§ Question again proposed, "That the Bill be now read the Third time."
§ 6.13 p.m.
§ Mr. Horobin
Having been temporarily knocked out, I will now try to resume the observations which I was putting before the House. As I was saying, this is the last stage of the Finance Bill, the last preliminary stage of the Government's financial policy, and I think it right and proper that those of us who have taken an active part in its development should attempt to stand back and look at the matter as a whole and put it in perspective to ourselves and, as far as we can, to the House. That duty is especially strong on those who, like myself, have on certain sections of it taken a strong line.
I have no doubt whatever that we are watching the development of a sound policy for which this country will have great reason to be grateful. I should like to mention, without developing them —to do so would probably be out of -order, and in any case would detain the House too long—three points in which this Finance Bill and its attendant policies mark, to my mind, a milestone on the road of the recovery of this country since the war.
Firstly, it marks the final repudiation by this side of the House of the disastrous fallacy which more than anything else caused all the mistakes of the previous Administration, and I need hardly add that I include among them all their Finance Bills. That fallacy really rests in their having persuaded themselves, and I fear too much persuaded the country, that internal financial policy can be divorced from the problems of foreign exchange, the dollar gap, etc. Over and over again in the last few years we have had the sort of statement that "Everything is all right at home, we are doing wonderfully, but by some curious accident we happen to have a convertibility crisis" or a dollar gap or some such difficulty.
That is a fundamentally false analysis of the situation. The Government have, in the last six months, broken with that tradition. They are trying in their policy, and in putting it before the country, to get it clearly into all our minds that it is impossible to carry out a loose and deflationary policy at home, even if it 2488 has all the advantages of full employment, high tax yields, etc., and expect not to have periodically these foreign payment troubles from which we have suffered for so long, and from which we are only now just beginning to rescue ourselves.
Secondly, this financial policy, into which I cannot go in any detail, is inextricably mixed up with the dear money policy, the Bank rate policy, etc. I should like here and now to pay my tribute to the courage and tenacity of the Chancellor of the Exchequer, who in the face of a great deal of ill-informed opposition has stuck to the courageous decision which he took to go back to what has been looked upon, by far too many people—not confined only to the other side of the House—as an out-of-date and outmoded weapon in protecting our solvency. I firmly believe that in doing so my right hon. Friend has earned our gratitude.
Thirdly, we must view the whole of this Finance Bill and the whole of the policy in which it has to be set against the absolutely fundamental decision which the Government have now placed on record of putting in the forefront of their policy of getting away from the seige economy conception with which we have been cursed ever since the war and the setting up of the convertibility of sterling in the very forefront of our policy. For all those reasons, and I could give others, I am convinced that this Finance Bill and its attendant policy thoroughly deserve the support of the country as a whole.
I should like to draw the attention of the House briefly to one aspect of what is happening in Lancashire which I do not think has been sufficiently borne in mind on either side of the House. It is often said that the great trouble with the country at the moment is that the great bulk of the ordinary people do not really believe that there is a crisis. I am afraid that there is a certain amount of truth in that, but surely the tragedy—I hope the temporary tragedy—which has overtaken Lancashire should be a warning to all England of what is facing this country.
There is a lot to be said for a boom if it can go on for ever, but the whole point is that booms do not go on. Nearly everybody—too many employers as well as too many workmen—always think "This boom is different from all the others."
2489 But booms do not go on. Ultimately they collapse under their own pressure, just as the boom in textiles had already collapsed when we came into office. I do not wish to detain the House in arguing whose was the fault; whether it was the Socialists or anybody else. The fact was there, and every honest Lancashire man knows it. The point I am making is that whenever anybody says to any of us in our constituencies, "Is there really a crisis? Is not this really a phoney business"? my own answer—and I am sure it is the right one—is,"Lancashire."
If we cannot realise that the policy which the Chancellor has been adopting, with great skill in my submission, if we cannot get away from the inflationary boom which was the curse of this country over the last year or two—although it was pleasant in some respects while it lasted—without waiting for it to collapse like it has in Lancashire, the whole of England will rue the day, just as Lancashire now rues the day, it lived in this false fool's paradise, which should not and has not gone on.
What the Chancellor has done so far in squeezing out a considerable amount of this inflationary pressure without running into heavy unemployment cannot be stated too often. If we take out the special textile problem the average unemployment figure during the years of Socialist administration was higher than it is today. Even total unemployment is less today than in 1947. So when we hear this story that we had six years of full employment, we should remember that unemployment today on the whole is less than in 1947; and unemployment over the country as a whole throughout the Socialist years of office was more than it is today, if we take out textiles.
So I think my point is perfectly sound and clear; that already in Lancashire in textiles, and not only in England but all over the world, the inflationary boom had collapsed like all inflationary booms have collapsed. What the Chancellor is doing, on the whole with already great signs of success, is trying to preserve the rest of England from going on too long in that inflation, or waiting until it collapses all over England just as it has collapsed in Lancashire.
