FINANCE BILL

HC Deb 26 June 1952 vol 502 cc2444-86

Order for Third Reading read.

3.55 p.m.

The Chancellor of the Exchequer (Mr. R. A. Butler)

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

Now that we have come to the Third Reading of the Finance Bill, I think we can legitimately look back, while remaining within the rules of order, on the progress that we have so far made. The Bill gives legislative authority to the Budget, and I think this debate should give us an opportunity of seeing the picture in perspective and as a whole. I undertake to the House to put as shortly as I can the general picture as I see it, so that other hon. and right hon. Members can take part in our short debate.

All Finance Bills nowadays are complicated and many of them are long. Certainly the one which we have had before us for the past few weeks must be regarded as one of the longest and most complicated on record. It is, I believe, more than twice the length of the Bill introduced by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), my predecessor last year, occupying no fewer than 123 pages of reasoned print, which we have examined time and time again in detail day and night, as opposed to 51 pages last year.

Moreover, it embodies not only a complete reconstruction of the Purchase Tax over a wide part of its field, but also the imposition of an entirely new tax in the Excess Profits Levy. This inevitably imposed a formidable task upon us when we came to consider the Bill in detail on the Committee and Report stages. As we approached that part of the task at the end of April, there were not wanting commentators and critics to take the part of Job's comforters and assure us that it would not be possible in a House of Commons so deeply and evenly divided to get the Bill through without severe limitation of time allowed for discussion of detail. It seemed to be the general feeling that the Closure would have to be applied more than once, as happened in past Bills.

I remained undaunted by those observations because I have felt always that the method of discussion and debate across the Floor of this House, which has served this and previous generations so well for so many centuries, will always see us through any Finance Bill. I believe that we should be able to accomplish what we have done by what I shall call the discursive rather than the coercive method. Certainly we have had plenty of discursive opportunities, and in the end the method succeeded.

I believe that there is great strength— and on this I based my calculations before the Bill was introduced—in the will of the House, satiated by repetitive speeches, to bring discussion to an end, and that if that joint will of the Chamber is used at critical times, without the coercive method, it is as firm and definite a method as any other. At any rate, my faith was justified; and it was a faith not in one side or the other but in the spirit of reasonableness and of sincere discussion which I believe can prevail on all sides of the House if given a chance.

At any rate, this is an achievement of which I think the House as a whole can be proud and for which every hon. and right hon. Member on each side of the House should take credit; and I am certainly not trying to give more credit to one section than to the other. It is right and reasonable that I should acknowledge the help, as well as the buffeting and criticism, I have received from every side of the Chamber, both in the House and in Committee.

I might also pay a tribute to those silent Members of our assembly who have restrained themselves from speaking on many occasions both day and night and without whose co-operation it would have been impossible to get this Bill through at all. They perhaps form the necessary army or column without which such a procedure is impossible.

Although this Bill is twice as long as last year's and a great deal more complicated and far-reaching, we took only about three hours longer than last year to get through the Committee and Report stages; and we did not have to bring the discussion compulsorily to an end once. [An HON. MEMBER: "A responsible Opposition."] Sir William Harcourt, in 1894, adopted the same technique and obtained the same result in his Finance Bill imposing the contentious Death Duties for the first time, so it is possible to combine contentious measures with methods that this House and the Committee have followed for a long time.

In the course of this year it was inevitable that amendments should be made to the Bill; and here I want to lead to another matter. The very fact that I have accepted Amendments or introduced Government Amendments to meet points made by hon. Members have been commented upon, by those who seem to be losing touch with constitutional procedure, as if it were the duty of the Chancellor of the Exchequer to turn a deaf ear to all criticisms, to steel his heart against every appeal, and to proceed on the assumption that the original proposals, just because they were the Chancellor's proposals, must necessarily be perfect in every detail. All I can say is that so arrogant an approach may be acceptable to some, but to me it seems the very negation of our Parliamentary institutions.

I believe the Bill we have now is a better Bill than it was when it was introduced and that this is due to the processes of free discussion in the House of Commons and the contributions made by hon. and right hon. Members on both sides of the House. I certainly acknowledge in all humility that any defects in the original draft have largely been removed, and I hope that this is now a spotless document.

Nevertheless these numerous improvements and Amendments have left the main structure of the Budget, upon which this Bill was founded, unaltered. I believe that events have shown and will further show that this is a Bill which contributes, so far as a Bill can, its proper share in reaching the objectives which are common to both sides of the House, namely, those of a sound economy and external solvency.

As the House already knows, we have made great progress in the latter task, and I will simply remind hon. Members that our average weekly gold and dollar deficit of £26 million sterling in the last quarter of last year, including an average of £5 million for the debt repayment, was reduced to £17 million per week in the first quarter of this year, and so far in the second quarter has been very small indeed.

It is not right for me on this occasion to pursue that any further; I would only say that it would be the greatest possible mistake to think that this is more than the beginning of the great task we all have before us. We are still faced with the formidable task of establishing ourselves firmly on an enduring basis so that we can live free from day-to-day anxiety, possessing sufficient reserves to enable us to meet with equanimity the ebb and flow of commerce and production in half the world's trade throughout the Commonwealth and the sterling area.

This Bill deals, as far as a Bill can, with the internal financial policy, and our general objective has been to ensure that consumption, both public and personal, will not prevent us from meeting the over-riding need of the balance of payments which, in my last main statement to the House, I said must come first. But as I have said also, our policy must not be grimly negative. Though stern, it must be positive. I consider that the nation—and that has been part of the object of this Bill—should throw off some of the crippling load of expenditure, and that while we have been obliged to impose burdens for reasons which I have given on numerous occasions, we should make a significant start in reducing taxation.

In Part III of this Bill we see a significant start in the realm of Income Tax in which millions of people are now seeing the benefit in their weekly pay packets, and there can be no doubt that this Bill to that extent will have a significant effect on incentives to production. Let me give a few human examples arising out of the staccato Clauses of this Bill.

From now on a man earning £8 a week —say, a lorry driver—pays 4s. 5d. less tax if he is single, and 5s. 6d. less if he is married and has no children. I am not giving many cases, but here is another one. Another case one might take is that of an underground coal-face worker in the mines, paid at piece rates and earning £14 15s. a week. If he is married with two children, he will now pay 9s. 10d. less tax, together, of course, with the extra family allowance which is not included in this Bill.

These tax reductions, of which I can give numerous other examples, benefit no fewer than 16 million taxpayers. About 1 million of them are not covered by the P.A.Y.E. scheme and so will not feel the benefit until next year, but the remaining 15 million are already benefiting, including 2 million who from now on under this Bill cease to pay Income Tax altogether. At the same time, I have done my best to see that the Budget surplus remains substantially unchanged in order to prevent consumption from increasing unduly.

In the course of our detailed discussions, two main criticisms have emerged. One section wanted a larger surplus and thus a bigger cut in consumption, and others have alleged that by Amendments made in the Bill the original design has been altered so radically as to present a totally different Budget picture and too soft a one. So we have the hard critics and the soft critics.

I explained at the time my reasons for rejecting the need for a bigger surplus or for turning the financial screw more cruelly than I decided to do in this Bill. Many industries were already faced with slack demand at home, with falling demand in the sterling area and with difficult selling conditions in the rest of the world. I judged, therefore, that to depress the home demand even further would not increase exports but would result in a further reduction in employment and industrial activity.

I believe that the experience of the last few months has sufficiently confirmed my conclusion. Indeed, it has been sufficient to modify the view of "The Times" which, in a leading article last week, said: There is no certainty at all that a more severe Budget as such would have made a greater contribution to national solvency. We have all been deeply concerned in these debates with the state of the textile industry, in particular in Lancashire and Yorkshire. The Government have recognised that special action was needed to prevent unnecessary hardship and loss of production, and therefore by adjusting certain D levels—and here I pay a tribute to right hon. and hon. Members on both sides of the House who have assisted with their advice in a novel method of achieving justice—with the aid of the House itself, and in adjusting rates of Purchase Tax, I have had the need of textiles, the boot and shoe industry, the glove industry in various parts of England and other industries before me. I am only sorry that I have not been able to satisfy one hon. Member opposite who took so noble a part in our debates in the cause of the hat industry. I do not propose to give a long catalogue of those industries which I have not been able to satisfy. At the same time, there are some who are more happy than when we first introduced this Bill.

As the House knows, we have agreed to institute a committee of inquiry into two points in connection with Purchase Tax, and I shall in due course be making the announcements both as to the constitution and as to the terms of reference. I myself shall watch during the rest of the year the operation not only of the Purchase Tax but also of the Entertainments Duty in accordance with the undertakings which I have given. I do not think I need go further into the Entertainments Duty at this stage.

