from economic and financial considerations.

There are great difficulties involved because much of our taxation today is quite openly designed primarily not to raise revenue but to assist planning. The Chancellor has told us that this year Purchase Tax must in his view be primarily regarded as a revenue-raising tax. But it has from time to time, and no doubt will again, be used to divert demand from goods which in our general planning we feel that we cannot affords to produce to meet unlimited demands. There are several other taxes today which are designed to minimise consumption and not to raise revenue. No doubt the Chancellor would be pleased if from those taxes he raised no revenue.

I quite see the difficulty today, therefore, in keeping tax-evasion and kindred subjects out of the Finance Bill—I am a complete novice in these matters—but it seems to me that it is fundamentally different from either the economic or the financial Clauses of the Bill. It raises very important legal points. They are apt to be represented as points which affect only companies and large financiers but I do not feel that that is true today.

My own feeling is that tax evasion is a problem which to a greater or lesser degree faces everyone in the country. Few people can be entirely happy either as to whether they know where to draw the line or whether, having drawn it, they follow it correctly. When we have before us Clauses which give powers to the Commissioners of Income Tax or the Treasury to make extremely important decisions which may have serious results to individuals, and in certain cases even more serious results to companies, we are doing something which, while I do not say that it has not been done before in this country—I am sure it has—is reaching such a degree that its whole nature is changing and Parliament is losing control.

I am all against government by theory. The best of our legislation in this country has grown up piecemeal and to meet particular circumstances, but I must confess that in the discussions on these tax evasion Clauses it has seemed to me that the root of the matter has not been touched, and that the time has possibly come when some general consideration of the important principles and effects which are involved should be given and that these Clauses should be taken out of the Bill.

So much of our discussions in the Committee stage and before that on Second Reading has appeared extremely remote to the ordinary man; one can see from the amount of time and attention given to them in the radio and Press that we have lost the ear of the public. But all the Clauses of the Bill are ultimately concerned with the sixpences and the pennies in the pockets of every labourer, clerk and housewife in the country. The legislation passed here may make the difference between prosperity and disaster to every one in this country. Even these tax evasion Clauses and the whole system of tax collection may bear very heavily not only on the man in the City of London but on the ordinary man engaged in business in the streets of every city in the country.

4.28 p.m.

Mr. Douglas Houghton (Sowerby)

The thoughtful speech by the hon. Member for Orkney and Shetland (Mr. Grimond), to which we have just listened, calmly delivered with a note of friendliness towards these ventures, noticeably reduced the temperature of the House after the speech by the right hon. and gallant Member for Gainsborough (Captain Crookshank). The hon. Member suggested that matters of tax evasion are not really proper to the Finance Bill and might be dealt with by separate legislation. There has been one example of an attempt to do that, and it was singularly unsuccessful. That was after the Report of the Royal Commission on Income Tax of 1919–20.

If my recollection is correct, the Government of the day shortly afterwards introduced a Bill containing many of the recommendations of the Royal Commission, especially on the administration of Income Tax and on other matters upon which the Royal Commission had made recommendations. The ultimate fate of that Bill was that it was withdrawn. I believe that it became so mutilated and so contentious in its passage through the House that the Government of the day found it, if not impracticable, difficult from a Parliamentary as well as from a political point of view to proceed with it.

Whether the separation of these contentious matters from the current questions of finance and the other provisions of the Finance Bill led to some fractiousness on the part of the House towards the provisions I do not know, but at all events I think that experience does not encourage us to accept the suggestion which the hon. Member made that a similar device should be adopted in future for dealing with questions of administration of the tax, the checking of tax evasion, the provision of means for revealing tax liability and so on. Anyhow, for many years past it has been the tradition that these matters are part of the Finance Bill and have been debated along with the other provisions relating to our annual supply of revenue for Government and other purposes. I shall come back to some aspects of Income Tax evasion which are dealt with by this Bill.

The hon. Gentleman in another remark said that many of the matters which we have been discussing for hours and even days in recent weeks are far removed from the common man, and he quite rightly pointed to the small amount of publicity in the newspapers to much of what we have been discussing. Yet on leaving the House early this morning I happened to get into conversation with a common man who had been listening to our debates in the Gallery of this House for the whole time of our sitting. I said to him, "Have you been sitting there all this time?" and he said, "Yes, I have." I said, "Well, then, you are crazier than we are." He said, "No, I do not agree. Although much of what you have been discussing has appeared trivial, a great deal of it complex, and some of it contentious, nevertheless all that you have been doing is affecting somebody's pocket and possibly all our pockets." I think that was a balanced view from one who must have grown weary listening to the debate in this House last night. One can, I think, take comfort from much that we have done, despite the great weariness of the flesh in recent weeks.

I want now to deal with the speech of the right hon. and gallant Member for Gainsborough. When he began, he said that he was not going to make an electioneering speech. Well, he soon forgot himself, because he plunged swiftly into contentious observations which, if they were anything at all, were surely excerpts from the Conservative Party manifesto, which is doubtless now being drafted for when the election takes place. In the course of his remarks he said that the total revenue provided for in the Finance Bill this year is one-third higher than at the peak of the war, and he went on to say that £1,000 million represented the extent of the additional tax imposed by the Socialist Government. I think I got his words correctly.

That is an observation which either indicates abyssmal ignorance of the difference between war-time finance and peacetime finance, or it comes so near to dishonesty that the most gentle epithet that can be applied to it is that it was grossly misleading. Much of the provision for the expense of the war was met, as the right hon. and gallant Gentleman knows, by borrowing on a large scale. He also remembers that in the early stages of the war much of it was provided for by large-scale selling of our overseas investments. He will remember "Cash and Carry," which bled us white on gold reserves, on dollar reserves and on overseas investments in the dollar area.

The right hon. and gallant Gentleman will also remember later in the war the splendid example of mutual co-operation between the new world and Western Europe—Lend-Lease. Surely if the right hon. and gallant Gentleman is going to compare the burden of taxation today with the burden of taxation at the peak of the war, he must take into account additional provision for war finance and the war effort. In the Budget today we are without much of the assistance of large-scale borrowing that was an essential part of war-time finance.

Another thing which the right hon. and gallant Gentleman omitted to mention is that in the last two or three years it has been imperative to increase substantially the amount we are spending on defence. No hon. Member opposite will criticise what the Government are doing towards making our security greater and our defences stronger. Indeed, when in February my right hon. Friend the Prime Minister announced the defence programme, I recall that the right hon. Gentleman the Leader of the Opposition got up and asked whether it was enough. That is a burden which must now be carried substantially on the revenue of the country.

I wonder whether members of the public realise that in this financial year every penny they pay in direct taxation is going to defence. That is the measure of the burden of defence expenditure in the current year. When taxpayers are being asked to pay their Income Tax and Surtax it might encourage them to pay with an easier grace if they realised that that was their contribution this year to defence, and if our expenditure remains on the present level, it will be their contribution to defence for several years to come.

