HC Deb 03 July 1951 vol 489 cc2200-26

Question again proposed, "That the Bill be now read the Third time."

6.15 p.m.

Mr. Jenkins

When we were interrupted, the hon. Member for Scarborough and Whitby had interrupted me, not I think to deny either of the two remarks I had attributed to him, which were, in the first place, if I may reiterate them, that it was the deliberate policy of the Government, as enshrined in this Finance Bill, to put up the cost of living; and secondly, that it had nothing to do with Korea. He interrupted me, not to deny it, but to put a new gloss on his previous remarks by saying that this Finance Bill did not free resources which could be used for re-armament, which would have to be done if re-armament was to be carried through without increasing the cost of living.

I suggest that the Finance Bill deals with the problem of freeing resources in the re-armament programme. This Finance Bill covers the cost of paying for re-armament, and it produces on top of that a more or less balanced Budget. This Finance Bill goes a little further than that, and fulfils what may be called the canons of the new Crippsian orthodoxy in raising enough revenue to cover the total expenditure of the Government during the year and that part of our investment expenditure, which it may be thought private savings will not be sufficient to cover. In that sense, from the point of view of dealing with the demands of re-armament and the situation at home, I should have thought that this Budget was quite adequately a disinflationary Budget, and I am not aware of any detailed argument against it put forward from the other side of the House or by economists in sympathy with hon. Members opposite.

Mr. Eccles (Chippenham)

Because the simple fact is that the Government propose to spend £900 million more this year than last year and are only raising about £130 million more in taxation.

Mr. Jenkins

I am very shocked to hear the hon. Member for Chippenham (Mr. Eccles), whom we on this side of the House regard as one of the more informed hon. Members opposite on these financial questions, get up and say something which shows that he has not followed any part of the main portion of the Budget speech of my right hon. Friend, which dealt in great detail with this question and shows how, accepting what I described as the canons of the new Crippsian orthodoxy, he produced a perfectly disinflationary Budget so far as home factors were concerned.

Mr. Eccles

The hon. Member is going on the assumption that it is the inflationary gap which has to be filled, and if it is filled all is well. I never accepted that the calculations of the Chancellor on that matter are correct. The fact remains that he is spending in one way or another, from capital or from current expenditure, very vast sums more this year than last year which are not being taken up in new taxation. The Chancellor gets out of that by saying there will be sufficient private savings to bridge the gap. No one believes it but the Chancellor.

Mr. Jenkins

The hon. Gentleman has rather changed his ground. He is not so much challenging us—in fact, I think he admitted in the middle of his rather long intervention that the inflationary gap was adequately covered. He is moving towards to what I know is rather a pet theme of his, which is that any Budget which takes about 40 per cent. of the national income is wrong, by its very nature, no matter how adequately the inflationary gap is covered.

Mr. Eccles rose

Mr. Jenkins

The hon. Gentleman has interrupted me twice standing up, and I do not think he ought to interrupt me any more. I do not think his is a view which we can take very seriously. If his party are committed to the re-armament programme and to maintaining even the skeleton of the Welfare State, then to talk about vast reductions in Government expenditure from a Budget concerned with only 40 per cent. of the national income is not practical politics but is only a rather romantic lament for times past.

Mr. Eccles

I undertake that this is my last intervention. I think the hon. Gentleman will agree that this year's taxation is increased by £120 million or £130 million. Does he maintain that that is all the additional expenditure put upon the country by the re-armament programme? If not, where is the difference coming from, except from a rise in prices?

Mr. Jenkins

I do not accept that position for a moment. [Interruption.] The hon. Gentleman cannot keep quiet for a moment. He said that it was to be his last interruption. It is not so much the interruptions standing up that I mind but the interruptions sitting down. I do not say that there is not in the Budget a very happy paradox between the amount which is raised in new taxation and the very much larger amount which is to be spent as new expenditure. That has been made possible by a number of factors like the running down of the very large foreign trade balance, the increases in savings, and the like, factors which were given full allowance, not only by Labour Party commentators but by a good many independent financial commentators in the time leading up to the Budget. So much so, that the gap which sources like the "Financial Times" and the "Economist" had predicted that we would have to close was pretty accurate. Therefore, we have my right hon. Friend the Chancellor of the Exchequer and a great number of other authorities, like the "Financial Times" and the "Economist," against the hon. Member for Chippenham, a fairly heavy preponderance of opinion against those who say that the Budget is not disinflationary.

I want to come back to the hon. Member for Scarborough and Whitby, from whom I have been diverted for rather a long time. We are having sharp increases in prices at the present time, but I should have thought that even the hon. Member, if he were making a less mildly polemical speech, would have admitted that they have a great deal to do with Korea and the subsequent putting up of world commodity markets which has affected companies all over the world.

Mr. Spearman

It is no doubt my own fault that I have misled the hon. Gentleman, but I did not say that the rearmament which has taken place after Korea had no effect upon commodity prices. What I wanted to say was that the rise in prices that the Government must expect in order to make the Budget intelligible, had nothing to do with Korea.

Mr. Jenkins

I submit that that is entirely untrue. It is a fact that rises ill prices are taking place which this Budget will not counter and which have a great deal to do with Korea. I should be extremely interested, even at this late stage of the Finance Bill, to hear a budgetary policy put forward opposite by which it might be possible to counter the price increases which we have been importing from abroad. I have no idea what hon. Gentlemen opposite mean by saying that that can be done by a Budget and that it would be done by cuts in expenditure. Does the hon. Gentleman think that a couple of Ministers' cars less will cancel what has been happening in the wool market of Australia? It is a fantastic proposition.

