Clause 13.—(CHARGE OF INCOME TAX FOR 1951–52.)

HC Deb 06 June 1951 vol 488 cc1096-179

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

Sir Arthur Salter (Ormskirk)

The taxation provided in this Clause amounts to something between one-third and a half of the total revenue, and the extra taxation described in the Clause amounts to very nearly half of the additional taxation proposed in the Budget. I suggest that the Clause is, therefore, one of particular importance and, whatever may be the conclusion of the Committee on the Question now before it, I very much hope that there will be adequate discussion and consideration of both the significance of the Clause and of the taxation provided in it and of the consequences, both to the economy of the country and to its citizens. I think it is fair to say that this Clause and the tax provided in this Clause give a better reflection than any others of the Government's general tax pattern, of the financial situation of the country, and, indeed, of the general policy of the country, of which that situation is the net result.

I propose a little later to make some contributions to the kind of discussion I hope will take place on four aspects of this Clause: first, the hardships involved to certain classes of individuals by Income Tax at the rate prescribed; second, the effect an Income Tax of this height has in diminishing incentives to work and to produce more; third, the discouragement which it involves to risk—enterprise; and, fourth, I propose to say something about the relation of the proposed increase of tax in this Clause to the general problem of inflation.

There is, however, one preliminary observation I should like to make. I think it is very important in the discussion of Income Tax to consider the effect of the great rise in prices not only upon the taxable capacity of different citizens but upon the very structure of Income Tax itself. It is very easy, I think, to fall into what I may call the fallacy of fixed money reliefs with falling money values. I think the Chancellor and the Financial Secretary have fallen very heavily into that fallacy; and I will justify that statement by quotations in a few minutes' time.

The fact is that in the very first four lines of this Clause pounds and shillings are used in two quite different ways and in two quite different senses. In the first place we are told that the standard rate of tax is to be 9s. 6d. in the £. That is a definition of a fraction, and that definition remains exactly the same whatever changes there may be in the value of the £. It is perfectly fair to say, without any qualification at all, when we are comparing the Income Tax rate of 4s. 9d. in the £ of 1937 with the 9s. 6d. rate of this present year, that the rate has doubled. That still remains equally true whatever changes have taken place, whatever changes may take place in future, in the purchasing value of the £.

But in the very next line the £ is used for a quite different purpose, in a quite different way. It is there stated that one begins to become a Surtax payer when one's income exceeds £2,000 a year. In that case the £ is used as what economists call, I believe, a measure of value. That is quite a different thing, because that measure becomes defective in precise proportion to any changes in the purchasing value of the £. Unless we are very careful to remember the effect of this on the whole structure of Income Tax we shall, I think, get completely distorted views. I think that the Chancellor himself, whose statement otherwise was, in general, so lucid and so fair, gave a very wrong impression of the situation in regard to the reliefs now given, and, therefore, of the Income Tax positions after those reliefs have been given.

Let me justify that by a quotation. What did the right hon. Gentleman say on 10th April? Since 1945, Income Tax reliefs have been given by my predecessors which amount in all to more than £650 million. This figure represents the cost at the time the reliefs were given, but with the steady rise in national income which has occurred since then, they are today, on current income levels, worth about £1,000 million a year. With great regret I now feel bound to take back some part of this relief…I propose to increase the three rates of Income Tax…The married allowance will thus be higher than immediately before the war…"—[OFFICIAL REPORT, 10th April, 1951; Vol. 486, c. 864.] Purely in terms of the £, of course, all that is true, but how utterly misleading, how utterly inaccurate, it is in reality.

7.45 p.m.

After all, why has the national income gone up so much as to turn £650 million into £1,000 million? Mainly because prices and incomes have gone up together. It is fantastic, I suggest, to describe the extent of the reliefs in the Income Tax, with the reliefs increased by the increase of prices, without any allowance whatever on the other side for the extent those reliefs have been reduced in the same period by the same process through rising prices. The description becomes even more absurd—it is reduced to the extreme of absurdity—when he says: The married allowance will thus be higher than immediately before the war. Married allowance before the war was £180. The Chancellor has now raised it to £190 in terms of the £, but inasmuch as the £ of 1939 has become worth about 10s., inasmuch as since that period, by and large, prices and incomes have about doubled, the real fact is that the £180 person before the war, both in real economic status—in what he can buy—and also, indeed, in relative economic status—that is to say, in proportion to the total national income that he enjoys personally—has become the £360 person of today. If the Chancellor were in any real sense going to give a relief equal to—to say nothing of greater than—the married allowance of 1938–39 he would have to give an exemption of £360. I am not suggesting that in the circumstances he should do so, but I do say that to speak of the married allowance in the context of the passage I have quoted as meaning that it is higher than it was before the war is really a deception—unintentional, of course, but a deception—and a rather cruel deception when we consider the classes of persons who are involved.

I think, therefore, that the whole of this passage in the Chancellor's Budget speech is very misleading, and in view of the fact that the same fallacy was not only repeated but exaggerated and increased by the Financial Secretary in his speech two days later, on 12th April, and in view of the fact that the same criticism which I am making now was made then and has not received an answer—I must say that the Government have not only given a very misleading description of the reliefs from Income Tax but a persistently misleading description.

So important is this point, I believe, to the whole consideration of this subject that I venture to quote a little further from the same Budget debate. The Financial Secretary said: We have, of course, since 1945 given reliefs in Income Tax which—I think this is a remarkable figure—if they were wholly reversed today would yield £1,000 million a year of revenue. That is not only the measure of relief we have given, but also shows the large reserves of taxable capacity which still exist against a real emergency."—[OFFICIAL REPORT, 12th April, 1951; Vol. 486, c. 1214.] That is complete nonsense. It does not show the measure of taxable reserves. It does not, in itself, show any reserves of taxable capacity. It is merely playing with figures, playing with nomenclature.

On the same day, following shortly after the hon. Gentleman, I said: the Chancellor and the Financial Secretary totally ignored the basic fact, which is behind their calculations, that prices, monetary incomes and the total national income, as expressed in terms of the pound, have all been rising together. The result is that all those whose wages and incomes have increased in correspondence with the rise in prices have, without any increase at all in their real or relative income status, been swept automatically into higher taxation categories and outside the exemption limits. That, surely, is undeniable. I went on to say: How absurd a calculation of that kind can be unless that qualification is made, can easily be shown if we imagine a great inflation which might have the result, let us say, of quadrupling all our prices, wages and incomes. Then, if we retained the same monetary limits for the exemptions and for entry into the Surtax range, we might at once double the real burden of taxation in spite of doubling the extent of nominal reliefs as calculated by the Chancellor. It is a fantastic calculation, unless those qualifications are made."—[OFFICIAL REPORT, 12th April, 1951; Vol. 486, c. 1241–2.] That point was made in the Budget debate. It was never answered, and I ask the Chancellor to answer it today. I ask him to repudiate the statement of the Financial Secretary that the £1,000 million a year is any kind of measure of unused taxable capacity, and also to correct his own statement in which he suggested that the relief position with regard to smaller income groups of married persons had improved.

A remark of that kind on the relation between rising prices and the whole structure of Income Tax was, I think, an essential preliminary to any useful discussion, or indeed any discussion that makes sense, of this Clause. With that in mind I propose to come to the four aspects of the problem to which I have referred earlier. In doing so, I do not propose to deal at length with the arguments I may put before the Committee. Indeed, they will hardly be arguments.

My object is neither to inform hon. Members of important facts which are not already in their minds, nor to attempt to convince them of the error of opinions that may already be in their minds. My only object is to try to induce hon. Members to bring the knowledge and opinions that are in any case at the back of their minds into the forefront of their minds for the consideration of this Clause. For that purpose it will be sufficient, I think, if I merely give illustrations, and only mention points that might obviously be elaborated at much greater length, and may perhaps be by some of my hon. Friends.

The first point to which I wish to refer is the hardship involved on citizens of our country by Income Tax rates at the height at which they are proposed in this Clause. I am concerned, not only with the increase of 6d. but with the total Income Tax as now increased, subject to the reliefs mentioned by the Chancellor, and subject also to the qualifications on those reliefs which I have already made. The Chancellor may have given the impression, by referring, for example, to those married couples who only get some increase under the proposals when they reach something over £1,000 a year, that for the great bulk of the people, for all but a relatively small minority of the working class, his proposals involved no increase. That is very far from the case.

Let me give a few illustrations of the kind of hardships which are involved in taxation of this kind. A bachelor or spinster earning, say, £6 a week—which in terms of 1945, when the Labour Party took office, is equivalent to about £4 10s. a week—paid about £26 and will now pay about £30. The increase rises rapidly with every further rise in income. Indeed, for the bachelor or the spinster there is no new relief, and the Chancellor's increases operate right the way through.

Similarly, an elderly spinster living on an investment income of £300 a year has been paying £41 and will now pay £46. Again, there will be increases all the way through if her income is higher than that. Take, again, a married couple of 60 years of age living on an investment income of £300 a year, which, at present prices, is a very low income indeed. They will have to pay £24—a small increase on what they paid in the past, but an increase that will rise with any increase in income that such a couple may have. The increase rises all the way through from that point.

It is perfectly evident that, whatever be the cause and wherever the responsibility, these are very grave hardships, to which hon. Members on both sides can easily add instances of very many others that will be in their minds. Then, in order to show the scale in human terms, they can multiply them by the number of people involved in the different illustrations. The result will be to show that a very considerable number of people are suffering very grave hardship indeed, which is somewhat increased by the Chancellor's new proposals. Undoubtedly, if we think who are the people involved in these categories we must all realise that, wherever the responsibility may be, we are witnessing, if not the liquidation, at least the gradual but inexorable economic degredation—and degredation to a point at which the body is enfeebled and the spirit broken—of some of the classes upon which much of the prosperity and civilisation of this country has depended in the past.

Mr. Ellis Smith (Stoke-on-Trent, South)

What would the right hon. Gentleman do to solve the problem?

Sir A. Salter

I am coming to that, if I may, a little later.

In this argument I am not suggesting that the responsibility rests upon the selection of this tax as one of the taxes to increase in this Budget. It may be that the main villain of the piece is not the actual Income Tax itself but the height of the Budget, or, rather, I would say the ratio of the total expenditure of the State to the total national income of the country. That is the real villain of the piece. While the Income Tax is the point at which a large part of the consequent hardship becomes felt by the individual, it would be equally true, possibly more true, if other forms of taxation were chosen instead. The real, root cause, is, as I say, the total Budget figure in relation to the total national income is as high as it now is.

We have, of course, all the way through to remember that with rising prices the people of the categories to whom I have referred not only suffer through the reduced purchasing power of the pounds that are left to them after taxation, but they find that the small amount of real income which is exempted from taxation is also being constantly and inexorably restricted and reduced.

8.0 p.m.

I come next to the effect of Income Tax at this height as a result of a Budget of this size upon the incentives to work and production. Here the effect of the Chancellor's changes in Income Tax is comparatively small. The real trouble, as we all know, is the total effect of the Income Tax with its consequence that at a very modest point of income the rate payable on any marginal increases of income is a very powerful disincentive to a man working more and earning more. I will not develop that point because we all know it, and we all know, too, that there is no easy remedy to that situation.

There is no easy remedy in extending reliefs in such a way that this impediment would disappear, because with a Budget of this size it is quite impossible to dispense with revenue to the extent required. Nor is there any easy remedy in exempting, say, overtime from taxation. We all know that the effect of trying to do that would be, in very large measure indeed, to transfer work from one day to another, so that overtime would be earned without any greater total of work or production.

I want to develop a little further the effect of taxation of this size on risk and enterprise. I ask the Committee to think back to the time before the war and to recall how large a part of the progress and prosperity of this country was due to the category of people who were then £1,000 to £2,000 a year men—the leading officials in great industries and organisations or the people who started new enterprises at their own risk and with their own money, or the people who ventured their money in the form of equity and share capital in business and made to so large an extent the capital structure of industry an equity structure rather than a fixed obligation structure. In very large measure, the people from whom these enormous benefits to the economy of the country came were the people who were £1,000 to £2,000 a year men.

What have we now with the doubling of prices and income? The man who was then a £1,000 a year man is now just beginning to enter on Surtax, and the man who was then the £2,000 a year man is now reaching the point at which any further income will attract a 15s. in the £ rate of taxation. I would ask the Committee to consider what this is going to mean, first of all, in discouraging the ambition of the most crucial people in the great organisations of this country upon whom enterprise and expansion depend. What does it mean to a company which is trying to reward, recognise and use the exceptional ability of one of its branch people living in the country? If they are to give so much extra salary as will give enough net income after taxation as to compensate him for coming from a part of the country where he has lived with greater amenities and less expense to, say, the head office in London, the cost to the company is very great and perhaps prohibitive, as any one employed in the organisations of great industries will recognise.

I want also to ask the Committee to consider what will be the effect of taxation of this kind upon people who would have been inclined to take a risk in developing a new enterprise, or, if they did not want to run one of their own, to take a bit of a risk in providing equity capital for industry rather than fixed obligation capital. If we are at a rate at which they are paying something like three-quarters of any additional income in taxation, what does it mean if they are considering whether they will take a risk? The country's interest really requires that if there is an opportunity for progress where the chances of profit are, let us say, double the risk of loss, that opportunity clearly ought to be seized, but in these circumstances it will not be seized if the prospects of profits are doubled or even trebled: they require to be fourfold. In those circumstances, we cannot expect that this country will hold its way in a changing world and in competition with other countries.

In the same way, when it comes to a question of investment money, one of the most regrettable developments in the last 25 years or more is the constant tendency for equity capital in industry to be replaced by fixed obligation capital. The industrial system that depends wholly or almost wholly upon fixed obligation capital is a constipated system. When we look at the changing circumstances in the world and the changing fortunes of companies from one year to another, we cannot expect that we can have in our economy the flexibility that is absolutely essential if this progress is continued further.

Indeed, a Budget of this kind and taxation at this height not only tends to replace equity capital by fixed obligation capital. It reduces the total savings of the country to a point at which the only resource open to the Government is, first of all, to counter the inflation which results when savings are less than the capital expenditure of the country by budgeting for a surplus. Secondly, as time goes on, the result must be a State capital system. If it is true that an economy depending on fixed obligation capital without equity shares is a constipated system, I think that a State capital system is a dying system—unless indeed it can be stimulated into some kind of activity by harsh penalties which are quite incompatible with a free society.

I want, lastly, to discuss for a few moments the relation between the taxation proposed in the Clause and the general problem of inflation. I am not going to be dogmatic as to what form of taxation is inflationary in its effect and what is not inflationary. The real fact is that it is quite impossible to attempt any scientific distinction that remains true and the same in all circumstances. What is undoubtedly true, however, is that the higher the rate of Income Tax the greater is the proportion of the inflationary as compared with the counter-inflationary results of that taxation.

If we were discussing an increase in Income Tax of, say, from 5s. to 5s. 6d., the Chancellor could be confident that the yield of the extra 6d. would be counter-inflationary to the full extent of the revenue so yielded. But with every increase in the rate that proportion will certainly change. I do not know—the Chancellor does not know—how much of the £73 million or so that he expects from this additional 6d., after allowing for the reliefs, will really operate as a net advantage in bridging the inflationary gap.

What I do know, and what he must know, is that it cannot do so to anything like the extent of £73 million. There must be repercussions. How far they go depends upon the psychological reaction to increased taxation, but there must be many reactions of one kind or another which will greatly reduce the extent to which the £73 million yielded by this 6d. is counter-inflationary. I do not for a moment say that there will not be any net result to help him in bridging the gap, but it will certainly be immensely less than the yield of the tax itself.

I now come to the point as to what we should do about it in these circum- stances. I am tempted to go through an argument with myself such as Robinson Crusoe did on his desert island with a table of pros and a table of cons. But I would rather imagine two of my hon. Friends and myself having an argument with each other. It might go like this. One of them would say, "Well, we are impressed by the enormous disadvantages and the enormous evils which result from Income Tax as high as 9s. 6d. in the £ and Surtax running up to 19s. 6d. in the £. Therefore, it is surely advisable for us to vote against the Clause."

The other one, however, might at once chip in and say, "Just a moment! You must take into account some other considerations before you definitely come to that conclusion. You say you must vote against the Clause, but do you really mean that the Chancellor has made excessive provision against what he described as 'the great dangers of increased inflation'? Surely not. If anything, perhaps we should think that his safeguards against inflation are inadequate rather than excessive. Do you then say that in these circumstances we can properly and responsibly advise such a change in the ratio between revenue and expenditure as would result from the sacrifice of the additional increase proposed in the Clause?"

The "con" might, in turn, say to me, "Yes, but remember that you have been arguing that the counter-inflationary effect of this increased Income Tax is doubtful and possibly small." "Yes," the other one might say, "But that is not to say that it does not exist. Is it really a responsible thing that we should be in favour of, and, indeed, demand, real re-armament and still refuse the money which, in the Chancellor's opinion, is required—in order to make that re-armament effective?"

Backwards and forwards the argument could go, but perhaps we have a clue to what may be the decisive factor in the remark as to the place of the defensive preparations in the Government programme. I ask the Chancellor to give us what information he can upon a matter which is causing anxiety in all our minds. What does he intend to do? What does he think he can do? How rapidly does he think that he will spend the money for which he is asking in the Budget, having regard to some factors which have now emerged or become clearer since his Budget speech, such as the raw material position and the manpower position? It is certainly the case that, if for example, he was unable to proceed with rearmament as rapidly as the Government had intended and if there was left an un-disposed of surplus, it would frustrate his efforts, as head of the Treasury, to reduce the extravagances of Departmental expenditure and to prevent those extravagances from being increased.

Can he tell us now whether he expects that, with the Budget he has now put before us, the Government will proceed with re-armament on the scale contemplated when the Budget was first prepared? Is he confident that we shall have the contemplated measure of increased defensive preparation not only in terms of money but in real terms of men and munitions? What can he tell us about that? I suggest to my hon. Friends we should take careful account of what the Chancellor says and consider the extent to which he has felt able to give an answer to this question before we come to a conclusion on this debate.

8.15 p.m.

Mr. Osborne (Louth)

I want to put to the Chancellor and to his hon. Friends one or two considerations rather different from those that have been adduced by my right hon. Friend. I believe that a permanent Income Tax of 9s. 6d. in the £ is far too high, and we must remember that it cannot be judged merely on its own but must be taken in conjunction with the Surtax, which takes up another 10s. and, with the accompanying Profits Tax, which goes up another 30 per cent. We also have to remember that these taxes must ultimately come out of industrial profits. It is the aspect of taxation at such a high rate on industrial productivity that I want to put to hon. Members opposite.

I believe that ultimately both sides of the Committee ought to aim, when times permit, at getting back to something like 6s. in the £, for anything above that tends to reduce the eagerness with which men are prepared to work, either by hand or brain, in order to earn the income we are taxing. I want to put to hon. Members opposite two points on which I hope one day they and their party will change their attitude.

We have to remember that the incomes which are taxed at these high rates come mostly from profits earned in industry, and that the Socialist attitude to profits is largely one of emotion and not of thought. Mention profits and the pulses of hon. Members opposite tend to beat faster. Few things make them more angry than the idea of large profits. It is fair to say that, because of the early development of the industrial age, hon. Members opposite tend to think of profits as being wicked and immoral and anti-social, as something we ought to abolish, if possible. They regard profits not as a reward for efficiency, but as the result of exploiting the workers or, in the phrase we used to hear so often, of grinding the faces of the poor.

Mr. Edward Evans (Lowestoft)

How does the hon. Gentleman know what we think?

Mr. Osborne

I was giving hon. Gentlemen opposite the benefit of the doubt in assuming that they could think at all. The history of the early industrial age, and especially the conditions over 100 years ago, when Lord Shaftesbury was doing his work in connection with the factories, lend colour to the emotional view that hon. Members opposite take of the wickedness and wrongness of profits, and of their anti-social effect.

Therefore hon. Members opposite tend to regard a high rate of Income Tax as something that is socially desirable of itself; that it is, as it were, a social retribution to those who have been successful in industry, and that they are doing good socially, quite apart from the economic merits of the high rate of tax. I put it to hon. Members opposite that that attitude will sooner or later have to be altered.