The right hon. and gallant Gentleman, in referring to the level of Government expenditure, omitted all mention of those taxes which are being imposed now for the sole purpose of financing our social services. They are re-distributive taxes—those which are collected from members of the community who can afford to give up something out of their private incomes and from their standards of life for redistribution to bring about more equality of incomes. When the right hon. Gentleman said that our philosophy is that every member of the community shall have a minute piece and an equal share of what is going, it was a scornful reference to his misconception of our philosophy. We do not stand for absolute equality of all incomes, but we do stand for a much greater measure of re-distribution and a much larger measure of equality than has; been a feature of our social, industrial and economic life of the past.

The right hon. and gallant Gentleman, of all people, now brings Gladstone to-his aid and preaches in 1951 the Gladstonian doctrine that money should be left to fructify in the pockets of the people. In Gladstone's time a lot of the money fructified in the pockets of a few of the people. In Gladstone's time we saw the expansion of the British aristocracy, the lavish expenditure by the nobility of the land. It was the peak of prosperity for the rich. But the state of affairs of large numbers of the workers, the victims of the Industrial Revolution, would not bear comparison with the conditions of today.

The right hon. and gallant Gentleman was very nettled indeed at the reference made by the Prime Minister in his message to the Labour candidate in the Westhoughton bye-election. I think he was so nettled because he felt in his own mind that there was a good deal of truth in what the Prime Minister said.

Colonel J. R. H. Hutchison (Glasgow, Scotstoun)

Not a word of truth in it.

Mr. Houghton

There have been sham election fights in the debates on the Bill—and some shammer than others. The right hon. Member for Ormskirk (Sir A. Salter) excuses himself by saying, "Of course, not all the Amendments the Opposition put down could have been accepted, but some were alternatives to others." When he says that, I think he means that when the Opposition saw some Amendments defeated they found alternatives which they hoped the Government would accept.

I ask hon. and right hon. Gentlemen opposite whether their proposal to reduce Profits Tax and their effort to reduce the Petrol Tax were alternatives to the proposal to increase the child allowance for the poor widow? Were they alternatives to increasing the child allowance for those who are sending their children to independent schools? Were they alternatives to the proposal to increase the dependent relative allowance? I do not believe they were. I think that there is no doubt, considering the whole of the Amendments proposed by hon. and right hon. Gentlemen opposite, that they combined their traditional interest in the protection of wealth with a mock sympathy with the difficulties of the workers and the middle classes.

I want to refer to the Clauses in the Bill dealing with tax evasion—Clauses 24, 29 and 33. Clause 24 deals with a problem which the Royal Commission studied 30 years ago—which has not till now been tackled by any Chancellor since—when it drew attention to the widespread evasion that was then taking place, when Income Tax was much lower and when the number of taxpayers was much fewer than it is today, by the failure to disclose interest on bank deposits, and when the Inland Revenue authorities were denied the opportunity of testing the validity of returns and accounts by reference to the knowledge of the amounts of capital that individual taxpayers had tucked away.

The Chancellor this time has grasped that nettle firmly, and has provided in the Bill that, on a demand being made by the Inland Revenue, joint stock banks, the Post Office Savings Bank, and others in similar business arrangements with clients, shall reveal the bank deposits which yield an interest of more than £15 a year.

I want to say something about the Post Office Savings Bank in this connection. I think that my right hon. Friend was right in treating the Post Office Savings Bank exactly the same as the joint stock banks and trustee savings banks in this matter. I know that, generally speaking, depositors in the Post Office Savings Bank are not conscious tax evaders. They are certainly not the scrimshanks, generally, that the Inland Revenue want to catch. However, a person who wishes to conceal from the Inland Revenue what accumulation of capital he has will seek out those places for investment or deposit where there is either no deduction of tax or no necessity to disclose interest on untaxed income; and he will select, no doubt, to deposit the maximum he may in the Post Office Savings Bank, and he will probably select a building society and a trustee savings bank, and may spread his resources also, not only amongst them, but amongst a number of branches of the joint stock banks.

So it is necessary to be able to bring together what may be the varied affairs of individual taxpayers, even though they include Post Office Savings Bank interest, although, on the whole, the Post Office Savings Bank is not a direction in which Income Tax evaders ordinarily put their money.

I do, however, wish to make one suggestion to my right hon. Friend regarding the Post Office Savings Bank. There are, I believe, something like 21 million deposits in the Post Office Savings Bank. How many of those are of over £600, which is the material amount for our purpose, since £600 there yields £15 interest, I do not know, but I would put it at something like one million, if not more.

How many of those million depositors have remembered to disclose in their Income Tax returns what interest they have had from their deposits, I do not pretend to know, but I believe there are many who are depositors in the Post Office Savings Bank who, quite unconsciously, have failed to declare that amount of interest, believing that, because interest was paid without deduction of tax, it was free of tax. There is a good deal of confusion in the public mind between income paid without deduction of tax which is still taxable and interest which is paid tax-free —as in the case of interest from the building societies.

Incidentally, I am distressed to realise how ignorant some hon. Gentlemen opposite are of how the Post Office Savings Bank works—of how these accounts are held centrally. It will be the Postmaster-General who will make the disclosures to the Inland Revenue under this Clause of the Bill. It will not be the local post offices, because the local post offices have no information of the credit standing to the accounts of depositors in the Post Office Savings Bank. That information is held in the central office of the Post Office Savings Bank which is part of the headquarters of the Post Office.

When the Inland Revenue authorities get to work with the power given to them under this Clause, I fear that many cases will come to light, not of conscious tax evasion, but of many people who, quite unwittingly, because of their ignorance of the position, have failed to make returns of their income from interest on their deposits. I have known of cases of old age pensioners and others now on quite small incomes. If they are to be asked to pay up arrears of tax from the period when they were liable to pay tax—when, say, the old age pensioner was still at work—I fear that considerable hardship may be imposed on those individuals.

Therefore, I suggest to my right hon. Friend that the work under this Clause should be undertaken with care, with discrimination, and with every sympathy with those whom it was never intended to catch. I believe that to be very desirable indeed.

Mr. Joynson-Hicks (Chichester)

Is not the hon. Gentleman introducing rather a new element into this matter? Is he not saying that the law which imposes the duty upon the Inland Revenue to collect taxes should be administered with restraint and discretion by the Inland Revenue? Surely, that is an entirely new procedure, which is quite contrary to what he has been practising all his life?

Mr. Houghton

No. The general sentiment I have expressed should surely be essential to the administration of any fiscal system. However, the Inland Revenue authorities already have power to write off tax in cases of hardship where, in their discretion, it would impose intolerable hardship on an individual to exact every last penny of Income Tax arrears accumulated over a period of years. I am certain that hon. Gentlemen will see in the reports of the Comptroller and Auditor-General reference to amounts which have been written off on the ground of hardship. I am merely asking my right hon. Friend to bear that power in mind when the net is plunged into the sea and some rather small and quite harmless fish may be caught in it.