To revert quite shortly to the more general economic picture, throughout a considerable range of consumer goods industries the pressure of home demand has ceased to be an obstacle in the way of achieving the maximum export effort and all that it means in the way of human or physical adjustment. Indeed, some people are now arguing that we need to stimulate home demand to prevent unemployment increasing. I think we must be very careful in flying to this opposite extreme, and I undertake that the Government will remain sensitive to the situation and ready to act where action can be effective.

I now address myself to those who have expressed the view that the Bill in this final form is radically different in design from that in which it was originally presented. This contention has only to be examined for it to be shown to be thoroughly baseless. As far as the present year is concerned—the year with which I was dealing in the Budget—I thought it right, with the agreement of almost every hon. and right hon. Gentleman in the House, to sacrifice £10 million of revenue in general reductions of Purchase Tax over the field of the D scheme. That was a possibility I envisaged before introducing the Bill, and I was very ready to do it.

I have sacrificed a further £2 million or £3 million—nearer the latter—in adjusting the D level on furnishing fabrics at the particular request of those who are interested in this aspect of trade in Lancashire, and about £¼ million in concessions to the low horse-power car, which my hon. Friend the Financial Secretary announced.

Here I should like to pay a tribute to the team which has helped me throughout this Bill and, in particular, to the batting of the Financial Secretary, which has not only been accurate but which has shown that he has a style of his own.

These concessions amount to a total of a little over £13 million in all, or less than one-third of I per cent. of the total revenue. That, I think, puts in perspective some of the wild observations that have been made.

Mr. Hugh Gaitskell (Leeds, South)

Will the right hon. Gentleman give the figures for a full year?

Mr. Butler

The figures for a full year would be about £17 million in the case of the first figure of £10 million—speaking from memory—and about £1 million more in respect of furnishing fabrics. That is for this year. The Excess Profits Levy does not take effect until next year.

In this Third Reading debate it would be out of order to discuss aspects such as the main realm of Government expenditure. In any case it would not be until much later that we should be able to form a final judgment about the way things are going. At present it cannot be said that the general balance struck by the Budget has been upset and, in any case, aspects such as this are matters which are outside the realms of this Bill during the rest of the financial year.

Before I conclude, I must add a word about next year. I can assure hon. Members that I am not going to give them any Budget picture for next year, as I am not in a position to do so. The revenue from the Excess Profits Levy will begin to come in during next year. That levy comes out of the rigorous drubbing in the wash tub in which I have been fully immersed and it is likely to give an additional yield of about £80 million, taking into consideration the revised rates of Profits Tax. The prospect of additional revenue of this order in 1953–54 is very welcome, although I must keep silent about next year's prospects.

Summing up, I would say that the House has had before it a Bill which has been long and complicated and which has dealt with all the major taxes with the exception of those on beer and tobacco. This has given the House an opportunity, of which all hon. Members have fully availed themselves, for a detailed examination of the whole range of our taxation system. It has given many hon. Members—more than I have ever heard in previous debates—an opportunity of putting the point of view of their own constituencies and the districts with which they themselves are connected. I have found it a most profitable and most moving experience to hear the points of view of so many Members representing so many industries and so many parts of the country.

After all this discussion, I maintain that not only has the basic design of the Budget been accepted but that the taxation system has in many respects been improved. It is in this spirit, and in the conviction that in the original Budget and in this Bill we have a firm basis on which to put right the mistakes of the past and look with hope to the future, that I commend the Bill, on its Third Reading, to the House.

4.15 p.m.

Mr. Hugh Gaitskell (Leeds, South)

Traditionally, the debate on the Third Reading of the Finance Bill can be likened to a period of calm water after the rapids and storms through which we have passed in the earlier stages of the debate. If I may drop the analogies, it is certainly an occasion to step back and look at the Bill as a whole. The Chancellor has done that and I propose to do the same, though he will find that my conclusion on it is rather different from his own.

The Chancellor gave us—not at any great length—the usual prize-giving speech, and we were all complimented on our excellent behaviour. I hope that all hon. Members feel satisfied with the compliment. We have also been told what an admirable thing it was that the Closure did not have to be used; but in explaining that, I think the Chancellor might have pointed out that the main reason the Closure was not used this year was that the Opposition was a responsible one and, from the very start of the proceedings, set out to take an entirely constructive line to help the Chancellor, and in no sense to obstruct the debate as did the Opposition last year.

I would at once agree that the fact that we had a greater number of days available and the personality of the Chancellor, as I think my hon. Friends would admit, have helped. The right hon. Gentleman has always been even-tempered and we have seen this afternoon how modest he is—at any rate, about his plans on these occasions. His description of the drubbing which he received in the wash tub during the discussion of the Excess Profits Levy made me feel rather sorry for him.

I should like to join him in expressing appreciation to the Financial Secretary— who worked very hard and carried a great deal of the burden of the Bill—and also to the Parliamentary Secretary to the Ministry of Civil Aviation. I think it is rather an interesting innovation that we should have Ministers coming in from other Departments to help out the Treasury. Perhaps that system might be extended next year. There are all sorts of Ministers who could be brought in. There is the Minister of Fuel and Power. I do not know whether any of the Whips might be allowed to join in and explain some of these complicated matters.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)

They are Lords of the Treasury.

Mr. Gaitskell

As the Financial Secretary reminds me, they are Lords of the Treasury, so it would indeed be appropriate for them to join in. I cannot help regretting that we did not hear more from the Minister of State for Economic Affairs. After all, even if he may have prolonged the proceedings on one or two occasions, he also enlivened them. Perhaps that fact could be borne in mind should the Chancellor by any chance be Chancellor next year.

I should like also to express my own great personal appreciation to my right hon. and hon. Friends who have played such a magnificent part on behalf of the Opposition during these proceedings. I can tell the Chancellor that one of the great advantages about being a member of the Opposition during a Finance Bill is that one can spread the load very much more. I took full advantage of that and devolved most of the work on to other people, and they did it very well indeed. I should like to express once again my personal thanks to them, and I think that I can speak for the whole House when I say that, although they were not a large band, they put up an extremely good show.

Having said all those nice things, I must turn to topics which are perhaps rather more controversial; but before I do so let me say that though we do not believe that this is a good Bill—it has been changed and improved, but in our view it is still a very bad Bill—we do not intend to divide the House on this Third Reading, simply because if we were to do so and we were to win, the logic would be that we should land the finances of the country in chaos and, being a responsible Opposition, we take that kind of thing into account. The right hon. Gentleman and his hon. Friends must not imagine from that that we in any way diminish our criticism of the Bill.

I think we can, however, agree on this —that the Bill has been considerably changed. One can argue whether it is the same Bill at the end, or substantially the same Bill, or not, but the fact that the changes have been far greater this year than is usually the case cannot, I think, be questioned. It may be said that that is due to the excellent criticisms which have come from these benches, and some from the benches opposite. We can pat ourselves on the back to that extent. It may be said that it is due to the accommodating spirit and modesty shown by the Chancellor.

I am bound to say that it seems to me that there is also evidence of a lack of foresight and planning, not only in connection with the Bill but in connection with the Budget, too. The Chancellor says it would be absurd to take the line, "I am not going to accept any Amendments." He says, "That would be most arrogant, and I am not that sort of man at all." On the other hand, he must surely accept the responsibility for thinking out a little in advance what he is going to say and what he is going to do, and when we find substantial changes made, apparently without any particular reason, I think we are legitimately entitled to criticise his approach to the Bill in the first instance.

Let me take a few illustrations. The Chancellor referred in an off-hand manner to the Entertainments Duty. Frankly, I still do not know where we are as far as cricket is concerned. We have been told that, at any rate for this year—we know it is written in the Bill—there has been no increase in the Entertainments Duty for cricket; but what will the position be next year? After all, cricket clubs have to make their plans; and the Chancellor either means something when he says we will do nothing this year but will consider it before next year, or he does not.

Either he meant that, on the whole, it is unlikely that cricket is ever going to pay the increased Entertainments Duty; or he did not. If it is not going to pay the increased duty, then, of course, we are in a quite untenable position because of the distinction between cricket and other sports. I am sure hon. Members will agree. If, however, cricket is not to benefit, then all I can say is that the Parliamentary Private Secretary has been most grossly deceived by his master, so much so that next year, at any rate, we shall certainly expect his resignation.

The Chancellor may say, "After all, I had to see what the reaction was." But I cannot see that his changed attitude towards cricket is justified, despite the fact that the season began between Budget Day and the Committee stage of the Finance Bill, because that is something which the Chancellor knew in advance; even if, like me, he is not particularly good at cricket, we both know that the season starts about that time and that there would be considerable agitation coming from the cricket clubs.