The other possibility is that the Opposition are thinking of having a Budget not in our new style, "adequately disinflationary" but a Budget so violently disinflationary that it is deflationary, one that would set up at home deflationary tendencies strong enough to cancel out the price inflation that we have been importing from abroad. The sort of Budget surplus one would need to have would demand the most swingeing increases in taxation and would set up a really dangerously deflationary situation here at home in which we should have large-scale unemployment in order, in the present situation, not merely to maintain the balance at home but to tip it down in order to counteract the great uuward trend which we are importing from abroad

The hon. Member for Scarborough and Whitby also brought before us a cry familiar from those benches, which was echoed by the hon. Member for Chichester to some extent, and that is the old cry we have heard in Finance debates for a number of years. It is that the redistributive policy of the Government, by means of a Budget sharing things out rather more fairly, is a policy which militates against increases in the national wealth and therefore leaves less to be shared out. It is rather late in the Bill to argue that point in great detail, but it has been the cry of "Wolf," which we have heard so often and which has been so untrue.

Mr. Assheton (Blackburn, West)

But the wolf did come.

Mr. Jenkins

Perhaps one could make it out that the cry did not start even with this Government or with this series of Budgets, but long ago. It was applied to Budgets like that of Mr. Lloyd George in 1909, that any increases in taxation would necessarily decrease the size of the national income. It is an a priori point of view, and not a shred of practical evidence have the party opposite been able to bring forward. It is a piece of dogma which they regard as irrefutable by any logical evidence. They believe it. They have always believed that it would be so, and so they think that it must be so.

Mr. Spearman

Sir Stafford Cripps said in this House that we had now reached about the limit of direct taxation which could usefully be imposed.

Mr. Jenkins

Nobody has suggested that there might not be a position in which we might take so much in taxation that the theory of the Opposition might become true. All I can say is that the Opposition cannot be taken very seriously upon it because they put forward the theory about every Budget, whether or not it is true. The reply to the right hon. Member for Blackburn, West (Mr. Assheton), who interrupted by saying that the wolf did come, is that the great disadvantage was that the people who shouted "Wolf" had made the cry quite useless by the time the wolf appeared. That is the position of the Opposition so far as this cry about taxation is concerned.

The hon. Member for Handsworth had a great deal to say against the Profits Tax. He quoted a statement in which the Chancellor had said that he was not against profits when they accrued to companies because of their efficiency and that he was against great increases in profits when they arose out of general economic factors more or less independent of the individual company. The hon. Member tried to controvert that point of view and asked: "Why impose a tax like the Profits Tax, which minimises the difference between the reward to the efficient company and the reward to the inefficient company?"

I find it very difficult to think of any tax upon profits which would not have increasingly this effect. I cannot see any other conclusion to the argument of the hon. Baronet on that point other than that we should not tax profits at all because any tax on profits has exactly that effect. If one is to put forward that argument one should be prepared to face that difficulty.

The hon. Gentleman also said that we on this side of the House had no faith at all in our ability to combine full employment with a situation which was not inflationary and in which there could be rewards for efficiency and penalties for inefficiency. I suggest that it is an extremely wrong and, in a sense, unfair criticism of Labour financial policy in this year to bring that forward. I should have thought that we had been pretty successful, and certainly more successful that any other country in the world, in combining a stable price level with full employment during a period when one did not have world inflationary factors working with one. That is certainly true of the period from the spring of 1948 to the end of 1949, but it is not a test of financial policy to say that because there are rising prices at present and we have a rampant inflation going all over the world, Labour financial policy is necessarily an inflationary policy in all circumstances and cannot possibly combine full employment with a reasonable degree of disinflation.

I entirely disagree with the hon. Member for Handsworth and other hon. Members in their attacks on the Profits Tax. The Profits Tax is one of the best parts of the Finance Bill. It would be intolerable—perhaps it is intolerable at the present time—when new burdens are to be borne, that a greater share of the national income should go to profits than had previously been the case. I expected rather more from this increase in the Profits Tax, which after all is a very substantial increase—from 30 per cent. to 50 per cent.—than has proved to be the case. I thought it would have a bigger effect on the general situation, but the buoyancy of profits and the determination of directors of many companies to be rid of the restraint they have had for a number of years is so great as more than to counteract the effect of the increase in the Profits Tax at present.

That changes my attitude to the whole question of the Profits Tax. When one was in a situation in which dividends were kept almost completely steady there was something in the argument that a Profits Tax, even a Profits Tax on distributed profits, merely took money away from company reserves and brought it to the Exchequer, but in a situation in which company dividends are very far from being frozen and steady but are tending to increase very sharply and in which one needs factors to reverse that trend, ones attitude to the Profits Tax must be entirely different.

I consider that the dividend policy which has been pursued, not by all companies but by a great number of companies, during the past three months greatly strengthens the case for the Profits Tax, which was strong any way, and indeed goes rather further and raises the question whether there ought to be further measures to deal with the problem of increasing profits and distribution.

6.34 p.m.

Sir Patrick Spens (Kensington, South)

I always enjoy very much the speeches on economics which we have in the House, but, on the other hand, I very often feel that they are somewhat away from the real facts of the situation. It is interesting to realise that hon. Members on the Government benches are at any rate attempting to put up some excuse other than Government policy for the inflationary situation in which the country is and to minimise entirely Government policy as a factor in the inflationary situation.