Sir Patrick Spens (Kensington, South)

The hon. Member will appreciate that the Government accepted an Amendment which I suggested to the effect that they should not be able to go more than three years back and therefore the liability even to persons with the Post Office savings is considerably reduced by that Amendment.

Mr. Houghton

I am afraid that the hon. and learned Member is still under a misapprehension. Although it is true that my right hon. Friend accepted an Amendment that the power to ask for disclosure should not go back more than three years, I would say straight away that that does not limit in any way the power of the Inland Revenue to go back six years if, on inquiry into a given case, they found income which should have been taxed and had escaped tax for as long as that.

After all, when the Inland Revenue are once aware of the existence of a deposit account revealed under Clause 24 of the Bill, they are free to ask the taxpayer himself to be quite open and frank about the amount of interest, not only for the three years disclosed, but any earlier amounts of tax going back for six years which the Inland Revenue already have power to assess under the present Income Tax Acts. So the power of disclosure is restricted to three years, but liability to tax will still extend to six years if the amount of income has been in existence that long.

I wish to refer to the two other Clauses in the Bill which deal with tax avoidance; Clause 29, which deals with tax avoidance of Profits Tax, and Clause 33, which contains other provisions against tax avoidance. Hon. Members opposite have criticised my right hon. Friend for introducing into this Bill omnibus Clauses which deal generally and not particularly with methods of tax avoidance. They have said, especially the hon. Member for Chippenham (Mr. Eccles), whose contributions to our debates have been most appreciated, that it was a canon of good constitutional law that the crime should be specified, the misdemeanour should be particularised; so that a taxpayer would know exactly where he stood and could steer himself just clear of it, if he could find an astute lawyer or a shady accountant to help him.

We all know from past experience, especially when Mr. Neville Chamberlain was Chancellor of the Exchequer, that to attempt to stop tax evasion by specifying particular methods which shall be banned, has not proved successful, because loopholes have been opened somewhere else almost at the same moment as the others have been closed. After all the experience he has had, my right hon. Friend is right to say that we are tired of complicated and contentious legislation which seeks to specify all the devious methods of tax avoidance with a view to stopping people paying less than they should, and that we must now make more comprehensive provisions for checking this abuse.

At any rate, I think the House and all those interested—and some of those who are not—will watch carefully to see how these new omnibus Clauses work in practice; to see whether the Inland Revenue will be the tiresome people that many hon. Members opposite have suggested they will be; and whether it will impede the merchant adventurers from setting sail into the far seas to unexplored lands to invest their capital, and to bring home rich rewards.

If I know anything about merchant adventurers they are tax avoiders as well and my right hon. Friend is right to try to provide continued facilities for merchant adventuring without continued facilities for tax avoiding. I am quite sure that under these Clauses, especially with the Amendments now included in the Bill, the right combination has been found. I have confidence that these Clauses will be operated fairly and with the minimum of interference with the legitimate activities of those who may be concerned. This experiment, long overdue, in checking tax avoidance by comprehensive provisions will be extremely interesting and significant.

The right hon. and gallant Member for Gainsborough reminded the House that it is just about three months since the Chancellor of the Exchequer introduced his Budget. We live in unstable times, when much can happen in three months, and sometimes one wonders whether to introduce a Budget in April and conclude its financial form in July is quite as speedy a process as may be needful in these days to relate the circumstances to measures designed to deal with them.

I do not know whether, were he introducing his Budget today, my right hon. Friend would do some things a little differently. I think there is one thing he might have done differently; he might have increased the child allowances more than he has done. There have been Amendments from hon. Members opposite to give increased child allowances to widows and to allow tax deductions in favour of minors which should cover the cost of fees and text books; but there is no doubt that the most urgent relief that can be given would be to those families with young children rather than to married couples without children—

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

On a point of order. Will subsequent speakers be allowed to pursue this line of thought? There is nothing about it in the Bill.

Mr. Deputy-Speaker (Major Milner)

The hon. Gentleman is, of course, only entitled to refer to matters in the Bill on Third Reading, and those relating thereto.

Mr. Houghton

I thought I was in order in referring to something which is in the Bill, which is a proposal to increase the Income Tax allowance for children. My reference was that perhaps in the light of circumstances today, it would have been a good thing to have had that allowance a little higher than it is. I will not pursue that point.

I merely wished to say that my right hon. Friend, when he introduces his next Budget—there is no doubt at all that he will introduce another Budget, and the right hon. and gallant Member for Gainsborough might just as well keep his electioneering speeches in his pocket for all the difference they will make to my right hon. Friend—will have the opportunity of looking at some of the provisions in this Bill; and of seeing whether they can be further adjusted to the economic strains and stresses which unhappily, so long as our Defence expenditure remains at its present level, will continue to be felt by many sections of the community. I have supported my right hon. Friend throughout the debates on the Finance Bill on many provisions which have met with considerable opposition from the benches opposite.

As we take leave of this Finance Bill, which is the legislative form of the Budget, we should not overlook two factors. One is that the object embodied in this Bill was received with approval by large sections of the thoughtful public when my right hon. Friend introduced it. Also, we must not overlook some of the questions which are outside this Bill—in particular, the provisions of the National Insurance Act—which were part of the comprehensive survey of the nation's welfare and the needs of the people when my right hon. Friend introduced the Budget. Hon. and right hon. Gentlemen opposite would have been glad and proud to have introduced a Finance Bill along these lines.

5.1 p.m.

Colonel J. R. H. Hutchison (Glasgow. Scotstoun)

I hope that the hon. Member for Sowerby (Mr. Houghton) will not think me discourteous if I do not immediately follow him on the questions which he has been discussing. In the course of my remarks some of the points which he mentioned will fall into their context.

I am anxious to treat the question of this Finance Bill from a rather different angle from the one from which it has been considered over the past weeks. We have listened for many hours to discussions on the material effects which the various Clauses in this Bill are likely to have. Very often, material considerations outweigh psychological ones, but we should be making a mistake if we lost sight of the psychological considerations.

This country owed its pre-eminence in the past to a number of assets. Some, such as the flying start we had in industry, have already gone: some, such as our closeness to the sea and, consequently, the facility of cheap sea transport and our climate, are still with us; and some are threatened by some of the provisions of this Bill. The characteristics to which I refer are enterprise and commercial courage. Changes which are almost imperceptible, and all the more insidious for that reason, are creeping over the character of our people. I think that the tendency will be quickened by some of the provisions of the Bill.

What are some of the main ingredients which go to make up the British character? Are they not, first and foremost, courage and independence; then, in a second group, judgment and decision; and, in a third group, honesty and respect for the law? Under the sort of pincer movement of controls and punishing taxes, commercial courage and independence are being gradually eroded. The tax penalty on success, rising to 19s. 6d. in the £, is certainly not conducive to commercial courage or to adventure in trade.