Mr. R. A. Butler

The right hon. Gentleman realises, does he not, that this applies to other sports, as well as cricket?

Mr. Gaitskell

I do realise that, but the right hon. Gentleman will agree that cricket is the most important summer sport as far as the Entertainments Duty is concerned.

Mr. Charles Pannell (Leeds, West)

It is the most important of all sports.

Mr. Gaitskell

If we turn to the Purchase Tax, the concession of the reduction in the rates, welcome as part of a loaf, could easily have been made at the start. The Chancellor cannot say that he was unaware of the position in the textile industry. We had had two or three debates in the House before he made his decision on the matter. Everybody was perfectly well aware that the question of Purchase Tax was of burning interest in Lancashire. I think the right hon. Gentleman is particularly to blame here because, by not making these concessions until half-way through the Bill, he deliberately prolonged the doubt and uncertainty in Lancashire and in the trade generally. There again, therefore, one cannot see why there could not have been a little more forethought on his part at the very beginning.

If we take the Excess Profits Levy, it is the same story. I do not propose to go through all the changes which have been made—there is a long list— but I will take a few of the more important. Take the introduction of the net assets standard. The Chancellor cannot say that that was a new idea. Everybody was aware that this problem existed and that if we took the capital standard and simply based it on nominal capital we should run into this difficulty. I confess that we had the same problem when we were considering dividend limitation, although, in my view, it was far less important then, because it was dividend limitation and not a tax. This problem clearly could have been foreseen in advance.

Next, the minimum standard profits, which were raised from £2,000 to £5,000—an immensely important change, from the point of view of administration. Why did we have to wait until half-way through in order to get that? Next, the change in the standard years. Again, it was perfectly clear that this would be one of the burning issues. Two other important changes which were made were the reduction in the over-riding maximum, on the one side, and the increase in the rate of tax on distributed profits, on the other side.

All these, it seems to me, are matters which clearly should have been thought out in advance, and a conclusion reached as to what was to be done, before the Bill was introduced. I must say, in passing, on the financial changes resulting from these concessions, that, if I am right, in the case of the whole year the total amount which the Chancellor has given away is very much as I said during the Report stage—about £40 million; that is between £20 million and £25 million net on the Excess Profits Levy and about £20 million—now that the furnishing fabrics concession is between £2 million and £3 million—on Purchase Tax. The loss is, in fact, about £40 million.

Mr. Butler

The Excess Profits Levy does not apply to this year.

Mr. Gaitskell

I am talking about a full year.

Mr. Butler

But it is a different year.

Mr. Gaitskell

Of course it is a different year, but it is, nevertheless, a year which has to be remembered when we are making tax changes and when we are giving away about £40 million.

Apart from the changes which have been made indicating this lack of forethought and planning, we must consider whether the Bill is now really adequate. As I have said, we take the view that, although improved, it is still a bad Bill, particularly when linked with the policy behind it. Here I want to follow the Chancellor and to consider for a few moments what are the basic problems and the setting against which the Budget and the Finance Bill have had to be considered

There is the balance of payments problem and there is the sterling-dollar problem; there are those problems which we, as a country and as a Commonwealth, have been facing for the past six years and which are now, I think, aggravated by the fall in demand for consumer goods throughout the world. I think that is the new feature of the situation.

We have, therefore, to try to solve this problem in more difficult circumstances and we have at the same time, in order to cope with them, to secure some readjustment of our resources as between industries and certainly as between home and export. We have also, of course, to cope with a slight incipient inflationary situation at home, although certainly not as inflationary as it was, and we have also to try to maintain full employment.

I do not think anybody would disagree with those aims, which are pretty much the same as those which the Chancellor mentioned. I would point out to him that on this side we have never argued against the Budget on the ground that it should have cut consumption more. We accepted the Chancellor's view—and I, personally, was glad that he took it—that in present circumstances it would serve no useful purpose to reduce purchasing power at home further at a time when the demand for consumer goods was already falling back.

Indeed, I would go further than that; I would say that this year, perhaps for the first time for some considerable period, the relationship of the Budget to the balance of payments problem, and still more to the gold reserve, is much less close and much less clear than it was on previous occasions. I did not recognise the critics whom he mentioned who were saying that the Budget should have been a very much tougher one, unless he meant criticisms outside the House from various journals.

Without going further into this, because clearly one would get out of order, I would say that I do not believe that the balance of payments situation as a whole can be handled satisfactorily on the basis of monetary policy and budgetary policy alone. We are in a situation where the use of physical controls of one kind or another is more than usually necessary. Unless we can get those controls used efficiently and well, we shall not be able to solve the problem.

We have, above everything, to expand our engineering output so as to cope with increased exports and defence demands and also, if we can, with a high level of investment at home. The problem there is largely a problem of the shortage of steel and certain other metals, on the one hand, and the shortage of certain types of skilled labour, on the other. We shall not be able to deal with this problem simply by cutting down consumption. We shall have to have something much finer in the way of controls.

The problems of the Budget this year are different from those in previous years. Nevertheless, the Budget can help. Here I come to certain criticisms which must be repeated. First, so far as the Purchase Tax is concerned, I have never felt that the Chancellor's decisions on that were at all convincing. His argument against our proposals—proposals supported at one time by the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) and some of his hon. Friends— that we should withdraw the Purchase Tax from textiles altogether was, in effect, that it was not sufficiently important. But, if that really was the argument, it is difficult to see why he made any concession at all, because the concession which cost £17 million would be even less significant; indeed, it would have no value and could not be justified.

I have never shared that view. I think that the effects of removing the Purchase Tax at the moment would have been valuable. Although I agree with the right hon. Gentleman that one has to watch the internal demand situation, I should have thought that there was everything to be said for providing an increase in effective purchasing power at a point where the increased demand was wanted, namely, in relation to textiles.

The Excess Profits Levy, although improved by Amendments, is still a very bad tax. In relation to the situation we are facing, it is particularly bad. After all, what we want is to induce firms and businesses to switch over to dollar exports as much as we can. We have to give them incentives to do that. By all means use the controls as much as possible but, as I think we all agree, those controls will be far more effectively used if monetary and incentive considerations are working with them.

At this very time, the Government's policy will, discourage people from earning extra profits. The Excess Profits Levy will be a spoke in the wheel of that transition which I should have thought that we all thought was necessary. I need not elaborate the arguments about the waste of effort and manpower and the work of accountants, inside the firms as well as in the Inland Revenue, that will be necessary. The Amendments made to the Bill, valuable though they have been in other respects, will make matters far worse, because it is an immensely complicated affair now. A great deal of effort will be wasted in sorting it out.

I turn to the Income Tax concession of which the Chancellor made so much in his speech this afternoon. Everybody would agree that Income Tax reductions are in themselves welcome. We would say, however, that we do not think that these tax reductions were fairly distributed in themselves. Incidentally, I will not say that they make nonsense, but they are not consistent with the Chancellor's continuous talk about the sacrifices which we have to make. There are a number of Income Tax payers who are not making any sacrifices at all, but are indeed better off. If the Chancellor appeals to the nation for greater effort and asks them to accept sacrifices, it is not consistent to hand out Income Tax concessions which, in the light of these changes, must inevitably go to people who are better off.

We have argued against these changes that we should take into account not only the Income Tax reductions but what goes with them; namely, the rise in food prices. It is clear—the Chancellor never made any bones about it—that the cut in the food subsidies was designed to finance the reduction in Income Tax. I repeat, especially in view of the claims he has made this afternoon, that when we take into account the rise in food prices as well as all the other changes, then, on my calculation which has not been challenged, two out of every three people below £500 a year are on balance worse off, whereas of course the gain is predominantly to those over £500 a year.

Mr. Cyril Osborne (Louth)

Speaking on the Address on 8th November, did not the right hon. Gentleman say, when challenged by the leader of the Liberals, what he had repeatedly said, which was that the whole nation must be worse off? How, then, can he complain when only part of the nation has been made worse off?

Mr. Gaitskell

I am grateful to the hon. Gentleman. It is true that at that time it seemed to me that it would be impossible to carry through the re-armament programme and achieve stability in our balance of payments without a reduction in the standard of living. I said so several times. In effect, however, the present Chancellor has decided that that is not necessary. I do not quarrel with that. The main difficulty is that of selling consumer goods abroad. Therefore, that argument for cutting down consumption at home is obviously much less strong.

What I say, however, is that having established the fact, as the Chancellor has, that we do not need any total reduction in our standard of living, it is all the more intolerable that some people who are poor should have their standard of living reduced so that others who are rich should have their standard of living improved. That is the essence of our criticism of this main feature of the Budget.