The second emotional outlook which the Socialists have towards profits is that, things being equally distributed—there is no denying that in the old days they were shockingly, badly and unequally distributed—a high rate of Income Tax does the work that we as boys were taught was done by Robin Hood in Sherwood Forest in taking from the rich and giving to the poor. Many hon. Members opposite—it is useless for them to deny it—think that this high rate of taxation up to 19s. 6d. is the right social policy to pursue.

Speaking only for myself, I think there is a great deal to be said for the way these things were looked at in Victorian days, when the great houses in the West End were being built and the slums of the East End were also being allowed to grow. There was no social justification for the one or for the other. Therefore, in the minds of hon. Members opposite, the evils of 100 years ago are being, as it were, adjusted to some extent by these high rates of taxation. I can understand their point of view.

I should like to give to Members opposite what I consider to be the answers to those two emotional approaches. First, I think it is entirely wrong for them to regard profits and profit-making as something that accrues to the man who is more cunning, more wicked and less socially responsible than his fellows. In a free competitive world, profits are really a payment for efficiency.

Mr. H. Hynd (Accrington)

Did not the hon. Member, at Question time the other day, complain about excessive profits now being paid out and ask that they be restricted?

Mr. Osborne

I did not. I did what I thought it was my duty to do, and I asked whether the Chancellor would meet the members of the great industrial groups and appeal that the dividend freeze should be continued, in order to help the responsible trade union leaders to get back to the wage freeze which they and the supporters of the Chancellor have been utterly unable to retain. As regards the social good that hon. Members opposite have been unable to effect, I felt that we on this side should set an example to them. I am not ashamed of having put my Question.

In a free competitive world, profits accrue to the man who is most efficient. After all, it is the consumer who decides who shall have the big income, the big profits and the dividends to tax. In a competitive world, when the customer had some rights, which today he lacks, he could decide whether he purchased this, that, or the other article, and according to how the manufacturer or the industrialist was able to meet the public wishes he either made profits or made losses.

I ask hon. Members to believe this and to disabuse their minds of bogeys which arose 100 years ago and to believe that today the vast majority of industrialists recognise they have three responsibilities. The first responsibility they recognise is to the consumer. The second is to their workpeople, to provide regular employment, decent wages and adequate conditions. The third, if there is anything left in the kitty when those two responsibilities have been discharged—[Interruption.] Well, in the monkeynuts project there is no kitty to be distributed. We do not offer our workpeople a profit-sharing scheme of losses, but a profit-sharing scheme of profits, and what is left out of the efficiency of industry by way of profits comes to the shareholder or to the owner, and is then taxed.

I want to put this point to hon. Members who represent the trade unions. It is to the benefit of the ordinary worker to be employed by a firm that is efficient, that provides regular work and is not in and out like so many firms which are not so efficient. When I was a boy, a poor man's son in Nottingham, we thought that if we could get into either Player's or Boot's we were made. "Made for life" was the term 40 years ago in Nottingham because once one got inside those companies one had a job for life, a regular job, a good job. Why was that? It was because both firms were efficiently run; they produced good profits and good conditions for their workers. I put it to hon. Members opposite that a firm which is unsuccessful is no good to the workpeople. I appeal to them completely to change their attitude to the making of profits and to the success of business.

Another point I wish to make is that the question of re-distribution of incomes through heavy taxation also merits their consideration. I am sorry that the Chancellor is not here now. He spoke in the De Montfort Hall in Leicester some time in February, and from his speech an important fact emerged. I should like hon. Members who have been jeering to listen to the fact he put forward. He said that if all income exceeding £2,000 a year were taken from the holders of those incomes and distributed to the workers of the country, the workers would get about 6d. per week extra from that surplus over £2,000 a year.

I put it to hon. Members opposite that it is not possible—and I beg them to believe that we on this side of the Committee would dearly like to do it—to give our people a higher standard of comfort. But it cannot be done by taxation. The limits have been reached and if we are to give our people a higher standard of life—

Mr. Tomney

Will the hon. Member take his mind back to the statement he made regarding Jesse Boot's? I believe he is a native of Nottingham and knows the firm of Jesse Boot quite well. He will correct me if I am wrong, but I am of opinion that round about 1927 Jesse Boot's was on the point of going bankrupt and was reorganised by American capital at that time and is still run by American capital.

Mr. Osborne

The hon. Member is quite wrong. It is not Jesse Boot, but Boot's Pure Drug Company, Ltd., and I am well aware of their finances and of their employees. The control was sold in 1923 to an American firm at a figure—I am speaking from memory, because I had a little to do on the side with the deal—of something like £2½ million. They were not going bankrupt. I had a brother working as a bookbinder in Boot's Pure Drug Company, Ltd. He, with all the operatives in Boot's, had a chance to share in the re-distribution of the capital, and it was a very fine thing for him and for everybody employed by Boot's who took the opportunity of having a share in that capital. The hon. Member's facts are completely and utterly wrong.

8.30 p.m.

May I go back to my point? The possibility of improving the standard of life of our people through taxation has been limited. I would point out to hon. Members that the higher rate of taxation plus inflation has made it even harder to give workers any more from the rich. I would remind them that in 1935 a man with an income of, say, £10,000 a year in round figures paid about £3,000 in Income Tax, and had about £7,000 to spend for himself, or save or give away. Today an income of £10,000 a year, again roughly, means, instead of paying £3,000 in Income Tax and Surtax, paying £7,000 and getting about £3,000 for himself. But that £3,000 in real purchasing power is worth only £1,500. It buys considerably less, since the purchasing power of the pound today is about 10s. compared with 1935.

I put it to hon. Members opposite that the men who previously carried responsibilities in industry and trade and in party politics, and in the nationalised industries, will not do it for £1,500 a year. If taxation coupled with inflation continues as it has been doing since the Socialists came into power in 1945, we shall have difficulty in finding men to carry the heavy responsibility that industry requires. In the nationalised industries and in politics there are all sorts of extra perquisites which come to the holders of high office, and which are not to be obtained in ordinary industries. I say again that Income Tax at 9s. 6d., plus Surtax, is a great deterrent to men of more than usual capacity to carry the responsibilities and the burdens which industry must impose upon some.

Hon. Members opposite are faced with this dilemma. The capitalist system was run with a driving force which was hope of reward, large salaries, large dividends, large incomes—

Mr. Douglas Houghton (Sowerby)

And small wages.

Mr. Osborne

That interjection comes from a very small mind.

Mr. Houghton rose—

Mr. Osborne

No, I cannot give way. I am trying to put forward a serious and reasoned statement of the case for profits.

Mr. Tomney

And for Surtax.

Mr. Osborne

Yes, and for Surtax.

Mr. Tomney

I wish Surtax worried me.

Mr. Osborne

The hon. Gentleman says he wished that Surtax worried him. At least he had as good a start in life as I did. He had the same chances—[Interruption.]—that is quite fair—he had the same chance, and if he has failed, he has failed because he is a failure—[Interruption.]—and if hon. Members like to take it, that applies to more than one hon. Member sitting opposite.

I was saying that the capitalist system which produced high incomes, and could carry the heavy rates on it, had as its driving force the hope of reward. I would remind hon. Members, although I know today it is very unpopular even with certain hon. Members on my own side of the House, of what Lord Birkenhead said to the Glasgow students in 1922. He talked about the glittering prizes that life had to offer—and the need for sharp swords and stout hearts, too. Hon. Members think it is wicked that these glittering prizes should go to men in industry, but they grab hard enough to get them in politics. See a Minister fall or about to fall, and see his friends run from him. See a Minister rise and see the people running round him.

Mr. Turner-Samuels (Gloucester)

On a point of order. Is this tergiversation in order?

The Deputy-Chairman (Colonel Sir Charles MacAndrew)

I hope that the hon. Member for Louth (Mr. Osborne) will not develop his argument too far.

Mr. Osborne

I am sorry that my medicine is so unpalatable to hon. Members opposite.

Finally, I would point out that the dilemma they face is that if these high taxes are to be forthcoming they can only come out of an efficient industry. At least, I carry them so far. If the whole industry of the country fails, then the Chancellor will not be able to get the money he requires either for re-armament or for the social services. At least, hon. Members opposite will admit that much. I maintain that in industry the men who carry the responsibilities are worth paying for carrying those responsibilities, to the same degree that politicians who carry the top responsibility are worth Chequers and other perquisites that go with high office.

Therefore, I say that if the economic machine is to function to 100 per cent. capacity, we must sooner or later get down these high rates of Income Tax and Surtax. I realise, as we all do, that whilst the cold war is on—a cold war that may one day become a very hot war—whatever it costs we have to pay for re-armament.

Mr. Edward Evans

Who is to pay—the rich or the poor?

Mr. Osborne

We are all paying for it. Therefore, for the time being, high taxation is inevitable. But I ask the Government and hon. Members opposite to look at this problem from a less prejudiced point of view. I ask them to realise that if, when times become normal, we are to get the high state of efficiency in industry which will be needed to maintain a high standard of comfort for the people, then sooner or later we must bring down our rates of Income Tax and Surtax.

Mr. Edward Davies

We have just listened to two speeches from the Opposition and we have been treated, in the latter instance, to some most offensive remarks based on false premises. The burden of the speech of the hon. Member for Louth (Mr. Osborne) was that the efficiency of industry could not be maintained, nor would men be forth-coming to serve their country, unless those at the top were rewarded in a highly disproportionate manner compared with the lower order of workers who had, as he would view it, less responsibility.

We heard the same argument during a Budget debate some years ago when Sir John Anderson, who then represented the Scottish Universities, made out a similar case. The hon. Member for Louth said that the justification for high rewards and high salaries was that men in managerial and other positions of responsibility would not accept those obligations unless they were amply rewarded. He said that, to that extent, we should all suffer and our economy would be the worse. To begin with, that is a false premise.

I submit that the gentleman recently cited, whose income, we are told, was reduced from £10,000 to £3,000 a year, had a sufficient income on which to live a full life and render useful service to the community. I put it to the hon. Gentleman and the Committee that there are many professional men who do not derive their income from a capricious economic system but who give first-class services. What of the missionaries and doctors in the Colonies, who after a first-class education, have gone out there, sacrificed their family life and worked for notional or nominal sums of money in the service of their country?

The hon. Gentleman also said that the mark of efficiency was the amount of reward which men in industry received. I submit that the conditions which we have seen in the world recently give the lie to that statement. The fluctuations of raw materials and commodity prices has been a great gamble and speculation, and I think the hon. Gentleman would admit that, because of some fortuitous circumstances, a man who had rendered no service at all might find himself the heir to a great fortune, or, on the other hand, might lose a great fortune. It certainly gives the lie to his argument that his reward is the mark of his efficiency.

Third, I submit this for the hon. Gentleman's consideration. As he looks around the country today and examines company reports, would he say that the increased rate of Income Tax over the years since the war is any evidence of decadence in the economic life of the country? Company report after company report, and the evidence of the Chancellor of the Exchequer, shows how profits have risen in the last few months, and supports us in the view that industry is doing very well. We do not complain about that, but I submit that there is no tangible evidence that there is a lack of managerial skill or of men being sufficiently unpatriotic and anti-social as to be unwilling to accept responsibilty at the present rewards.

Mr. Osborne

I am most grateful to the hon. Gentleman for giving way. All I want to do is to remind him that Lord Citrine, Secretary of the T.U.C. for many years and a very eminent and respected Labour leader, became Chairman of the Central Electricity Authority, not at a salary which the ordinary worker was receiving, but of £8,400 a year and perquisites, and he is by no means an isolated case. Therefore, the hon. Gentleman buttresses my statement that, on the whole—I agree there are exceptions—men carry extra responsibilities if they are paid so to do.

Mr. Davies

I think the facts as put by the hon. Gentleman are correct. So far as Lord Citrine is concerned, in my view, he is doing a very good job, but, in so far as we compare his salary with some of the payments in positions in some of the big monopolies, corporations and private undertakings, like Woolworths. I.C.I. and Unilevers and corporations of a comparable size, his salary is modest.

We have never put forward the view, held by some people like Bernard Shaw, that Socialism means absolute equality in terms of money incomes. The view we put forward is that, in a Socialist society, money income has less significance in so far as we increase the social services and assure a man against times of misfortune in terms of industrial accidents, provide for old age, the education of children and the rest of it. In so far as we do that, the significance of actual money incomes is reduced, and, to that extent, I think the proposals made today are very modest ones.

I say that they do not discourage incentive amongst properly socially-minded people who wish to see this country emerge from its present difficulties, and who believe that they are living in a world of great opportunities. I think that the view which the hon. Gentleman has put forward does not represent the views of many men in industry today, and certainly does not represent the views of my countrymen whom this party has the honour to represent.

8.45 p.m.

Mr. Boothby (Aberdeenshire, East)

I thought that my right hon. Friend the Member for Ormskirk (Sir A. Salter) rut his finger on the crux of the problem we are discussing when he drew attention to the relationship between the total volume of taxation, amounting to well over £4,000 million, and the total size of the national income. The proportion is about 40 per cent. We maintain that it is a perfectly valid proposition to put forward that that is what is now having an inflationary effect, that too much of the total national income is, in fact, being taken in the form of taxation and that the effect of that going on, as it has now been going on, year after year is bound to be in itself inflationary, and will therefore aggravate the fundamental problem with which we and most other countries are confronted.

The remedies for inflation are not in dispute. I do not think that the Chancellor of the Exchequer would disagree for a moment that they are increased productivity, the deliberate restriction of credit and the encouragement of saving and of investment. Those are the obvious classic remedies for inflation. I cannot deal, on this Clause, with the question of restricting credits, although I must say I am surprised that the Chancellor has not done a little more in that direction. However, I do say that the proposed rate of Income Tax is certainly not designed to increase productivity, that is, greater output at lower costs. I cannot see that a 9s. 6d. standard rate of Income Tax can possibly be expected to do that.

Another point which seemed to me to be of immense importance was raised by my right hon. Friend. It was the question of risk capital. There is a shortage of risk capital in the country at present, and that shortage is bound to increase until it reaches dangerous proportions if the present rate of direct taxation is maintained. We shall increasingly become a country of debenture and preference shares. No one on either side of the Committee would argue that the British Empire was built up by holders of debentures—by the safety first policy. It was built up by risk capital, by people who really were prepared to take a risk in the hope of making a little money.

Who is going to risk their capital today—and we must remember that the risks in the world at present are perhaps greater in some respects than they have ever been—especially if it is put overseas, if he is not allowed to take a profit should the risk come off—after all he takes the loss if it fails—and if, at the same time, he knows that money is depreciating and that costs and wages are steadily rising? No one is going to risk what savings he has left—and they are rapidly disappearing under the present régime—if he is not going to benefit if the risk comes off. That is where we have got to at the present time.

I now turn to the question of personal saving and investment, because I believe it to be one of absolutely vital importance. There is now a net deficit in savings of £90 million, and if we add to that sum the interest paid by the Government on saving certificates, it comes to about £120 million. No one can say that that is good, and I defy the Chancellor to state that an increase in the standard rate of Income Tax will stimulate saving or investment by anyone in this country.

The fact is that before this extra 6d. goes on it is today impossible for anybody to save money out of earnings. This is a question which, sooner or later, the House of Commons will have to face seriously because it has enormous social implications, which were touched upon by the hon. Member for Stoke-on-Trent, North (Mr. Edward Davies). He suggested, with some truth, that with the extension of the social services and the creation of what we call the Welfare State it was becoming less necessary for anybody to build up personal savings because they would be looked after by the State from birth to death. The question has to be faced—and it is raised directly by this Bill—whether we want to bring up a population all of whom are dependent completely from birth to death on the State and the creative members of which are denied the opportunity of building up any kind of nest-egg of their own.

A good many people who still have capital are spending it. That will not go on for ever. When that is gone there will be practically no capital left in private hands. I mean by creative people not just managers of Unilevers but professional men, artists, scientists, doctors, surgeons, barristers, the creative people in this country who ought to be making, saving money and investing money. They are not allowed to do so.

Mr. Edward Davies

I think there is some truth in the hon. Member's argument, but does he not know of instances where people have been taken out of poverty and, with the comfort derived from an adequate income, have been able to develop their creative personality to a greater extent than have men and women who have been exercised about making ends meet? What about Florence Nightingale, for instance, who had a private income?

Mr. Boothby

I should be very glad to examine the character and performance of Florence Nightingale, in whom I have always taken an historical interest, but I think it would be out of order on this Clause to go into that matter too deeply. One could name people and say that the development of their personality did not depend on their cash. It is true that it does not depend on great wealth, but I should be inclined to say that in many cases the development of personality was dependent upon the kind of freedom that one can only have if one has some savings of one's own and is not entirely dependent for one's fortunes and the fortunes of one's wife and children upon the State. In other words it depends upon one's not being in a position where one has no say in the personal conduct of one's own affairs, which is a condition we are gradually approaching.

My own solution, which, I believe, may come, for this problem is that after we have taken care of the small rentier class, of the spinsters, the widows and pensioners and all the people who have a small amount of independent income—and their allowance should be as great as the State can afford—we shall have to make a far bigger differentiation in the taxation of earned income at every level right through to secure the incentives necessary for maximum production at the present time.

This does not really raise the issue of Conservatism against Socialism and I wish this Government had faced this problem long ago. It is a serious factor that, at the moment, nobody in this country is able to save money out of earnings. This proposed standard rate of Income Tax is not an incentive but a further disincentive. Goodness knows, the problem facing the Chancellor of the Exchequer in financing the re-armament programme is formidable. The choice facing him really boils down to reducing the total size of the Budget somehow and providing greater incentives to people through remission of taxation on earned income, or continuing to rely on inflation to do the job for him, because whether we like it or not our re-armament programme is being financed at present by means of inflation.

Rising prices are doing the job. The total volume of direct taxation of this magnitude is definitely increasing the inflationary pressure. I agree that from the political point of view the Chancellor of the Exchequer could perhaps hardly do otherwise than he has done, but from the economic point of view and, in the long run, from the point of view of the social welfare of the mass of the people in this country, the financing of this re-armament programme by inflation is the less desirable of the two alternatives.

Mr. Grimond (Orkney and Shetland)

I think it was the late Lord Keynes who drew attention to the myth that artists and poets gladly lived and died in garrets. He pointed out that many of them were either born in comparatively good circumstances or made a fair amount of money. I might also say that he pointed out that a good many of them thrived in periods of inflation, and I think we should bear in mind that the £ has probably been decreasing in value since the days of Queen Elizabeth.

Mr. Boothby

But not so fast.

Mr. Grimond

I agree, not so fast. I now come to the point raised by the hon. Member for Aberdeenshire, East (Mr. Boothby), which is that the enormous size of the Budget today is tending to increase the rate of inflation and that it may reach alarming proportions which we have not yet seen in this country. He suggested, I think, two remedies which he said, were generally agreed—the restriction of credit, presumably by higher interest rate, and greater production. I agree with the hon. Gentleman, but also believe that a great problem which faces us today is to make use of the free market and of the very natural desire of man to improve his own lot. There has been a certain amount of discussion about that today. We all know that historically that has lead to great evils, and, for reasons which I do not want to go into, society grew up in a way which was unacceptable.

As a result, we are rather inclined to treat the free market—the profit motive, as it is called—as a wild beast, and when it begins to take effect we try to chain it up. I do not think that is entirely or by any means due to the party opposite. From all parts of the Committee we have the pressure of producers' interests. There only needs to be a trade or an industry getting into difficulties, and it approaches its Member of Parliament who, in turn, asks the Government to intervene. It is unrealistic to talk about the profit motive unless we are prepared to take the rough with the smooth.

The problem which faces us if we want to cut down Government expenditure is to use some more automatic means of bringing about changes in society—that is, a return, to some extent at any rate, to a free system of trade and exchange—and to try to eradicate from that system the great socially evil effects which undoubtedly existed when it was originally tried. Unless we can do that we shall be faced with an almost indefinite extension of Government interference for which every party is responsible.

We are sometimes told that we suffer from too much doctrine, but a lot of what has happened in the last five years is not due to Socialist doctrine. Some of it may have come from party pamphlets and books of philosophers and economists before the war, but a lot is a continuation of what was brought in by the Government before the war and by the Coalition Government during the war to meet war-time circumstances. A great deal more is simply the result of actions taken off the cuff to meet recurring crises in the last four or five years.