As one of those who have made the life of the Chancellor a bit of a burden on recent occasions, I would say this to 2490 him. With the great burdens and responsibilities and troubles he has in his office, if such an Olympian can ever feel disappointment and perhaps depression, is it not true that he will ultimately be judged, not by the votes in this House or the arguments night by night, but when those remorseless ledgers of the Bank of England are made up recording the progress this country is making in preserving its foreign exchange position? That is where he will be tested.
Judged by that test, how can any honest man in any part of the House deny that, while the Chancellor himself would be the first to admit that much more remains to be done, he has been remarkably successful in reducing a deficit of something like £300 million in a quarter down to £10 million? That is a very remarkable achievement after six months of taking office. It is not due to him alone, because we are all in this together. But he would take the main responsibility if a crash came, and so he is entitled to the main credit if he preserves us from it. If it be that, as a result of the Government's policy, we can feel that we have clawed our way back by a million or two and by 24 hours from the abyss, he need not fear the judgment or criticism of anyone.
I say with all the emphasis at my command that I believe every hon. Member on this side, and a good many of those on the other side of the House, feel that we shall be doing a good job of work in passing, as we certainly shall, this Finance Bill which enshrines already so great a measure of success.
§ 6.25 p.m.
§ Mr. Douglas Houghton (Sowerby)
The hon. Member for Oldham, East (Mr. Horobin) always speaks with vigour and conviction, although I think it will be within the recollection of most hon. Gentlemen that his speeches are something like the weather—they are variable in their content. He alternately bestows praise and blame on his right hon. Friend the Chancellor of the Exchequer. I seem to remember in the Budget debates that he stoutly defended the Budget and roundly condemned my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and the rest of us on these benches. Then, a little later on, we heard 2491 him say of the Excess Profits Levy that it was a crazy nightmare of a tax.
§ Mr. Houghton
I think that perhaps the hon. Member added some epithets which I have forgotten. I certainly think his speeches have another quality, that of saying the unexpected thing. At the same time he has again sounded the warning note which I think must be repeated time and again in Britain—that we have perhaps the most precarious economy of any country in the world.
There is no question as to what task confronts the people of this country. I read recently in "The Observer" a most arresting conclusion in a leading article, which said that the great challenge to the political parties in Britain at this time is to formulate a grand strategy which will enable the people of Britain, not only to live, but to live well, in a world where, to an increasing extent, countries are making for themselves what Britain has been making for them for the last 100 years. I think that is the challenge which the hon. Member is constantly throwing out to the House. There is no question, whatever Government is in power, that the fundamental weakness of our economy, and the nature of the task confronting the people of Britain, will be the same.
But the hon. Gentleman should concede that the methods, or many of the methods, by which his right hon. Friend arrested the deterioration in our balance of payments position were the very methods which had been created and used by my right hon. Friend the Memberber for Leeds, South when he was Chancellor of the Exchequer. The present Chancellor employed the machinery at hand, created by the Labour Government for the express purpose of dealing with problems arising in the field of foreign exchange: limitation of imports; control of exports; the controls placed on production, and the ban on the use of essential raw materials for unessential purposes.
All these things form part of the comprehensive mechanism by which our economy is held as steadily as it is. There is no difference between us on the use of those methods, and no word was said 2492 from these benches against the decision of the Chancellor to restrict imports and to use the machinery at his disposal. The criticism, if there could have been any, was perhaps that he took two bites at the cherry when he could have taken one.
I rose, however, to draw the attention of the House to what I think is the fault of legislatures everywhere, even of this one, which is to ignore or to under-rate the problems of administration.
§ Mr. Houghton
I am fortified in making reference to this matter by the hon. Member for Kidderminster (Mr. Nabarro), and my right hon. Friend the Member for Leeds, South referred to it. The Chancellor of the Exchequer said that this is one of the longest and most complicated Finance Bills on record. Fifty-seven out of 76 Clauses, eight Schedules out of 14, and goodness knows how many pages, are devoted to problems which must now be taken over by the Inland Revenue Department. We should be making a mistake if, when we parted with this Finance Bill, we under-rated the administrative difficulties which we are now transferring to the Inland Revenue Department, as well as to company secretaries, accountants, taxation advisers and all those whose job it is to work out the Clauses of the Bill.
I am enormously proud of the Inland Revenue. I have either been in it or with it for the last 30 years, and we all pay tribute to its resourcefulness, its resilience, skill and ability in dealing with some of the most complicated fiscal legislation which this country has ever seen. We all understand that this Bill will add to the burdens, especially of the small band of fewer than 2,000 inspectors of taxes, specially trained and skilled in these complicated matters of company taxation. To be in a predatory vocation has its trials in the easiest of times, but to be in it in a period of high taxation, with many contentious features of our fiscal system, places abnormal burdens upon those who are administering our system of taxation.
The House may not fully appreciate that there are two Income Taxes in Britain today. One is Pay-as-You-Earn, and the other is facetiously described as 2493 "Pay-if-you-like"—the difference between the inexorable application of a system of tax deductions from salaries and wages, and, on the other hand, the assessment of tax on profits and gains.