I must mention in that connection one consequence of this change—the reduction in tax and the increase in food prices —and that is the repercussion on wages. I thought that the Chancellor would say something about this in his remarks. The Press certainly had foreshadowed it, and we all know that he is in the middle of discussions with the Trades Union Congress committee. I have repeatedly stressed the danger of the wage-price spiral. I do not propose to change my mind on that because I am in opposition. Indeed, in a recent speech at Whitley Bay, which the Chancellor may have read, I emphasised the difficulties to one of our largest trade unions.

But I must point out to the Chancellor that he carries a responsibility here as well. It really is unreasonable to go to the trade union leaders, all of them responsible men, and say, "We want wage restraint; we want to hold wages stable," and at the same time to act as he has done in the Budget and deliberately put up food prices. In passing, I must say that I have some sympathy with the Chancellor in this matter because of the extraordinary statements made by some of his colleagues on this subject in the past.

I dare say that he is sometimes reminded by the trade union leaders of what the present Minister of Works said on the whole subject. He made a speech which was so popular with the Leader of the Conservative Party that it was ordered to be printed and circulated to candidates. He said: From its earliest days I have been against the wage freeze. It is a policy for covering up inflation at the expense of the active people in the country. Bad Chancellors resort to it as drunkards cling to lamp-posts, not to light themselves on their way but to conceal their own instability. I dare say that the T.U.C. are asking the Chancellor what he is doing about the lamp-post now and whether he still finds it necessary to hold himself up in that way. I hope that, somehow or other, he will make it plain, if it is the case, that the policy of the Government is not that put forward by the Minister of Works in that speech and that the Government recognise that here is a grave and serious problem.

Of course, the Minister of Works was not the only one. Some of the backroom boys and the brighter young men in the Conservative Party came out just before the election with a pamphlet called, "The New Approach" which had a foreword by the right hon. and learned Gentleman the Home Secretary. I am not sure it was not the foreword that got him into trouble over the trade unions, so that he did not go to the Ministry of Labour. But there were hon. Gentlemen opposite taking a most extraordinary line on this One of them was the hon. Gentleman the Member for Woking (Mr. Watkinson), who is now Parliamentary Secretary to the Ministry of Labour. He said in his pamphlet: Was there ever a more ludicrous situation than trade union leaders supporting a wage freeze. I really think some effort should be made to clear up this muddle inside the Conservative Party, although we know it is very difficult to clear up muddles inside the Conservative Party; but this muddle is a serious one because of the effects it may have on the trade unions.

But, of course, far more important than these outpourings from hon. Gentlemen opposite has been the fact of the food subsidy cuts. I know that it is said, "Well, after all, they only put up the cost of living by 3½ per cent." Well, that is a quite substantial increase—and, by the way, we have not had the whole of it by any means yet. I would say to the Chancellor that he cannot think of this thing entirely in quantitative terms. There is a psychological aspect to the whole situation which must not be ignored.

If he had decided, instead of cutting the food subsidies, to say to the House— perhaps, he would have liked to have done so—that he personally felt there was a great deal to be said for cutting the food subsidies and reducing the taxation to that extent, but that in view of the repercussions on the wage situation he had decided against it, because he was so anxious to have happy and friendly relations with the unions and to work jointly with them on this extraordinarily difficult problem, what a very much better atmosphere we should have today. How much easier his own task would have been; and he could, I think, also have said that, while import prices are rising fast, it is extremely difficult, of course, to cope with the wage situation. Inevitably those rising import prices find their way into retail prices and the cost of living goes up, and then, of course, we get the demand, inevitably, for higher wages.

But we are precisely at the point where the rise in import prices has slowed down. Increases in the food import prices in the first six months of the present Government have been at a much slower rate than during the previous six months or the six months before that, and I think the Chancellor had a real opportunity of saying to the unions, "We are getting through this difficult period of world inflation, and we have got to try to hold the situation as it now is." He has thrown that away, and nothing he can say and no appeals that he can make can really dissuade us from the belief that he made a most grave error in that decision to reduce the food subsidies.

The Government, as we all know, are becoming increasingly unpopular. They are now, of course, very much aware of that, and are seeking by various desperate efforts to retrieve the situation. The more they try to do that, the worse muddle they get into. I think their fundamental mistake here is to suppose that their unpopularity is due to the economic difficulties facing the country. I do not believe that is true in the least. I believe that if the country is told that there are these economic difficulties imposed on us from outside and that certain unpleasant things have to be done, the people will face up to them, and the Government would lose no popularity in doing that.

Their unpopularity is due to three causes: first, because, of course, of the glaring contrast between the promises and the picture painted before the Election and what is now said and done; second, because of the reversal of the fair shares policy carried out, in particular in this instance, by the reduction of the food subsidies; and third, of course, by the general muddle and incompetence and vacillation shown on every possible occasion.

This Bill, and the Budget which preceded it, illustrate all three of these weak- nesses. The Bill will be a monument, first of all, to the indiscretion of the Prime Minister in putting an Excess Profits Tax into the Conservative Party manifesto. It will be a monument to the Government's failure to comprehend the real needs of the situation, and it will be a monument to a policy which is destined, I am afraid, to divide the country instead of uniting it to face the great economic difficulties which lie ahead.

4.45 p.m.

Mr. Ralph Assheton (Blackburn, West)

I am very tempted to join issue with the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) over the latter part of his speech. If the present Government are in any sense unpopular, their unpopularity comes from their having to pay for the sins of the Government which preceded them. That is a fact of which a great many people in this country are very well aware.

I am one of those who occupied some of the time of the House during the course of the Bill, though on no occasion did I make a speech of any length, and now I should like to follow the right hon. Gentleman the Member for Leeds, South in congratulating the Chancellor upon— to follow his analogy—bringing this ship safely to port in spite of a number of squalls on the way, during the course of which, I am bound to say, the Chancellor handled the vessel very adroitly.

I should like to thank him both for myself and on behalf of hon. Friends of mine who co-operated with me during the Committee stage of his unvarying courtesy throughout the whole of the proceedings, and for the great pains he took in examining, and in many cases accepting, Amendments which we moved with a view to improving the Bill. He accepted those Amendments only when he thought they were right. I entirely agree with the Chancellor that it is the work of this House, and particularly of the House in Committee on a Bill, which enables a Bill to be improved and enables the Chancellor to take advantage of such advice and criticism as he receives during the course of the Bill.

I should like also to add my word of thanks to the Financial Secretary, who was such a very stalwart lieutenant of the Chancellor throughout the whole of the proceedings.

My main criticism of the Bill is the same criticism as I have made of every Finance Bill since 1945—that is, that it is designed to raise too large a sum of money by way of taxation from the citizens of this country. Over £4,500 million in taxes is, in my opinion, more than the country can afford if our trade and commerce are to survive, much less to expand. It is, in fact, the heaviest burden of taxation which has ever been imposed by any Chancellor in this House. I feel that there is a particle of truth in a doggerel rhyme, which hon. Members may know, and which is sung to the tune of "Pop Goes the Weasel": Everyone has his political views. And everybody backs his; But whether you win or whether you lose, Up go the taxes. The Chancellor, on the other hand, is quite justified in saying that, although the general burden of taxation has increased, he has done a great deal to reduce the burden for a very large number of citizens in this country by his reductions in Income Tax, and I hope that he will continue his good work. I do very fully appreciate the difficulties which the Chancellor is facing, and facing with great courage, but the one thing that I do want to urge upon him is my most sincere view that the total volume of taxation is too heavy, and that it is absolutely essential to reduce it for the well-being of the country. I believe that most sincerely and honestly, and I believe also that the employment of our people is threatened by high taxation, just as our financial stability is endangered by it.

The Chancellor must remember not only the workers, but the "work providers"—a phrase which I did not invent, but which, I believe, Mr. Douglas Woodruff invented. It is a very good phrase indeed to remember. The work providers have got to be thought of as well as the workers, and unless the work providers are allowed some reduction in taxation, unless it is made more attractive to provide work and to employ people, then, I believe, the employment situation in this country will deteriorate.

Great stress is continually being laid upon production, and, important though this is, I hope we shall never forget that in this country we live largely on the profits of commerce. In other words, we live on our wits. That is one of the things we have to do when we cannot grow enough food in our own country to feed ourselves; we must live on our wits. Until we have once again convertibility of sterling, we are largely prevented from using our wits and therefore living upon them, so that little can be done to achieve our ambition, which is to pay our way and gradually improve the living standards and prosperity of our people.

We need many things: we need honest money, and we need to lower the cost of production; 6ome of us will have to work harder and spend less; and finally, we must gradually dismantle the planned economy which is hampering us and preventing us from recovering. I could not disagree more completely than I do with the passage of the speech of the right hon. Member for Leeds, South when he urged greater physical controls. Until we can dispense with physical controls and rely on the sounder financial controls, we shall never again be a truly prosperous country.