It is not planning that I object to, but Government interference brought about by competing interests of producers and the failure to use the free market in a way which will enable us to cut down expenditure, give the consumers' choice a bigger play in our economy and allow us to meet the circumstances of the economic world without at every point trying to block and contort the natural development of economy. What we are actually discussing is Income Tax. I think Income Tax was introduced by the Tories—though I am not sure that its sponsors were orthodox members of the Tory Party, even in their own day. Personally, I think there is a great deal to be said for it. I think it is one of the Tory gifts to this country; it is a good, honest, direct tax which does what it says it is going to do—take a large slab of one's earnings and transfer them to the State. There is no concealment about it.

I think many of us are agreed that, where we can have it, direct taxation is the best form of taxation, and many of us feel that where we intend to give out benefits we should follow the same principle. There is a good deal to be said for the use of direct action in the benefits given out by the State. There is too big an element of truck in the Welfare services. A lot of them are given in kind or are designed to condition the ordinary choice of the consumer. Just as we should take money straight out of a man's pocket if we want to take it from him, so we should pay straight into someone's pocket if we want to give him anything.

9.0 p.m.

But Income Tax has reached such a figure that it is not merely a method of raising revenue. It is a deliberate weapon used by the Chancellor to stop private expenditure, so that it has changed a great deal in its nature since it was first introduced. The right hon. Member for Ormskirk (Sir A. Salter) also pointed out that it was having fairly serious effects on the social structure of the country. I think those effects can be exaggerated, and that the middle and upper classes must sacrifice a great deal of their comforts for the sake of a better distribution of wealth in this country. I should not like to see that process reversed to any extent.

Turning to the professional classes, the fact that they have to spend time in washing up and doing housework is really a great waste of brain power. I happen to have some insight into the Chancellor's own household of which he is not aware, and I believe that in the days before he became Chancellor he and his family spent a good deal of their time in manual labour of a kind which, possibly, in such an eminent man was wasteful.

Mr. Edward Davies

A nice change!

Mr. Grimond

These are not entirely minor points, for one of the greatest assets of this country is brain power, and we cannot afford to waste it. We have lost a great deal of our position in the world; we have lost a great deal of our wealth and we are using up our natural resources. We have not the command we once had. But we have a greater experience, we have a great deal of initiative and enterprise, and if hon. Members look at the inventions of the last few years they will find that the great bulk of them are due not to the Russians or even to the Americans but are due to the British—penicillin, radar, and so on. They are due to this country, and it is important that we should keep the lead in the use of brains.

Mr. Boothby

Is the hon. Gentleman suggesting that we should have been denied the advantages of these great inventions if the inventors concerned had been under the necessity of washing up?

Mr. Grimond

I do not suggest that; I was following the suggestion which the hon. Gentleman himself had made. [An HON. MEMBER: "Who invented the washing machine?"] I understood that the hon. Gentleman said that if these processes were continued we should reach a stage at which the class from which inventors have been drawn in the past would disappear.

Mr. Walter Fletcher (Bury and Radcliffe)

Might I remind the hon. Gentleman that one of the greatest inventions of all time came from watching the tea kettle?

Mr. Grimond

Watching a tea kettle is a very different thing from making the tea or from washing up the cups. I am very willing to watch any number of tea kettles for the hon. Gentleman, provided he washes up the teacups.

This disincentive point is continually brought up in discussions on Income Tax. We are always told that a very high rate of tax is a disincentive to enterprise. How far that is provable I do not know, but it is one of the points which the Royal Commission which is being set up should investigate. I think it is time that investigation was carried out into the other matter that is always mentioned in debates like this—the diminution in risk capital. Is it true today that industry is failing to replace its capital, and is it true that there is a serious lack of risk capital? If it is true it is absolutely disastrous for this country, and unless we are prepared to go very much further towards State control, and in allowing the State to provide capital, then we have got to find some way of bringing back into circulation capital for enterprise.

I do not quite know as yet what remit this Royal Commission will have, but these three points do seem to me points which should be examined in an impartial and calm manner; the effect which a very high rate of taxation is having on our general social structure—and I agree that that is the least important; second, its effect as a disincentive, which is always talked about but about which the actual data is not very clear; and, third, its effect on production of capital.

Mr. Booth (Bolton, East)

I have listened very carefully to this debate, and it has sounded to me rather like a protest meeting of the sort that we always have when there is some financial proposition put to this Committee. I can remember when, under the late Lloyd George, the same things were said and ruin was prophesied, but we have survived all that a long time.

When I speak of Income Tax I speak of something very near my heart. I am very sincere when I say that I have never been enamoured of so much indirect taxation in this country. I agree with what was said by the hon. Member for Orkney and Shetland (Mr. Grimond) about direct taxation. All my life—at any rate, since I began to think about these things—I have thought that if I had my way I would tax everybody as soon as he started to earn. I would tax the office boy. The tax always can be graded according to capacity to pay. I would do this because so many people have no idea of what they pay in taxes and have no interest in them, because so much of the taxation is indirect.

In my more affluent days, when I was a sub-postmaster and tobacconist, a man walked into my shop and asked for 20 Players. They were then half a crown, because the Chancellor of that day was not quite so fierce. Then another man came in and took an interest in another part of the counter. He wanted to put some money into the Post Office Savings Bank. He wanted to place 10s. to the credit of the State. He said about the first customer, "I am a better man than he is. He spends. He spends on things that go up in the air that do not do any good. I lend my money to Britain." It was during the war. I said to him, "That man, though he does not know it, has given about 1s. 9d. to the Chancellor of the Exchequer. You have come to me and put 10s. in, but, like the man in the Bible, you want it back with usury."

I happen to be chairman of a Bolton savings committee, and I know how difficult it is to get savings. It is argued that people are discouraged from saving by this penal taxation. Everybody knows that the main reason for this taxation is the shadow of war, and they are discouraged by this overhanging cloud, which seems to be settling permanently over the people of the world, and the discouragement of taxation is not to be compared with this other discouragement for the London surburban women or those in the built-up areas of Lancashire. We must have some regard to what has brought about this heavy taxation.

When the Chancellor introduced his Budget proposals, I remember hearing tales from hon. Members opposite about the dire consequences, the complete disruption of credit and the chaos in industry. Since then, and up to this very day, there has never been such a spate of bonus share issues. Hon. Members have only to read the financial columns of the Press. There have been queues outside the Capital Investment Committee office of people applying for sanction, and sanction has been forthcoming. Hardly a day passes when there is not an issue of bonus shares. There is a case today of an issue of two for one, in spite of all these things. Let the people know what it costs to run the country, not through the tobacconist, and so on, but by having to pay as they go. Let them see that what is happening abroad places upon this country a terrific burden. If paying 9s. 6d. in the £ averts war, it will be a bargain. That is the way we ought to look at it.

What is the alternative? I have not heard one offered. After all, we do not complain about profits. Profits are earned by good management, and there will be profits in the nationalised industries when there has been time to sort things out. The trouble in the old days was that profits were sacrosanct. I remember, as a Lancastrian, that ours was the only county to produce a bantam battalion, because Lancashire was a fertile field, one reason being that profits had been the first charge on Lancastrian industries. We do not grumble about profits in themselves, if they are used wisely for the good of the industry and for the proper remuneration of the workers in those industries.

Mr. Osborne

Does the hon. Gentleman, as a Lancastrian, not remember that in Oldham, Bolton and all the cotton towns, between 1921 and 1937 half the mills were either empty or half working? Not only were there no profits, but half the people in Lancashire were ruined.

Mr. Booth

I remember the 'thirties, and I also remember the golden days of the 'twenties when the financiers descended upon us from this City offering £20 for £1 shares in Lancashire cotton mills, and then coming back here and talking of penal taxation.

I regard this Income Tax of 9s. 6d. in the pound as a regrettable necessity. It is stringent and penal taxation if you like, but if it is going to bring us back to normal and enable men to be engaged in all the things in which they should be occupied, then let us pay it with a smile.

9.15 p.m.

Mr. Nigel Birch

We have had a very interesting speech from the hon. Member for Bolton, East (Mr. Booth). I must say that I agreed with a lot of it. I agree with him that many people who do not pay indirect taxation do not realise exactly what the Government are doing, and there is something to be said for more direct taxation at the lower levels. I agree with him, too, when he implied that he had no sympathy with those who leave a single talent unoccupied, and I have some sympathy with him in the remarks which he made about profits. We must have profits if we are to have industry at all. He introduced the old bogey of the bonus shares. I do not think that we will argue that again. [HON. MEMBERS: "Oh."] I will argue it if hon. Members opposite wish me to do so.

Mr. Booth

I did not say that there was anything wrong about them. I only mentioned the spate of them since Budget day.

Mr. Birch

I thought that the hon. Gentleman was implying that they meant something more than they do. The right hon. Member for Bishop Auckland (Mr. Dalton) talked the most unmitigated nonsense ever heard in the House on the subject of bonuses and he put a special tax on them. It was taken off by Sir Stafford Cripps, and in his speech he indicated that he took much the same view of the right hon. Member for Bishop Auckland and his statement as we did. Anyone who wants to know about that had better look up the old debates, and he will find them most interesting.

I was very grateful and proud to hear the hon. Member for Bolton say that we had to pay for re-armament, and that if we could get peace it was worth almost anything. That is one of the reasons why we have not put down an Amendment to this Clause. I think that we want to be clear about the ultimate consequences of taxation at this level. When my hon. Friend the Member for Aberdeenshire, East (Mr. Boothby) was talking about the danger that everybody would always be dependent upon the State, he was interrupted by an hon. Member opposite, who said, "What about Florence Nightingale?" That was a most interesting intervention.

If the hon. Member would read the last "Life of Florence Nightingale," I think that he would realise that it was not perhaps a very wise intervention. Florence Nightingale had two very great trials in her life. One was to get the medical administration of the Army right, starting in the Crimea, and the other was to get the medical administration in India right. How did she do it? She did it as a result of a long, violent and bitter controversy with two Government Departments, in which every civil servant of both Departments was violently opposed to her.

She did it by financing out of her own pocket the research necessary to bowl out all the civil servants. She was, in fact, the daughter of a very comfortably off family and she had many rich friends to help her. She was connected with Cabinet Ministers on both sides of the House, and she was, I think, a classic example of how reforms are hardly ever instituted except by people of some independence. If Florence Nightingale had had no independence she would have written to the Ministry and back would have come a postcard saying "Your letter has been received." Nothing more would ever have been heard of her, these reforms would have been delayed for 25 or 50 years, many lives would have been lost, and one of the great glories of our country would not have come about.

Mr. Edward Davies

The argument adduced by the hon. Member for Louth (Mr. Osborne) was that, unless there was a good cash award, the "sacrificial service," as he would term it, would, in some instances, not be forthcoming. That was the point with which I was dealing. I adduced in support of my argument that much of the best service given to this country has had no relation to cash, and, by way of intervention in the speech of the hon. Member for Aberdeenshire, East (Mr. Boothby), I stated that here was a lady with an assured income from her parents who might well have lived in idle comfort but who exercised her great creative talent because of her love for her fellow men.

Mr. Birch

I did not say that Florence Nightingale made any money out of this; indeed, she spent what money she had. The point which was being made by my hon. Friend the Member for Aberdeenshire, East, was that it would be a very dangerous thing if the present development continued as it is doing, because at the end of it we should get to the point where everybody is dependent on the State from the cradle to the grave. He said that if we reached that condition we were losing many of the most valuable things in life.

As the Chief Whip for the Liberal Party said, the Conservative Party first imposed Income Tax. It was under Pitt during the Napoleonic War. It was re-imposed by Peel in 1841. Gladstone, always a great opponent of Income Tax, said that no tax so much demoralised and degraded the people. I think that the great man occasionally nodded, and he was wrong there. It is a question of the scale. I was glad that my right hon. Friend the Member for Ormskirk (Sir A. Salter) began by pointing out how completely the personal allowances are put out of scale by the rise in prices which has now taken place. When the Chancellor was talking about them, it was rather like pretending that what we have to pay for a taxi is what appears on the meter; but that is not the case, and these allowances are out of scale with the present value of money. It is important to remember that we have to look to the rise in the cost of living in the future and must not consider only the rise in the past. The rise is going on with increasing rapidity now, and I believe that it will go much beyond the Chancellor's expectations.

There are two effects about which I wish to talk. The first is the direct effect upon the individual. With a certain amount of wisdom—at any rate we can congratulate him on a certain amount of political wisdom—the Chancellor of the Exchequer has seen to it that the majority of voters are not very much affected by the 6d. on the income tax; but a number of people are very badly affected. There are the bachelors; but perhaps they do not matter so much, for I am a bachelor no longer! Then there are old people living alone who, even after the age allowance have been given, are still badly hit. It is worth remembering that someone who is over 65 and lives alone and has an income of £400 a year at present pays £46 5s. tax and will in future pay £51 10s. That is an appreciable increase when we remember what else is happening all the time.

Various hon. Members have talked about artists, barristers, technicians, business executives, managers, officials and civil servants, all peope on whose brains and talents we depend for the greatness of our country and for its prosperity. They are all knocked about, and it will produce an effect, particularly when in combination with rising prices and with high indirect taxation. We have to remember that Customs and Excise is £520 million higher this year than in 1945 to 1946, and all this comes on top.

But I do not want to talk about the direct effect. I want to talk about the indirect effect on the individual, and principally the effect it has through what taxation at this level does to industry. My first point has not been discussed this evening, but it is an obvious and important one which has not been explicitly admitted by the Government. It is that during a period of active inflation Income Tax is a tax which is not levelled only on income but also upon capital. That comes about because paper profits are not true profits. That is one of the problems which is now going before the Cohen Committee.

I want to quote a remark published this morning which came from a memorandum by the Association of Certified and Incorporate Accountants. They were talking about the definition of a true income. They put it in that jabberwock language which accountants generally use, but I think it is a good definition. They said that a true income is that sum which, at the end of a given period, a business unit could dispose of without impairing the same aggregate of physical assets in the same workable condition as they were at the beginning of the period. It is rather difficult to follow, but what it really means is that you have not made a true profit unless your real assets are maintained out of income at the same time and in the same state as they were before.

Taxation is not now levied on the income as defined by the Association of Certified and Incorporate Accountants. Tax is now levied on that sum which would be provided had there been no rise in the cost of replacement of assets of all sorts. But, as we all know, the cost of replacement is two, three, and four times, depending on the article. Therefore, the whole time the taxation of income is really also a taxation of capital where companies are concerned. The result of that is one of two things: either the real capital of the company is not maintained—and that, of course, is true in a great many cases; the real capital is running down all the time which, in the last resort, is disastrous—or sufficient money has to be made in profits, and a sufficient amount retained in the company after taxation at these enormous rates, in order to make up for the amount of money which has been taxed not on true income but on paper income.

Mr. Scholefield Allen (Crewe)

Is that where the bonus shares come from?

Mr. Birch

Could I give two main illustrations of this? The first I will deal with shortly. Some hon. Members may have noticed that Imperial Chemical Industries have just done what everybody ought to do, that is to say, they have revalued all their assets on the basis of replacement cost less depreciation. Now if one looks at their balance sheet one will see a colossal increase in the nominal value of the assets there, and also that the depreciation allowed by the Treasury upon assets is wholly inadequate to replace them. Therefore, an enormous extra reserve has had to be put aside out of taxed money simply in order to keep those assets in any sort of condition.

9.30 p.m.

The other illustration which I want to give is from a very interesting article by the President of the Society of Incorporated Accountants, which I also read this morning, illustrating the difference between what happens nowadays to a small firm and what used to happen to such a firm. The illustration begins at the price level of the years 1910–13. Supposing that a firm in those days had made a profit of just under £1,000—the exact figure is £997—and had divided it, as was very common in those days, in this way: the family who owned the business spent just under £500 on their living, put back £480 into the business to build it up—all old businesses were built up in that way—and paid the odd £37 in taxation. That was a typical instance in the old days.

Conceive now what would be required to produce the same result in real terms today—that is to say, the same living for the family who owned that business, and the same amount put in real terms to build up that capital. The calculation is that the profit required, as against £997 in 1910, would be £8,066, which is over eight times as much, of which taxation would take £4,946, or over 130 times as much as it took in the old days.

Profits are not up in anything like that proportion to what they were before the war, and the consequence is that in a great many industries there is an actual physical run-down in their assets. The only alternative to people who are unlucky, like the cinema proprietors, who are now being squeezed between the upper and the nether millstones, are the people who deal in commodities such as copper or things of that sort, which have gone up to a very high price, and who may be all right at present at the cost of being jeered at and told they are profiteering and everything else—because no one can make enough money at the present rate of taxation to keep his physical assets in proper order without showing very high nominal profits. They are punished in this heavy way by taxation, and hon. Members opposite think that the crime should fit the punishment and therefore a crime is imputed to them.

Mr. Albu (Edmonton)

Is the hon. Member suggesting that taxation should be so designed as to give a special advantage to the ordinary shareholders in companies over all other income receivers?

Mr. Birch

I think two things: that the State should run its affairs in such a way as to try to maintain money at a stable value and that taxation should be levied on true profits and not on profits which are not true ones at all.

I ask hon. Members opposite to think for a moment about the ultimate consequences of this. The real evil of this is that it is conservative in the bad sense of the term: that is to say, that it leads to social immobility. The present high taxation means that a firm which was in a big way before the war probably can get on somehow or other—it can borrow the money if it has good credit, assets, and so on; but someone who is starting now can never build up a business such as was built up by the great men of the past, whose names we have known through every generation.

In the old days hon. Members opposite said, "We do not mind. We intend to nationalise everything. We intend everything to go to the State." I have no doubt that the right hon. Member for Ebbw Vale (Mr. Bevan) would still say that. He has learned nothing and forgotten nothing—he is a sort of utility Louis XVIII. He has quite a lot of supporters and, as I read the situation, many hon. Members opposite represented by the Fabian Society do not now believe in nationalising. In various articles by the hon. Member for Coventry, East (Mr. Crossman), now leading the "Keep Sideways Group," and other publications from the Fabian Society, we have seen that they have an idea that they should have something different.

One of the distinguished members of this movement is Professor Lewis, of Manchester University. In reading a book of his the other day, I saw that he said something which is perfectly true: The future of the country depends on bold and free entrepreneurship. That is a horrible word, but what he meant was that it depends on somebody having a chance to start something new and getting away with it. I think he is right, but on the present basis it really cannot be done and we have to think what this present immobility means. It means that we cannot get the new building of businesses, it means that many existing businesses are running down and that if any business is to keep going it has to charge high prices for what it produces. That sort of thing cannot go on forever.

Mr. Woodburn (Clackmannan and East Stirling)

I gather that the hon. Member is talking on the theory of this question. Is he aware that in the industrial estates there are quite a number of applications for small factories and that quite a number of people who took small factories during the last five or six years are now moving into the larger factories. I am wondering what was the basis of the hon. Member's experience.

Mr. Birch

If the right hon. Gentleman goes into the matter—and remember that we have to reckon that we had a period of tremendous boom trade—I think that the comparison with any previous period would be found to be extraordinarily small.

The right hon. Gentleman asks on what basis I am working. It is on the figures. Out of taxed profits the build-up of capital must and can only be extraordinarily small. Many of these businesses, particularly in the development areas, have had special help through loans from the Government finance board and it is in effect an indirect subsidy, but that is quite a different thing and is a much more dangerous and unsatisfactory way of building it up. It means that they are dependent on the good will and judgment of the officials of the corporations, whereas so many businesses in the past have been built up against the good will and good advice of officials, banks and corporations.

I do not think this can go on for ever and perhaps this debate is a vote of sympathy for the Chancellor of the Exchequer for the legacy he has been left and for the weight on his tail of so many hon. Members sitting behind him. All we can offer to him is the early prospect of being relieved of the task of his office and the weight on his tail.

Mr. Albu

I do not think we can allow the arguments which the hon. Member for Flint, West (Mr. Birch), or the hon. Member for Aberdeenshire, East (Mr. Boothby), have been using to pass any longer without a reply from this side of the Committee. The hon. Members live, of course, in the period of the good old speculative days of the beginning of the century and of the last century when it was perfectly true that businesses were built up by this sort of speculative enterprise and we had not reached the degree of concentration of capital, the large bureaucratic management of public companies and particularly the degree of reduction of risk entailed in the running of business enterprises which we have seen during the last 10 years or so during which we have had full employment, which we are likely to have for a good time to come.