§ Mr. Assheton
Has the hon. Gentleman noticed the inexorable deduction of taxation from his dividends or interest?
§ Mr. Houghton
That, of course, is merely another feature of our system of direct taxation, but I am not referring to taxation at the source in regard to business profits, but to the normal method of assessment under Schedule D, and the right hon. Gentleman will appreciate the difference between the two. There is quite a distinction in the degrees of closeness of administration of these two taxes, and the Inland Revenue Department were recovering from the arrears of investigation and probing into tax avoidance and evasion left behind by the war when they were confronted with this new Excess Profits Levy.
The right hon. Gentleman may remember that, at a recent social gathering, which I believe he attended, this Excess Profits Levy was referred to as the name of the Prime Minister's horse, and its pedigree was described as "by Confusion out of Election Promises." When the Chancellor of the Exchequer referred to the drubbing which this tax had had in the wash tub, he must have been thinking, among others, of the hon. Member for Oldham, East, though I think that perhaps the plungings, the gyrations and the twistings and turnings of the "dolly," which is punched around inside the wash tub, really did the job. The hon. Member for Oldham, East has done more of that in public, though probably most of the real drubbing on this tax has been done inside and behind the scenes. However that may be, it has emerged, as my right hon. Friend the Member for Leeds, South has said, a more complicated tax than it was to begin with.
This is the moment at which the Inland Revenue Department must utilise all its resilience to cope with this new burden of taxation at the same time as it carries forward the work already begun on the checking and overtaking of tax avoidance and evasion. Section 27 of the Finance Act, 1951, which dealt with the disclosure by banks of amounts of untaxed interest over a certain figure, adds considerably 2494 to the current burdens of the Department. I understand that there was astonishment at the large number of bank accounts yielding interest of more than £15 a year which had not come to the notice of the Inland Revenue before.
This is the moment when the Inland Revenue must employ all the resources available for training the staff which is specialised in the task, and for harnessing the skill and experience of men not previously engaged on this work, in order to ensure that the disparity in closeness of administration between one tax and another is not increased. Yet at this very time the Treasury have decided on a cut of 50 per cent. in the cost of training in the public service. That, I think, is a great mistake when we are in need of more skill, greater ability and a wider field of availability of staff for the multiple tasks which modern legislation is imposing upon them.
I sat with the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) on the Committee on training in the public service, which made recommendations which have been carried out with imagination and courage in the public service in the years since, and I think it is regrettable that the Treasury should decide to make a substantial cut in the whole of the machinery and administration of training in the public service at the present time. I hope that, as far as the Inland Revenue is concerned, the Financial Secretary to the Treasury will watch carefully to see that cuts in training do not damage the ability of the Department to cope with the additional burdens now being placed upon it.
I pass now from problems of administration to what I think must be plain to hon. Members on both sides of the House—the shift of emphasis from direct to indirect taxation which this Bill makes. We see in this Bill additions to indirect taxation and reductions in direct taxation. A picture of that change is to be had from pages 25 and 26 of the Financial Statement which we had immediately after the Budget, in which we see that the indirect taxation on petrol is being substantially increased, while decreases in direct personal taxation are being made at the same time. Of course, we realise also that the withdrawal of the food subsidies is a form of indirect tax- 2495 ation, as such a step is not only accompanied by, but indeed made possible by, decreases in direct taxation.
When the hon. and gallant Member for Ayr (Sir T. Moore), with rather bombastic optimism, declared that the nation would honour the right hon. Gentleman for his courage and for the wisdom of his policy, and that the time would come when a Conservative Government would be in office indefinitely until it had put the country to rights, and, presumably, there would not then be the need for any other kind of Government—when he is saying all that, the truth is that the present Government are more unpopular today than at any moment since they took office.
Therefore, we have to ask ourselves whether reductions in direct taxation when accompanied by increases in indirect taxation, and by a subtle additional form of indirect taxation in the withdrawal of the food subsidies, have indeed made the Government popular after all.
§ Mr. Horobin
Does the hon. Gentleman suggest that the only test of a Government's policy in a crisis is whether they are popular or not?
§ Mr. Houghton
I am not suggesting that for a moment. It was only that the hon. and gallant Member for Ayr was claiming, I thought quite preposterously, that the people of Britain were about to rise and call Her Majesty's Government blessed. There is simply no evidence that they are going to do any such thing. I should say that the Government have lost more popularity over measures which send up prices than they have gained over steps which reduce the amount of direct taxation.
One may ask whether an increase in the proportion of indirect taxation as compared with direct taxation is desirable from a social or fiscal point of view. I know that some cynics have said that the great virtue of indirect taxes is that they are all optional, and that no one need pay them if he likes to live his life in that sort of way. But we all realise that they are widely spread nowadays that it is almost impossible for anyone, however he may contrive, to steer clear of all forms of indirect taxation. I think it would even baffle my hon. Friend the 2496 Member for Ealing, North (Mr. J. Hudson) should he make the attempt to try and make all indirect taxes optional.