I do not propose to deal with that at all. I am certain that the situation is such that it is absolutely essential that we should endeavour to secure every new possible source of wealth for this country and so make more secure the prospect of employment here. It is because I believe certain Clauses in the Bill will do exactly the reverse that I want to make a few remarks.

The hon. and gallant Member for Scotstoun (Colonel Hutchison) dealt with those who wanted to expand their business abroad or to venture abroad and to the extent to which they would be debarred by some of the Clauses. I want to look at the matter from the other point of view. For centuries the wealth of this country has been increased by people coming back from our Colonies and from abroad to set up businesses and headquarters of businesses here. The amount that we owe to additions of wealth which have come in over the centuries because this has been the place in which to trade and to have headquarters is incalculable.

Let us imagine what would face someone from the Colonies or abroad, who has not the same high respect as we have for the Treasury, the Inland Revenue and the Inland Revenue officials, coming here to do business. Under the first Clause that we came to, this person would find that in certain circumstances a mere surveyor of taxes, no doubt under orders from the Commissioners of Inland Revenue, could demand particulars of his bank account. Going a little further, he would find that if he entered into certain ordinary business transactions, which he thought would be for the benefit of himself and subsidiary companies, they could all be re-written and taxation charged as the Commissioners of Inland Revenue thought fit.

Going still further, he would find that if he proposed to transfer his business or sell to a subsidiary company abroad the price at which he thought fit to sell could be inquired into, the transaction upset and the whole of his taxation revised on that basis. Finally, he would find that, if he got his business going really successful, in no circumstances could he extend it abroad or even go back to the country from which he had come without the consent of the Treasury.

If one takes a bird's eye view of those four Clauses, does anyone think that a single foreign person will ever come over here and incorporate a company in this country? The man would obviously say that it was not "incorporation" but "incarceration" as a result of the Clauses. The result of this must be detrimental to the whole future trade outlook of the country. Why is it done? These wide powers are given to officials because, for the first time, it is thought necessary to introduce what the hon. Member for Sowerby (Mr. Houghton) regards as "sweeping powers" so that the Inland Revenue may get at every possible evader of taxation.

Time after time during these debates, in the middle of the night and in the early hours of the morning, we have heard that Conservative Chancellors never took any steps to deal with evasion of taxation. The hon. Member for Sowerby, who was not in the House before the war when I was, knows quite well how untrue are the statements that have been made. I entered the House in 1933 in the middle of the campaign against evasion of Surtax, and up to the time when I left the House in 1943 I believe there was not a single Finance Bill that did not deal with some specific type of evasion of taxation. Tax evasion was dealt with right up to the war in the traditional way, namely, the House laid down by its legislation what the transaction was that was not to be entered into or what special measures should be taken by the Commissioners to deal with the situation if it was entered into.

Then came the war. We know that there crept into not only finance legislation but all sorts of legislation the idea of giving the Treasury, above all, and other Departments all sorts of powers to do things which we would never have dreamt of empowering them to do in time of peace. Time after time we had enactments of one sort or another to provide that certain things could happen if a Minister thought it proper. We left wide discretion to Ministers and Departments and, above all, to the Treasury to manage our affairs during war.

Now we are in peace-time and not wartime, and yet these wide powers are being given to officials to do all sorts of things, to make up their minds whether the taxpayer has done something rightly or wrongly and to make decisions; and in these Clauses the possibilities of protecting the taxpayer by the ordinary machinery of the law courts have been reduced to the absolute minimum. I believe that the new system—the hon. Member for Sowerby readily admits that it is a new system—is utterly wrong and against the interests of all subjects in the country, and it is absolutely frightening to anybody who thinks of setting up a business here.

For those reasons I regard the Budget, whatever may b its other merits, as a bad Budget, because I am absolutely certain that the Clauses I have mentioned will dry up potential sources of great wealth and future employment here.

6.40 p.m.

Mr. Henry Strauss (Norwich, South)

The hon. Member for Stechford (Mr. Jenkins), in replying to my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman), said that my hon. Friend had stated that it was the deliberate policy of the Government to put up the cost of living. The hon. Gentleman said that that was not so and, of course, I accept it from him. That is admittedly the effect of their policy, but I agree it may not be their deliberate aim, because everyone knows that they often achieve exactly the opposite of that at which they are aiming. We are, of course, familiar with their split minds. We are familiar with Ministers saying at one moment that the aim of the Government is re-distribution by way of retribution and saying almost in the next breath that what they want to do is to encourage savings. We are quite used to all that.

Many hon. Members have said that, when the Chancellor of the Exchequer originally made his Budget speech, many people thought that the Budget might have been much worse. I would say, even of the Finance Bill, that it might have been much worse, but for one Clause. That Clause is so bad and the injury it will do to this country is so great that I believe its influence will be remembered long after the rest of the Budget is forgotten. It is mainly about that Clause that I wish to speak, the Clause at present numbered 33.

The hon. Member for Sowerby (Mr. Houghton)—to whom I think we should be grateful because throughout all stages of this Bill he has intervened from time to time and given us the benefit of his views, to which I, at any rate, always listen with interest—dealt with some Clauses on tax avoidance such as 29 and 33. Owing to the pressure of time I shall say very little about Clause 29. I had reason for some mild satisfaction in that the Government produced 39 lines of Amendments to this Clause on the Report stage, embodying Amendment after Amendment which I had the pleasure of moving during the Committee stage. On that Clause, therefore, I shall say nothing more tonight. Let me come at once to Clause 33.