I think many of the arguments which they use about the necessity for the return on capital, the attraction of risk capital and so on cannot be applied to a large part of our industry, especially in this area. It certainly cannot be applied, in my opinion, to the large public companies which I suppose form something like half, or rather more than half, of the economic activity of this country at the present time. There is no doubt that the return to the ordinary shareholders in those companies is worth considerably more than the risk that they take, when we take into account the annual dividends they receive year by year and capital appreciation, whether it is turned into bonus shares or reflected in the increased share value on the Stock Exchange.

Hon. Members opposite must not be quite so innocent about bonus shares. They are profits made in the past and are an addition to any dividends received in the past. The issue of bonus shares is a reflection of the present economic strength of a company, with the result, of course, that its shares appreciate considerably further in value and considerable capital profit can then be made by their sale without any loss of capital held by the shareholders.

I wish to deal particularly with the argument used by the hon. Member for Flint, West, about the possibility of building up enterprises now. I believe there is something in the argument about the small risk-taking enterprises. It is in the early stages of a new business when there are what I would call real business risks and those running it are risking a good deal of their own capital in trying to build it up. I believe, though I do not think this is the exact Clause on which to discuss it, that there is some case for taxation relief in the early stages of a new business enterprise.

Mr. Birch

I intend to try to frame a new Clause on that subject and I hope to have the support of the hon. Member.

Mr. Albu

We shall see about that when we see the Clause. This is not, incidentally, the first time I have said this during a discussion on a Finance Bill. But when the argument is extended to cover shareholders in public companies, it really makes complete nonsense. There has been absolutely no difficulty on the part of public companies during the last four or five years in raising fresh capital in order to maintain or extend their assets.

The argument used by the hon. Member for Flint, West and by the hon. Member for Aberdeenshire, East that the real capital of companies should be maintained by remission of taxation will only have the effect at the present time, when prices are rising, of giving to the ordinary shareholders, who are the residual beneficiaries of the profits of these companies, an advantage over all other income receivers or other investors in the community.

Mr. Brendan Bracken (Bournemouth, East and Christchurch)

Is the hon. Gentleman sending an encouraging message to the Prime Minister of Persia?

Mr. Albu

I am very sorry, but as usual I cannot follow the relevance of the remark of the right hon. Gentleman.

Mr. W. Fletcher

The hon. Gentleman has used the phrase "raising capital to maintain assets." Could he explain a little more clearly exactly what that means.

Mr. Albu

I should have thought that almost anybody who had read reports of the speeches of almost any company chairman would have understood what I meant. They have all complained they are unable to maintain their assets out of their profits and have had to raise fresh captial in order to do it. If this is not the case, what is the argument? I thought the argument was that it was not possible to maintain the assets of the company out of profits left after taxation. I agree that that may sometimes be the case. I am merely saying that there does not appear to be any difficulty in raising further capital in order to do so. I think that is perfectly fair.

9.45 p.m.

If this is not done, the result is that the ordinary shareholders maintain the real value of their investment in money terms, and they are the only section of the investing community, or the saving community, that does so. There is absolutely no right for the ordinary shareholder in a public company who takes very little risk at present, who plays no part in the management of the concern, to receive any benefit which no other saver, no other pension receiver, no other receiver of any fixed income, gets at present. It is time that right hon. and hon. Gentlemen opposite realised that in fact this is the point of view of this side of the Committee.

If it could be shown that there has been difficulty in raising fresh capital in order to maintain and expand the industrial activities of the country, then hon. Gentlemen opposite would have a case; but, in fact, there has been no difficulty whatever during the past five or six years. When, for instance, the hon. Member for Aberdeenshire, East, was pleading the case of the professional classes and pointing out that they are unable to save at present, I wondered how he accounted for the very great increase in the savings invested in insurance companies. These insurance companies are themselves expanding their own investment in risk enterprise.

Mr. Lyttelton

I trust that the hon. Member will pursue this enchanting argument a little further and explain to the Committee why the raising of further capital against the same assets enhances the value of the existing shares.

Mr. Albu

I am sorry that the right hon. Gentleman misunderstood what I said, If one does not have to raise fresh capital and if one is able to maintain the assets out of profits, the value of the ordinary shares rises. If one has to raise fresh capital, the value of the ordinary shares remains relatively the same. I am in favour of the latter, and in fact that is what is taking place. Ordinary shares are not falling. On the other hand, in this country, the index of share prices has not gone up as much as it has in other countries.

That may well be because of the taxation we have had and because of the fact that it has been necessary, in order to expand business enterprise, to raise this capital. I see no reason why public companies in this country should not be forced to raise fresh capital in order to expand their activities and to develop new technical and other resources. The yield of ordinary shares has certainly been adequate, and there has been some capital appreciation. I think that that is sufficient.

If we were to follow the argument of the hon. Member for Flint, West, and apparently of the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton), what would have happened is that the, index of ordinary share prices, instead of being around 130 today—I forget the exact figure; it is probably higher—would be something like 200. I see no reason why the wealth of ordinary shareholders in public companies should have doubled since the end of the war when the savings of other members of the community have been rather reduced by the rise in prices. But apparently hon. and right hon. Gentlemen opposite think that the very small number of people who have ordinary shares—not many more than one million—should be the only class in the community to continue to benefit from rising prices and full employment.

Mr. Mott-Radclyffe (Windsor)

I hope that later in this discussion either the Chancellor or the Financial Secretary to the Treasury will be able to explain a little more clearly than the hon. Member for Edmonton (Mr. Albu) the exact process by which anybody would benefit in the raising of fresh capital to maintain the existing assets of a company. I do not move in the realm of high finance myself, and I found that argument a little difficult to understand.

I believe that there are two quite simple tests which should be applied to any fresh taxation proposal by the Chancellor, and that they should be applied particularly in the proposal to increase the standard rate of Income Tax by 6d., as in Clause 13. In the first place, does the increase in the tax reward or penalise skill and thrift? That is the first test. The second is this: Does it stimulate or stifle savings? I claim that the increase in the standard rate of tax falls most heavily upon those who, by now, should be entitled to a little lightening of the burden which they have borne for so long.

It falls on the single wage earner and salary earner, the retired person living on a pension—and, incidentally, many of these retired people living on their pensions have rendered very distinguished and valuable service to their country—and it falls particularly heavily also upon elderly people living on the income out of their savings. Furthermore, the increase in the standard rate is a direct discouragement to a very wide range of technicians, managers and higher salaried officials, who are just the very people whose skill and imagination we ought to be encouraging in the highly competitive world of today.

Secondly, in so far as savings are concerned, the figures speak for themselves. My hon. Friend the Member for Aberdeenshire, East (Mr. Boothby) referred earlier in the debate to the fact that, in the year 1950–51, the total net deficit was £90 million. No Chancellor can afford to ignore these figures, and, if I may say so to him with respect, it really is no use exhorting us to save and then inserting a provision in the Finance Bill which will make saving proportionately more difficult.

The truth is that when taxation reaches a certain point it is almost impossible to save, and beyond that point taxation is met either from money which otherwise would go into savings, or, in some cases, the increased taxation is met by taking money out of savings. The same sum of money cannot go in two different directions at the same time. It can either go into the Chancellor's pocket in the form of taxation, or into National Savings certificates or some other form of Savings. It cannot do both at one and the same time. In parenthesis, may I remind hon. Gentlemen opposite, who are so keen at times to decry what they call unearned or invested income, that the interest from savings is treated by the Inland Revenue as unearned income?

It is precisely the desire to save for one's old age, for one's children or for an unforeseen emergency which might arise later in life, that is one of the fundamental urges spurring a man on to further efforts. If we remove the possibility of saving, or make it more difficult, in a great many cases we shall actually remove the accompanying incentive. How often do we hear today the phrase, "This job is not worth the sweat"? We hear it from the wage earner, whose overtime rates send him up into a higher P.A.Y.E. category. We hear it from the higher salaried man who has been offered a better job with vastly longer hours of work and greatly increased responsibilities, but who, as a result, is very little better off, if at all, because of the increased tax liability.

I think the Chancellor would agree if I say that the future of our economy depends upon our capacity to save, both as individuals and as a nation as a whole. The trouble is that the Government themselves have not put anything by for a rainy day. They have put nothing into the kitty on which they could draw in times of emergency such as these. Had they done so, had they spent less of the nation's total income then, of course, there would have been some slack to take up which could have been used to pay at any rate for the early stages of the re-armament programme without imposing a fresh burden upon the already grossly overburdened taxpayer.

The Government themselves have not set a good example of the thrift which they preach to others. It seems to me that we are now moving into a new era of Socialist economics. We are all used to paying for things which we have or enjoy, although we do not always enjoy the things we have. But, today, vast sums are being extracted from the taxpayer while he receives none of the objects for which the money was taken. We have thus paid £36 million not to have groundnuts, just under £1 million not to have eggs from Gambia, and about £2½ million not to enjoy having the Festival Gardens opened on the appointed day.

I believe that our prosperity depends to a great extent, in a commercial world, on the country's capacity to take risks, but I do not believe we can persuade many to take a risk if, as the result of a successful venture, one is left very little better off after tax has been deducted than if it had been unsuccessful. So long as the ratio of total Government expenditure is so high in relation to the total national income, so long will the Chancellor have to extort from the country so high a proportion of the nation's income in the form of taxation. In my view, a flat rate of Income Tax of 9s. 6d. in the pound with Surtax on top is in itself absolute proof of a wholly inflationary and irresponsible financial policy.

Mr. Ivor Owen Thomas (The Wrekin)

The last two speeches delivered by hon. Members opposite indicate that they are still living in the glorious past, or, rather, the supposedly glorious past of Tory prosperity. The hon. Member for Flint, West (Mr. Birch), went as far back as the days of Florence Nightingale and used the illustration of the life of that lady as proof of the utter irresponsibility of Government Departments, and even of Governments, in the face of terrible social tragedies, and of the failure of such Governments and Departments to face up to those responsibilities.

I was interested to note that he went back for that illustration to days when politics were practically dominated by Toryism of the old school, and, perhaps, of the old school tie. [An HON. MEMBER: "Do not forget the Whigs."] We can bring in the Whigs if desired, for both parties were much of a muchness. There was not much difference between them, and it did not matter very much to the bottom dog at that time which crowd happened to be in power.

10.0 p.m.

That illustration of Florence Nightingale and her struggle brought to my mind, and I am sure to the minds of my hon. Friends on this side of the Committee, the struggle that has been taking place between the forces of reaction in this country and the forces of progress. It is not an exaggeration to refer to the forces of reaction as those which have been repeatedly led by Tory Governments in this Chamber and the forces of progress have been those outside clamouring through the years for a fair deal. It was not until the Labour Government, the Labour Party and the trade union move- ment became strong enough to take an effective part in the national life of the country that any fundamental change took place in the relationship between the great underpaid and poverty-stricken and the privileged few who dominated this Chamber.

Mr. Bracken

Is the hon. Member making a severe attack on the new chairman of the Iron and Steel Corporation, Mr. Hardie?

Mr. Thomas

I make this admission straight away, that in the purely technical sphere of business management, we have had outstanding successes in the business world whether politically they were Tories, Liberals or what not. As a matter of fact, there were other elements in the business world besides what one might call the honest, trained, skilled business expert who made a good job of the task of which he was given the responsibility of discharging. There were, of course, the other crowd in the background.

My point is that it was not until the challenge of awakening organised democracy in this country came on the political scene that any responsibility was even accepted by our opponents and their party predecessors. After all, who are the great outstanding figures—

The Chairman

I am sorry to interrupt the hon. Gentleman, but I must point out that we are dealing with the question of Income Tax.

Mr. Thomas

I must plead, in extenuation, that I did not bring in Florence Nightingale, and I am really trying to bring out certain features of the arguments which were adduced by the hon. Member for Flint, West, and on which he was absolutely silent. The hon. Member has the rather unhappy knack of stating a premise and then drawing false conclusions. If his premise was correct that everything in the garden was lovely before the Labour Party came on the scene, and that the Tory Party were such outstanding champions of equality, democracy and fair play, why did the electorate of this country throw them overboard at last when a new aspiring party came on the political stage? The greatest damnation of the Tory Party's claim to be the champions of democracy and fair play is their own miserable, deplorable record in the field of social services in this country.

Air Commodore Harvey (Macclesfield)

In his most interesting speech the hon. Member has forgotten to mention the Liberals. Will he give them a break?

Mr. Thomas

I pay this compliment to the Liberals. Although they failed to work their passage into the land of promise, at least I think they had a social conscience, which is more than can be said of the Tory Party.

What about the comparisons made by the hon. Member for Flint, West, between these times and the happy days of freedom from taxation and the low rate of Income Tax in the 'twenties and 'thirties? While I listened to the hon. Member painting that beautiful picture of the Tory paradise in those years I began to believe that I had not been living and experiencing certain things in that period. He nearly led me to believe that the Tory Party had been responsible for giving a fair deal, for instance, to the miners in the Welsh valleys and that everything in the industrial field was absolutely healthy and prosperous during those years when we had a succession of Tory Governments. It was only when I remembered certain outstanding facts—

The Chairman

I am sorry, but if the hon. Gentleman will forgive my saying so, his speech is not relevant to this Clause. I must ask him to be relevant.

Mr. Thomas

I am relating the condition of the people in this country to taxation as provided in the Bill, by comparison with the condition of the people in this country as related to taxation imposed when the party of the gentlemen opposite were in power.

The Chairman

Order. I fully appreciate the hon. Member's point, but that is not the question before the Committee. That question is the proposed increase in the rates of Income Tax. The subject of social conditions and so forth is quite incidental to the argument. I must really ask the hon. Gentleman either to be relevant to the matter before the Committee or to resume his seat.

Mr. Thomas

I will conform with your Ruling, Major Milner, and relate my remarks more definitely to the question, but in my opinion the argument I was adducing had a specific relationship to the matter which the Committee is discussing.

The hon. Member for Flint, West, went as far back as the middle of the last century, and I thought that I was at least equally in order in saying what I have been saying for the last five minutes when we remember that the hon. Member was holding forth about the merits and virtues of previous Tory Governments. In any event, I will leave that question. [HON. MEMBERS: "Hear, hear."] If hon. Members opposite were not quite so conceited and vain they would admit that there may be a possibility of their learning from something said from this side of the Committee as well as from listening to the profound economic analysis of their own purported leaders in the field of economics.

This scale of Income Tax—[HON. MEMBERS: "Hear, hear."]; this scale of Income Tax—[HON. MEMBERS: "Hear, hear.]; this scale of Income Tax—[Laughter.] I will vary it a little if hon. Members like. The scale of Income Tax arises particularly from a few outstanding facts. The hon. Member for Windsor (Mr. Mott-Radclyffe) seemed to develop the argument that if any other Government were in power they could slash expenditure right and left. [HON. MEMBERS: "Hear, hear."] There would be no need for vast armament expenditure—

Mr. Manuel (Aryshire, Central)

Now cheer that!

Mr. Thomas

The argument was that there would be no need to take all the precautions the Government are taking in concert with the North Atlantic Treaty Powers and the Dominions. But hon. Members opposite give no indication as to what part of the national expenditure they would slash for the purposes of economy. I shall put some definite questions to the Opposition which I hope will be answered before the debate on the Bill concludes.

10.15 p.m.

The first question is this. They plead for economy—the reduction of national expenditure. Would the Opposition, if they were the Government, reduce family allowances? [HON. MEMBERS: "We started them."] Would they reduce—

The Chairman

This question is not relevant to an increase in Income Tax, and I must warn the hon. Gentleman that unless he is relevant, if he proposes to go on with his speech at all, I shall have to call the attention of the Committee to his continued disregard of my Ruling, which, as he knows, will, unfortunately, have certain consequences. I do ask the hon. Gentleman to make his speech have direct relevance to the Clause before the Committee, irrespective of what he alleges any other Member has or has not said.

Mr. George Thomas (Cardiff, West)

On a point of order. [HON. MEMBERS: "Oh."] I realise that hon. Gentlemen opposite are in the right mood; I wish they would be quiet. If my hon. Friend is relating his argument to the effect on the social services of the rate of Income Tax, would not that be well within order?

The Chairman

I cannot discuss the whys and wherefores of the hon. Gentleman's case, but, in my view, the hon. Member who has the ear of the Committee was not so relating his argument. In any event, I must ask him to obey my request.

Mr. I. O. Thomas

I was approaching the end of the development of my argument, in reply, I claim, to the case consistently put forward from the benches opposite in the debate, and I think that we on this side of the Committee have the right, and should exercise the right, of answering the case. Anyway, one further point—one further question. It is this. Would they reduce the social services in order to be in a position to reduce the taxation provisions as contained in Clause 13? If not, how would they effect those economies which they claim should be effected, and which they claim can be effected, and should be sought and attained by the Government of this country at the present time?

I say this finally to the Opposition, that in attacking the Government's proposals in regard to Income Tax, without putting forward a tangible alternative to the policy now being pursued by the Government bearing upon national expenditure, they are being entirely unreal; that they are false to the facts of the situation; and that it would be no exaggeration to say that they have been absolutely dishonest to the people of this country.

Mr. W. Fletcher

I have listened entranced to the voice of the forces of progress, which certainly made up in length—

Mr. Henry Strauss (Norwich, South)

And in irrelevance.

Mr. Fletcher

—for what it lacked in clarity. As I think it is rather important that we should get on with the real discussion of the effects of high taxation, I do not propose to follow further what the hon. Gentleman had to say.

However, I think it is necessary to refer to the speech of the hon. Member for Edmonton (Mr. Albu). He went to the London School of Economics, and his economic playground seems to have been the maze at Hampton Court, because it was almost impossible to follow—I doubt very much whether he himself was able to follow—his argument. I think he must have struck terror into the heart of the Chancellor of the Exchequer. After all, his plea was that one only had to go in for the purchase of ordinary shares to be ensured of making a rapid fortune. How, then, can the Chancellor expect in future to get anything with 3 per cent. or 3½ per cent. in the way of fixed interest on Government securities?

Following the lead of the hon. Gentleman, no doubt he and all his followers, and everybody in the country who reads the words of wisdom which the hon. Gentleman let fall will see opening before them the pearly gates of the way to a great fortune—and an untaxable fortune, because it will be in the form of capital profit, and therefore will escape taxation. I think that he has done a great disservice to his financial leader, and he should be very much more careful in future.

He rather opened up the question, which has been touched on by other hon. and right hon. Members, of the rôle of risk capital and how it is affected by the high level of taxation. There is a considerable misconception on the other side of the Committee about risk capital. Too many hon. and right hon. Members opposite seem to think that it is a sum of money in the hands of individuals which is used for a speculative purpose, and of which they themselves control the destinies. The vast amount of risk capital in this country is not of that nature at all. It is invested in public companies whose policies are directed by the boards of directors, and the great trouble that arises from a very high level of taxation, and from other obstacles that are put in the way, is that a state of mind is being induced which makes it almost impossible for the director with a conscience to take the risks that he should take with that capital.

It is very important to bear in mind that any company whose construction contains fixed interest-bearing capital in the form of debentures and preference shares has capital which is very often just as much at risk as the ordinary capital. When, through force of circumstances, the whole assets of the company are in jeopardy—and we have an instance before our eyes at the present moment—it is not only the ordinary shares and the ordinary capital that are at risk, but the whole assets of the company.

If the minds of directors and those who are responsible—who in this country have traditionally been bold and enterprising and balanced risks very successfully—there is induced the idea that to take those risks is a very bad bet, very soon the economy, not only of this country but of all the countries which have depended for their development on capital exported from this country, will gradually be brought to a standstill. No clearer indication could have been given than that given by Lord Reith in his Report on the Colonial Development Corporation.

It is perfectly clear that at the present moment the path of the directors is very different from that which existed in the era when, because of our development, we had a £2,000 million cushion with which to take the shock at the beginning of the last war. It was a 220 yards race with a nice prize at the end then. Now it is an obstacle race, with new obstacles being interposed at every period, and the prize is probably a lemon or a groundnut.