Indirect taxation is unfair in its incidence and it may be damaging in its effect on our industrial activities. I think that the dangers of too great a reliance upon indirect taxation are to be found in the anxious position we now have with regard to the Purchase Tax, especially on textiles. I do not hold the view that the total exemption of textiles from Purchase Tax would completely solve the recession in the textile industry, though I am fully in favour——
§ Mr. Houghton
—of the total exemption of textiles from the Purchase Tax, because there is no doubt that even in its modified form the imposition of that tax on textiles is an aggravation of the position. The real causes of the recession in textiles quite obviously go deeper than that, and were alluded to in the concluding stages of the speech of the hon. Member for Oldham, East.
I think the Chancellor will have to study more closely than he appears to have done at present the financial policy underlying the present ratio between direct and indirect taxation. There is no doubt that the effect of this Bill is to relieve many people of direct taxation while calling upon them to pay more in indirect taxation. At the same time, it has called upon many people who have received no relief whatever in direct taxation to pay more in indirect taxation. Those are, I think, significant aspects of the Bill.
The verdict of the country on this Finance Bill will be given not in this House tonight, but in the experience which the whole community will have of the financial and social effects of the financial and fiscal policy of the Government. I do not believe that the people of this country are unaware of the existence of a crisis. Many people may under-rate its gravity, but I think it is something of an insult to the political intelligence of the great mass of the British people to say that they do not know there is a crisis. At all events, they know there is a crisis in Lancashire and in the West Riding of Yorkshire, and the hon. Member for Oldham, East quite rightly said that the rest of the country 2497 must take that as a warning, because it may be the first sign of the consequences of the very thing to which I referred earlier in my speech, the growing independence of other countries of British goods.
That is a serious factor which is a challenge to us all. But it opens up much wider questions than those contained in the Bill. Had this Bill come from a Labour Government, it would have been a different kind of Bill. It would have had no Excess Profits Levy in it, it would not have been accompanied by a cut in the food subsidies, and it would certainly have retained a fair balance between direct and indirect taxation. Therefore, I think our verdict on the Bill must be that, from our point of view, it is a bad Bill, and we hope that the number of occasions on which we shall have to comment on a Finance Bill introduced by the present Government will be very few indeed.
§ 6.46 p.m.
§ Mr. Cyril Osborne (Louth)
Except for one short intervention on the Committee stage, I have been a silent brother during the long passage of this Bill, but I want today to make two points on it. But, first, I want to refer to the warning given by the hon. Member for Sowerby (Mr. Houghton) that we should make clearer to our constituents the gravity of the problem now facing the people of Lancashire and the West Riding of Yorkshire and that it may overtake the rest of the industrial population of this country. When he says that, is he prepared to tell the people that their rations may be cut in half and doubled in price and that we may go back to two million unemployed, because those are the only terms in which the matter will be understood?
§ Mr. Houghton
I do not think it would be wise or true to say that we may go back to two million unemployed. I do not think we shall or need do that. What I said was that it may be necessary to make sacrifices in our standard of life in order to retain our solvency and keep our people employed.
§ Mr. Osborne
If the hon. Gentleman says that the tragedy of Lancashire may overtake the whole of the country, to what extent does he think unemployment will increase?
§ Mr. Houghton
I hesitate to intervene again, but I did not say that what is happening in Lancashire would overtake the rest of the country. I said it was a warning to the rest of the country.
§ Mr. Osborne
A warning that it may do so is what I said, and I link that with what the hon. Member for Newton (Mr. Lee) said so wisely. He said that because of men's fear of unemployment we cannot get the extra production on which the Chancellor depends for the proper working of his Budget. The necessary production is not easy to get because of the memories of the old days, and no one who stood in the shoes of such men, as I did, can blame them for it. The greatest difficulty we have in putting over the message which the hon. Gentleman wants to give them is in overcoming the difficulty which his own colleague posed to him.
When I intervened on the Committee stage, I asked the Chancellor if he would do something for the shopkeepers of the country by allaying their fear regarding stocks already in their shops, on which Purchase Tax had already been paid, in the event of a reduction of that tax. He promised to appoint a committee. I ask the Financial Secretary whether he will bear that in mind and announce the composition of that committee as soon as possible and so relieve the anxiety of the shopkeepers on that point.
I am sorry to strike this discordant note, but I am disappointed with the Budget in one respect. It has been said many times that when we came into power we faced economic disaster. We were told, and the late Chancellor agreed, that we were over-spending to the extent of something over £500 million a year and that that had to be corrected. That £500 million a year represents to the people of this country nearly 25 per cent. of rationed and unrationed food which we did not earn last year. We paid for those foodstuffs out of our savings. As the previous Chancellor knows, those savings were going and therefore that situation could not be allowed to continue.
The new Government were faced with this great crisis and the opening of the Budget was brought forward by a month to deal with it. My complaint about the Budget is that, whatever may or may not be in it, it has not struck the mind of 2499 the ordinary person sufficiently to emphasise the fact that this crisis does exist. To that extent the Budget has failed. The previous Socialist Chancellors failed in the same respect and I said the same thing to each in turn.