These islands were a bastion of the independence of the individual in the past. That independence is being undermined by the fact that in so many industries now is there only a single supplier. I wonder how many hon. Members get letters from their constituents of a similar nature to those which I have had during the course of this Bill, giving examples of matters about which they complain but saying, "Don't quote me."

What is this attitude of mind which is creeping over the people of this coun- try as a result of which they are afraid to be caught complaining because of the victimisation they may suffer at the hands of a single supplier which, in many cases under nationalisation, is the Government? What will happen to the character of the people under the system of confidential reports which is also one of the accompaniments of nationalisation? But I must not dwell too long upon that though it goes to help to build up an edifice which I think is a dangerous one.

I have tried to show that commercial courage and adventuring are being attacked. What about the second group of characteristics—judgment and decision? This country was famous for the pioneers that it sent all over the world. Indeed, much of the opening up of the world was due to our pioneering. Yet, under Clause 33 of the Bill, the Treasury will, in the ultimate, decide whether a pioneering adventure shall take place or not. If the Treasury is not consulted then somebody who infringes the conditions of this Clause will be liable to savage penalties.

Is the Treasury really better able to judge? The fact that it is not was voiced yesterday by no less and no more unusual an advocate of my case than the right hon. Member for Ebbw Vale (Mr. Bevan), who had some pretty severe strictures to lay upon the Treasury in the matter of prospecting for minerals. The Chancellor, pressed by hon. Members from these benches, has agreed to set up an advisory panel to advise the Treasury on these matters. He has taken powers to allow certain exemptions, but the Treasury is still the dominant and controlling master in the matter. All that it has done is to change its garb from that of gaoler to that of governess.

The Treasury has to give no reasons for any refusal which it may, if it sees fit, make. In fact, there was an example only the other day. Imperial Chemicals went to the Capital Issues Committee, conforming, as far as the ordinary outside mind could see, with all the requirements laid down by the Committee when an application goes before them. But that application was turned down and, as far as I know, no reason was given for the refusal and no appeal from that refusal is allowed.

In considering these matters what must the Treasury be guided by? Surely it must be guided by its jealousy of preserving taxes. Its eye must be continually upon the tax yield. I would not go so far as to say that no other considerations enter into its mind, but the jealousy of taxes and the necessity to preserve tax yield must be the main criterion by which it judges these matters.

If that is to be the main criterion, what chance have many of the projects of getting past the Treasury? What chance would there have been in the past, with similar legislation, for the opening up of the rubber industry, the gold industry, railways all over the world, and a global insurance system? Would the Pilgrim Fathers ever have got consent from the Treasury? Would the actions of such great men as Clive and Rhodes have turned them into criminals?

The Socialist method of thought extols the present system of living. It is really extraordinary to what length they will go to prevent the dwellers in these islands from escaping from paradise. They seem determined to impose a sort of permanent attack of financial claustrophobia upon us.

The third pair of characteristics which I mentioned at the start of my speech as going to make up character, are honesty and respect for the law. In the past these two characteristics were the envy and the wonder of other Europeans and, indeed, of all foreign peoples. Yet today there is considerable evidence of its erosion. I do not say that it was possible to avoid rationing—I am only talking about the psychological effects of what has happened—but rationing was undoubtedly followed by something which was unknown in this country in the past—the black market.

Mr. Deputy-Speaker

The hon. and gallant Member is surely going rather outside the scope of the Bill.

Colonel Hutchison

I thought that all this was linked up with the various provisions contained in the Bill. Extravagant taxation—and I think you will agree, Mr. Deputy-Speaker, that in this Bill there is extravagant taxation—has led to a system of trading in notes, which is one of the tax evasion methods about which the hon. Gentleman was speaking. In the past, these evils were either insignificant or non-existent. Characters do not change of their own free will, but they can be changed by circumstances and by treatment, and I believe that character is being changed by the treatment that is going on under Socialism, and will be further changed by this Bill.

Also, in the Bill, and finally, we make a dangerous breach with a precious British tradition, namely, the doctrine that a man is innocent until he is proved to be guilty. This is thoroughly un-British and contrary to all our cherished ideas on the matter. Not only that it is psychologically bad. The more we go on presuming guilt the more likely are we to get it: the more we talk about good behaviour the more will people tend to behave well.

This is an extension of the Goebbels system of the war, whereby, by reiteration, the people of Germany finally came to regard persecution and inhumanity as something very near normal. By this concept of life, which is carried on by the Bill which we have been considering, I believe that the character of the people is being eroded, not very obviously —I do not want to exaggerate the story —but gradually, and their moral fibre is being impaired. This is, after all, the decade which invented the phrase, "I couldn't care less." This is the decade in which spivs have become V. I. Ps. Funds can be rebuilt, but character, if it can be rebuilt at all, can only be rebuilt with great difficulty. Let us remember the words of Abraham Lincoln: You cannot build courage and character by taking away a man's independence and initiative. And Abraham Lincoln was a very wise statesman.

5.12 p.m

Mr. Daines (East Ham, North)

For some reason which I have never been able-to understand, when we reach the Third Reading of a Bill, a nostalgic tone seems to enter our words, as if we part with the Bill with great reluctance. My hon. Friend the Member for Sowerby (Mr. Houghton), expressed that traditional sentiment, and the hon. and gallant Member for Scotstoun (Colonel Hutchison), who has just spoken in funereal tones, also did likewise and then went on to talk about the psychology underlying the Finance Bill. Certainly, the hon. and gallant Gentleman appeared to me as the undertaker of the party.

I am not sorry to see the back of this Bill; indeed, I am glad to see the back of it. I think we have been dealing with it far too long. I want to make only one other reference to the speech of the hon. and gallant Gentleman. It is to that part of his speech in which he was dealing with the old Tory fable of the loss of moral fibre that has revealed itself among the people under a Socialist Government, and his theory that they were reluctant to come forward and give evidence. The hon. and gallant Gentleman was not quite saying that they were afraid of economic victimisation under nationalisation, and he did not quite say whether it was economic victimisation by monopolies and so-called trade associations.

All I want to say to him is that it is his responsibility, in his public capacity, as I think it is mine, that, when he comes across a case where there is victimisation, he should expose it on the Floor of the House. I look forward, when we have our next debate on monopolies and resale price maintenance, to having a little support from the hon. and gallant Gentleman, who, I notice, was missing on the occasion of our previous discussion.

Colonel Hutchison

The hon. Gentleman will know that we, on these benches, have never extolled or believed in the victimisation of the public by any form of monopoly. I did, in fact, say "under nationalisation and a single supplier."

Mr. Daises

The point I am trying to make is that the hon. and gallant Gentleman was very adept at spreading a little muck and leaving it. He should make his case and make a charge, and he should then stand by that charge when it is made. The practice of spreading dirt by innuendo and inference is one which does not commend itself to the average hon. Member of the House.