Let us examine what Clause 33 does. First, of all, at what companies is it directed? Here, fortunately, the Chancellor of the Exchequer was very frank in his speech during the Committee stage. The companies at which Clause 33 is directed are companies which, though resident in the United Kingdom, are trading abroad. That is the important thing to remember: they are trading abroad but they are resident in the United Kingdom. The object of the Clause is to prevent them from leaving the United Kingdom and going abroad, possibly to the country where they are carrying on their trade.

The first thing to realise is that those companies need never have been resident here at all. Why did they choose to be resident here. The answer is, for some of those advantages which were described in the speech of my right hon. Friend the Member for Aldershot (Mr. Lyttelton), such as the banking facilities of the City of London, the insurance facilities, shipping and, I might add, the reputation of, and the possibility of access to, English law. All those things made it attractive for them to be resident in the United Kingdom. From that residence the United Kingdom drew immense advan- tages in invisible exports which even today constitute one of the main things on which the Chancellor necessarily relies.

This Clause, then, is directed at companies which are trading abroad and which need never have come here at all. What is the form of the prohibition? It says this: All transactions of the following classes…shall he unlawful unless carried out with the consent of the Treasury. Now let me read the first of those classes of transaction: for a body corporate resident in the United Kingdom to cease to be so resident"; That is what the Socialist Government say ought to be prohibited in 1951. I ask hon. Members, with those words fresh in their minds, to remember these words: All merchants, if they were not openly prohibited before, shall have their safe and sure conduct to depart out of England, to come into England, to tarry in, and go through England, as well by land as by water, to buy and sell without any manner of evil tolles by the old and rightful customs, except in time of war; That is from Magna Charta, 1215. The text can be found in the first volume of the Statutes Revised, which any hon. Member can find in either of the Division Lobbies. He will find it in the Statute of Magna Charta of 1297, 25 Edward I, Chapter XXX. That shows the extent of the revolution that is here being enacted and the blindness to the nature of British greatness which the mere putting forward of this Clause involves.

Hon. Members opposite have sometimes asked why, if we attack some things in this Finance Bill so violently, did we not criticise more violently the original Budget speech of the Chancellor? The answer is simple. He never mentioned this Clause and, when it was printed, it was adversely criticised not merely by the Conservative Party and the Liberal Party but by every thinking organ of opinion in the country. There was nobody who was at all conscious of the nature of the factors on which British commercial and industrial greatness had been built up, who was not horrified when he saw this Clause. So much for the mere existence of this Clause. I tell the Chancellor of the Exchequer that, even if he withdrew this Clause now, he would not do away with the injury that he has done to British credit; nothing could do that, but he would at least diminish it.

Let me call attention to two legal monstrosities in this Clause, apart from the nature of the Clause itself. The first is that it contains in subsection (2, b), as last printed, a presumption of guilty knowledge in persons. There have been previous examples of creating a criminal offence for a company and then saying that, where the company commits the prohibited act, every director shall be deemed to be a party to it. until he proves the contrary. There is precedent for that but there is no precedent at all, as was admitted to me by the Attorney-General, for this presumption of guilty knowledge contained in that subsection. That is the first legal monstrosity in the Clause.

The other legal monstrosity has been mentioned by several hon. Members who have spoken this afternoon. What is made unlawful under this subsection is unlawful unless carried out with the consent of the Treasury. The Chancellor of the Exchequer claims a dispensing power. That has a very serious connotation and a very ugly sound in English constitutional history. It does not become better when it is claimed by the Chancellor of the Exchequer in 1951.

In answer to me last night the Chancellor of the Exchequer dealt with the point that I had put to him and said that the powers that he had taken for granting a consent generally could be used in a manner that would be absolutely unfair, as far as the law was concerned. He said that he did not mean so to use those powers, but he refused to give the undertaking that, where he gave a general consent, he would refrain from discriminating between bodies corporate not already resident in the United Kingdom and other bodies corporate.

What does that mean? It means that he can say to any company not yet in this country, "I will give you permission to come and will free you from every prohibition in this Clause," but to any company which came in the past, relying on British credit, honesty and fair play, he will say, "I will give you no similar advantage." I say that that is another desperately serious blow at the reputation of this country. I believe that this Clause is so great a blemish on this Bill that, were there no other fault whatever in the Finance Bill, the Finance Bill should be utterly condemned.

6.54 p.m.

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

It is a signal privilege for a back bencher to utter the final words on behalf of his party at the conclusion of the financial discussions of the year, and particularly at the end of the long pilgrimage upon which hon. Members have been occupied both by day and night since 10th April. I may be old-fashioned, but I have always regarded the Finance Bill as the most important Measure of any Session, meriting considerable expenditure of time, particularly since the abolition of the Report stage of the Budget Resolutions which used to be a useful preliminary stage of these discussions.

Before I turn to more controversial matters, may I be permitted to say that on this side of the House these debates have been conducted under a sense of loss which I cannot but feel is shared by hon. Members opposite, at the absence from our debates of the concise and sparkling speeches of Oliver Stanley who could illumine the darkest and longest all-night Sitting by his shafts of humour.

But whatever our sense of personal or party bereavement, the work of the House has to continue, and I think it may be claimed for the Finance Bill, 1951, that it has produced a particularly high quality of speech and temper throughout our protracted proceedings. For my part, I never remember a Committee or Report stage sustained with such spirit or at so worthy a level, and I find that on this side of the House no fewer than 129 hon. Members have taken part in the debates on the Committee stage. I feel that that must be a near record, but the Parliamentary statisticians can tell us whether that is so or not.