So far, not one Budget since 1947—and we have been in a state of crisis ever since—has made the industrial worker believe that there is a crisis which would affect him and that the facts at which the hon. Member for Sowerby hinted and will not state openly may overtake him. I should like to remind the Chancellor of another figure, which I think I obtained from the former Financial Secretary.
§ Mr. Pannell
The hon. Member suggested that no Chancellor since 1947 has ever hinted at a crisis or the sort of crisis which might overtake the industrial worker. Surely that cannot be true. Sir Stafford Cripps was subjected to considerable hostility and attack from the benches opposite, including the Front Bench, when he attempted to bring that home to the industrial worker. My right hon. Friend the Member for Leeds, South (Mr. Gaitskell) has already quoted from a document issued by the Conservative Party condemning the wage freeze.
§ Mr. Osborne
I said that past Chancellors had been unable to make the industrial worker realise the gravity of the situation. I have always expressed in this House the greatest admiration for the integrity and ability of the late Sir Stafford Cripps. But since reference has been made to him, I might remind the House that in Cmd. 7573, paragraph 30, Sir Stafford—in what was a begging letter sent to America to say that we must have 940 million dollars to keep us afloat— confessed his inability to do the very thing which I now say my own Chancellor has failed to do.
I want to make it abundantly clear that I am sure that the danger, which has been hinted at, that the tragedy of Lancashire will overtake the rest of the country is so real and so near to us, and yet that very few hon. Members realise it themselves. I had a letter from Chile only last week bearing on this matter. I should like to ask the previous Chancellor, as well as the present Chancellor, to listen to it—because the right hon. 2500 Gentleman the Member for Leeds, South may have to face this problem if he ever comes to power. Unless we can make our people realise the truth of this matter, we shall never secure the exertion which is so necessary if we are to survive.
§ Mr. Jack Jones (Rotherham) rose——
§ Mr. Osborne
No, please let me continue. The letter came from Santiago last week from an importer of British machinery—not textiles, but capital goods. He said:As regards British trade here, we are feeling more and more every day competition from Germany, Italy, Austria and Belgium. Japan is coming into the picture too. All these countries' deliveries are very much better than ours and German prices are sometimes considerably cheaper.There are lots of complaints of the deterioration of the quality of British goods. For generations here to buy British meant to buy the best and the word ' British' was a hallmark of quality. Unfortunately this now is not so, and we have experienced it with our own machinery——…
§ Mr. Speaker
It is allowable on Third Reading of this Bill to refer generally to the economic background, but really on Third Reading one must try to confine oneself to what is in the Bill. I think that what the hon. Member was saying was really out of order.
§ Mr. Osborne
I must, of course, obey your Ruling, Mr. Speaker, which I will do at once; but, if I may say so with respect, a great deal more latitude has been given on matters not so germane to the position.
§ Mr. Speaker
All I am saying is that, while reference to the economic background may be necessary in order to make a speech intelligible, and I do not object to that, I hope that the hon. Member will keep those references within bounds.
§ Mr. Osborne
May I just complete my quotation, Mr. Speaker? The writer went on to say:There does not seem to be the pride in workmanship there used to be before the war; this is not my own opinion but that also of many competent people who have been buying machinery for years.The Budget estimates will not be fulfilled unless we have a 3 per cent. increase in national production. Already in certain consumer industries we are not going to obtain a 3 per cent. increase but a 3 per 2501 cent. or 5 per cent. decrease. My hon. Friend the Member for Kidderminster (Mr. Nabarro) has said that we shall make that up with capital goods, but those are the goods that we cannot sell.
§ Mr. Osborne
It is useless to say "nonsense" about things on which my hon. Friend has no evidence at all. I believe that the industrial and financial situation of this country is so critical that the steps taken by the Chancellor do not meet it. I beg of him to do what he can, either in this House or on the radio or in the Press, to bring home to everyone in the country that unless there is a new attitude to the task which awaits us, each in our own sphere, we shall face the tragedy from which Lancashire is now suffering.
§ 6.58 p.m.
§ Mr. J. Grimond (Orkney and Shetland)
I also feel the concern which has been expressed by the hon. Member for Sowerby (Mr. Houghton) and the hon. Member for Louth (Mr. Osborne) about the future of certain industries in this country, even though at the moment some of them are enjoying an almost boom condition. I must say, however, that further appeals to the workers of this country, which appear to be the solution offered by the hon. Member for Louth, are at the moment not altogether appropriate.
§ Mr. Grimond
Yes, but different circumstances are developing in different industries. Some are held up by lack of material, and to appeal to the workers in those industries to work harder is beside the point. Other industries are finding it difficult to sell goods both at home and in the export market. This is a very complicated question.
My own view is that we have not yet moved over from a condition of inflation to a condition of deflation such as would justify the Chancellor of the Exchequer in reversing his policy. But it is obvious that we shall be placed in difficulty in the matter of employment in certain industries in years to come. Management and labour in those industries must accept a higher degree of mobility and must be prepared to accept changes from one form of production to another, and 2502 indeed from one industry to another. Whatever Government is in power will have to rely a great deal upon management and workers in industry to accept that position. Any political party which professes to be able to guarantee full employment in the sense that a man can be certain of continuing indefinitely to do the job that he is doing now is misleading the country.