The Chancellor of the Exchequer should really think of the dangers that he is running on long-term development by the state of mind which he is inducing and forcing upon those who have to look after these things. If a person goes to the race course and permanently backs outsiders, he may be very lucky over a short period during which he has golden success and is envied for his brilliance by all around him. But as a long-term financial policy, no serious board of directors could possibly continue on that path.

At the present moment the companies which are developing the overseas markets that allow us to export the manufactured goods of this country, and attempt in some way to balance our trade, are committed in many instances to heavy local taxation, not all of which is set off against taxation here, to heavy taxation in this country and to depreciation which they cannot easily meet out of their normal revenue. Therefore, when the position is put before the directors at a board meeting—and that is the moment when a decision has to be taken on risk capital—they must say to themselves: "I, with a sense of responsibility on behalf of those who are investing their money in this company"—and it is they whose capital is being risked—"cannot take this risk. The political horizon is cloudy. If it were an even risk and taxation were not such a burden and if I were not pointed out, as in a later Clause of the Finance Bill, as being a villain of the deepest dye because I am a director of a company, I would take this risk." The average director, whether he knows it or whether he does not, recoils now from the risk that he would have taken before.

There is a much worse effect. There is no new class of young people growing up to inherit the very great art of employing risk capital. The City of London is predominant over any other city in the world in doing that. If this lost art of taking a business risk with capital is too much suppressed and those who are responsible for policy in every sort of company are hedged round as they are at present, what will be the result?

The right hon. Gentleman is trying to freeze capital in this country and stop its export. What he cannot do is stop the export of the brains and knowledge which know how to use that capital. It is the high rate of taxation on individuals and the enormous weight which is put upon them as administrators of public money entrusted to them which is driving them out of this country. [An HON. MEMBER: "Where to?"] To a great many places in the British Empire which will welcome them, and which will give them a much better deal than they get here in many ways; and to many other countries.

Mr. Manuel

What about Florence Nightingale?

Mr. Fletcher

Florence Nightingale had a lamp which had a flame in it, and the hon. Gentleman is much too smoky to recognise it. I would commend to the Chancellor, if his only plea is that he is losing capital rapidly—

The Chancellor of the Exchequer (Mr. Gaitskell) indicated dissent.

Mr. Fletcher

The right hon. Gentleman nods his head repudiating it. [Interruption.] Those behind him the other day jeered at him because he gave a concession which meant that the highest grade of taxpayer would not have to pay 21s. in the pound. It is not the individual, and the jealousy of the success that he may be having through his own brain and incentive, that matters; it is that we have largely broken down the desire and the possibility of the proper use of risk capital.

10.30 p.m.

We are an entrepot country; our greatest exports have always been our invisible exports. The greatest impact of high taxation and the evil that springs from it is the slowing down and killing of our invisible exports. The Chancellor can argue that it is necessary to get the taxation. That seems to be a panacea today. It seems to be a reproach against hon. Members on this side if they criticise any course without immediately suggesting something to take the place of the taxation which they think is wrong. That is a foolish and childish attitude. The Opposition are fulfilling their function when they put forward these criticisms. It is not their duty to suggest directly the substitutes. I hope they will continue on the same path.

In my final word I would say to the Chancellor that I believe that in his heart of hearts he knows that he will not be able to finance the expense of the necessary development of markets and the carrying out of the promises to people to whom we are giving political advancement without giving them the same degree of economic advancement—all the development that is necessary if we do not want to deal in the markets of other countries outside. If he is hamstringing the whole of that endeavour, we in this little island, unable to produce more of what we need in the way of foodstuffs and raw materials, will go into a steady decline to a degree which it is difficult to realise at this moment with all the rosy clouds around us, but which, when the mist clears away, will be seen clearly. This obstacle, and all the other obstacles, to freedom that the Chancellor introduces in this Budget are some of the most shameful pieces of legislation this Committee has seen.

Mr. Lyttelton

We are not making very rapid progress, and I shall try so far as possible to keep my remarks short. Naturally, little discussion is necessary about the methods of raising revenue through Income Tax, which is covered by this Clause. It is a traditional method, which has this one merit: it is levied on profits after they have been made and not, like Entertainments Duty and rates, on profits before they are made. I wish to begin by discussing the effect of Income Tax at its present level on business and industry, and I shall go on later to say something about its effect on the individual.

First of all, let me take the effect upon the prices at which we are able to offer our goods. Though this is not immediately affected by a rise in Income Tax, it is gravely affected at long term. The indirect effect of Income Tax at this crippling rate must be making it extremely difficult, if not impossible, for our business and industry to keep their plant and equipment in a modern enough condition to meet international competition from whatever source it comes. If that be true, it is all the more true that its chances of expanding become very small.

As an industrialist, I should like to add that it is completely repugnant to my ideas that we should ask the most highly skilled body of workmen in the world to work with anything but the best tools. At the present rates of tax, industry must lose sight of modern equipment, and the great expansion of industry and production which is the first necessity of our national life today will be impossible.

I now turn to a matter which is germane to the whole subject—namely, that Income Tax at 9s. 6d. in the £ accelerates the depletion of industrial capital at an unpardonable rate at a time when all concerned in these matters are deeply anxious, and at a time when we should be trying to build up further industrial capital to meet the finance necessitated by the higher prices we see all round.

I must at this moment refer to the subject of taxable capacity. My right hon. Friend the Member for Ormskirk (Sir A. Salter) demolished the arguments which have so far been produced by the Chancellor and the Financial Secretary, and I want to confine my remarks on the subject of taxable resources to a practical issue. The £1,000 million which is claimed to be the taxable resources out of Income Tax would mean raising the standard to 10s., reducing the main income allowances from one-fifth to one-tenth, reducing the personal allowances for single persons from £110 to £80 and of married couples from £180 to £140, and children's allowances from £60 to £55. The hon. Member for The Wrekin (Mr. I. O. Thomas) will find the answer to many of his questions in those figures.

I should judge that that kind of thing is manifestly impossible in its entirety. The social consequences would be much too grave. Nor should the increase in Income Tax that we are discussing be judged in isolation. It has been estimated that the total amount to be raised in taxes, direct and indirect and local, amounts to nearly £4,330 million this year, and it is well for the Chancellor to realise that cancellation of concessions to the lower paid earners and savers will provide the only source of any substantial revenue still remaining to the Government. That is not my submission; that is on the Government's own admission.

I want to say at the outset of my remarks that any hopes that are held out to the public—they frequently are—that we can, first of all, re-arm on the scale proposed; secondly, maintain our exports; thirdly, maintain the social services; and, fourthly, enjoy, or suffer—I offer hon. Gentlemen the choice of either word—our present standard of life, are hopes which are certain to prove false.

I must examine these four claims for a moment. We are to suppose that we are to spend £1,300 million on armaments in 1951–52. I see that Sir Godfrey Ince, in a speech to the Institute of Personal Management, stated that in October, 1950, there were 450,000 persons employed in the manufacture of equipment and supplies for the Armed Services compared with 1,300,000 in 1939, although he afterwards revised the figure to say that we had about 750,000 fewer persons in the munitions industries than we had in 1939.

We want to hear from the Government what their estimate of the position is today, because it is very germane to the subject of raising tax to meet the bill. What I am asking is whether the Government are convinced that they can spend this money upon armaments during the year 1951–2. I feel that it is at least open to doubt whether in the present state of raw material supplies and manpower we can spend the money mentioned in this financial year; but we have to acknowledge that that is our aim.

Now, I turn to exports. It is, of course, certain that our exports must suffer because the engineering industries which have made such a large contribution must largely be turned over to munitions. I am afraid that our exports will be a fair measure of the success or failure of the armaments drive. The social services have already been drastically cut by the present Government, not only by the addition of charges, but by the decrease in the value of money. The stamps which were put on the cards in 1947 are worth far, far less in benefits than when they were first stuck on. The social services are being cut every day by the Government in the easy way, by just letting the sums contributed buy ever less and less. Lastly, the standard of living is falling and will continue to fall, and this fact is openly admitted by the Government, although the Chancellor seeks to say in some public utterances that the immediate effects will be small.

Faced by the need to re-arm and by the menace of war, a well-managed State would have had a reserve of taxable resources on which to draw. If that well-managed State had been a prudent spender it would have seen that it got £1 worth for every £1 spent, and the natural expectation would be for some increase of taxation out of reserves of taxable resources, and perhaps for some increase in the Income Tax. But our State has not been prudently managed, so that the ability to raise further taxes is small; and the effect of the present rise will also bear very hardly on the individual. I must discuss shortly the effect upon the individual.

We, on these benches, welcome very much the increases in the allowances for married couples with children. They are quite substantial allowances, and the increased burden will not fall in the main upon those with family responsibilities. It will fall upon the single wage earner and salary earner, upon the single people living on fixed incomes and pensions; and, of course, it will fall—as it goes without saying under a Socialist regime—upon the managers and technicians upon whose success and initiative our industrial future depends.

Let me quote some figures showing how the present tax and the proposed new tax bears on people over the age of 65, taking into account the one-fifth age allowance. For those with an income of £4 a week, the increase amounts to 25s. a year—not perhaps very heavy. But at £6 it is £3 5s.; at £8 about £5 a year, and at £10 something over £7 5s. In these times those are serious increases for people trying to live on these very marginal incomes. I also remind the Committee how the increased tax falls on a single person among the lower paid workers. It is true it is only 5s. a year beginning at £3 a week. It then rises to £2 5s. on an income of £5 a week, and about £4 5s. on what we might call the average industrial earnings of £7 a week.

The significance of these figures becomes all the more striking when they are read against the background of the Government claim that there is a reserve of taxable resources of £1,000 million a year; because we can only get that reserve of taxable resources by the cancellation of these allowances all down the line. There was a time when trades unionists and hon. Members opposite used to favour no increase in taxation being made without an increase in direct taxation, for the human and understandable reason that the contributions made by their members, and by those who, in the main, they represented, would thereby be greatly decreased; other people, in the main, would find the money—shoulders better able to bear the burden would carry it, They subscribed to the doctrine that taxation in the higher scale is bearable only if other people pay it.

There is no comfort in that doctrine today, because the yield from Income Tax—I am quoting from Table II of the Financial Statement—amounted to £1,404 million in 1950–51, while the yield from Surtax amounted to £121 million. The yield from Income Tax in a single year exceeded the yield from Surtax by £1,283 million, so do not let hon. Members opposite lose sight of the fact that Income Tax, like death, has become classless.

10.45 p.m.

Today, we are the most heavily taxed nation in the world. I cannot help referring to something which, when I heard it, I did not regard as trivial, and the more I hear of it the more serious I find it. The Chancellor referred to a certain tax as being overdue, and I heard that with more surprise than bitterness. For our people, no increase in tax is overdue; what is overdue is any attempt by the Government to cut down its own extravagance in any serious way.

The proposal to raise the standard rate by 6d. in the first year of the re-armament programme is indeed a very grim proposal, and it must be remembered that our expenditure on armaments is going to rise very steeply in the second and third years—1952–53 and 1953–54. If our affairs and finances had been prudently managed by the right hon. Gentleman's predecessors, we could certainly have financed the first year's armament programme without anything like the increase now proposed, and perhaps without any increase. [HON. MEMBERS: "Oh."]

We cannot, however, re-write the history of the last six years, but must face the realities of the day. What we can and must do is to see that the Government tackles the subject of its expenditure now and starts pruning now. [Interruption.] Hon. Members complained that a speech by my right hon. and gallant Friend the Member for Leicester, South-East (Captain Waterhouse) went on too long, but the whole speech was devoted to detailed economies which the Government could make. Perhaps they would like him to repeat it. I recommend hon. Members to read it. It is not a question of whether they like it or not; they have got to tackle it now, because only in that way can we avoid any further burden, which I think would become intolerable, being added to the weight the people are being asked to bear.

I want to discuss at no great length the effect of this savage rate of tax on incentive, reward, the profit motive—to which the Chancellor of the Exchequer made some genuflexion the other day—and upon the national economy. Taxation at its present level is distorting the whole national life. I referred during the Second Reading of the Bill to the need for bonuses for extra efforts and premiums on success. Instead of that we have fines—fines on overtime, fines on high earnings and fines on profits, which are greatly in the national interest. Does anyone deny that? They do not.

What I want hon. Members opposite to realise is that it is demonstrable that the top layers of taxation are raised, not for revenue purposes at all, but merely for punishment. "If you earn a lot of money," say the Government, "as a lawyer, as a surgeon, a doctor, an actor, an author, a singer, or company director, we will jolly well soon teach you not to."

I shall try to give simple proof of this. Here it is, and I hope hon. Members will be a little surprised by the figures. If a law were passed to say that no one in the country had to pay any direct taxation, Income Tax and Surtax, at more than 15s. in the £—and I shall be glad to be corrected afterwards if I am £1 million or £2 million out—then, as near as I can calculate, it would cost the Exchequer £16 million a year—about 1½d. on the Income Tax. Compare that £16 million with the £4,333 million which has to be raised in taxation.

It is upon those figures that I based my statement, which I repeat, that the top levels of taxation are not intended for revenue purposes at all but as punishment. They are intended as punishment on success at a time when what we want is private enterprise and the urge to increase our national wealth. [Interruption.] I quite understand how very distasteful the figures will be to hon. Members opposite, but I hope they will receive them in the proper spirit.

Mr. I. O. Thomas rose—

Mr. Lyttelton

No, the hon. Member has had a very good run. I should be very glad to give way to the hon. Member if I could feel any assurance that the interruption would be relevant to the sub- ject, but my experience teaches me that it would not be.

Mr. Thomas

Will the right hon. Gentleman allow me?

Mr. Lyttelton

Oh, very well.

Mr. Thomas

When the right hon. Gentleman says that Income Tax is not relevant to the national income and claims that those paying the higher level of Income Tax are entitled to special consideration, are we to take it that it will be one of the first parts of Tory policy to lighten the burden of these people if they are returned to power?

Mr. Lyttelton

The hon. Member is entitled to any flights of fancy which the Labour Party or his particular views suggest. But that type of taxation raises only £16 million out of a Budget total of £4,000 million. I strongly recommend the hon. Member to wait for the Budget that will be introduced next year by the Conservative Party. If he has the good fortune to hold his seat, which I think is doubtful, he will have the good luck of being able to criticise the proposals.

Incentive and hard work are cancelled by this penal taxation. I believe that there could be a higher yield from the "soak-the-rich" policy if some incentive were left. I think the punishment motive, beside being inequitable and unfair, is silly. It is hard nowadays to get lawyers to take briefs, to get doctors to take out appendices, for directors to take on new commitments, managers to take new responsibilities, or anyone else to make any effort at all. It is this deadening doctrine of trying to level out everything that is responsible. It is sapping the vitality of this trading nation that is largely carried on by the momentum of ideas which it has inherited, ideas which are extremely repugnant to the present Government.

A new generation is growing up, and it cannot be blamed if it looks twice at working overtime when it has to give up a large part of its earnings and is unwilling to take responsibility because it has no chance of adequate reward. It is all very well for the hon. Member to laugh, but those who run large companies now know that it is difficult to get people to take the higher responsibilities when they get no commensurate reward. I would be so bold as to put my industrial experience against that of the hon. Member. These rates of taxation are also poison to the ideas of personal thrift and saving.

The figures of net small savings for the last five financial years have been: in 1946–47, plus £324 million; in 1947–48, plus £189 million; in 1948–49, plus £37 million, and in 1949–50, minus £68 million; in 1950–51, minus £90 million. That is one of the reasons why my right hon. Friend describes the rise in Income Tax as being not wholly disinflationary, to use the jargon of Sir Stafford Cripps. I accuse the Government of gross mismanagement of our national affairs, and I urge them to economise now, before the value of the £ takes another lurch downwards. I would remind the Committee that this is the highest level at which tax has ever run in peace-time.

I now conclude with some remarks concerning inflation. Too often the social consequences of inflation are ignored or underrated. But inflation, and the rise in prices which accompany it, work most unfairly between one class and another. Inflation is the deadliest poisoner of course for all those who live on fixed incomes—the civil servants, all the official classes, teachers and professors, all those living on the proceeds of their past thrift, pensions, and so forth. The entrepreneur and the wage earner are least affected because economic facts adjust their earnings to the spiral of inflation. But even then, their wages and earnings are slow to adjust themselves to the spiral, and during the time the adjustment is taking place they suffer very great hardships. All we can say is that inflation is less likely completely to destroy the wage earner or the entrepreneur class. It does inflict the greatest hardship upon them.

Are we at this moment in an inflation? I shall be very short and give three or four figures. One sentence from the Economic Survey of Europe of the O.E.E.C. reads: There can be small doubt that if our import prices rise any further the rise in the cost-of-living is bound to be very considerably greater than was apparently assumed when the Economic Survey for 1951 was written. The cost-of-living price index stood at 111 in April, 1950. In April, 1951, it was 121, but the wholesale prices were 246.2 in April, 1950, and 314.1 in April, 1951.

So it is quite clear that we are now in a galloping inflation. I have seen myself the effects of such a galloping inflation in Germany, and no one with the least humanity could fail to be impressed by the horrible tragedies it brings in its train. I think it is undeniable that the gaining of £73 million in a full year is to some extent disinflationary. I do not subscribe to the theory that all increases in taxation are inflation, and I agree with what my right hon. Friend said that the deflationary effect of rises in taxes now are far less than we should like to see, far less than they should be if our economy had been properly managed. These figures prove the point.

I suppose no one would deny that if we are successful in our re-armament programme there will be a steady decrease, becoming more acute as time goes on, in consumer goods available for civilians, and that by taking £73 million in a full year from the taxpayers some deflationary effect will be produced—some decrease in the amount of money chasing an ever-decreasing supply of goods.

It is with at one and the same time a deep sense of the way our affairs have been managed in the past, but also with a deep sense of responsibility, that we must not neglect even a partial deflationary measure, that I propose to advise my right hon. and hon. Friends to let this Clause go without a Division. We feel we shall have done our duty in discussing it. [Interruption.] I see nothing funny in it whatever. The hon. Gentleman can gain what pleasure he likes out of it. We have done our duty when we point out that the national economy is distorted by taxes at these rates.

It is necessary to have an entirely new approach to the whole of our economic problems, and the true weapon against inflation is increased production, not mentioned by the Chancellor in his Budget speech, and increased incentive. But the sombre realities of today, when we are already in the third month of the financial year, which imposed these taxes, have to be faced. We cannot re-write the history of the last six years. It is with great reluctance that I advise my right hon. and hon. Friends to let this Clause go. The plain fact is that no patching can be done now. What is required is not new taxes or new measures, but a new Government.

11.0 p.m.

The Chancellor of the Exchequer (Mr. Gaitskell)

The right hon. Gentleman the Member for Ormskirk (Sir A. Salter) made what I thought was a very moderate speech in opening this debate. It was rather gloomy in content and was delivered, unfortunately, to a thin House, but it seemed to me to set a fairly high standard. I cannot feel, however, that the standard was always upheld by everyone. It deteriorated quite a lot, and that goes for the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton), whose speech I shall come to later on.

First of all, I want to reply to some of the questions which the right hon. Gentleman the Member for Ormskirk put. He spent some time complaining that what my hon. Friend the Financial Secretary and I have said about the taxable capacity of the nation was inaccurate. I do not think that there is really a great deal of difference between us. The facts are not disputed by the right hon. Gentleman. He said we ought to have explained that there has been a change not only in the total money income but also in the price level as well. He will understand that in the course of a lengthy Budget speech one cannot stop and say: "But remember the price level has risen." No one would dispute that there has been such an increase.

Where I would disagree with the right hon. Gentleman, and where I think he goes much too far, is when he implied that there has been no increase in the real national income at all. That plainly is not so. There has been an increase in production of something like 40 per cent. since 1946, and that is something which clearly has to be taken into account when making the various computations he was making.

Sir A. Salter

I did not say there had been no rise in the real national income. I said that quite obviously a large part of the difference between the figure of £650 million and £1,000 million was due to the rise in prices, and therefore the description the Chancellor gave of the effect of his reliefs, and subsequently the suggestion of the Financial Secretary, needs very considerable correction if we are to have a just view on these two points.