In conclusion, I should like to say that, although this Finance Bill has had a difficult and stormy passage, there have in the course of its passage been debates which have somehow or other been a useful exchange of views and thought. I believe that there was a greater understanding of the point of view of one side of the House by the other than there has been in recent years, and in this I detect a rather happier sign for the future of our country than I had dared to hope for a few years ago.

4.53 p.m.

Mr. Coldrick (Bristol, North-East)

It is not my intention to discourse on the Budget generally, and I do not propose to follow at length the arguments adduced by the right hon. Member for Blackburn, West (Mr. Assheton). I felt one could say of his arguments, like his doggerel, "Pop goes the weasel," because at one stage he suggested that whatever we do the taxes go up, and he then proceeded to praise the Chancellor for having brought the taxes down. If we have to live on our wits, as he suggested, rather than on work, I am afraid we shall all be bankrupt before the next Budget.

On this occasion I wish only to call attention to something arising from Clause 38, as amended, where I think an injustice has been done, quite inadvertently, to a large number of very small people in Co-operative societies, particularly in Lancashire, and I hope that I shall have the full support of the right hon. Member for Blackburn, West in what I have to say.

Under this Clause provision is made whereby the standard profits will be reduced by 12 per cent. on repaid shares, with the later provision that they will be increased proportionately on increased capital when making allowances in the chargeable accounting period. Owing to the peculiar composition of the capital in the Co-operative movement, all the shares are withdrawable. Consequently it is conceivable that, when the chargeable accounting period comes, people who have put a large amount of money into Co-operative societies as shares with open membership will find in a period of recession that they are obliged to withdraw those shares.

It should be appreciated that out of the whole of the shares in the Co-operative movement only £1 out of every £4 is engaged in trade; the great majority of the people look upon a local Co-operative society as a savings bank as much as a trading establishment. Consequently, if they meet with adversity, either through sickness, accident or unemployment, they withdraw their shares. Those shares are taken from money invested at a fixed rate of interest, so that very often we find the anomalous position that, whereas the total capital actually engaged in trade and the total surplus remain precisely the same as before, because the total withdrawable shares have been reduced those local societies will attract Excess Profits Levy in a way that we feel is wholly unjust.

I realise that this is a very technical point, but it arises because of the peculiar composition of the capital inside the Cooperative movement. Where all other firms and companies have fixed capital with limited liability, in the Co-operative societies—and I am talking mainly about small societies at the moment—there is open membership, consequently all the shares are withdrawable shares. If for the reason I have given they are placed in a position in which, with a lower surplus, they attract Excess Profits Levy, I am sure hon. and right hon. Members would feel that a great injustice was being done to a lot of deserving people.

I sincerely hope the Chancellor, the Financial Secretary and others concerned will look into this problem to see whether it is not possible on some future occasion to do something in order to prevent this difficulty arising.

4.57 p.m.

Lieut.-Colonel Sir Thomas Moore (Ayr)

I was hesitating to disturb the genial, friendly atmosphere which the Chancellor encouraged until the concluding remarks of the right hon. Member for Leeds, South (Mr. Gaitskell). I propose to answer one or two of the charges he made about the failure of the Chancellor to implement our Election promises, but I should like to say, first, that this is a record Finance Bill, for me at any rate.

In 27 years it is the first time that I have never made a speech until the concluding stage of a Finance Bill. Secondly, it is the first Finance Bill to which I have never put down an Amendment, moved a new Clause, or added my name to an Amendment put down by some other hon. Member. Thirdly, it is a faithful and fruitful implementation of the promises and pledges which my party gave at the General Election.

The reasons for this self-imposed restraint on my part are, I suppose, obvious. In any case, they are very sound to me. We were told, timidly I admit, by the former Chancellor, but more forth-rightly by the present Chancellor, and also of course by the Prime Minister, that our situation was perilous in the extreme and that we could only save ourselves by the most hurtful, harsh and drastic methods.

I believed then, and I still believe, that it would be wrong to seek to alter the framework which the Government considered necessary for the structure of our recovery, and so I took no part whatsoever in trying to alter the Chancellor's views. Indeed, I feel that the Chancellor was rather over-sensitive to criticism, and that he should have held more firmly to the design which he had originally created and framed to secure our economic and financial salvation.

Here I must put on record an impression that I gained throughout the various debates on this Bill, namely, that there was a certain amount of cynical shadow-boxing on the part of the Opposition. I admit that there were some useful and constructive speeches, and some excellent suggestions from both sides of the House, but, on the whole, the Opposition knew it was shadow-boxing. They knew that it was a good Budget and a good Finance Bill. They knew that it was a necessary Budget and a necessary Finance Bill. They knew that they would have to introduce a similar Budget and Finance Bill, had they the courage and honesty to do so.

That sentence brings me back to the Election and the reasons for it. The then Prime Minister knew that he had only two alternatives—to go on and to go bankrupt, thus exposing the whole Socialist philosophy, slogans and patitudes with which they had deluded the country for a quarter of a century, as bogus, or of going to the country and hoping that we would get in, believing that we would rescue and restore the country, and thinking that the Measures that we would then have to impose would be so harsh and make us so unpopular that the Leader of the Opposition and his hon. Friends would, in a few years' time, succeed to a solvent concern.

They took the latter course and were proved right from their point of view. Everything has come to pass as they anticipated, except the last contingency. I am convinced that when this Government has fulfilled its purpose and its mission that it will be hailed if not with hosannas, at least with gratitude by the people who will send us back for the many years that may well be necessary to restore the financial economic and moral leadership in the world which, of course, we lost through six years of Socialism.

What does this Finance Bill do as it has finally emerged, and how does it— and here I come to the point raised by the right hon. Gentleman—tie up with our Election pledges? I am not going to refer to balance of payments or inflationary pressure, because, as Lord Kirk-wood said in another place, the other day, these phrases do not mean anything to a vast number of our people. They say, "That is something for the boss, or something for the politician; it has nothing to do with us." They do not realise that it can alter their whole way of life and their whole future. I am not going to use any technical phrases; I am trying to put the position as I see it from the point of view of the man in the street.

We promised, rightly or wrongly, that we would prevent anyone engaged in the manufacture of armaments from securing thereby any undue profit. We have E.P.L. as a result. I agree with the right hon. Gentleman the former Chancellor of the Exchequer that it may not be the best method, but that can be re-adjusted in the next Budget or in some of the later Budgets which this country will be introducing.

Secondly, we promised that we would cut Government expenditure, which, of course, had reached fantastically high proportions under the late Government, and, as a start—and although I admit it is in a small way, but it is an indication of our good intentions—the Chancellor has knocked £50 million off the Civil Estimates.

Thirdly, we made it clear that we would not be a party to the iniquitous principle that the poorer off people should be called upon to pay increased taxation to pay for the food, or to make it cheaper for the better off people who could well afford to pay the increased costs, and so a dramatic reduction was made in the food subsidies.

But I admit that the Government, and, I think, the Conservative Party, realised that this desirable achievement might well hurt many people, especially pensioners, the retired and those living on fixed incomes, so the Chancellor made it possible to increase the pensions of about four million people and through improved sickness benefits and insurance rates to help another 1,500,000.

One of the main purposes of the Conservative Party was to provide incentives —a word which has been used more often than any other word in the Finance Bill discussions; but it remains a true word, a useful word and a necessary word. Our policy was to provide incentives for harder and more productive work. So as we know—and I think that this should be repeated because it should be known to the country as a whole, as well as to the supporters of the Conservative Party who have shown a little restiveness of late because of the unpopularity which many of the newspapers have sought to impose upon us—that something like three million people have been relieved of Income Tax altogether, while there have been considerable reductions of taxation, involving another 14 million people.

Finally, the Prime Minister said that we would have to follow the hard road before we could undo the harm caused to our economy by six years of wasteful and reckless expenditure, so the Chancellor has arranged that £600 million shall be cut off our imports.

That is a very brief recitation of the faithful way in which the Chancellor has fulfilled our election pledges. Surely, therefore, it is sheer hypocrisy for the Opposition to bleat about the Budget as favouring the rich. Of course, there was one substantial mistake which the Government obviously committed. They trusted the Opposition to put country before party, and hence, of course, the policy advanced last autumn by the Prime Minister who, knowing the facts, or rather having found them out, just as the previous Government knew them, conceived that it would be in the national interest to work together to restore the country irrespective of party.