It so happens that, so far as these benches are concerned, I am in the middle of the road. The last speech which I made on the Bill was against the Government, so I might as well balance it today by making a speech for the Government. The right hon. and gallant Gentleman the Member for Gainsborough (Captain Crookshank) quite unexpectedly raised the temper of the House this afternoon when he made an apologia, at great length, for the time taken by the opposition on this Bill. I may be a bit out with the actual time, but I think some thing like 100 hours of the time of the House has been spent on this Bill. The right hon. and gallant Gentleman justified that by saying, "Well, we have done our job; look at the concessions we have got." It seems to me that the old phrase about an elephant having been in labour and producing a mouse was a very accurate description of their efforts.

Mr. Henry Strauss (Norwich, South)

it was not an elephant; it was a mountain.

Mr. Daises

I think "elephant" sounds better. In any case, the hon. and learned Member for Norwich, South (Mr. H. Strauss) will no doubt follow me in his usual erudite way and put it right in his own pedantic and literary fashion, so that I feel comforted if I have stumbled a little on that account.

The Opposition cannot have it both ways. If they are claiming that this yea: they have been doing their duty by keeping us sitting over 100 hours, what have they been doing in all the other years since 1945? Where was all the great care over public money in previous years, in which we spent only about one-third of the time which has been spent on this Bill this year? Hon. Members may check it up. This year, it has been carried to fantastic lengths, but I must be quite fair and say that none of the speeches to which I have listened seemed to me to be filibustering; all the same, I think the filibustering may have occurred in the vast variety of subjects to be dealt with, but we must be quite fair about it.

So far as I am concerned, I am not at all impressed by the way in which we have handled the Finance Bill. I think it is perfectly fantastic and stupid that 3 grown-up body of people like us, in the Mother of Parliaments, every year have to sit through the night until 4. 5. or even 6 or 7 o'clock in the morning, to deal with certain essential parts of our legislation. I think it is crazy. I suppose we have the old vested interests sitting on the Front Bench, who will say that they cannot run their Ministries unless they have the whole morning free.

All I have to say in reply to that is that they cannot have it both ways. If their argument is that we cannot have the Bill earlier in the day, because they have to do their Ministerial work, what about the vast amount of Ministerial time which is spent in the House, particularly in this Parliament, because of the balance of the parties? It seems to me that we ought not to carry on with an out-of-date method of timing the hours of Parliament, arising out of the convenience of lawyers and professional gentlemen, and resulting in the most important part of our work being dealt with at 7 or 8 o'clock in the morning.

The hon. and gallant Member for Scotstoun dealt with the psychology of the people; I am not worried about that, but I am worried about the mentality that was applied to the Bill at 4 and 5 o'clock in the morning. It seems to me that we are a rather dull lot, and, in case we want to give ourselves any medals for this, it is just as well to remember that the public do not think very much of it. They think we are a dim lot to carry on in such a stupid way.

The right hon. and gallant Member for Gainsborough gave us his views about the country going along the road to ruin, and his hon. and gallant Friend also dealt with the psychology of the road to ruin, and dealt with it in good old Tory terms. He dealt, of course, with the familiar argument, which has been contained in all the speeches, that the only way in which we are to get a risk capital going and get the adventurous spirit into industry is by allowing the wealthy to accumulate even more wealth than they are doing.

That is the argument; that is the familiar Tory position. They believe that we have arrived at a stage in economic development where the State or some form of public corporation can run the basic industries which are not rich enough to produce vast capital accumulations, and that the boys with the risk capital will only share in the industries where there are rapid accumulations of capital. In other words, they want to get us back to the old days where the rich get richer. What it amounts to, as far as I can see, is that if we have the misfortune of a return to Tory Government, we shall rapidly have the clock put back to where the public have the skilly and the Tories have the cream.

One of the mistakes of this Bill is the same as that made by Labour Governments in the whole of their finance policy since 1945. May I say, in passing, that I have raised precisely this point in previous Budget debates? We have concentrated far too much of our time and attention upon forcing down income and have left capital accumulations alone. I should have thought the Financial Secretary would occasionally have refreshed his own mind and that of his chief with the very admirable book he wrote under the title "The Case for Socialism."

In that book he dealt with precisely this problem and in which he showed that despite everything we do so far as Estate Duty and Death Duty are concerned, at the end of the year the amount of capital in private hands is substantially the same as it was at the beginning. What I am afraid will happen if we get a return of a Tory Government and a really good Tory Chancellor of the Exchequer—I exclude the right hon. Member for Ormsk irk (Sir A. Salter) from that category—is that he will put the whole thing right in about two Budgets.

My final point concerns tax evasion. I welcome everything we have done, but what I get rather appalled about are the other things which the Department could do without coming here for fresh legislation. Let me give one illustration. The Government brought in a method of taxing bookmakers on the dog tracks. What happened? The bulk of the bookmakers are men who, apparently, have some other form of income. Therefore, the only return they make for Income Tax purposes under Schedule E is that received from their known job. But they do not stand on the race-course all the time purely to make losses, although there is the classic case of the bookie who had to keep his job going on losses just because it was his job.

I have raised this point with my right hon. Friend, and have found that the activities of the Excise Department are so watertight that information is not passed from them to the Inland Revenue. I should have thought it perfectly simple for the Excise Department, which issues the stamp and collects the money and which has the name and address, to pass the information over to the Inland Revenue. I think there is still a lot of work to be done in the field of tax exasion, particularly among shopkeepers and the smaller businesses. This debate today, though very nostalgic, has been a pleasant one, and I think we have all enjoyed it in a quiet sort of way. I repeat that I have no tears to shed at the passing of this Bill. I am glad to see the back of it, and if I am a Member of this House next year, as I hope to be, I trust that we shall tackle the Finance Bill then in a more intelligent way than we have tackled this one.

5.25 p.m.

Sir Edward Boyle (Birmingham, Handsworth)

Before I come to my main point, perhaps I may be allowed, although it is not in the Bill, to reply to the Financial Secretary about redistributive taxation because it seems to me he failed to prove the one point which is most important. A man with £30,000 a year today has much less income available than he would have had 50 years ago, or even before the war, but the hon. Gentleman was unable to show us that the poorer people of the country were comparatively better off.

I thought it very interesting that just before the General Election in January, 1950, the "Economist" published a series of tables to show the effect on the various classes of the community of the economic policy pursued over the last few years. If we allow for increased taxation and rising prices, we find that the average male weekly wage-earner in 1950 was better off than in 1938, but no better off than he was in 1945. I think it still has to be shown that there has been any substantial rise in the standard of living of the weekly wage-earner under the present Government.

The hon. Member for Sowerby (Mr. Houghton) described the tax system as drawing in money from those well off and giving it to those less fortunate. My hon. Friend the Member for Flint, West (Mr. Birch), in last year's Budget debate, made the point that the amount of tax levied on people with incomes of less than £500 a year was less than the amount of money spent on the social services, and that we were approaching a stage where taxes were ceasing to have a real re-distributive effect.