One morning when dawn was breaking, and I was making some laudatory remarks about the speeches of some of my hon. Friends, and some distinguished characters opposite had just joined us after a night of refreshing sleep, I was asked by the hon. Member for Sowerby (Mr. Houghton) whether this was the annual prize giving, and I told the hon. Gentleman, as I am sure the Government Whip will confirm, that the occasion for such is not the Committee stage, particularly after an all-night Sitting, but the Third Reading when, in accordance with our traditions, it is usual to make some comments upon those who have been on the bridge throughout the voyage.

As it was the hon. Member for Sower-by who raised the subject, perhaps I might deal with him first. I have here his terminal report compiled from research both at Westminster and in his constituency. I am sorry to inform him that, as my father used to say to me so frequently, it leaves considerable room for improvement, for it reads as follows: "Conduct fair, tries hard, may do better in a lower form during the autumn term."

The Chancellor opened these long debates with a speech which was recognised on both sides of the House as one achieving a particularly high standard, whether judged by form or quality. His frequent interventions since have been amicable apart from some asperity during the watches of the night and a curious outburst of passion this afternoon which I thought was due to fatigue rather than bad temper.

The Financial Secretary has been painstakingly zealous and less susceptible to criticism than in days of yore, but I thought he made an odd speech this afternoon in moving the Third Reading, when he girded at my right hon. Friend the Leader of the Opposition for the part he has taken in our discussions, in asking from time to time what the Government's intentions were as regards our long debates and in moving to report Progress for that purpose.

This mystified me until the hon. Gentleman went on in his speech to make an even more curious pronunciamento, which was that his hon. Friends had carried out discussions on the Finance Bill by the superior method of correspondence and consultation rather than by the delivery of speeches and the tabling of Amendments. That is surely an admission that in a Socialist State Parliamentary debate has become objectionable. I thought it a sinister hint of the manner in which right hon. Gentlemen opposite intend to conduct their business should the electorate be so misguided as to give them another opportunity of doing so.

Mr. Jay

The hon. and gallant Gentleman is in error. I did not say "instead of making Parliamentary speeches." I said "instead of putting Amendments on the Order Paper."

Lieut.-Commander Braithwaite

That, if I may say so, makes the hon. Gentleman's offence even greater than I though. How frustrated would have been the common man referred to by the hon. Member for Sowerby who, when he reads it, will be offended by being so described, because none of us regard ourselves as being common men. How frustrated will the common man feel when he reads what the Financial Secretary said this afternoon. No longer can he regale himself by listening to the representatives of the people discussing the nation's affairs; all will have to be done by correspondence and consultation. The Strangers' Gallery would have to be closed.

The Economic Secretary to the Treasury, who has now joined us, came to the discussions on the Finance Bill hot foot from a not very happy experience in the Argentine, which will be discussed on Thursday and, therefore, cannot be referred to now, and found himself immediately plunged into much hard work on complicated Treasury briefs, which I imagine, all of us would find difficulty in mastering.

As I observed the hon. Member for Bosworth (Mr. A. Allen)—that devoted amanuensis who, for the moment, is absent for the first time—flitting to and from the fount of information which resides under the Gallery, I was reminded of an incident graphically described in Chapter 8 of the Acts of the Apostles in which, hon. Members will recall, or ought to recall, Philip in his travels came up with a man of Ethiopia, a eunuch of great authority who was reading the words—I am glad to see that the hon. Member has returned, but I am afraid that he has missed the quotation from Holy Writ and will have to turn to the record tomorrow morning. The eunuch of great authority was reading the words of the Prophet Esaias and Philip said to him: Understandeth thou what thou readest? To which came the reply: How can I, except some man should guide me? The Economic Secretary obtained guidance from under the Gallery and we all did our best on this side of the House but, unlike Philip, we were not invited into the chariot.

The Secretary for Overseas Trade had what I might describe as a walking-on part. I think he only crossed the stage once, and then it was to tell us, appropriately, of Turkish Delight—the outcome of the Torquay negotiations.

We must all regret that the Attorney-General is not here to take a final curtain. With his usual courtesy he has sent me a telephone message, because I informed him I intended to make some remarks about him, to say that he is engaged elsewhere and I am sure we all understand that. The right hon. and learned Gentleman carried a well-nigh intolerable burden, a continuous tour of duty of nine hours and remained throughout calm collected and courteous without even a suspicion of annoyance on his countenance except during certain interventions by the hon. and learned Member for Gloucester (Mr. Turner-Samuels) or the hon. Member for Sowerby.

Beneath a smiling face, we are told, there is often to be found an aching heart and the amiable features of right hon. Gentlemen opposite cannot conceal the stark reality of this Budget. Its chief features have been canvassed this afternoon. I will only refer to them very rapidly. There is the increased Petrol Duty, which must surely go down to history as the "Groundnuts tax," counterbalancing, as it does, with great exactitude, the sum poured by the Government so light-heartedly into the burning sands of Africa. It also raises the costs of distribution and public transport. If the hon. Member for Sowerby had described that as an omnibus Clause I would have known what he was talking about.

The Entertainments Duty is to be overhauled and I hope that the right hon. Gentleman, when reviewing the whole of this impost, will not be unmindful of sport, amateur sport in particular. I thought I detected yesterday some note of the Chancellor becoming somewhat cinema-minded. It would be a pity if the whole Entertainments Duty was ranged round the requirements of one industry. I hope, therefore, that the review will be of the broadest character.