He misplaced his faith and so was proved wrong. Hence we have now the situation, so well described by Lord Kirkwood, that the cry of wolf has been made so often that the worker today no longer believes there is an economic crisis. It may be too late to remedy that mistake, and we can only try by our actions to justify the nation's confidence, even though we are temporarily unpopular in doing so.

Despite the excellence of the Budget and of the Finance Bill, I sometimes say, "Are we going the right way towards undoing the harm that has been done during the last few years and towards putting our affairs in order?" Somehow or other, despite the integrity of our motives, I am not sure that the result of our post-war policy has been all that we hoped for. All of us seem to have become a nation of takers; giving has taken a low place in our national virtues. All of us, it seems to me, have developed into parasites—parasites on the State and, therefore, on each other—[An HON. MEMBER: "Speak for yourself."]

I remember that in 1944 the coalition Government, which was mostly Con- servative, tried to create the social and industrial target of full employment. I thought that that was a noble conception, and it seemed to satisfy most of my ideals of social justice; but since then I have continuously wondered if it has had the success for which we hoped.

I would go even further: Is it fair to the workers themselves? In the old days, the worker—and by worker I mean all of us—had the privilege, and the very important one, of selling his labour in the best market and to the highest bidder. Under full employment he has no longer that privilege because there is no competition for his talents. I do not know the answer and time alone will clear up that doubt.

Meanwhile, I should not like to lose this opportunity of congratulating the Chancellor of the Exchequer on the tact. patience and courtesy which he has shown in guiding this Bill through its various stages.

Mr. Ede (South Shields)

Surely the worker has more competition for his labour when there are more jobs than men, when there is full employment, than when large numbers of his comrades are unemployed?

Sir T. Moore

I agree. I do not defend at all the hateful period in our history when queues formed at the employment exchanges. I am only advancing this as a doubt because it occurred to me that the worker has not the same privilege as he seemed to me to have when he could go from one employer to another to see what he was offered for his services. That may not agree with all the theories we have heard about the values of full employment but it is common sense.

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

Is the hon. and gallant Gentleman referring to the time about which Burns wrote, when …man was made to mourn?

Mr. Deputy-Speaker

We appear to be getting rather wide of the Third Reading of the Finance Bill.

Sir T. Moore

I was about to conclude, Mr. Deputy-Speaker, by congratulating my right hon. Friend the Chancellor of the Exchequer upon his patience, for he has shown great patience, and also something more: he has given the country new confidence in itself and in its ability to survive as a great nation, and for that achievement alone he will have made his Budget and this Finance Bill memorable.

5.11 p.m.

Mr. Frederick Lee (Newton)

The hon. and gallant Gentleman the Member for Ayr (Sir T. Moore) can always be relied upon to put a point of view which is different. He has based his congratulations to the Chancellor on the fact that the Conservative Party is carrying out its Election pledges. It was a little remiss of him not to ask the Chancellor to explain the speech he made when he announced the Election pledges in which he said that under existing conditions there would be no alteration in the food subsidies. It may well be that the hon. and gallant Gentleman's speech has made Lord Woolton's ears burn as a result of what he said about red meat.

The right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) trotted out the old theme that in this Finance Bill the Government have been hampered and have suffered unpopularity because of what they have had to do on succeeding the Labour Government. As we had a broadcast speech by the Minister of Works telling us the same story on the night it was announced that there was a surplus of £400 million from last year's Budget, and as we have also had a speech by the Colonial Secretary telling the country that we are now living on the stocks amassed by the Labour Government, it is time the hon. and gallant Gentleman forgot that one.

I take no particular pleasure in saying that I believe that the greatest tragedy about the Bill will be its effect, maybe psychologically, in industry. The policy pursued since 1947, of trying to maintain the cost of living, even at a time when world prices were rising rapidly against us, had elicited from the trade unions an unwritten agreement that, so long as that was the policy of the Government of the day, they would exercise extremely responsible restraint in their demands on the national income.

That feature in post-war industry, more than any other single feature, has enabled this country to come through its tremendous difficulties. The greatest tragedy of the Bill is that it has broken down the delicately balanced mechanism which allowed the trade unions to adopt that attitude.

I have read with great interest of the meetings the Chancellor has had with members of the T.U.C. In view of his cynical disregard of the advice those men gave him before he made his Budget proposals, it is somewhat ironical now to ask them to accept the same basis as that upon which they have conducted their affairs for the last seven years when he himself throws overboard the very provisions which enabled the trade unions to do what they did. With some knowledge of industry and the trade union movement, I say that it is utterly and completely impossible for any member of the T.U.C. General Council now to give the Chancellor any such undertakings as he wants.

The Chancellor may be able to say, as he did today, that in certain sections of our economy prices are being reduced— he mentioned textiles—but he must not claim that that is brought about by any policy in the Finance Bill. It is brought about at the cost of 100,000 unemployed in Lancashire and also by the decrease in consumer demand which makes it imperative that prices shall drop. No virtue in the Finance Bill has brought that about. I am not gloating, for I am not in the least happy about this, but I believe that the basic departure from the policies which have served us so well for seven years is the greatest tragedy this House has seen in a Finance Bill since the war.

To turn to the subject of Purchase Tax, we have tried to impress upon the Chancellor the necessity for dispensing with the D scheme. Within the D scheme, the Chancellor has accepted the necessity to tax or to increase the tax upon textiles which were untaxed before the Finance Bill. That has worked to the detriment of millions of workingclass people whose standard of life benefited considerably from the fact that there was no Purchase Tax on a great range of textiles, on boots and shoes and on other types of consumer goods which are now taxed under the D scheme.

My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) mentioned the necessity to keep a close watch on what was happening in the areas where there is now unemployment. I have asked the Chancellor Questions about this. I have tried to point out to him that in industries other than textile inside the textile producing areas there is now a great slackening in demand consequent on the diminution of purchasing power. The Chancellor told me he was watching this, but that there was at present not much evidence of unemployment. I hope he will not wait until there is vast unemployment before he does something about it. It is obvious that unless we can in some way make up for the lack of purchasing power in those areas the industries there will suffer unemployment.

I believe we are in a state that the country has never seen before. We have areas containing a deflationary pull alongside areas where there is inflation. I should have thought that in such conditions it would be right and proper for the Chancellor to use some of his budget surplus to ensure a different policy from the one he is now pursuing of a high Bank rate and credit restriction. Even if we look only at the textile industry we see that it is necessary that there should be more credit and that employers should have increased facilities for modernising their mills so that they have a chance to compete in the overseas market.

Mr. Peter Roberts (Sheffield, Heeley)

Would the hon. Member be prepared to say whether the present deflationary tendency has greater weight than the inflationary tendency?

Mr. Lee

I do not think the hon. Gentleman quite got my point. I do not think it matters for the purpose of my argument. There are inflationary tendencies in some parts of the country, but I am quite sure there is no such tendency in Lancashire and he would agree probably that there is none in Yorkshire. I do not think that this situation has ever been know before, and instead of conducting a policy which may be right in its outlook for some areas, the Chancellor should produce one which deals with the entire nation.

It cannot be right to restrict credits, and have high bank rates operating in areas where we have vast unemployment and where further unemployment threatens us every day. Under those conditions I should have thought that the Chancellor would utilise his Budget surplus to grant easier credits to small employers, particularly inside the textile areas, who are now suffering from lack of credit. They could then bring prosperity back which is so necessary if our people are to have the opportunity to work in the near future.

To attack the food subsidies in the way that the Chancellor has done was bad. It is now impossible for any trade union leader or, indeed, for the Chancellor himself to be able to convince the lower-paid workers that the right hon. Gentleman is trying to achieve financial stability in Britain, because he is pursuing a policy which enables him to give Income Tax rebates to the higher income groups at the expense of a reduction in the food subsidies, whilst, at the same time, he asks the lower-paid workers to pay more for their food.

I repeat, it is totally impossible to discuss wage restraint with the T.U.C. or with trade union leaders, who are not wanting to be particularly awkward at all but would desire to be helpful in bringing economic stability and solvency to this country. They cannot possibly argue the Chancellor's case when hundreds of thousands of their members are advancing the same arguments as I am putting forward today.

During the course of the Committee stage we asked the Chancellor to assist in greater measure than he was doing—I agree that he increased the allowance from £13 to £26—those serving apprenticeships in industry so as to encourage parents to put their children into a craft or send them to a university to study science and technology. As the Chancellor knows, there is a great gap between the way we are dealing with the university population and the way we are dealing with these younger people.

Those of us who take an interest in industry can be under no delusions as to the tremendous crisis which faces British industry. I do not want to repeat the speeches which I have made before or to read extracts from the debate in another place on science and industry, but it is not now a question of appealing to the men and women in industry to slog a little bit harder. It is a question of trying to catch up with our competitors in science and technology. We are being left very far behind in the race. The relationship between industry and the universities is wide. There are less of our university people taking careers in industry than in any of the countries of our competitors, and there are not sufficient scientists or technologists on the boards of our great industrial firms.