There are certain points of detail in this Budget which I find bad. I think the increased duty on petrol is a bad increase. I think the Excess Profits Levy is a bad tax. It has all the objections which have been mentioned in Committee, and, in addition, I feel it is time that we stopped levying new taxes and, for that matter, it is time we had a holiday from legislation in general.
This debate has been largely taken up with the more important and main points of the Finance Bill, and it is to those that I propose to direct a few words. We have heard from the Chancellor that the main purpose of the Bill is to give some incentives, to bring reality into our economy and to right the balance of payments. In all this, of course, he is dependent upon the system of private enterprise and, in a modified form at any rate, a free market. It is fair to say that that system, coupled with the welfare services and coupled with a fair amount of control, has yielded this country extremely good dividends. It is reasonable to say that the majority of people are fairly well off and few want to go back to the situation which existed 20 or 30 years ago. We have a very sound standard of living in this country. That is something to be proud of.
At the same time, we have to realise that we are living on capital, not only in the strict sense but capital in skill and technique—the capital which has been built up under the system in which free enterprise has been working. We have to some extent been drawing on that capital. We are not developing the free enterprise system in the way which we must if this country is to survive in the difficult conditions which will face us in the future.
To begin with, as the hon. Member for Louth mentioned, it must be realised that a free enterprise system depends upon the enterprise of management, shareholders and people who risk capital, and their sinews have become rather soft in the last five or 10 years. Secondly, we have 2503 to realise that free enterprise depends upon a great deal of mobility of resources and labour. It is not a system in which we can guarantee that a certain amount of our resources can be locked up in one form of production or another. To my mind, that is the only excuse for such a large amount of our resources being turned over to housing.
Thirdly, these conditions have to be accompanied by a high level of social services. Family allowances, pensions and so on are being increased in this Budget. I doubt, however, whether they are being sufficiently increased. I do not say that in the difficult situation in which we are more could be done, but I do say that there is a good deal of substance in the criticism that this Budget gives reliefs. If not to the wealthiest people, at least not to the poorest people, and the people who are apt to suffer from this system of private enterprise are not as yet adequately safeguarded and guaranteed the minimum in life which I feel sure we should all like to see.
Further, this system depends upon greater trade. This Budget has written into it several of the provisions which we had in the last Finance Bill and which are essentially of the siege economy to which reference has been made. Provisions on the movements of companies, for instance. It may be true to say that we have to retain these restrictions on the movement of capital and so on at this moment, but those people who believe in a system of private enterprise cannot really be content so long as this country is restricting trade in the way it is.
We have had a great deal of lip service paid to the need for greater trade. It would be out of order to discuss now how it is to be achieved. There is possibly a need for a further Commonwealth conference. But it is certain that for a country such as this, which is so dependent upon an expanding and flourishing world trade, it is up to us to take the lead and to show in some practical way not only that we are asking other people to accept the principle of freer enterprise and trade but that we are ready to accept it ourselves.
When I hear the importance placed on the need to bring up the standard of living in the backward areas, for instance, I wonder whether it is right to put so 2504 much emphasis upon putting capital into those areas and whether more emphasis should be placed upon greater trade and the sale of goods from this country to those areas.
I feel that this Bill is in a dual position. It is an emergency Measure introduced at a critical period. On the other hand, it is intended to mark a step in a new direction. I have some difficulty in making up my mind whether we are going in a new direction or not. For instance, the Chancellor hotly denied, in answer to a question by the right hon. Member for Leeds, South (Mr. Gaitskell), that it was his intention to encourage labour to go out of the textile industries and into engineering. I do not believe that he can have thought that over because he must have expected such a transfer, but it will be within the memory of the House that he seemed very offended by that question. But that is the kind of question which we have to face.
I want to finish by saying that it is my own view that a country such as this, which depends upon private enterprise and which will have to depend upon it for some time to come, has got to make clear to the world that this system, given decent conditions, can yield a good way of life. At the moment we are continually saying that we must all tighten our belts, and, no doubt, for the time being it is necessary, but in the longer run I believe that a country which still has enormous resources of skill and capital should yield a fairly good livelihood and can, at least, support, if not the total of its present population, at least a high population and a high position in the world.
§ 7.8 p.m.
§ Mr. Frederick Gough (Horsham)
I hope the hon. Member for Orkney and Shetland (Mr. Grimond) will forgive me if I break into the general style of debate which has marked his speech and that of his predecessor. It is my desire to detain the House for a very few minutes and to discuss a rather particular topic.
The subject I want to discuss is one about which I have had quite a little correspondence with my hon. Friend the Financial Secretary. I should hasten to say that it has to do with my own business, and in that respect I should declare an interest, although I think it will be agreed that what little knowledge I have 2505 of the matter will be helpful and does not have any bearing on my own personal business.