Mr. Gaitskell

If, in fact, the right hon. Gentleman is limiting himself to saying that there has been some change in the value of money and a rise in the real national income to the same extent, I do not think there is any difference between us. Neither the Financial Secretary nor I suggested there has been anything attractive in going back over the paths of reducing taxation. Quite obviously, no one wishes to increase taxation or reduce the personal or other allowances. I would go so far as to say that in peace-time it would be an extremely difficult thing to go the whole way. I think that is absolutely true, but that is not the same thing as saying that you have absolutely no reserves to go back on.

The right hon. Gentleman also did me less than justice when he suggested that I was indifferent to the hardship aspects of direct taxation. I certainly never gave that impression, and I would draw his attention to what I said in my Budget speech and on many other occasions. It is surely reasonable to say: "Yes, we have to impose this taxation, and recognise there will be hardship, but in the international situation"—as the hon. Member for Bolton, East (Mr. Booth) so aptly said—"we must accept it, and accept the hardship too."

Sir A. Salter

I did not suggest the right hon. Gentleman was indifferent to the hardship. What I did say was that, while his statement that any such marriage allowance was higher than immediately before the war was accurate in the terms in which it was stated, it gave a cruelly wrong impression as to the changes in the reliefs.

Mr. Gaitskell

I have already answered that question. One cannot stop every half sentence and say, "Well, of course, there has been a change in the value of money." The right hon. Gentleman and other speakers, including the right hon. Member for Aldershot, emphasized what seemed to them to be the adverse effects of Income Tax. Of course, nobody complains that in a debate on an indivdual Clause of this kind attention should be drawn to what hon. Members feel are disadvantages. But I should like to say a few things in reply to these various aspects of the problem.

First, let me say a word on the effects of Income Tax on work. Some horn. Members feel it is a very serious thing if clever barristers decide not to accept quite so many briefs as before, because they find themselves paying 19s. 6d. in the £, but I wonder if that really is a terrible loss to the community. As a matter of fact, I have heard it said by younger lawyers that it would give them a chance. I have even heard them complain that in spite of the rate of Income Tax and Surtax the cleverer lawyers with established practices do still go on taking briefs. It seems difficult to reconcile that with some of the things that have been said opposite.

Really, if we take the position of what are roughly called the professional classes today, can it be seriously maintained, for example, that the English stage is any less flourishing than it was before the war, or that in the arts generally there has been any falling back? I should have said that, on the contrary, there is a distinct renaissance in the sphere. If one passes to other professions, do hon. Members opposite really suppose that nowadays there has been a general slackening by very many lawyers and doctors? I find no signs of it. I hear a lot of complaint from some of them of overwork, which is quite a different thing. But to suppose that people who are paid on a salary basis are likely greatly to be influenced by taxation in the direction of working less, is rather unlikely. On the contrary, they are paid so much and they do their job, and if they do not do their job so well as somebody else they will not get on in their profession.

I would not deny that there are some cases—that of the very experienced barrister has been mentioned—cases of writers, for example, who do make very large sums writing stories and novels and decide that they will write rather fewer than before. Again, I cannot say that I think that a very serious consequence. If we turn to the manual workers, I would remind the Committee that the T.U.C. itself, which is likely to know more about this than most people, have recently said that they do not believe the effects of P.A.Y.E. on overtime or work are at all serious. Therefore, I cannot see that there is a great deal of effect here.

The fact is that people's motives for working are a good deal more complicated than hon. Members opposite think They are interested, of course, in earning their living in the ordinary way, but they are interested in all sorts of other things—family responsibility, ambition, power—and all these factors come into the picture as well. I do not believe there are very serious consequences of taxation here.

A great deal has been made of the consequences on capital investment. At first hearing it sounds extraordinarily convincing. The hon. Member for Bury and Radcliffe (Mr. W. Fletcher) drew a very gloomy picture of the way in which nobody was prepared to invest any money in industry, of how disastrous the consequences were going to be to our export trade, and of how short industry was of capital. All this is in complete conflict with what has been happening these last few years. We have had an extraordinarily high rate of capital investment.

Our problem in restraining inflation at the moment at home is, not wholly but to a considerable extent, to prevent too many orders going to the investment industries. That is the reason we have found it necessary this year to suspend the initial allowances. Does that look as though there was any shortage of capital for industry, or any disinclination to spend money on modernising plant? There really is no sign of that. The theory is miles from reality.

The hon. Member for Flint, West (Mr. Birch) considered that the definition of profits by the Inland Revenue was such that it must involve a steady running down of capital. He suggested that there should be a new arrangement by which taxation should be levied on what he called true profits. I would only point out that we have recently had the Tucker Committee reporting on this matter. I do not want to go into details—we shall no doubt have another opportunity for discussing this matter—I need only say now that they came to a completely different conclusion.

Mr. Birch

The Tucker Committee recommended increased allowances for industry.

Mr. Gaitskell

That has nothing to do with it. I am talking about the definition of profit, and their conclusion is totally different from that of the hon. Member. They support the definition of the Inland Revenue. [Interruption.] It is not in the least dishonest. It is well known. The right hon. Gentleman probably has not read the Report. If he does he will find that what I have said is true. [An HON. MEMBER: "Another lecture."] Some people deserve a lecture occasionally. Heaven knows, we have had quite a lot of lectures from Members opposite.

The second point I was going to make is that the hon. Member is, in fact suggesting that the definition should be altered so as to take away less in taxation from companies. At the same time, he seemed to be disavowing any intention that he was going to alter the position of the shareholders. My hon. Friend the Member for Edmonton (Mr. Albu) pointed out fairly [Laughter]—hon. Members tried to laugh him out of it, but they failed completely—that a consequence of leaving ordinary shareholders with a great deal more was bound to be a further boom in equity prices. That apparently is about the only contribution the hon. Member for Flint, West makes to this Debate. He really thinks that the salvation of the country depends on letting ordinary shareholders have more money.

Mr. Birch

But to raise or maintain their assets the companies must have more capital. Does the right hon. Gentleman agree with that?

Mr. Gaitskell

If by raising more capital the hon. Member means borrowing more money, I should think he is right, and that is exactly what the right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) said later.

Mr. Lyttelton

Really, raising capital and borrowing money are not synonymous terms. The right hon. Gentleman will learn that later on, no doubt.

11.15 p.m.

Mr. Gaitskell

They certainly are synonymous terms sometimes, as the right hon. Gentleman knows perfectly well. It is apparently the view of the Opposition that at this moment, when they are complaining of the dangers of inflation, talking about prices going up, and drawing attention to the position on the Stock Exchange, that the remedy for all this is to let the shareholders keep more in the way of profits. Is that really a serious contribution? I can think of nothing likely to increase inflation more rapidly.

The right hon. Gentleman the Member for Ormskirk has spoken about the effects of taxation on saving, and he argued that with an Income Tax rate of 5s. or 5s. 6d. in the £ it would not make very much difference whether we put on 6d. or not. But, he said, when we get up to 9s. and 9s. 6d.—as I understand the argument—that is going to have serious consequences on the rate of saving. I do not agree with that. I think that whether or not taxation has inflationary effects—that is to say, whether it leads to dissaving, and whether it fails to mop up purchasing power—depends really on whether the people taxed are determined to maintain their standard of living and draw on their savings to do so. If they are, and they draw on their savings, of course it follows in those circumstances that they will spend money and that we shall not cut down their consumption.

Mr. Lyttelton

They have to eat.

Mr. Gaitskell

Yes, but they should give up a few luxuries. That is the intention. What the right hon. Gentleman is saying is that the rich are so determined to maintain their standard of living that they will not give anything up.

Mr. Lyttelton

I am sorry the right hon. Gentleman should seek to raise prejudice in such an obvious way. One of the reasons why small savings are less is that people like to eat, and they have to realise their savings in order to keep any standard of living.

Mr. Gaitskell

The other contribution of the right hon. Gentleman to the solution of our fiscal problems was to reduce the taxation of those with £15,000 a year and over. He recommended that in his speech. He said that after all it would cost only £16 million: we could give them bonuses, and they are worth it.

Mr. Lyttelton

The right hon. Gentleman is not entitled to misquote and distort what I said. I never said anything of the kind. If he wishes to know what I said I refer him to HANSARD. The whole of his speech is based on misrepresentation.

Mr. Gaitskell

If the right hon. Gentleman did not in fact mean that we should relieve the taxation of those with £15,000 a year and over, why on earth did he bring it up at all? It just does not make sense. He actually took the trouble to find out what it would cost the Exchequer. Of course, if he wishes to withdraw that proposal I have no objection.

We come finally to the last proposal—a proposal which always comes up as the sole constructive remedy, and that is that we should reduce expenditure. This is the way in which the right hon. Gentleman proposes to solve the whole of our problem. He has not, of course, told us what he proposes to reduce. He referred to a speech of the right hon. and gallant Gentleman the Member for Leicester, South-East (Captain Waterhouse), but he failed to remind the Committee that the right hon. and gallant Gentleman's suggestions were at once repudiated by his own Front Bench. Unfortunately, the right hon. Gentleman the Member for Saffron Walden (Mr. R. A. Butler) does not seem to be here. I refer the right hon. Gentleman the Member for Aldershot to HANSARD, where he will see precisely what was said.

Mr. Lyttelton

Since the right hon. Gentleman persists in continuing in this

strain, I must interrupt him. He said all the proposals of my right hon. and gallant Friend were repudiated by the Opposition. There were one or two; not more.

Mr. Gaitskell

Certainly all the main ones that would bring in all the money were—for example, the abolition of any subsidy for children's meals. Really, the right hon. Gentleman cannot be allowed to get away with these facile explanations of how they would do it. The fact is that it is the Opposition's view that we should not in these last years have developed the social services in the way we have. [HON. MEMBERS: "Nonsense."] Oh, yes. With the result that now we should have lower rates of taxation and it would be very much easier to raise revenue.

The Parliamentary Secretary to the Treasury (Mr. William Whiteley) rose in his place and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The Committee divided: Ayes, 293; Noes, 287.

Division No. 85.]	AYES	[11.25 p.m.
Acland, Sir Richard	Chetwynd, G. R.	Field, Capt. W. J.
Adams, Richard	Clunie, J.	Finch, H. J.
Albu, A. H.	Cocks, F. S.	Fletcher, Eric (Islington, E.)
Allen, Arthur (Bosworth)	Coldrick, W.	Follick, M.
Allen, Scholefield (Crewe)	Collindridge, F.	Foot, M. M.
Anderson, Alexander (Motherwell)	Cook, T. F.	Forman, J. C.
Anderson, Frank (Whitehaven)	Cooper, Geoffrey (Middlesbrough, W.)	Fraser, Thomas (Hamilton)
Awbery, S. S.	Cooper, John (Deptford)	Freeman, John (Watford)
Bacon, Miss Alice	Corbet, Mrs. Freda (Peckham)	Freeman, Peter (Newport)
Baird, J.	Cove, W. G.	Gaitskell, Rt. Hon. H. T. N.
Balfour, A.	Craddock, George (Bradford, S.)	Ganley, Mrs. C. S.
Barnes, Rt. Hon. A. J.	Crawley, A.	Gibson, C. W.
Bartley, P.	Crosland, C. A. R.	Gilzean, A.
Bellenger, Rt. Hon. F. J.	Crossman, R. H. S.	Glanville, James (Consett)
Benn, Wedgwood	Cullen, Mrs. A.	Gooch, E. G.
Benson, G.	Daines, P.	Gordon-Walker, Rt. Hon P. C.
Beswick, F.	Dalton, Rt. Hon. H.	Greenwood, Anthony (Rossendale)
Bevan, Rt. Hon. A. (Ebbw Vale)	Darling, George (Hillsborough)	Greenwood, Rt. Hon. Arthur (Wakefield)
Bing, G. H. C.	Davies, A. Edward (Stoke, N.)	Grenfell, D. R.
Blenkinsop, A.	Davies, Harold (Leek)	Grey, C. F.
Blyton, W. R.	Davies, Stephen (Merthyr)	Griffiths, David (Rother Valley)
Boardman, H.	de Freitas, Geoffrey	Griffiths, Rt. Hon. James (Llanelly)
Booth, A.	Deer, G.	Griffiths, William (Exchange)
Bottomley, A. G.	Delargy, H. J.	Gunter, R. J.
Bowden, H. W.	Dodds, N. N.	Hale, Joseph (Rochdale)
Bowles, F. G. (Nuneaton)	Donnelly, D.	Hale, Leslie (Oldham, W.)
Braddock, Mrs. Elizabeth	Driberg, T. E. N.	Hall, John (Gateshead, W.)
Brook, Dryden (Halifax)	Dugdale, Rt. Hon. John (W. Bromwich)	Hall, Rt. Hon. Glenvil (Colne Valley)
Brooks, T. J. (Normanton)	Dye, S.	Hamilton, W. W.
Broughton, Dr. A. D. D.	Ede, Rt. Hon. J. C.	Hannan, W.
Brown, Rt. Hon. George (Belper)	Edelman, M.	Hardman, D. R.
Brown, Thomas (Ince)	Edwards, John (Brighouse)	Hardy, E. A.
Burke, W. A.	Edwards, Rt. Hon. Ness (Caerphilly)	Hargreaves, A.
Burton, Miss E.	Edwards, W. J. (Stepney)	Harrison, J.
Butler, Herbert (Hackney, S)	Evans, Albert (Islington, S. W.)	Hastings, S.
Callaghan, L. J.	Evans, Edward (Lowestoft)	Hayman, F. H.
Carmichael, J.	Evans, Stanley (Wednesbury)	Henderson, Rt. Hon. A. (Rowley Regis)
Castle, Mrs. B. A.	Ewart, R.	Herbison, Miss M.
Champion, A. J.	Fernyhough, E.	Hewitson, Capt. M.
Hobson, C. R.	Mathers, Rt. Hon. G.	Snow, J. W.
Holman, P.	Mellish, R. J.	Sorensen, R. W.
Holmes, Horace (Hemsworth)	Messer, F.	Soskice, Rt. Hon Sir Frank
Houghton, D.	Middleton, Mrs. L.	Sparks, J. A.
Hoy, J.	Mikardo, Ian	Steele, T.
Hubbard, T.	Mitchison, G. R.	Stewart, Michael (Fulham, E.)
Hudson, James (Ealing, N.)	Moeran, E. W.	Stokes, Rt. Hon. R. R.
Hughes, Emrys (S. Ayrshire)	Monslow, W.	Strachey, Rt. Hon. J.
Hughes, Hector (Aberdeen, N.)	Moody, A. S.	Strauss, Rt. Hon. George (Vauxhall)
Hughes, Moelwyn (Islington, N.)	Morgan, Dr. H. B.	Stross, Dr. Barnett
Hynd, H. (Accrington)	Morley, R.	Summerskill, Rt. Hon. Edith
Hynd, J. B. (Attercliffe)	Morris, Percy (Swansea, W.)	Sylvester, G. O.
Irvine, A. J. (Edge Hill)	Mort, D. L.	Taylor, Bernard (Mansfield)
Irving, W. J. (Wood Green)	Moyle, A.	Taylor, Robert (Morpeth)
Isaacs, Rt. Hon. G. A.	Mulley, F. W.	Thomas, David (Aberdare)
Janner, B.	Murray, J. T.	Thomas, George (Cardiff)
Jay, D. P. T.	Nally, W.	Thomas, Iorwerth (Rhondda, W.)
Jeger, George (Goole)	Neal, Harold (Bolsover)	Thomas, Ivor Owen (Wrekin)
Jeger, Dr. Santo (St. Pancras, S.)	Noel-Baker, Rt. Hon. P. J.	Thorneycroft, Harry (Clayton)
Jenkins, R. H.	O'Brien, T.	Thurtle, Ernest
Johnson, James (Rugby)	Oldfield, W. H.	Timmons, J.
Johnston, Douglas (Paisley)	Oliver, G. H.	Tomney, F.
Jones, David (Hartlepool)	Orbach, M.	Turner-Samuels, M.
Jones, Frederick Elwyn (West Ham, S.)	Padley, W. E.	Ungoed-Thomas, A. L.
Jones, Jack (Rotherham)	Paget, R. T.	Usborne, H.
Jones, William Elwyn (Conway)	Paling, Rt. Hon. Wilfred (Dearne Vally)	Vernon, W. F.
Keenan, W.	Paling, Will T. (Dewsbury)	Viant, S. P.
Kenyon, C.	Pannell, T. C.	Wallace, H. W.
Key, Rt. Hon. C. W.	Pargiter, G. A.	Watkins, T. E.
King, Dr. H. M.	Parker, J.	Webb, Rt. Hon. M. (Bradford, C.)
Kinghorn, Sqn. Ldr. E.	Paton, J.	Weitzman, D.
Kinley, J.	Pearson, A.	Wells, Percy (Faversham)
Lang, Gordon	Peart, T. F.	Wells, William (Walsall)
Lee, Frederick (Newton)	Poole, C.	West, D. G.
Lee, Miss Jennie (Cannock)	Porter, G.	Wheatley, Rt. Hn. John (Edinb'gh, E.)
Lever, Harold (Cheetham)	Price, Philips (Gloucestershire, W.)	While, Mrs. Eirene (E. Flint)
Lever, Leslie (Ardwick)	Proctor, W. T.	White, Henry (Derbyshire, N. E.)
Lewis, Arthur (West Ham, N.)	Pryde, D. J.	Whiteley, Rt. Hon. W.
Lewis, John (Bolton, W.)	Pursey, Cmdr. H.	Wilcock, Group Capt. C. A. B.
Lindgren, G. S.	Rankin, J.	Wilkes, L.
Logan, D. G.	Rees, Mrs. D.	Willey, Frederick (Sunderland)
Longden, Fred (Small Heath)	Reeves, J.	Willey, Octavius (Cleveland)
McAllister, G.	Reid, Thomas (Swindon)	Williams, David (Neath)
MacColl, J. E.	Reid, William (Camlachie)	Williams, Rev. Llywelyn (Abertillery)
McGhee, H. G.	Rhodes, H.	Williams, Ronald (Wigan)
McGovern, J.	Richards, R.	Williams, Rt. Hon. Thomas (Don Valley)
McInnes, J.	Robens, A.	Williams, W. T. (Hammersmith, S.)
Mack, J. D.	Roberts, Goronwy (Caernarvonshire)	Wilson, Rt. Hon. Harold (Huyton)
McKay, John (Wallsend)	Robertson, J. J. (Berwick)	Winterbottom, Ian (Nottingham, C.)
Mackay, R. W. G. (Reading, N.)	Robinson, Kenneth (St. Pancras, N.)	Winterbottom, Richard (Brightside)
McLeavy, F.	Rogers, George (Kensington, N.)	Wise, F. J.
MacMillan, Malcolm (Western Isles)	Ross, William (Kilmarnock)	Woodburn, Rt. Hon. A.
McNeil, Rt. Hon. H.	Royle, C.	Woods, Rev. G. S.
MacPherson, Malcolm (Stirling)	Shurmer, P. L. E.	Wyatt, W. L.
Mainwaring, W. H.	Silverman, Julius (Erdington)	Yates, V. F.
Mallalieu, E. L. (Brigg)	Silverman, Sydney (Nelson)	Younger, Hon. K.
Mallalieu, J. P. W. (Huddersfield, E.)	Simmons, C. J.
Mann, Mrs. Jean	Slater, J.	TELLERS FOR THE AYES:
Manuel, A. C.	Smith, Ellis (Stoke, S.)	Mr. Popplewell and Mr. Wilkins.
Marquand, Rt. Hon. H. A.	Smith, Norman (Nottingham, S.)
NOES
Aitken, W. T.	Boles, Lt.-Col. D. C. (Wells)	Clarke, Brig. Terence (Portsmouth, W.)
Alport, C. J. M.	Boothby, R.	Clyde, J. L.
Amery, Julian (Preston, N.)	Bossom, A. C.	Colegate, A.
Amory, Heathcoat (Tiverton)	Boyd-Carpenter, J. A.	Conant, Maj. R. J. E.
Arbuthnot, John	Boyle, Sir Edward	Cooper, Sqn. Ldr. Albert (Ilford S.)
Ashton, H. (Chelmsford)	Bracken, Rt. Hon. B.	Cooper-Key, E. M.
Assheton, Rt. Hon. R. (Blackburn, W.)	Braine, B. R.	Corbett, Lt.-Col. Uvedale (Ludlow)
Astor, Hon. M. L.	Braithwaite, Sir Albert (Harrow, W.)	Craddock, Beresford (Spelthorne)
Baker, P. A. D.	Braithwaite, Lt.-Cr. G. (Bristol, N. W.)	Cranborne, Viscount
Baldock, Lt.-Cmdr. J. M.	Bromley-Davenport, Lt.-Col. W.	Crookshank, Capt. Rt. Hon. H. F. C.
Baldwin, A. E.	Brooke, Henry (Hampstead)	Crosthwaite-Eyre, Col. O. E.
Banks, Col. C.	Browne, Jack (Govan)	Crouch, R. F.
Baxter, A. B.	Buchan-Hepburn, P. G. T.	Crowder, Capt. John (Finchley)
Beamish, Major Tufton	Bullock, Capt. M.	Crowder, Petre (Ruislip—Northwood)
Bell, R. M.	Bullus, Wing Commander E. E.	Cundiff, F. W.
Bennett, Sir Peter (Edgbaston)	Burden, F. A.	Cuthbert, W. N.
Bennett, Dr. Reginald (Gosport)	Butcher, H. W.	Darling, Sir William (Edinburgh, S.)
Bennett, William (Woodside)	Butler, Rt. Hon. R. A. (Saffron Walden)	Davidson, Viscountess
Bevins, J. R. (Liverpool, Toxteth)	Carr, Robert (Mitcham)	Davies, Nigel (Epping)
Birch, Nigel	Carson, Hon. E.	de Chair, Somerset
Bishop, F. P.	Channon, H.	De la Bère, R.
Black, C. W.	Clarke, Col. Ralph (East Grinstead)	Deedes, W. F.