I submit to the Chancellor that merely to appeal for more and more increase in production is no answer to the problem at all. We all know the relative increase in production in the last 50 years in the U.S.A. and one can quote the same position in Switzerland and in Germany, where industry is fast recovering. If a Finance Bill is not couched in such a way that it can help us to get over these industrial and economic problems, then it is not a Bill germane to the conditions in which we are living. I ask the Chancellor to look at this problem with a view to encouraging our young people to invest their lives in the industries of our land. If he does so, he will be able, in some measure, to redress the wrongs that he has committed in this Bill.

I will go further with the argument. When the Chancellor introduced his Budget he said his calculations were based upon the ability of the nation this year to increase production by 3 per cent. We have never yet had any calculations given to us as to how he is to get that increase and which industries are to give it to him. Perhaps the Financial Secretary will apply his mind to this matter before he comes to reply.

The engineering industry has increased its production more than any other since the war and is now engaged in producing goods—I am not arguing the case for or against—which would be classified as non-wealth producing for this country. They are for the international emergency in which we find ourselves. The textile industry will not do it as the hon. Member for Oldham, East (Mr. Horobin) can tell us. It will not be able to contribute the level of last year. In many other industries we find the same sort of tendency. From what industries does the Chancellor expect to get the 3 per cent. increase in production? We should know, because unless he gets it this Finance Bill will make complete nonsense.

I do not want to detain the House too long but I would direct the Chancellor's attention to the fact that we are seeing something in industry today which we have not seen since the end of the war. We are discussing this Bill against the background of a feeling of insecurity in employment. I took off a pair of overalls to come into this House in 1945, and I can remember what my reactions were to insecurity in employment. They are very much alive inside me now, and the same can be said of all my colleagues in the engineering and other industries.

It would be the greatest calamity which could overtake this country if men and women in industry are again forced back in their own protection upon restrictive practices, the equal of which we have not seen since the end of the war. But how is it possible for these men and women to give their uttermost in the cause of their country when they know that by so doing they will work themselves on to the employment exchange the week after? I believe that the Labour Government which I supported did a great job of work in increasing investment in industry in capital equipment. It has had a great effect in producing the good levels of production we have seen since the end of the war, and an even greater effect in producing the knowledge in the oldest men and women in industry that, for the first time in their lives, they could go flat out at their job without any fear of working themselves on to the dole.

I hope that the Chancellor will realise the enormous importance of this issue. If, throughout the whole of British industry, the feeling of insecurity and of the necessity to hold back comes again, the greatest effort at survival made by any nation in this century will have failed. I do not want to be too hard, but the right hon. Gentleman will have played some part in causing that failure.

I am glad to see that the right hon. Member for Blackburn, West is now back in his seat. He told us he wanted to congratulate the Chancellor upon getting rid of planning and that the present Government were suffering from their predecessor. I put this to him in all seriousness: If the situation the present Government inherited was bad— I am not saying that it was rosy, by any means—would he have preferred them to inherit the situation that we took over in July, 1945?

Mr. Assheton

I presume that the hon. Gentleman wants me to answer the question now. It is a fair question, and the answer is quite simple. In 1945, the country had just emerged from six years of most tremendous struggle. Six years later one would have expected there to have been six years of recovery and a financial position which would have matched it. As it was, the present Chancellor found himself faced with a disastrous financial position.

Mr. Lee

The right hon. Gentleman has given me the answer. In July, 1945, we had, as he rightly says, emerged from six years of disastrous warfare. Half our Merchant Navy was at the bottom of the sea and millions of our workers were spread throughout the world. Our overseas trade had been thrown away, and rightly so, in our effort to defeat Nazism. There was national bankruptcy on a scale that no person living had ever seen. That was what we inherited. We did not complain, but we got on with the job.

The right hon. Gentleman talks about national bankruptcy in 1951, but I say there had never been a six-year period when so much of the national income had been invested in industry as during the period before this Government inherited power. Production was on a scale never before dreamed of in Britain, while profits, wages and everything of that character were at a higher level than before. We had a £400 million surplus, and stocks on which we have been living ever since.

Several Hon. Members

On a point of order.

Mr. Deputy-Speaker (Sir Charles MacAndrew)

We are getting very far from the subject of the Finance Bill.

Mr. Beverley Baxter (Southgate)

I wanted to raise only one point, Mr. Deputy-Speaker. Many of us on this side have much sympathy with what the hon. Gentleman is saying, but does he realise that in 1945 this country finished the war owing no debts to America or to the outside world?

Mr. Deputy-Speaker

That is just the very point I do not think can be discussed on the Third Reading of the present Finance Bill.

Mr. Baxter

The hon. Gentleman made the point, Mr. Speaker, and you did not correct him. Why do you suddenly select me and say that I am out of order, when he was not out of order?

Mr. Deputy-Speaker

I do not select anyone personally. Several Members got up on a point of order, so I thought I would get my point in first.

Dr. Barnett Stross (Stoke-on-Trent, Central)

I am satisfied, as the result of your Ruling, that a further interjection from me would have been out of order, and I will not make it.

Mr. Lee

And I will not, therefore, remind hon. Members of the £3,000 million that we were in debt, or that Lend-Lease suddenly finished.

I conclude by appealing again to the Chancellor of the Exchequer. I have criticised his Finance Bill. I believe it is a bad Bill for the reasons that I have tried to place before the House, and that it is essential we should concentrate on the aids we can give to industry to furnish itself with scientists, technologists, new capital and so on. The Bill does not do that and does not stand up to the situation in which we find ourselves today.

I hope that the Chancellor will realise that in what he is doing in the Bill he is making it impossible for the trade unions to continue the support which they would undoubtedly give, irrespective of the colour of the Government, if only he would make it possible for them to do it. Even at this late stage I hope he will reconsider the wrong he has done and make it possible for the workers' side of industry still to continue the contribution they have made in the past, and want to continue to make, to the prosperity and wellbeing of the country.

5.38 p.m.

Mr. Hugh Fraser (Stafford and Stone)

The whole House has listened to the speech of the hon. Member for Newton (Mr. Lee) with interest, knowing full well his industrial experience. Surely one point must be quite clear to him and to most other Members of the House. It is that the background to the problems of British industry has been the value of the £ sterling in the international market. If that value were to collapse, and even if it were threatened, the result would be the automatic standing off of orders.

It is clear that the measures which the Chancellor has taken have stabilised, and seem at the moment to have saved, the £. In relation to that matter, everything else falls into minor perspective. I am sure that the hon. Gentleman will also view with pleasure the plans of the present Government for the extension of technological education.

I should like to mention, briefly, a problem which I have raised again and again in finance debates regarding relief to raw material production by British companies in the Empire and throughout the world. The importance of this matter has been high-lighted by the recent report of an official committee to President Truman on the question of probable world consumption of raw materials during the next 20 or 30 years. I am sure that the House will agree that through the production of raw materials we can go some way to bridge our gap with America, a country which is becoming more and more an importer of commodities like copper, and even of oil.

The Chancellor is to be congratulated on some of the steps he has taken in this Bill to bring our taxation of mineral resources a little more into line with world practices. Allowances can be made for abortive exploration, for the acquisition of land by a mining or oil company, for exploration plant and for capital contributions to employers' welfare services. All these things will assist our companies abroad to retain their position in the world production of these short materials.

The Chancellor has been wise in treating these extractive industries on a different basis from some of the industrial production inside this country, and on that he is to be congratulated. Of course, he needs to go still further. We must recognise that the production of these precious metals, oils, and other things is internationally competitive. We have also to accept the fact that we must bring our rates of taxation into line with world practice if we are to remain in the powerful position in which we should remain because of the immense territories we still possess overseas and because of the influence of the City of London. I hope, therefore, that he will go further in the Budget next year.

To take two examples of the way in which the world is moving in these matters today, in Southern Rhodesia in the last two months a percentage depletion allowance has been given. At the same time, the Northern Rhodesia legislation is being introduced to write off all capital ex- penditure as and when incurred. Those are steps which will have to be taken in this country. The Chancellor has accepted a great deal of the Millard Tucker Report on this type of taxation. That is admirable but, if we are to get further ahead in the struggle for raw materials, we shall have to give even greater inducements to these companies.

Owing to the difficulties in which we found the Exchequer on taking office, and owing to the difficulties and problems of re-armament, the amount of financial manoeuvre possible in the way of tax remissions is small. Any advances we make will have to be made on narrow and specialised fields, since we have not the money available to make vast remissions of taxes over the whole area. We shall have to pick out special subjects where a remission of tax will not only be inexpensive, but will give a huge economic return.