The taxation of undistributed profits, which finances re-armament at the expense of the export trade of this country and the modernisation of its plant, we believe to be unwise. The so-called tax dodging Clauses, in our view, make a far deeper incision than is necessary into our economy and, as so many hon. Members have so well said, act as a brake on overseas development. We are sorry that the Purchase Tax Committee is not to possess the powers suggested from this side of the House. We believe our proposal was a more effective piece of machinery. May I say to the Chancellor that, while review is desirable, reduction is far more so?

The Third Reading of the Finance Bill is the occasion every year when we look back on the long road travelled for the past three months and consider the impact of the Budget upon the taxpayers as a whole. Despite the observations of the hon. Member for Stechford (Mr. Jenkins), concerning whom I shall have a word to say in a moment, it aggravates instead of soothing our inflationary distresses. I well remember how, in 1945, hon. Members opposite had a ringing slogan that, with the nationalisation of the Bank of England, finance would become the servant and not the master of the people. But finance is the master—

Mr. Norman Smith (Nottingham, South)

Hear, hear.

Lieut.-Commander Braithwaite

I hear an echo of a voice which has been too long silent, the financial adviser to His Majesty's Government.

I was going on to say that when 8s. in the £ in every wage and salary is confiscated there is a harsh master and that the cost of living continues to rise with the printing press in hot pursuit. After all, the paper £ is no more expensive to produce than the American dollar, but what a difference when they perform their functions of purchase and sale!

There is another complaint I have to level at His Majesty's Government on this occasion, that the taxpayers are once again, in 1951, confined to barracks. Last year, when performing this same function, I said to Sir Stafford Cripps—and when he replied he did not deny that it was true—that the high cost of railway fares was preventing people from taking their holidays. They were sitting in their gardens watching the trains—of which they are the owners—thundering past half empty on the way to the coast. This year it is estimated that seven million people are so immobilised and I submit to the Government that the so-called "free" Health Service loses much of its value if the contributors are denied access to the health giving properties of sea and mountain. I commend that to the Minister of Local Government and Planning.

The cuts in social services go far beyond the charges imposed by the right hon. Gentleman for teeth and spectacles. They have caused a grievous decline in the value of benefits under our social services and all these facts are the consequence of former follies, not of the right hon. Gentleman himself, although he is in close juxtaposition with the architect of them, but he was an accessory, as far as I know, before, during and after the fact.

We are living today in the morning after, or hangover of, the Daltonian debauch which resulted in the investment of the Unemployment Fund at par—that was a fact that did not emerge at Question Time today—in Treasury 2½ per cent., losing at the moment, if realisation were necessary, one-third of the capital involved. Despite £6,000 million devoted to defence since 1945, with so little to show for it, we are now confronted with a new re-armament programme of £4,700 million, a fresh burden on a patient nation.

That is not the end of the story. because as I said during the debate on the Budget Resolutions this is not the only Budget introduced by the Government this year. The Postmaster-General had a curtain raiser only the week before, and there has been the increase of railway fares. We are confronted with a tripartite tyranny on the part of the Socialist Government. I and my hon. Friends feel that the British people deserve a better fate than this.

My right hon. and gallant Friend the Member for Gainsborough (Captain Crookshank), who opened the debate from this side of the House, referred to our Budget and Finance Bill discussions as a pilgrimage, a word which had also occurred to me—a pilgrimage symbolised to some extent by that described in John Bunyan's masterpiece, which I have recently been re-reading. Even if all the incidents are not in chronological order, can we not, on both sides of the House, say that in 1945 our nation set forth, after six years of war, from the City of Destruction. Only to flounder into the Slough of Devaluation, of which the hon. Member for Stechford has never heard in his defence of the Socialist Party; and we are wandering in By-Path Meadow on the advice of Mr. Worldly Wiseman and Mr. Timorous, both of whom can be clearly observed on the Treasury Bench opposite?

Now, in 1951, we are invited to disport ourselves in Vanity Fair built for our delectation by Mr. Vain Confidence. And yet the most exacting part of the road remains to be travelled. I feel confident that as our British people ponder upon the lessons of this Finance Bill they will turn again to Mr. Greatheart, who brought us through the dread Valley of the Shadow.

7.12 p.m.

The Chancellor of the Exchequer (Mr. Gaitskell)

In rising to address the House for the last time on this Bill I should like to begin by associating myself with what the hon. and gallant Member for Bristol, North-West (Lieut.-Commander Braithwaite), said about the absence of Oliver Stanley. We on this side of the House always appreciated enormously his wit and his humour, the light touch and, at the same time, the penetrating speeches that he made. I should also like to say how sorry we are that the right hon. Member for Aldershot (Mr. Lyttelton) who led for the Opposition during the earlier stages of the Bill and up to the Report stage is also ill and unable to be here.

I must say to the hon. and gallant Member for Bristol, North-West, that at least in that part of his speech which he described as the prize giving section, he gave us a very entertaining and amusing exposition. I cannot say that the rest of his speech was quite so relevant and entertaining to us, but I would add that he also, in his interventions from time to time, generally keeps us in a lively mood.