Digby, S. W.	Langford-Holt, J.	Redmayne, M.
Dodds-Parker, A. D.	Law, Rt. Hon. R. K.	Remnant, Hon. P.
Donner, P. W.	Leather, E. H. C.	Renton, D. L. M.
Douglas-Hamilton, Lord Malcolm	Legge-Bourke, Maj. E. A. H.	Roberts, Emrys (Merioneth)
Drayson, G. B.	Lennox-Boyd, A. T.	Roberts, Major Peter (Heeley)
Dugdale, Maj. Sir Thomas (Richmond)	Lindsay, Martin	Robertson, Sir David (Caithness)
Duncan, Capt. J. A. L.	Linstead, H. N.	Robinson, Roland (Blackpool, S.)
Dunglass, Lord	Llewellyn, D.	Robson-Brown, W.
Duthie, W. S.	Lloyd, Rt. Hn. Geoffrey (King's Norton)	Rodgers, John (Sevenoaks)
Eccles, D. M.	Lloyd, Maj. Guy (Renfrew, E.)	Roper, Sir Harold
Elliot, Rt. Hon. W. E.	Lloyd, Selwyn (Wirral)	Russell, R. S.
Erroll, F. J.	Lockwood, Lt.-Col. J. C.	Ryder, Capt. R. E. D.
Fisher, Nigel	Longden, Gilbert (Herts, S. W.)	Salter, Rt. Hon. Sir Arthur
Fletcher, Walter (Bury)	Low, A. R. W.	Sandys, Rt. Hon. D.
Fort, R.	Lucas, Sir Jocelyn (Portsmouth, S.)	Savory, Prof. D. L.
Foster, John	Lucas, P. B. (Brentford)	Scott, Donald
Fraser, Hon. Hugh (Stone)	Lucas-Tooth, Sir Hugh	Shepherd, William
Fraser, Sir Ian (Morecambe & Lonsdale)	Lyttelton, Rt. Hon. O.	Smiles, Lt.-Col. Sir Walter
Fyfe, Rt. Hon. Sir David Maxwell	McAdden, S. J.	Smithers, Peter (Winchester)
Gage, C. H.	McCallum, Major D.	Smyth, Brig. J. G. (Norwood)
Galbraith, Cmdr. T. D. (Pollok)	McCorquodale, Rt. Hon. M. S.	Snadden, W. McN.
Galbraith, T. G. D. (Hillhead)	Macdonald, A. J. F. (Roxburgh)	Soames, Capt. C.
Gammans, L. D.	Macdonald, Sir Peter (I. of Wight)	Spearman, A. C. M.
Garner-Evans, E. H. (Denbigh)	Mackeson, Brig. H. R.	Spence, H. R. (Aberdeenshire, W.)
Gates, Maj. E. E.	McKibbin, A.	Spens, Sir Patrick (Kensington, S.)
George, Lady Megan Lloyd	McKie, J. H. (Galloway)	Stanley, Capt. Hon. Richard (N. Fylde)
Gomme-Duncan, Col. A.	Maclay, Hon. John	Stevens, G. P.
Granville, Edgar (Eye)	Maclean, Fitzroy	Steward, W. A. (Woolwich, W.)
Gridley, Sir Arnold	MacLeod, Iain (Enfield, W.)	Stewart, Henderson (Fife, E.)
Grimond, J.	MacLeod, John (Ross and Cromarty)	Stoddart-Scott, Col. M.
Grimston, Hon. John (St. Albans)	Macmillan, Rt. Hon. Harold (Bromley)	Storey, S.
Grimston, Robert (Westbury)	MacPherson, Major Niall (Damfries)	Strauss, Henry (Norwich, S.)
Harden, J. R. E.	Maitland, Cmdr. J. W.	Stuart, Rt. Hon. James (Moray)
Hare, Hon. J. H. (Woodbridge)	Manningham-Buller, R. E.	Summers, G. S.
Harris, Frederic (Croydon, N.)	Marlowe, A. A. H.	Sutcliffe, H.
Harris, Reader (Heston)	Marples, A. E.	Taylor, Charles (Eastbourne)
Harvey, Air Cdre. A. V. (Macclesfield)	Marshall, Douglas (Bodmin)	Taylor, William (Bradford, N.)
Harvey, Ian (Harrow, E.)	Marshall, Sidney (Sutton)	Teeling, W.
Harvie-Watt, Sir George	Maude, Angus (Ealing, S.)	Teevan, T. L.
Hay, John	Maude, John (Exeter).	Thomas, J. P. L. (Hereford)
Head, Brig. A. H.	Maudling, R.	Thompson, Kenneth Pugh (Walton)
Headlam, Lieut.-Col. Rt. Hon. Sir C.	Medlicott, Brig. F.	Thompson, R. H. M. (Croydon, W.)
Heald, Lionel	Mellor, Sir John	Thorneycroft, Peter (Monmouth)
Heath, Edward	Molson, A. H. E.	Thornton-Kemsley, Col. C. N.
Henderson, John (Cathcart)	Monckton, Sir Walter	Thorp, Brig. R. A. F.
Hicks-Beach, Maj. W. W.	Moore, Lt.-Col. Sir Thomas	Tilney, John
Higgs, J. M. C.	Morrison, John (Salisbury)	Touche, G. C.
Hill, Mrs. E. (Wythenshawe)	Morrison, Rt. Hon. W. S. (Cirencester)	Turner, H. F. L.
Hill, Dr. Charles (Luton)	Mott-Radclyffe, C. E.	Turton, R. H.
Hinchingbrooke, Viscount	Nabarro, G.	Tweedsmuir, Lady
Hirst, Geoffrey	Nicholson, G.	Vane, W. M. F.
Hollis, M. C.	Nield, Basil (Chester)	Vaughan-Morgan, J. K.
Holmes, Sir Stanley (Harwich)	Noble, Cmdr. A. H. P.	Wade, D. W.
Hope, Lord John	Nugent, G. R. H.	Wakefield, Edward (Derbyshire, W.)
Hopkinson, Henry	Nutting, Anthony	Wakefield, Sir Wavell (Marylebone)
Hornsby-Smith, Miss P.	Oakshott, H. D.	Walker-Smith, D. C.
Horsbrugh, Rt. Hon. Florence	Odey, G. W.	Ward, Hon. George (Worcester)
Howard, Gerald (Cambridgeshire)	O'Neill, Rt. Hon. Sir Hugh	Ward, Miss I. (Tynemouth)
Howard, Greville (St. Ives)	Ormsby-Gore, Hon. W. D.	Waterhouse, Capt. Rt. Hon. C.
Hudson, Sir Austin (Lewisham, N.)	Orr, Capt. L. P. S.	Watkinson, H.
Hudson, Rt. Hon. Robert (Southport)	Orr-Ewing, Charles Ian (Hendon, N.)	Webbe, Sir H. (London)
Hudson, W. R. A. (Hull, N.)	Orr-Ewing, Ian L. (Weston-super-Mare)	Wheatley, Major M. J. (Poole)
Hutchinson, Geoffrey (Ilford, N.)	Osborne, C.	White, Baker (Canterbury)
Hutchison, Lt.-Com. Clark (E'b'rgh W.)	Peake, Rt. Hon. O.	Williams, Charles (Torquay)
Hutchison, Colonel James (Glasgow)	Perkins, W. R. D.	Williams, Gerald (Tonbridge)
Hylton-Foster, H. B.	Peto, Brig. C. H. M.	Williams, Sir Herbert (Croydon, E.)
Jennings, R.	Pickthorn, K.	Wills, G.
Johnson, Howard (Kemptown)	Pitman, I. J.	Wilson, Geoffrey (Truro)
Jones, A. (Hall Green)	Powell, J. Enoch	Winterton, Rt. Hon. Earl
Joynson-Hicks, Hon. L. W.	Prescott, S.	Wood, Hon. R.
Kaberry, D.	Price, Henry (Lewisham, W.)	York, C.
Kerr, H. W. (Cambridge)	Prior-Palmer, Brig. O.
Kingsmill, Lt.-Col. W. H.	Profumo, J. D.	TELLERS FOR THE NOES:
Lambert, Hon. G.	Raikes, H. V.	Mr. Studholme and Mr. Vosper
Lancaster, Col. C. G.	Rayner, Brig. R.

Question put accordingly, and agreed to.

Motion made, and Question proposed, "That the Chairman do report Progress, and ask leave to sit again."—[Mr. Bowden.]

Captain Crookshank

On that Motion, Major Milner, I am bound to ask the Chancellor of the Exchequer what are his plans with regard to the debating of this Bill. Is it that we are reporting Progress because the Government's majority was so very minute just now that they prefer not to carry on the debate tonight; or is it their intention that we should have an early night tonight so that we may have a series of late nights? I think the Committee is entitled to know because, after all, while you accepted the Motion just now, it was moved from the Government Front Bench, "That the Question be now put," and if the intention was to rise immediately after the Clause had been completed, it seems to me there was no reason why the Government should have moved that Motion when there were several of my hon. Friends wishing to carry on the debate. I thought the intention was to take the Bill a little further before we rose, and I think it is only reasonable to ask the Government what they aim to do, and how they propose to handle the business of the Finance Bill.

The Secretary of State for the Home Department (Mr. Ede)

That is quite a reasonable request to make. We are disappointed at the progress we have managed to achieve so far, but I see no reason for asking the Committee to sit late tonight. We shall, however, certainly ask the Committee to sit until early on Friday morning when we start the Sitting tomorrow.

Mr. Eccles

Surely it would be better to divide the time. The right hon. Gentleman can see his supporters are as fresh as daisies. It would be better for us to go on for two hours now—[Interruption.]—let us go on for two hours now—

Sir Richard Acland (Gravesend)

And the hon. Member can drive home in his car.

Mr. Eccles

Hon. Gentlemen have been elected Members of this House and they must make their arrangements accordingly. I am not in the least interested in their transport arrangements; I am interested only in getting this Bill through. Let us get it through in an orderly fashion and give enough time to it. Do hon. Members opposite wish it to go out to the public that they want to cut down the discussion on the grievances of the taxpayers? I appeal to the Leader of the House: let us have another couple of hours tonight, and we shall be in a better state to get through the Bill in an orderly fashion tomorrow.

Mr. Butcher (Holland with Boston)

I should like to reinforce the plea that we sit for a further two hours tonight and make some further progress with the Bill. In the 14 years in which I have been in the House, I do not think I have ever known two Motions follow one another in this way—that the Closure should be put and that hon. Members representing large numbers of taxpayers should be deprived of their right to speak on the Clause.

I could understand that the Government would move such a Motion if their intention was to make further progress with other Clauses of the Bill, but, when that Motion has been carried by a miserable majority of six, immediately to move that we report Progress and ask leave to sit again makes it perfectly clear that the Government's intention is to stifle debate and that they are studying solely the comfort and convenience of their own supporters. The hon. Baronet the Member for Gravesend (Sir R. Acland) said that we have cars in which to go home. If anyone living on the south side of London is inconvenienced, I, and I am sure many of my hon. Friends, will be happy to see that they reach their homes.—[Laughter.]—It is all very well for Members opposite to laugh, but I have had the pleasure of taking them home and look forward to a similar pleasure.

I reinforce the appeal made by the hon. Member for Chippenham (Mr. Eccles) that we continue to discuss the Bill for a further period of, say, two hours and make some substantial progress. I hope that if this Motion is taken to a Division, some of us will vote against it.

Mr. Henry Strauss (Norwich, South)

I only wish to ask the Leader of the House two simple questions. The first is whether the sole motive in moving the Closure just now was to prevent an immediate reply to the absurd speech of the Chancellor of the Exchequer. My second question is whether the Closure was moved at the request of the Chancellor, or whether—

The Chairman

I am sorry, but that question does not arise. The Motion before the Committee is that I do report Progress, and the debate must be limited to that question.

Mr. Strauss

With apologies, Major Milner. In that case I suggest that the Motion to report Progress should not be accepted because of the conduct in moving the Closure on no reasonable grounds whatever. Surely—

The Chairman

Order. The statement of the hon. and learned Member is in effect a reflection on the Chair. I accepted the Closure and I cannot, of course, accept any reflection on my so doing.

Mr. Strauss

Let me at once dispose of that. When you accepted the Closure I assume, and I am perfectly certain, that you had no idea that it was to be followed by the Motion to report Progress. You, Major Milner, very naturally assumed, as did we all, that the object of moving the Closure was to enable us to get on to the following Clauses, which I think the whole Committee was eager to debate.

Captain Crookshank

As the Leader of the House will see, there is some division of opinion whether it is wise or not for the debate to come to an end and consideration to continue tomorrow. I must thank the right hon. Gentleman for having answered me, because I rose on behalf of my hon. Friends to find out what was the plan for the Finance Bill debates. I found out from him that the Government suggest that we adjourn now and have a longer Sitting tomorrow, it being left undetermined at what time the Government will, as usual, move the Closure of the debate. That is, at any rate, an intelligible plan; but it is not the particular business of the Opposition to facilitate the business of the Government. Therefore, there is no particular reason why we should not adjourn, because by sitting on we should be facilitating the Government's business.

Mr. Osborne

May I ask the Leader of the House to give us this information? When he says that tomorrow we shall sit rather late, or into the early hours of the morning, does he mean that we shall sit until 2 a.m., or until 10 a.m.? Before I came into the Chamber, I heard that we were likely to sit until 10 a.m. If that is so, I submit that it surely would be better for everyone in the Committee to divide that long Sitting and to sit for another two hours tonight. Will the Leader of the House tell us what he means when he says that we shall sit until the early hours?

Lieut.-Commander Braithwaite

I think that I can help my hon. Friend. We are working now to a formula which. I understand, the Patronage Secretary was good enough to lay down just before Easter when the question of late Sittings was being discussed. He then said that if hon. Members opposite wanted all-night Sittings, let there be sittings until breakfast time. That is his point of view. The Patronage Secretary being a notoriously late riser, I would predict that tomorrow's Sitting may last until 10 a.m. The right hon. Gentleman having laid that down, may I suggest that there is still three quarters of an hour before public transport stops. As we are on Part 11 of the Bill, which deals with Income Tax, might we not make a little progress with that now?

Sir Peter Macdonald (Isle of Wight)

I cannot understand that there is any great urgency about adjourning at this early hour. Some of us have been in this House for quite a long time, and we remember that in the past we never expected to go home before midnight when the Finance Bill was being discussed. Unfortunately, this Government is a feather-bedded Government. It starts to think about beds, not at 11 o'clock at night, because I see them sleeping in the Library at 4 o'clock in the afternoon.

Quite seriously, there are a great many Clauses in this Finance Bill to be dealt with. We are told that the number of days for discussion is limited. Therefore, why should we not make the most of today, for instance? We have still a number of hours which could be used. I am told that the question of transport is worrying hon. Members opposite, but honestly I have never seen so many cars packing New Palace Yard as there are tonight. [HON. MEMBERS: "Ministers' cars."] I have not had a car here for years, but I had one tonight and I could not get any room in New Palace Yard at all. I drove into the Speaker's Court. There was no room at all in the Speaker's Court, and I was told by a policeman that it was reserved for Ministers' cars.

11.45 p.m.

The Chairman

Order. The hon. Gentleman's remarks are not really relevant to the Motion.

Sir P. Macdonald

There were 14 Ministers' cars. Have we got 14 Ministers who are entitled to have large motorcars? In my young days in this House, very few Ministers had cars.

The Chairman

I have indicated to the hon. Gentleman that his remarks are not in order. I must ask him to be relevant to the Motion before the Committee.

Sir P. Macdonald

I understand that the Motion relates to the Finance Bill.

The Chairman

No. The Motion before the Committee is that I do report Progress.

Sir P. Macdonald

Yes, report Progress and ask leave to sit again. Why should we not sit on to-night, because we have still a lot of time? It is not yet 12 o'clock. Why should we not have at least another

^* See Mr. Deputy-Speaker's Ruling, Column 1232.

hour on this Finance Bill and then perhaps the feather-bedded Government could get home earlier to-morrow night, or they might bring their feather beds with them. Why not? I know what is going to happen to-morrow night. We are going to have a series of discussions for about an hour or two and then the Government are going to put the gag on us, and that will go on all night until they have got the number of Clauses they want. That is a very bad way to deal with the Finance Bill, because there are some very vital things in it affecting the whole nation. I protest most vehemently at reporting Progress at this early hour of the night.

Question put, "That the Chairman report Progress, and ask leave to sit again."