The point I want to raise relates to the back service payments of pensions, and this is dealt with in the Ninth Schedule. I was very glad indeed that my right hon. Friend the Chancellor of the Exchequer realised, from the pitfalls in the previous Excess Profits Tax, that there was a serious loophole by which an employer could arrange either for himself in certain circumstances or for some of his staff to utilise moneys which otherwise he would have to pay by way of Excess Profits Tax to provide them with such pensions as should be provided for them.
That is excellent, and I think that the risk has been thoroughly dealt with in this Ninth Schedule. But I venture to suggest—and I know I am supported by people who are involved in this very technical business—that the net has been drawn a little too wide. I only wanted to say that to put it on record and to ask my right hon. Friend if he will, during the course of the next 12 months, give this matter his very serious consideration.
As this Schedule is worded at the moment, I am afraid that it may dissuade perfectly bona fide employers from taking out and arranging pensions for their employees. I am also a little frightened that it may have an effect upon perfectly good provident schemes for works employees and also for their widows and children. I am not quite sure; I think that only experience will show.
Another aspect of the matter about which I have certain qualms was mentioned by the hon. Member for Sowerby (Mr. Houghton). It is going to be another load on the already overworked Inland Revenue. If it performs the function for which it is intended, to prevent an unscrupulous employer retaining monies that otherwise should go in Excess Profits Levies, well and good, but if experience proves that it is going to put a very heavy additional load upon the Inland Revenue and if, in addition, it is going to have a deterrent effect upon what we must realise is one of the most important constituents of savings in this country—pensions, provident schemes and so on—I would ask my right hon. Friend to give this matter further consideration and bear it in mind in 12 months' time.
§ 7.13 p.m.
§ Mr. Jack Jones (Rotherham)
I enter into this debate at this very late period in these very long-drawn-out Finance Bill proceedings with one intention, which is to say a word or two about the speech which was made by the hon. Member for Louth (Mr. Osborne). He is an employer of labour and I have heard him make speeches in this House which have been couched in terms which proves that he has, or did have, some knowledge and understanding of the standards of the ordinary British working man and his womenfolk.
I am surprised that he is learning, at this late stage in his development, that the average British working man does not realise that there is a crisis and that the Chancellor of the Exchequer has failed to bring that home to him. I want to suggest that the average British working man, his wife and children above the age of 13 or 14 know full well that there is a crisis and that there always has been since the war; but they also know that that crisis has been intensified since this Government came into power.
§ Mr. Osborne rose——
§ Mr. Jones
I am sorry, I cannot give way. The hon. Member for Louth would not give way to me and, as we say in Lancashire, what is good to give is not bad to take. I know of no measures which the present Government could take, other than those which they have taken, to bring home well and truly to the British working man the fact that there is a crisis. There is less food today; prices are higher; there is difficulty with regard to housing; there is more difficulty with regard to the raw materials which we need to supply the factories in which he hopes the work is to be done.
§ Mr. Jones
There is plenty of material but there are not the markets. The hon. Member for Louth should not try to talk to me like that. I represented Bolton for five years and know something about the textile industry. There is an unholy fear of a repetition of what happened under previous Tory Governments. One cannot eradicate the facts. Facts are very stubborn things.
I feel sorry for the present Government. They have set about prevailing upon 2507 people to produce more by giving them less of the good things of the earth, less food etc., to create the strength to produce the goods which the Government want. They make agreements within the Commonwealth which say, in effect, "Everybody shall buy less, but we shall produce and export more." How we are to produce and export more to people who have made up their minds to buy less I do not know, and neither does the Government.
I have made speeches in this House and in the country about the responsibility of the individual British working man. The problem of exporting more is one which we have to bring home at once, because, as sure as tomorrow morning dawns, the Government are not going to last very much longer. They may think that the trend of events indicates a gradual improvement and that everything in the garden is going to be lovely. That is not so. The trend shows that the country is becoming woefully dissatisfied and discontented, and a discontented community in the workshops is not going to let this Government remain in office much longer.
The hon. Member for Kidderminster (Mr. Nabarro)—with whom I often agree —knows as well as I do that we cannot expect our workers to see diminishing raw material stocks and expect them to tighten their belts, to eat less food and to work harder in order to get shut of the remaining stocks and so put himself out of work all the sooner.
§ Mr. Nabarro
The hon. Member is talking glibly about diminishing raw material stocks. The most vital of our raw material stocks is coal, which stood at 15,335,000 tons at the end of last week, which is 4 million tons higher than in the equivalent period last year.
§ Mr. Jones
The hon. Member for Kidderminster should remember the speech which I made in this House—as a lone soul—advocating Saturday work for the British miners throughout Britain. I did that although it was very unpopular. I think I can claim a little credit for the scheme which has made that four million extra tons possible. That is the point which I have been advocating for six years. Coal under nationalisation has improved the same as steel production.
The point is that if things do not alter coal stocks will also diminish. Are 2508 British miners going to be satisfied with the present standard of life? Does the hon. Member for Kidderminster think that all this talk about tightening his belt is going to give the miner at the coal face an incentive to produce more? If he thinks that he does not know the British miner. Does he think the furnace men making steel are satisfied to see these things happening under the present Government?