The right hon. and gallant Member for Gainsborough (Captain Crookshank) made what I thought was a very unfortunate and ill-chosen reference to the Prime Minister's visit to Glasgow. While I do not wish to labour the point I should have thought that when Glasgow University—I was mistaken in referring to the Corporation when I intervened—has its quincentenary, to which the Prime Minister of Great Britain is invited, all Members of the House, particularly the Scottish Members, would wish that he should be there. Let me say at once that the right hon. and gallant Gentleman told me that he would be unable to be here and I warned him of what I intended to say about Glasgow. I will come later to the question of the Prime Minister's letter and will tell hon. Members why I think he was perfectly entitled to say what he did in that letter on the occasion of a by-election.

This is not the time to go over the whole Bill again, still less to go into the major issues of the Budget. The hon. Member for Scarborough and Whitby (Mr. Spearman) made some astonishing statements about the Budget, and he was supported by the hon. Member for Chippenham (Mr. Eccles), both of whom were very accurately dealt with by my hon. Friend the Member for Stechford (Mr. Jenkins). He has really saved me the trouble of saying anything more. I thought that his speech was exactly right. The idea that the Budget deliberately, or indeed not deliberately, increases the cost of living, is, of course, absolute nonsense.

I was astonished to hear the two hon. Members, who, I should have thought, understood these matters a little better, suggesting at this late stage—not previously, I think—that we had deliberately planned a deficit Budget to increase inflation. How anybody could listen to or read the Budget speech, and subsequent speeches on the Second Reading of the Finance Bill, and still believe that, how, if they understand the general principles contained in the Budget they can still believe that, passes my understanding, except that there is, of course, one simple explanation, that it is a little try-out for a possible bit of election propaganda.

The Opposition concentrated a good deal of their attack on this Bill on the Profits Tax, on the suspension of the initial allowances and on tax evasion and the anti-tax evasion Clauses. I wish to say a few words about these three subjects. We were not surprised that the Opposition objected to the increase in the Profits Tax. We expected that that would be their reaction. But we believe, and here I very much agree with my hon. Friend the Member for Stechford, that what has happened since the Budget has abundantly justified the increase in tax on distributed profits from 30 to 50 per cent.

I justified it at the time not on the ground that I wished to penalise efficient businesses but because it seemed to me that, owing to circumstances largely beyond the control of the management in individual enterprises, profits were rising. They have risen—we all know that. We have seen the figures in the papers, and I make no apology for saying that in those circumstances we were right to increase the tax and to raise it to the admittedly high level at which, out of the total distributed dividends, the Government now take some two-thirds in taxation—in Profits and Income Tax.

Frankly, my only doubt is whether the increase in tax was really sufficient to achieve the objective which I had in mind. What I wanted to do—and I made it very plain to the House at the time—was to encourage companies to put a higher proportion to reserve and to distribute a smaller proportion of their profits, so that as far as possible the level of dividends paid would not increase or would at any rate increase only in very special cases.

If the dividend distributions continue—though I admit they have diminished since the Budget—if there is a sign that they are increasing, we shall have to reconsider the position because of the general effect which the payment of large dividends has on the economy as a whole, an effect which is disproportionate to the amount of money involved. It has an effect in all sort of other ways which are generally inflationary.

As to initial allowances, the hon. Member for Orkney and Shetland (Mr. Grimond) dealt quite fairly with our attitude on that matter and I do not intend to say a great deal about it. The purpose of suspending the initial allowances, as the right hon. and gallant Member for Gainsborough recognised, was not to raise revenue or to improve the budgetary position; it was to discourage money spent on investment. It was an anti-inflationary measure. Quite obviously, it brought no particular political advantages, and it was not confined in its influence to this year. It was done because in the circumstances of rearmament, and in view of the enormous importance which must attach to maintaining at least a high level of exports in the engineering industry, we thought it necessary to discourage too many orders coming for British industry.

Of course, we should all like to see a high level of investment—I do not disagree in the least with that—and we would all recognise that the higher the level of investment, on the whole the more we were likely to get an increase in productivity, and the bigger the increase that might result. But we have to address ourselves to this problem. The engineering group of industries and the building industry—the two main groups of industries concerned—are all fully occupied, their capacity is being worked to the full, and it is impossible to see how the defence programme can be fitted in and exports maintained unless there is some decline in home investment.

If we did not do anything to discourage that, there would simply be an additional inflationary pressure. Perhaps I have not sufficiently explained what that signifies: namely, that if we allowed it to go on, there would be too much money chasing too few goods, and there would be some impact, at any rate, on the cost of living, which makes it all the more extraordinary that the hon. Member for Scarborough and Whitby, whose party has been opposed to us on the supension of initial allowances, should accuse me, through the Budget, of putting up the cost of living. Of course, it has exactly the opposite effect.

As to the supply of money capital, I do not frankly at this stage see any serious danger. If we have a situation in which the amount being spent on equipment for British industry is larger than we can sustain physically, it does not look as though there is any shortage of money capital. That makes me feel that the elaborate arguments that have been put forward in connection with the suspension of initial allowances and the Profits Tax really cannot be sustained when one looks at the facts as they are today.

The anti-tax evasion—or anti-tax avoidance, as the Opposition prefer to call them—Clauses have, of course, been the most hotly contested of all. I can only say that I do not think that the Government would have been doing their duty had they allowed companies to migrate freely and to escape the Profits Tax and Income Tax in certain cases which they could thereby do. We were very seriously concerned with this problem.