The Committee divided: Ayes, 293; Noes, 280.^*

Division No. 86.]	AYES	[11.48 p.m.
Acland, Sir Richard	Crawley, A.	Grey, C. F.
Adams, Richard	Crosland, C. A. R.	Griffiths, David (Rother Valley)
Albu, A. H.	Crossman, R. H. S.	Griffiths, Rt. Hon. James (Llanelly)
Allen, Arthur (Bosworth)	Cullen, Mrs. A.	Griffiths, William (Exchange)
Allen, Scholefield (Crewe)	Daines, P.	Grimond, J.
Anderson, Alexander (Motherwell)	Dalton, Rt. Hon. H.	Gunter, R. J.
Attlee, Rt. Hon. C. R.	Darling, George (Hillsborough)	Hale, Joseph (Rochdale)
Awbery, S. S.	Davies, A. Edward (Stoke, N.)	Hale, Leslie (Oldham, W.)
Bacon, Miss Alice	Davies, Harold (Leek)	Hall, John (Gateshead, W.)
Baird, J.	Davies, Stephen (Merthyr)	Hall, Rt. Hon. Glenvil (Colne Valley)
Balfour, A.	de Freitas, Geoffrey	Hamilton, W. W.
Barnes, Rt. Hon. A. J.	Deer, G.	Hannan, W.
Bartley, P.	Delargy, H. J.	Hardman, D. R.
Bellenger, Rt. Hon F. J.	Dodds, N. N.	Hardy, E. A.
Benn, Wedgwood	Donnelly, D.	Hargreaves, A.
Benson, G.	Driberg, T. E. N.	Harrison, J.
Beswick, F.	Dugdale, Rt. Hon. John (W. Bromwich)	Hastings, S.
Bevan, Rt. Hon. A. (Ebbw Vale)	Dye, S.	Hayman, F. H.
Bing, G. H. C.	Ede, Rt. Hon. J. C.	Henderson, Rt. Hon. A. (Rowley Regis)
Blenkinsop, A.	Edelman, M.	Herbison, Miss M.
Blyton, W. R.	Edwards, John (Brighouse)	Hewitson, Capt. M.
Boardman, H.	Edwards, Rt. Hon. Ness (Caerphilly)	Hobson, C. R.
Bettomley, A. G.	Edwards, W. J. (Stepney)	Holman, P.
Bowles, F. G. (Nuneaton)	Evans, Albert (Islington, S. W.)	Holmes, Horace (Hemsworth)
Braddock, Mrs. Elizabeth	Evans, Stanley (Wednesbury)	Houghton, D.
Brook, Dryden (Halifax)	Ewart, R.	Hoy, J.
Brooks, T. J. (Normanton)	Fernyhough, E.	Hubbard, T.
Broughton, Dr. A. D. D.	Field, Capt. W. J.	Hudson, James (Ealing, N.)
Brown, Rt. Hon. George (Belper)	Finch, H. J.	Hughes, Emrys (S. Ayrshire)
Brown, Thomas (Ince)	Fletcher, Eric (Islington, E.)	Hughes, Hector (Aberdeen, N.)
Burke, W. A.	Follick, M.	Hughes, Moelwyn (Islington, N.)
Burton, Miss E.	Foot, M. M.	Hynd, H. (Accrington)
Butler, Herbert (Hackney, S.)	Forman, J. C.	Hynd, J. B. (Attercliffe)
Callaghan, L. J.	Fraser, Thomas (Hamilton)	Irvine, A. J. (Edge Hill)
Carmichael, J.	Freeman, John (Watford)	Isaacs, Rt. Hon. G. A.
Castle, Mrs. B. A.	freeman, Peter (Newport)	Janner, B.
Champion, A. J.	Gaitskell, Rt. Hon. H. T. N.	Jay, D. P. T.
Chetwynd, G. R.	Ganley, Mrs. C. S.	Jeger, George (Goole)
Clunie, J.	George, Lady Megan Lloyd	Jeger, Dr. Santo (St. Pancras, S.)
Cocks, F. S.	Gibson, C. W.	Jenkins, R. H.
Coldrick, W.	Gilzean, A.	Johnson, James (Rugby)
Collindridge, F.	Glanville, James (Consett)	Johnston, Douglas (Paisley)
Cook, T. F.	Gooch, E. G.	Jones, David (Hartlepool)
Cooper, Geoffrey (Middlesbrough, W.)	Gordon-Walker, Rt. Hon. P. C.	Jones, Frederick Elwyn (West Ham, S.)
Cooper, John (Deptford)	Granville, Edgar (Eye)	Jones, Jack (Rotherham)
Corbet, Mrs. Freda (Peckham)	Greenwood, Anthony (Rossendale)	Jones, William Elwyn (Conway)
Cove, W. G.	Greenwood, Rt. Hon. Arthur (Wakefield)	Keenan, W.
Craddock, George (Bradford, S.)	Grenfell, D. R.	Kenyon, C.
Key, Rt. Hon. C. W.	O'Brien, T.	Summerskill, Rt. Hon. Edith.
King, Dr. H. M.	Oliver, G. H.	Sylvester, G. O.
Kinghorn, Sqn. Ldr. E.	Orbach, M.	Taylor, Bernard (Mansfield)
Lang, Gordon	Padley, W. E.	Taylor, Robert (Morpeth)
Lee, Frederick (Newton)	Paget, R. T.	Thomas, David (Aberdare)
Lee, Miss Jennie (Cannock)	Paling, Rt. Hon. Wilfred (Dearne Vally)	Thomas, George (Cardiff)
Lever, Harold (Cheetham)	Paling, Will T. (Dewsbury)	Thomas, Iorwerth (Rhondda, W.)
Lever, Leslie (Ardwick)	Pannell, T. C.	Thomas, Ivor Owen (Wrekin)
Lewis, Arthur (West Ham, N.)	Pargiter, G. A.	Thorneycroft, Harry (Clayton)
Lewis, John (Bolton, W.)	Parker, J.	Thurtle, Ernest
Lindgren, G. S.	Paton, J.	Timmons, J.
Logan, D. G.	Pearson, A.	Tomney, F.
Longden, Fred (Small Heath)	Peart, T. F.	Turner-Samuels, M.
McAllister, G.	Poole, C.	Ungoed-Thomas, A. L.
MacColl, J. E.	Popplewell, E.	Usborne, H.
Macdonald, A. J. F. (Roxburgh)	Porter, G.	Vernon, W. F.
McGhee, H. G.	Price, Philips (Gloucestershire, W.)	Viant, S. P.
McGovern, J.	Proctor, W. T.	Wade, D. W.
McInnes, J.	Pryde, D. J.	Wallace, H. W.
Mack, J. D.	Pursey, Cmdr. H.	Watkins, T. E.
McKay, John (Wallsend)	Rankin, J.	Webb, Rt. Hon. M. (Bradford, C.)
Mackay, R. W. G. (Reading, N.)	Rees, Mrs. D.	Weitzman, D.
McLeavy, F.	Reeves, J.	Wells, Percy (Faversham)
MacMillan, Malcolm (Western Isles)	Reid, Thomas (Swindon)	Wells, William (Walsall)
McNeil, Rt. Hon. H.	Reid, William (Camlachie)	West, D. G.
MacPherson, Malcolm (Stirling)	Rhodes, H.	Wheatley, Rt. Hn. John (Edinb'gh, E.)
Mainwaring, W. H.	Richards, R.	White, Mrs. Eirene (E. Flint)
Mallalieu, E. L. (Brigg)	Robens, A.	White, Henry (Derbyshire, N. E.)
Mallalieu, J. P. W. (Huddersfield, E.)	Roberts, Emrys (Merioneth)	Whiteley, Rt. Hon. W.
Mann, Mrs. Jean	Roberts, Goronwy (Caernarvonshire)	Wilcock, Group Capt. C. A. B.
Manuel, A. C.	Robertson, J. J. (Berwick)	Wilkes, L.
Marquand, Rt. Hon. H. A.	Rogers, George (Kensington, N.)	Wilkins, W. A.
Mathers, Rt. Hon. G.	Ross, William (Kilmarnock)	Willey, Frederick (Sunderland)
Mellish, R. J.	Royle, C.	Willey, Octavius (Cleveland)
Messer, F.	Shurmer, P. L. E.	Williams, David (Neath)
Middleton, Mrs. L.	Silverman, Julius (Erdington)	Williams, Rev. Llywelyn (Abertillery)
Mikardo, Ian	Silverman, Sydney (Nelson)	Williams, Ronald (Wigan)
Mitchison, G. R.	Simmons, C. J.	Williams, Rt. Hon. Thomas (Don Valley)
Moeran, E. W.	Slater, J.	Williams, W. T. (Hammersmith, S.)
Monslow, W.	Smith, Ellis (Stoke, S.)	Wilson, Rt. Hon. Harold (Huyton)
Moody, A. S.	Smith, Norman (Nottingham, S.)	Winterbottom, Ian (Nottingham, C.)
Morgan, Dr. H. B.	Snow, J. W.	Winterbottom, Richard (Brightside)
Morley, R.	Sorensen, R. W.	Wise, F. J.
Morris, Percy (Swansea, W.)	Soskice, Rt. Hon. Sir Frank	Woodburn, Rt. Hon. A.
Mort, D. L.	Sparks, J. A.	Wyatt, W. L.
Moyle, A.	Steele, T.	Yates, V. F.
Mulley, F. W.	Stewart, Michael (Fulham, E.)	Younger, Hon. K.
Murray, J. D.	Stokes, Rt. Hon. R. R.
Nally, W.	Strachey, Rt. Hon. J.	TELLERS FOR THE AYES:
Neal, Harold (Bolsover)	Strauss, Rt. Hon. George (Vauxhall)	Mr. Bowden and
Noel-Baker, Rt. Hon. P. J.	Stross, Dr. Barnett	Mr. Kenneth Robinson.
NOES
Aitken, W. T.	Brooke, Henry (Hampstead)	Davies, Nigel (Epping)
Alport, C. J. M.	Browne, Jack (Govan)	de Chair, Somerset
Amery, Julian (Preston, N.)	Buchan-Hepburn, P. G. T.	De la Bère, R.
Amory, Heathcoat (Tiverton)	Bullock, Capt. M.	Deedes, W. F.
Arbuthnot, John	Bullus, Wing Commander E. E.	Digby, S. W.
Ashton, H. (Chelmsford)	Burden, F. A.	Dodds-Parker, A. D.
Assheton, Rt. Hon. R. (Blackburn, W.)	Butcher, H. W.	Donner, P. W.
Astor, Hon. M. L.	Butler, Rt. Hon. R. A. (Saffron Walden)	Douglas-Hamilton, Lord Malcolm
Baker, P. A. D.	Carr, Robert (Mitcham)	Drayson, G. B.
Baldock, Lt.-Cmdr. J. M.	Carson, Hon. E.	Dugdale, Maj. Sir Thomas (Richmond)
Baldwin, A. E.	Channon, H.	Duncan, Capt. J. A. L.
Banks, Col. C.	Churchill, Rt. Hon. W. S.	Dunglass, Lord
Baxter, A. B.	Clarke, Col. Ralph (East Grinstead)	Duthie, W. S.
Beamish, Major Tufton	Clarke, Brig. Terence (Portsmouth, W.)	Eccles, D. M.
Bell, R. M.	Clyde, J. L.	Elliot, Rt. Hon. W. E.
Bennett, Sir Peter (Edgbaston)	Colegate, A.	Erroll, F. J.
Bennett, Dr. Reginald (Gosport)	Conant, Maj. R. J. E.	Fisher, Nigel
Bennett, William (Woodside)	Cooper, Sqn. Ldr. Albert (Ilford, S.)	Fletcher, Walter (Bury)
Bevins, J. R. (Liverpool, Toxteth)	Cooper-Key, E. M.	Fort, R.
Birch, Nigel	Corbett, Lt.-Col. Uvedale (Ludlow)	Foster, John
Bishop, F. P.	Craddock, Beresford (Spelthorne)	Fraser, Hon. Hugh (Stone)
Black, C. W.	Cranborne, Viscount	Fraser, Sir Ian (Morecambe & Lonsdale)
Boles, Lt.-Col. D. C. (Wells)	Crookshank, Capt. Rt. Hon. H. F. C.	Fyfe, Rt. Hon. Sir David Maxwell
Bossom, A. C.	Crosthwaite-Eyre, Col. O. E.	Gage, C. H.
Boyd-Carpenter, J. A.	Crouch, R. F.	Galbraith, Cmdr. T. D. (Pollok)
Boyle, Sir Edward	Crowder, Capt. John (Finchley)	Gammans, L. D.
Bracken, Rt. Hon. B.	Crowder, Petre (Ruislip—Northwood)	Garner-Evans, E. H. (Denbigh)
Braine, B. R.	Cundiff, F. W.	Gates, Maj. E. E.
Braithwaite, Sir Albert (Harrow, W.)	Cuthbert, W. N.	Gomme-Duncan, Col. A.
Braithwaite, Lt.-Cr. G. (Bristol, N. W.)	Darling, Sir William (Edinburgh, S.)	Gridley, Sir Arnold
Bromley-Davenport, Lt.-Col. W.	Davidson, Viscountess	Grimston, Hon. John (St. Albans)

Grimston, Robert (Westbury)	McCallum, Major D.	Ryder, Capt. R. E. D.
Harden, J. R. E.	McCorquodale, Rt. Hon. M. S.	Salter, Rt. Hon. Sir Arthur
Hare, Hon. J. H. (Woodbridge)	Macdonald, Sir Peter (I. of Wight)	Sandys, Rt. Hon. D.
Harris, Frederic (Croydon, N.)	Mackeson, Brig. H. R.	Savory, Prof. D. L.
Harris, Reader (Heston)	McKibbin, A.	Scott, Donald
Harvey, Air Cdre. A. V. (Macclesfield)	McKie, J. H. (Galloway)	Shepherd, William
Harvey, Ian (Harrow, E.)	Maclay, Hon. John	Smiles, Lt.-Col. Sir Walter
Harvie-Watt, Sir George	Maclean, Fitzroy	Smithers, Peter (Winchester)
Hay, John	MacLeod, Iain (Enfield, W.)	Smyth, Brig. J. G. (Norwood)
Head, Brig. A. H.	MacLeod, John (Ross and Cromarty)	Snadden, W. McN.
Headlam, Lieut.-Col. Rt. Hon. Sir C.	Macmillan, Rt. Hon. Harold (Bromley)	Soames, Capt. C.
Heald, Lionel	MacPherson, Major Niall (Dumfries)	Spearman, A. C. M.
Heath, Edward	Maitland, Cmdr. J. W.	Spence, H. R. (Aberdeenshire, W.)
Henderson, John (Cathcart)	Manningham-Buller, R. E.	Spens, Sir Patrick (Kensington, S.)
Hicks-Beach, Maj. W. W.	Marlowe, A. A. H.	Stanley, Capt. Hon. Richard (N. Fylde)
Higgs, J. M. C.	Marples, A. E.	Stevens, G. P.
Hill, Mrs. E. (Wythenshawe)	Marshall, Douglas (Bodmin)	Steward, W. A. (Woolwich, W.)
Hill, Dr. Charles (Luton)	Marshall, Sidney (Sutton)	Stewart, Henderson (Fife, E.)
Hinchingbrooke, Viscount	Maude, Angus (Ealing, S.)	Stoddart-Scott, Col. M.
Hirst, Geoffrey	Maude, John (Exeter)	Storey, S.
Hollis, M. C.	Maudling, R.	Strauss, Henry (Norwich, S.)
Holmes, Sir Stanley (Harwich)	Medlicott, Brig. F.	Stuart, Rt. Hon. James (Moray)
Hope, Lord John	Mellor, Sir John	Studholme, H. G.
Hopkinson, Henry	Molson, A. H. E.	Summers, G. S.
Hornsby-Smith, Miss P.	Monckton, Sir Walter	Sutcliffe, H.
Horsbrugh, Rt. Hon. Florence	Moore, Lt.-Col. Sir Thomas	Taylor, Charles (Eastbourne)
Howard, Gerald (Cambridgeshire)	Morrison, John (Salisbury)	Taylor, William (Bradford, N.)
Howard, Greville (St. Ives)	Morrison, Rt. Hon. W. S. (Cirencester)	Teeling, W.
Hudson, Sir Austin (Lewisham, N.)	Mott-Radclyffe, C. E.	Teevan, T. L.
Hudson, Rt. Hon. Robert (Southport)	Nabarro, G.	Thomas, J. P. L. (Hereford)
Hudson, W. R. A. (Hull, N.)	Nicholson, G.	Thompson, Kenneth Pugh (Walton)
Hutchinson, Geoffrey (Ilford, N.)	Nield, Basil (Chester)	Thompson, R. H. M. (Croydon, W.)
	Noble, Cmdr. A. H. P.	Thorneycroft, Peter (Monmouth)
Hutchison, Lt.-Com. Clark (E'b'rgh W.)	Nugent, G. R. H.	Thornton-Kemsley, Col. C. N.
Hutchison, Colonel James (Glasgow)	Nutting, Anthony	Thorp, Brig. R. A. F.
Hylton-Foster, H. B.	Oakshott, H. D.	Tilney, John
Jennings, R.	Odey, G. W.	Touche, G. C.
Johnson, Howard (Kemptown)	Ormsby-Gore, Hon. W. D.	Turner, H. F. L.
Jones, A. (Hall Green)	Orr, Capt. L. P. S.	Turton, R. H.
Joynson-Hicks, Hon. L. W.	Orr-Ewing, Charles Ian (Hendon, N.)	Tweedsmuir, Lady
Kaberry, D.	Orr-Ewing, Ian L. (Weston-super-Mare)	Vane, W. M. F.
Kerr, H. W. (Cambridge)	Osborne, C.	Vaughan-Morgan, J. K.
Kingsmill, Lt.-Col. W. H.	Peake, Rt. Hon O.	Wakefield, Edward (Derbyshire, W.)
Lambert, Hon. G.	Perkins, W. R. D.	Wakefield, Sir Wavell (Marylebone)
Lancaster, Col. C. G.	Peto, Brig. C. H. M.	Walker-Smith, D. C.
Langford-Holt, J.	Pickthorn, K.	Ward, Hon. George (Worcester)
Law, Rt. Hon. R. K.	Pitman, I. J.	Ward, Miss I. (Tynemouth)
Leather, E. H. C.	Powell, J. Enoch	Waterhouse, Capt. Rt. Hon. C.
Legge-Bourke, Maj. E. A. H.	Prescott, S.	Watkinson, H.
Lennox-Boyd, A. T.	Price, Henry (Lewisham, W.)	Webbe, Sir H. (London)
Lindsay, Martin	Prior-Palmer, Brig. O.	Wheatley, Major M. J. (Poole)
Linstead, H. N.	Profumo, J. D.	White, Baker (Canterbury)
Llewellyn, D.	Raikes, H. V.	Williams, Charles (Torquay)
Lloyd, Rt. Hn. Geoffrey (King's Norton)	Rayner, Brig. R.	Williams, Gerald (Tonbridge)
Lloyd, Maj. Guy (Renfrew, E.)	Redmayne, M.	Williams, Sir Herbert (Croydon, E.)
Lloyd, Selwyn (Wirral)	Remnant, Hon. P.	Wills, G.
Lockwood, Lt.-Col. J. C.	Renton, D. L. M.	Wilson, Geoffrey (Truro)
Longden, Gilbert (Herts, S. W.)	Roberts, Major Peter (Heeley)	Winterton, Rt. Hon. Earl
Low, A. R. W.	Robertson, Sir David (Caithness)	Wood, Hon. R.
Lucas, Sir Jocelyn (Portsmouth S.)	Robinson, Roland (Blackpool, S.)	York, C.
Lucas, P. B. (Brentford)	Robson-Brown, W. (Esher)
Lucas-Tooth, Sir Hugh	Rodgers, John (Sevenoaks)	TELLERS FOR THE NOES:
Lyttelton, Rt. Hon. O.	Roper, Sir Harold	Mr. Galbraith and Mr. Vosper.
McAdden, S. J.	Russell, R. S.

12 midnight.

Mr. Boothby

I wish to raise a point of order concerning the last Division. When the Division was called, I found myself—

The Chairman

Order. I have been directed by the Committee to report Progress. I think the hon. Member had better make his point in the House.

Mr. Boothby

This is a matter of deliberate obstruction.

Committee report Progress; to sit again Tomorrow.

Mr. Deputy-Speaker (Major Milner)

Mr. Boothby.

Mr. Boothby

I should like to draw your attention, Mr. Deputy-Speaker, to the fact that when the last Division was called I found myself in the Ayes Lobby. I proceeded to make haste to get into the Noes Lobby. I was debarred from so doing by the massed forces of the entire Labour Party. I had a hard struggle against overwhelming odds. I submit that I was prevented by force by the Labour Party—

Mr. Deputy-Speaker

Do I understand that the hon. Member did eventually vote in the proper Lobby?

Mr. Boothby

No. They kept me in till the doors were locked.

Mr. Deputy-Speaker

I shall direct inquiry to be made into the matter of complaint, and will report to the House.

Mr. Churchill (Woodford)

I am very glad indeed, Mr. Deputy-Speaker, that you have not dismissed the matter summarily. It is quite certain that hon. Members ought not to thrust their way violently into the Lobbies, as happened a few weeks ago, or, should they be caught in the wrong Lobby, be debarred from recording their votes. [Laughter.] These are not laughing matters. We could easily come to physical violence if we wanted to. The object of Parliament is to substitute argument for fisticuffs. I thank you very much for saying that this matter will receive a searching inquiry under the authority of Mr. Speaker. If it be found that the hon. Gentleman was improperly or unfairly obstructed—[HON. MEMBERS: "Harried."]—I suppose that a Ruling with the power of the Chair will be given.

Mr. Arthur Lewis (West Ham, North) rose—

Mr. Deputy-Speaker

If the hon. Member is rising to debate that same matter, it has already been concluded. If it is on some other point of order, I am prepared to hear it.

Mr. Lewis

I understood you to say there would be an inquiry. I want to know if, in that inquiry, consideration will be given to the question whether the Leader of the Tory harriers was not in the Government Ayes Lobby attempting to harry the Labour voters of the Labour Government.

Mr. Deputy-Speaker

That may or may not be one of the matters coming out in the inquiry.