Mr. Daines

The hon. Gentleman is not taking into consideration the social wage which, I think, approximates to £2 10s. a week for a family of four. His first figure does not take into account the mass unemployment of that time, and neither do his figures take into account the fact that more members of families are working today.

Sir E. Boyle

The hon. Member's second point does not seem to be very relevant to the question of the standard of living.

Mr. Daines

It would have seemed relevant to the hon. Member if he had been unemployed.

Sir E. Boyle

I am talking now about financial statistics. The hon. Member's first point is, I agree, something which must be taken into account, but I do not think that even when we take into consideration the fact that the Insurance Act has been in force for two years there is much evidence that the standard of living is substantially better than it was in 1945.

I wish to answer three points made by the Chancellor of the Exchequer in the course of these debates and, first, the one he made on Income Tax, when we were discussing Clause 13. Hon. Members will recall that there was quite a lively exchange between the Chancellor of the Exchequer and the right hon. Member for Aldershot (Mr. Lyttelton) on the subject of Income Tax, during which the Chancellor said: …whether or not taxation has inflationary effects…depends really on whether the people taxed are determined to maintain their standard of living and draw on their savings to do so."—[OFFICIAL REPORT, 6th June, 1951: Vol. 488, c. 1171.] Of course, it is perfectly true that today the climate of opinion in this respect is different from what it was 50 years ago. Fifty years ago people did, on the whole, try very hard to live within their incomes, whereas today everyone is determined to keep up his net spendable income by some means or another.

Surely there are two simple reasons for that. The first is, as my hon. Friend the Member for Chippenham (Mr. Eccles) has said, that when the Government takes more than a certain proportion of the national income in taxation, everyone resents it and tries to compensate for that by getting higher money incomes for themselves. The second point is that we shall never get people to economise and to make things easier for the Government while they feel that the Government are not setting a good example. I want to be perfectly fair about the question of cuts in Government expenditure. I think that the average elector in this country today would fully agree with what the Minister of Defence said in the debate on 26th July last year: It would be very foolish of me to deny that in a vast expenditure of £780 million there are not some items that could be pruned away."—[OFFICIAL REPORT, 26th July, 1950; Vol. 478, c. 473.] If that was true then of a defence expenditure of £780 million, how much more must it be true today of a total Government expenditure of more than £4,000 million?

It is no good the Chancellor trying to discount altogether all the points made in the speech of my right hon. and gallant Friend the Member for Leicester, South-East (Captain Waterhouse), during the Budget debate. I noticed that in later debates the Chancellor tended to discount that speech, and said that all the reductions that amounted to anything at all were disavowed by my right hon. Friend the Member for Saffron Walden (Mr. R. A. Butler). That really was not true. Only half the reductions recommended by my right hon. and gallant Friend the Member for Leicester, South-East, could in any sense be regarded as involving changes of policy. My right hon. and gallant Friend did not cover the whole field though he spent about an hour on his speech. If the Government really gave the impression that they were tackling administrative expenditure in the way he suggested, they would do a great deal towards making people feel that they, too, should economise, and it might be that taxation would then have a more disinflationary effect.

Secondly, I should like to make one comment on the Profits Tax, because I thought that part of his Budget speech which the Chancellor devoted to this tax was very interesting. He said: But it is one thing to recognise the justification for profit in the case of the individual firm as a reward for efficiency…it is quite another to ignore a situation where, by reason of the general economic climate and not through the aptitude of individual managements the whole level of profits and the share of the national income taken by it, is rising."—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 854.] First of all, if the Chancellor really thinks that profits should be a reward for efficiency, is it not rather curious to increase a tax which has the effect of reduc- ing the difference between the respective rewards earned by efficient and inefficient producers? Secondly, is it not rather odd that a Socialist Chancellor should say by implication that he is not capable of doing anything to influence the economic climate? We, on this side, have always said that he should do so, and that profits have been too easy to obtain during the last few years.

I cannot help feeling that the real trouble is that hon. Members opposite do not believe full employment is compatible with a policy designed to promote economic efficiency. They think full employment can only be maintained if one always keeps demand steadily ahead of supply, with paper profits rising steadily upwards. I believe it is perfectly possible to maintain a full employment policy and, at the same time, to ensure that only efficient producers make large profits. It is quite ridiculous to suppose one can only maintain a full and stable level of employment in an essentially inflationary situation.

The last point I wish to make concerns Clause 33 relating to tax evasion, and again I quote the Chancellor. He said: Hon. Members opposite do not regard the tax avoidance, of which I have spoken, as such a serious factor as we do; and on the other hand they take a more serious view of the possible consequences to legitimate business which the Clause will have."—[OFFICIAL REPORT, 13th June, 1951; Vol. 488. c. 2451] When one uses a word like "serious" one can mean a number of things by it. I think the right hon. Gentleman has been dominated be a strong feeling about the moral aspect of tax evasion, and we on this side are dominated by the belief that this Clause will really do harm to the British economy. I suggest that however much hon. Members opposite may feel strongly about a particular evil, before taking steps to check what one regards as a moral evil one must count the cost and realise the precise effect, in terms of hard fact, of the steps one wishes to take. I cannot feel that in this Clause the Government have sufficiently counted the cost of what they are doing.

I think that, on these points, there are deep-seated differences of opinion between the two sides of the House. It is absurd to gloss over such differences where they exist, and while I know hon. Members opposite will not agree with the points I have made, I hope that at any rate a speech of this kind will do something towards clarifying those issues on which there really is a substantial divergence of view between hon. Members opposite and ourselves.

5.35 p.m.

Mr. Spearman (Scarborough and Whitby)

I think there are two tests by which the Finance Bill can be judged. One is how fairly the distribution of a burden is laid, and that is very important. But in conditions today I think more important is the other test as to how far the Bill will encourage maximum production in this country. I believe it is in that test that this Finance Bill fails. I heard the hon. Member for Sowerby (Mr. Houghton) say that we on this side were only concerned with the protection of wealth. That is one of those wild and reckless statements that politicians on all sides sometimes make and it need not be taken very seriously because no thinking person would believe it.

Mr. Houghton

I meant it very seriously.

Mr. Spearman

Then the hon. Member is evidently not in the category of politicians who speak without due thought, as we all sometimes do, but a reckless and unthinking person and I do not think any attention will be paid to his contention by thinking people outside.

We on this side are concerned with the expansion of wealth because only if wealth continues to expand can the social services be maintained and a high standard of living secured for this country. If we become once more a poor country we can no longer afford the tremendous redistribution of wealth we had under all Governments in the last 50 years. We shall have to go back to conditions where there is an immense inequality of wealth and where there is a privileged class and totalitarian methods are used, as in Russia today. It is only a rich country that can afford to move towards equality and a high standard of living. That is why we on this side of the House, and I think all reasonable people, want to see an expansion of wealth. Without reasonable security that expansion will not take place.