We shall have to pinpoint the places where we can make remissions, and the extractive industries throughout the Empire as well as in this country are one of the points where, although the actual concession will not cost this country much, it can show a golden harvest in dividends and raw materials.

5.44 p.m.

Mr. William Wells (Walsall)

The hon. Member for Stafford and Stone (Mr. H. Fraser) will forgive me if I do not follow him on the important but narrow field of concessions to overseas companies. There is one point that was made by the hon. and gallant Member for Ayr (Sir T. Moore), who, I am sorry to see, is not in his place, which I do not think the House will have taken seriously but which will be reported outside the House and, for one reason which I will mention, I feel well qualified to controvert.

At one time I felt almost embarrassed at taking part in what seemed to be a kind of prize giving. My own part in the Finance Bill has been confined to drafting a number of Amendments, most of which were out of order and hardly any of which were called. I therefore feel well qualified to controvert the statement of the hon. and gallant Member for Ayr that this Budget and Finance Bill have been conspicuous for what he described as the cynical shadow boxing conducted by the Opposition in the debates.

It having been my fate since 1945 to sit up on numerous occasions right through the night, listening to points being put by the then Members of the Opposition, when perhaps one or two speakers would make serious and substantial points but would then be followed by five, six or seven speakers repeating them, no doubt for the benefit of their local papers and to prevent the House from rising while public transport was available; having listened to speeches of that character for so many years with so much tedium, and having heard this year the serious speeches made by my right hon. and hon. Friends, to which the Chancellor himself has to a large extent paid tribute, not only verbally but by the number of Amendments he has accepted, I think the observation of the hon. and gallant Member for Ayr will be taken with no seriousness by the House, but it is proper, for the benefit of those who have not heard the debates on the Committee and Report stages of the Bill, to contradict it.

Mr. Baxter

A very long sentence.

Mr. Wells

The sentence may be long, but I think it will be found to be grammatical and I think it will also be found to be intelligible. If hon. Members opposite are not capable of following the somewhat involved structure of a sentence while I am speaking, and they find the subject matter so interesting, they will always have the opportunity in the morning of studying it in greater detail than I myself think it deserves——

Mr. Julian Snow (Lichfield and Tamworth)

Full stop.

Mr. Wells

—in the columns of HANSARD.

It has not at any time been the case put forward by my right hon. and hon. Friends that this Budget and Finance Bill contains no good measures. I suppose most of us would welcome in themselves the Income Tax reliefs that were granted, the increase of marriage allowance, and so on. Yet the question which the House has to ask itself is: what is the cost of those concessions? To a large extent, in order to see the real, the social cost—not merely the financial cost—we have to look outside the Finance Bill, and that is what in a Third Reading debate one cannot do.

My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) has referred to the reduction of food subsidies. There is indeed sufficient evidence of the bias with which this Bill has been framed inside the framework of the Bill itself. The Entertainments Duty increases, the abolition of the Utility scheme are both measures for which in vacuo perhaps a case could be made, but they are measures designed, perhaps not deliberately, to inflict burdens on sections of the community which are not being helped very much by the financial changes in the Finance Bill and are being severely hit by the reduction of food subsidies which has been effected outside the Finance Bill.

My right hon. Friend and other of my hon. Friends have criticised the Excess Profits Levy, which was born of a piece of electioneering on the part of the Prime Minister and is based on a false analogy between a complete war economy, in which, no doubt, an excess profits tax is proper, and an economy such as our present economy, which is influenced by partial re-armament. So far as the Finance Bill contains good things, they are good things done at the wrong time.

Sir William Darling (Edinburgh, South)

Is it possible to do a good thing at the wrong time?

Mr. Wells

Virtues, as the hon. Gentleman should know, should always be practised, but politics are always a matter of deciding, not what is desirable in the abstract, which all of us find easy to answer, but what is desirable in the context of the existing political and economic circumstances. We say, and we have said throughout these debates, that the concessions that have been made and are designed on the whole to help the more prosperous classes of the community, ill consist with measures that are designed to raise the cost of food.

The Bill contains a number of measures, in addition to the financial measures that the Government have taken outside the Bill, to increase the cost of living and the cost of production. These measures have been partially offset by crude proposals of the opposite tendency. Other Governments at different times have made plans which have borne fruit in an industrial expansion, in a boom. Other Governments—and we have been accustomed to this from Governments provided by the party opposite—have made plans which have borne fruit in slumps.

This Goverment has the melancholy distinction of being the only one the result of whose policies is to achieve higher costs based on lower commodity prices and on lower employment. That situation has been worsened by measures of the Government in this Finance Bill. The measures that have been taken in the Bill have done nothing to counteract it, but merely to aggravate it.

5.54 p.m.

Mr. Ian Horobin (Oldham, East)

Before I come to the few observations I wish to put before the House, I think it right that some Member on this side should make one or two observations on a most interesting and moderate speech from the hon. Member for Newton (Mr. Lee), who, I am sorry to see, is not still in his place. They referred to the difficulties which, he said, now existed, as a result of the Bill, in persuading the trade unions to exercise restraint in wage demands.

I want to say nothing which could be at all polemical, because I do not pretend to be an expert in that field. I think, however, that somebody from this side ought to remind hon. Members opposite of one or two very simple points which did not seem to be put quite fairly in what the hon. Member said. His point was that we must now face the responsibility, as a result of the Bill, that we have so increased the cost of living that it is impossible for reasonable and moderate trade union leaders to exercise restraint.

I only want to put three quite simple points to the House. First, it is not true, whatever may be the case later, that the cost of living is rising faster now than it was before this Government came in. There is good reason to believe that the reverse is true, but it certainly is not the case that the cost of living is now increasing much more rapidly, as the hon. Member seemed to think, and that, therefore, we must face responsibility for making it impossible for reasonable trade union leaders to continue doing their best to exercise restraint.

Secondly—and this is in no way polemical—it is fair to remind the House and the country that if that be true, as it is, the situation is better, because the cost of living now does not represent a substantial amount of subsidy, which, of course, had to be paid for, and paid for not just by soaking the rich, but in taxes which, as we have heard this afternoon, were coming out of the pocket, and endangering the employment. of the ordinary working man—for example, Purchase Tax. The hon. Member took no account of the substantial reliefs of taxation. It can certainly not be denied that some, at least, of the demands for wage increases which are now before the country come from sections of society such as the miners, for instance, who on any showing have, while the cost of living is not going up faster, very materially benefited by the tax remissions of this Finance Bill.

Thirdly, I think it fair to remind the hon. Member and those responsible trade union members who have so great a part to play in this matter, that it is really not quite fair to suggest that the whole of this restraint was working perfectly up to last October and is now collapsing. I do not want to overstate the case or to say anything that could be considered to be unhelpful, but it must be borne in mind by hon. Members opposite that already, last year, a very substantial breach had been made in anything which could fairly be called restraint, let alone wage freeze. It is not being quite fair to suggest that under Socialism we had obtained, good or bad, a perfectly stable settlement of these wage problems, which was now collapsing about our heads as a result of the Bill.

Mr. Lee

Would the hon. Member agree that during the post-war period, perhaps the saving grace of the whole thing has been that wage advances have lagged behind the increase in production in industry, and that that has enabled the economy gradually to gather strength, whereas the possible result—I put it no higher—of the Chancellor's present Bill may well be to cause the thing to reverse and the demands for wages to go higher than the increase in production will allow?

Mr. Horobin

If I went too much into that, I should probably be ruled out of order. All I wish to say on this section of my speech is to express the hope, with which, I am sure, the hon. Member would agree, that responsible trade union leaders will bear these sort of facts in mind and not give up doing their best now, as in the past, to see that while legitimate wage claims for those who have a strong case are still made—and met, we hope—they will not be made the excuse for some applications as a result, allegedly, of this Finance Bill, and for which, to put it mildly, the case is not very strong.

This, as the Chancellor has pointed out, is the last stage of the Finance Bill, which itself is the last stage of the developing financial policy of the Government for dealing with the situation we found. I wish to say nothing about who was responsible for that situation; there it was. In the course of discussion of this Finance Bill it is true that there have been very substantial criticisms of some parts of it. I have myself ventured one or two very tentative observations from time to time.

If two or three hon. Members could produce anything to the tune of £150 million in taxation there must be something in those suggestions. But they did not affect the main structure of this Finance Bill, let alone the main structure of the financial policy of the Government. If I may put it so, they were a criticism, not of the main structure, but of the gargoyles with which the dean and chapter had seen fit to adorn it.

c2486
1. ROYAL ASSENT 83 words