What, however, hon. Members opposite, and particularly the hon. and learned Member for Norwich, South (Mr. H. Strauss), overlooked, is that in fact under the Exchange Control Act, so far as the migration of companies is concerned, there has already been existing for the past four years control of the kind to which he objected so much. It is only because we thought that we ought not to use that Measure, which is designed for exchange control purposes, to prevent tax avoidance, that it was necessary to bring in that part, at any rate. of the Clause in the present Bill. I cannot therefore readily accept that all the sinister consequences that the hon. and learned Member seemed to indicate would follow, have any substance whatever, because they certainly have not been apparent in the last few years.

As for Clause 24, which requires that interest paid on bank accounts should be disclosed, the hon. Member for Chichester (Mr. Joynson-Hicks) objected strongly to this and seemed to think that it was a new idea, but he overlooked that the Royal Commission on Income Tax of 1919 recommended that action should be taken about this.

Mr. Joynson-Hicks

It was not taken.

Mr. Gaitskell

It was not taken, I daresay, but it is not a very new idea. I have listened to all the arguments, and certainly I cannot see any reason why income which is paid in the form of interest on deposits should not be disclosed when income which is paid as wages must be disclosed. There is no possible ground for the distinction.

Of course, the main argument of the Opposition has been the usual familiar one that we ought not to have this high taxation because taxation is ruining the country, and that therefore there should be cuts in Government expenditure. I thought that the right hon. and gallant Member for Gainsborough might, perhaps, have taken some account of the very detailed analysis that I gave in my Budget speech of exactly what was being spent and the way in which it was spent; because, of course, half of Government expenditure is spent on defence and interest on the National Debt, and of the rest some three-quarters is spent on social services. In my Budget speech, I went in detail through the rest of it and showed the economies that we had achieved.

All we have had from the Opposition is the suggestion from the right hon. Member for Aldershot (Mr. Lyttelton), that there might be a £50 million economy—the kind of casual figure which anyone could put forward—and a much more detailed proposal from, I think, the right hon. and gallant Member for Leicester, South-East (Captain Waterhouse), which has never been taken up by the Opposition Front Bench and on which we have had no indication from the Conservative Party whether they agree with him. I suggest to right hon. and hon. Members opposite that they should study that speech and say frankly to the country whether or not they agree with the right hon. and gallant Member's proposals.

As the hon. and gallant Member for Bristol, North-West said, it is customary —and a very pleasant custom it is—to say what we feel about different persons who have taken part in the proceedings on the Finance Bill. It is with very real pleasure that I now do that. As regards the Opposition, on a number of occasions excellent speeches have been made, and the level of debate has been high, but that does not mean that every word that was said had to be said or that we need have spent quite so many hours on discussing all the Clauses of the Bill. It would be surprising if among some 250 Amendments and 90 new Clauses there were not some good ideas included, but I think we could well have dispensed with quite a lot that was said and proposed. We therefore think that my right hon. Friend the Prime Minister was absolutely justified in the strictures which he passed upon the Opposition.

Mr. Lionel Heald (Chertsey)

Does the Chancellor of the Exchequer disagree with the Leader of the House when he said on 19th June: I want quite wholeheartedly to pay tribute to the way in which there has been a great effort on the part of both sides of the Committee to conduct our proceedings with reasonable speed, without doing any undue injury, to the necessity of properly examining the Bill."—[OFFICIAL REPORT, 19th June, 1951; Vol. 489, c. 406.] Does the right hon. Gentleman agree with that or not?

Mr. Gaitskell

That was one of the good moments in the proceedings. Unfortunately, it was not always like that] wish it had been.

Turning to our own side of the House, many things have been said already about my right hon. and learned Friend the Attorney-General. I was fortunate enough to have his company and assistance during the passage of the Gas Bill, and I must tell the House, if I may be permitted, a story about the Committee stage of that Bill, which continued upstairs, as hon. Members will remember, for two days and two nights. The story, which is of course only a rumour, is that at one point in those proceedings, early in the morning of the second day, an Opposition Amendment was moved and my right hon. and learned Friend got up to reply. Ten minutes later, somebody looked up and observed that my right hon. and learned Friend was speaking to a completely sleeping Committee. I think that we should regard that as typical of him, although, of course, he did not do it this year: we can run relays here, but we cannot do it upstairs.

I think it would be agreed that although my right hon. and learned Friend may be unshaven, hungry and tired, his voice is just as harmonious, his conduct just as courteous, and his argument just as persuasive and lucid. He is an incomparable Attorney-General, and on the Front Bench we value his assistance enormously.

The Financial Secretary has continuously, throughout the whole Bill, come in again and again to deal with a great many Amendments. He copes not only with the vices and the things which we tax rather heavily, but also with the virtues, where there are always claims for relief. Let us not forget that my hon. Friend the Economic Secretary took the burden of one all-night sitting himself. I should like to say to my hon. Friends on the benches behind me how very indebted we are for their support in the Lobby, and for the admirable discipline which has been observed. As for myself, I will only say that I practise, to the best of my ability, a policy of devolving as much work as I can on to other people.

Finally, I should like to say "Thank you," last but not least, to the officials who have helped us throughout this Bill, and who have been here throughout our long Sittings, and have sent my Parliamentary Private Secretary along with notes from time to time to help us out. They are a very, very fine body of men, as I know the House realises, and we all appreciate them.

So, with gratitude to all I have mentioned, and now at this stage with a more benevolent feeling towards the Opposition than I have had throughout the Bill, I say farewell to a Measure which I think embodies the various proposals which, though unpalatable, are in the circumstances necessary, and which I think involves important steps towards ensuring that taxpayers pay what they are supposed to pay.

Question put, and agreed to.

Bill accordingly read the Third time, and passed.