We on this side must admit that this Bill might have been worse. If the Chancellor had produced a Finance Bill which would have retained a united Cabinet it would have led to disastrous consequences very soon. But I also think that the Bill might have been, and should have been, very much better if we were so going to develop our resources that we might carry through the re-armament programme with a minimum disturbance to social conditions.

I should like to comment on two points. One is the cost of living. When the cost of living first started to rise, it was the common practice of hon. and, indeed, of right hon. Gentlemen opposite to deny that the rise was taking place. Today, They no longer take that line. They prefer to say that it is all on account of Korea, I think that is not so at all. I think the rise in the cost of living is quite deliberate. It is an essential part of this Finance Bill.

It is quite impossible in these conditions to arm painlessly. To arm as we are doing must hurt. It means the diversion of men and resources to arm the country and that means there have to be cuts in other expenditure. Either the Government cut their expenditure or else the consumer cuts his. One way of cutting the consumer's expenditure is to raise taxes, but the Chancellor appears to think, like most thinking people in this country, that taxation is now at a level where any increase would kill the goose that lays the egg because it would be a discouragement all through the ranks of industry, from the workers to the management.

The right hon. Gentleman is also finding that taxation at this level is causing more and more dis-saving and is, therefore, ceasing to be a dis-inflationary weapon. For that reason this Budget inevitably implies a rise in the cost of living, because by permitting that it mops up purchasing power and leaves resources for re-armament. I therefore say that it is a deliberate policy of the Government to put up the cost of living. That rise has nothing whatever to do with Korea, but is a deliberate and inevitable consequence of this Bill.

What we on this side of the House would say is this: if the country were asked whether they would like cuts in Government expenditure—other than eliminating waste, with which we all agree —of course they would say they would not; but if they were given the choice between cuts in Government expenditure and a rise in the cost of living—and that rise goes far enough—I think most people would prefer the first choice. They would say, "If there are to be cuts in expenditure by the Government we shall have some choice as to where the burden will fall. We can see that it hurts those who can most afford to bear it. But if the burden takes the form of enormous rises in prices, that hurts that part of the population who can least afford to bear it." Such a choice is a complete abdication of planning. It permits the burden to fall wherever it may, regardless of choice or plan.

The second point I want to make is in connection with the increase in the Profits Tax and the abolition of initial allowances. At present I think about two-thirds, or perhaps rather more, of a company's profits are being absorbed in taxation. That must clearly mean that there is not a great deal left for paying out or maintaining dividends and, at the same time, carrying out the necessary improvements in the capital equipment of the industry.

If the company cut dividends it will be quite impossible for them to raise new money. If they do not cut dividends they will not have enough resources left to carry out those improvements which ought to take place. Most unfortunately, this affects, most of all, those young and vigorous companies which it is vital that we should encourage if we are to expand industry as we ought. Those companies with great reputations and with accumulated reserves can much better improvise and find the resources than these new and vigorous people we ought to encourage.

I do not think hon. Members opposite always realise how unsatisfactory our investment programme has been. If they look at the Economic Survey of Europe for 1949 they will see that this country's investment is enormous. It is more per head than in any country in Europe except Norway. But if they look at the figures for investment in industry they will find that we invest per head of the people engaged in industry only one-third of the amount in America and not much more than half of the amount in France.

If they look at Table 8 of the Economic Survey they will find that the distribution of investment is of this order: the total new investment in manufacturing industry is £405 million, but the total new invest ment by the Government in nationalised industries and other undertakings amounts to £624 million, or about about half as much again. I believe that is a clear indication that though investment as a whole is very large in this country, and though investment in nationalised concerns is considerable, the amount which is going into progressive industry, and particularly into smaller companies, is nothing like as much as it should be—nor can it be under these arrangements.

I have heard hon. Members opposite, among them the hon. Member for Stechford (Mr. Jenkins), suggest that there was some conflict between our advocacy of the maintenance of initial allowances and our advocacy of dearer money; he thought the two were in conflict. But it is just because we feel there are not enough resources available today to do all the investment that should be done that we suggest it is vital to use that weapon which will most effectively weed out those things which, however desirable, are not vital.

There are many things in which we are investing today, especially in the nationalised industries and by the Government, on social amenities, which are good of their sort but which will not pay a quick return and which we cannot afford today. One of the instruments which would most effectively weed out those things which are not so desirable and which would lead to a concentration on things which are most desirable is an effective use of the interest rate.

Mr. A. Edward Davies (Stoke-on-Trent, North)

Would the hon. Gentleman give a few examples of untimely expenditure in nationalised industries?

Mr. Spearman

Yes. If the hon. Gentleman will look at Table 8 of the Survey he will see, as I have said, that whereas manufacturing industry takes £405 million, gas, electricity and water take £177 million and transport and communications £317 million. All that sort of thing is given in the Survey.

Mr. Davies

Surely the hon. Gentleman will admit that those basic services are absolutely vital if we are to have increasing production. In all sorts of industries we have not sufficient gas and electricity or we lack adequate transport. Where is the economy in a policy such as that which he suggests?

Mr. Spearman

What I say is that if those concerns had to pay a higher rate for the money they would carry out only those improvements and investments which would pay a quick reward. I do not deny that these things are good; I say that things are being done today which we cannot afford because we cannot even do those things which are still more urgent.

In conclusion, I believe that this Finance Bill is like a ship which has been patched up—enough to keep afloat but not enough to reach the other end. It might have been worse. It avoids a disastrous collapse, but it will certainly not encourage the expansion of wealth and the development of industry in this country to enable us best to carry the burden which we must carry in the future.

5.48 p.m.

Mr. J. J. Robertson (Berwick and East Lothian)

I intervene in the debate very briefly to refer to Clause 30 and to the remission of Death Duty on properties to be handed over to the National Trust. This Clause is a welcome gesture on the part of the Chancellor of the Exchequer and can be received as such by all sides of the House. Of course, it is not an innovation because as far back as 1935, when the right hon. Member for Woodford (Mr. Churchill) was Chancellor of the Exchequer, a remission of Death Duty on landed estates was introduced.

The difference between that remission and the remission proposed by the present Chancellor is that the latter has seen to it that the remission is given to bodies who have some public accountability—who can report to local authorities or to the Chancellor, if need be, that the money saved by the remission has been spent for the purpose for which it was given. To that extent the Clause should be doubly welcomed by the House.

I should be out of order were I to enlarge upon the provisions made in the 1925 Finance Act, and continued ever since, whereby landed estates have considerable remission of Death Duty. I do not now intend to say what would have been said better on Second Reading, but I trust that the Chancellor will continue the good work he has started in this direction, so that in future remissions or rebates of Death Duty will be given in the way he has been giving them so far, to those public bodies who have received this assistance as a result of the generosity of the Chancellor.

5.51 p.m.

Mr. Joynson-Hicks (Chichester)

I appreciate very much the point which the hon. Member for Berwick and East Lothian (Mr. Robertson) has just been making, but it is a rather more detailed point than the one I was proposing to pursue myself, and I therefore hope he will forgive me if I do not follow him.

I am grateful for the opportunity of very briefly making some observations of a general character, which I have not previously done on this Bill. I thought initially that it was a bad Bill, and I am still of the same opinion. We have to some extent succeeded in improving it in matters of detail, but we have not succeeded in overcoming its basic defects. I think that the first and primary defect is that it is a Bill which is the machinery for the production of £4,015 million during the ensuing year. That is a bad thing in itself.

The second thing which is fundamentally bad is that, in order to raise that sum of money, the Bill incorporates certain bad principles. In fact, they are cause and effect. If in a country of this size, producing the amount of wealth we do, the Government require or insist upon raising revenue to the extent of over £4,000 million, it is bound to be forced to the necessity of introducing principles of financial legislation which are in themselves bad.

The cause is that the weight and burden of taxation have become too heavy for the economic structure to bear; it is beginning to bend and to creak, and we are now in the phase where we are entering a new spiral—a spiral where, in order to achieve the product of the tax, it is becoming necessary to bolster up the legislation with ever more complicated and more detailed provisions in order to ensure that as much as possible of the estimated amount of the money is collected.

Each time a new tax is put on a new safeguard has to be introduced, and each time a safeguard breaks down yet another safeguard has to be put on in order to bolster up the whole mechanism of the machine. What we ought to be doing is simplifying the system of our revenue production and collection. Instead of that, every time that we are asked to pass a new Finance Bill we are introducing more complications into it.

The effect of that can only be one thing, and it is an effect which is even more widely felt on the industrial side than it is on the Government side, because the effect is simply to increase the overhead expenses of industry and commerce, and also to diminish the productivity of industry. It means that more effort in industry has to be diverted towards implementing the work of the Chancellor in the raising of taxation as against continuing to produce wealth.

Two or three years ago I asked Sir Stafford Cripps when he was Chancellor of the Exchequer whether he could estimate for us the number of man-hours which had to be spent in industry in collecting taxation for the Government, by P.A.Y.E. and matters of that sort. Sir Stafford almost laughed; he said that it would be quite impossible even to estimate the amount of time which was occupied in that way. Well, I wonder whether that really is so. If the present Chancellor would apply his mind to that, I believe that he would be staggered by the number of unproductive man-hours which have to be occupied throughout industry and commerce in what is really doing the job of the Treasury in the collection of their taxes. All those additional man-hours are dead weight on the industry, which are reducing its productive capacity, reducing its profit-earning capacity, and therefore reducing its taxable capacity.

I want, if I may, to try to illustrate by three quite short points why I consider that certain of the fundamental principles introduced into this Bill are bad. The first one, of course, is Clause 29, which was referred to by the hon. Member for Sowerby (Mr. Houghton), who defended it with considerable ability. That is the Clause in which the Government admit that the problems of industry with regard to Profits Tax have become so complicated that it is impossible for the Government to say that they can introduce legislation to ensure that such profits as may be made by a company shall be liable to taxation. Therefore, the Government have thrown a net right round what hitherto has been understood as being the legal liability of companies, so far as Profits Tax is concerned; and they have said that anything caught within that wider net shall be, in the discretion of the Commissioners, liable to taxation.

Where the principle is bad is that it leaves the taxpayer—who normally speaking is, or at any rate was, an honourable person and an honest minded man—in a state of doubt as to what he can or cannot do without getting caught by Profits Tax. Further than that, the Government have thrust upon the Commissioners the invidious onus of having to decide, in their discretion, without the guidance of the law, whether or not that person should be subjected to tax. Those are two principles, both of which are, in my submission, bad principles of law and bad principles of taxation.

Next there is Clause 24 which, substantially, grants power to the Treasury to obtain information, particularly from banks. We have never heard who are the other people referred to in Clause 24 from whom information may, by direction, be obtained. Even now I still hope that we may have some information upon that. The necessity—and this is where the principle comes in—of the Government having to pass legislation to obtain from banks information against the taxpayer, who is under the liability to make his own return for assessment, is a confession of Government failure.

It shows that there is something wrong when we have got to the point where this power has to be sought. It is an admission that there must, in the Government's belief, be a lack of morality and a fall in the standard of honesty of the people. Finally, it is an abuse of the confidence which should exist between man and man, whether they be banker and client or anybody else. It is the setting of one section of the community against another in order to give away the private information of the other party. That action, I maintain, is a bad principle for us to introduce into law.

To my mind, Clause 33 is the most heinous of all; yet it was passed with singularly little comment during the course of the debate. It is, I submit, a breach of our constitutional position in this House. We in this House, on the advice of the Government, pass a provision for the restriction of certain transactions leading to the avoidance of In- come Tax, etc., in which we say it shall be unlawful to do something. We then go on to say, "But, nevertheless, notwithstanding we have made this action unlawful, we will give permission to the Treasury officials to say that it can be done." That must obviously be wrong in principle and a bad thing for us to do.

I am very sorry indeed that we should have descended to such a position where it is necessary to resort to these methods in order to implement the taxation liability upon the people of this country. This is stated to be a Finance Bill designed to finance rearmament, but rearmament, as the Chancellor has said, is dependent upon increased production, and yet this Bill of all things is designed to handicap production.

I will not go further into that because it returns me to the point at which I began —the amount of taxation which is involved. The amount which the Government are seeking to raise cannot be raised without handicapping the production of this country. It is the weight of the taxation itself which has now become the inflationary element throughout the whole of our financial and economic system, and we have got to the point—and I beg of the Government to realise it and not fight against it any more—when inflation can no longer be checked by greater taxation because taxation has itself become inflationary.

6.3 p.m.

Mr. Jenkins (Birmingham, Stechford)

A large part of the speech of the hon. Member for Chichester (Mr. Joynson Hicks), was devoted to technical points about revenue collection, and I prefer to return to some of the broader economic considerations which were put forward by the hon. Member for Scarborough and Whitby (Mr. Spearman), and the hon. Baronet the Member for Handsworth (Sir E. Boyle). I think that it was because the hon. Member for Scarborough and Whitby is always so very mild in his manner that I am sometimes left breathless by the extreme nature of the things he puts forward. I think that it was the eighth Duke of Devonshire who once described himself as being "A moderate man: a violently moderate man." The hon. Member for Scarborough and Whitby is the reverse of that. He is a mild man, but a mild extremist, so far as these economic questions are concerned.

I think that was demonstrated by his speech this evening, when he made some strong statements about the relationship of the rising cost of living to this Finance Bill. I think that he said that it was the deliberate policy of the Government to put up the cost of living, the deliberate policy being carried out in this Bill. He went on to say that this had nothing to do with what was happening in Korea.

Mr. Spearman

I said that the only intelligent understanding of this Budget was that it meant to put up the cost of living because it had disregarded cutting Government expenditure and it had disregarded that further taxation—