I want to be fair and honest with the Government. I say that the approach which they have made has been psychologically wrong, in that they are telling the people to produce more, to eat less food and to pay more taxes. The hon. Member for Orkney and Shetland (Mr. Grimond) hit the nail on the head when he said that unless we have a Government who are prepared and willing and will definitely guarantee a fair standard of life to those who are responsible in the main for Britain's prosperity—the workers of the country—we are not going to get very far. The slashing of the food subsidies and the imposition of a miserable shilling on sick pensioners and diabetics have had a profound effect on the workers of this country.
The sooner the Government realise that and set about imposing taxation where it can best be carried, and finding the food to give our people the strength to bring about what they want, the better it will be for all concerned. I want to say a word of warning to my own party. The Labour Party have an immense task before it in getting its own individual supporters to recognise the gravity of the situation; the fact that the crisis will continue to be a grievous one, and to make them realise that they must be prepared, as good patriots and citizens, to be satisfied to give that they expect to get—a fair deal.
Throughout my industrial life, in the trade union movement and elsewhere, I have always advocated the fact that the secret is to get a contented community among the workers who matter most—the men in the steel industry, and in the foundry and workshops, and the sooner the Government set about doing that psychologically and in a practical way, and so giving people contentment, the better it will be for them. Then and only then can they expect to remain in office.
§ 7.20 p.m.
§ Mr. Douglas Jay (Battersea, North)
My hon. Friend the Member for Rother-ham (Mr. Jack Jones) and the hon. Member for Louth (Mr. Osborne) have had a short argument as to how far the people of this country understand our economic difficulties. However that may be, I do not think there will be any dispute that Sir Stafford Cripps did more than anybody else to ensure that they should understand it.
That brief argument brought us near to the end of the very last lap, and that last lap finds the Treasury Ministers not merely rather tattered and torn from our long debates but also, in our view, riding almost a totally different horse from the one on which they started. Indeed, we have seen a remarkable circus ride since Budget day three or four months ago. In the debates on the Bill, the Chancellor has put down more than 200 Amendments in his own name. In his speech today, in which he congratulated himself on almost everything under the sun, he took credit for the democratic spirit in which he had been listening to other people's suggestions. I notice that "The Times" took a rather different view of the Amendments a few days ago, and said:A plethora of amendments is usually a sign of measures either hastily conceived, or bad in themselves, or both.That, I think, is probably the truer explanation.
The Chancellor also appealed in the course of the debates to two of my hon. Friends and one of his own to help the Government out of some of their textile difficulties. He called in the Parliamentary Secretary to the Ministry of Civil Aviation to help us all to understand Income Tax; and he conscripted into the band of silent brothers, whom he complimented this afternoon, not only his own back benchers, but also the Minister of State for Economic Affairs. I have a special reason for regretting that we have heard so little from the Minister of State in these debates, because it so happens that I used to derive a lot of economic enlightenment from him back in the 1930's, when he was so forceful a critic of the Government of Mr. Neville Chamberlain, of which I think the present Chancellor of the Exchequer was then a loyal Member.
2510 The Financial Secretary, however, has been far from silent, and he has seemed to me to confirm a theory which I have always held, that Financial Secretaries to the Treasury ought to be lawyers and not economists. The present Financial Secretary defends a bad proposal with just as dogged good humour as the Chancellor abandons it on the following day. Nor, I think, should we forget the right hon. Member for Blackburn, West (Mr. Assheton) who marches his soldiers up the hill like the grand old Duke of York, but leads them from behind like the Duke of Plaza Toro. I should, in fairness, add that when he marches them down again he usually charges enthusiastically in the van.
On this side, I want to pay tribute to certain hon. Ladies who showed the importance of visual appeal as a method of persuasion; to my hon. Friend the Member for Stechford (Mr. Roy Jenkins) and my hon. Friend the Member for Gloucestershire, South (Mr. Crosland), who understood the E.P.L. better than anybody outside the Officials' Gallery, until during the Report stage they were lured away to some more pressing assignation, I believe in Germany; to my hon. Friend the Member for Sowerby (Mr. Houghton), who really understands the Income Tax; to my right hon. Friend the Member for Huyton (Mr. H. Wilson), who helped the Chancellor out of his textile tangles; and to many other of my hon. Friends.
Although the Chancellor still carries his bat after this long contest, it has had, I think, five new blades and at least ten new handles. In spite of that, we still think this is a thoroughly bad Bill, because in our view it embodies a thoroughly bad economic policy. We have all today had a look, in perspective, at the Bill and the policy, as it emerges from this final debate. In our view, the Bill is bad, first in that it imposes Purchase Tax on a whole range of new textile goods. This must, of course, raise the cost of living, which the Government were pledged to lower, and at the same time limit the public demand for textiles in the very midst of a textile depression, when a wise Government would be using every instrument to relieve that industry.
I think the best proof that the Chancellor knows he has made a mistake in thus extending the Purchase Tax in the 2511 textile field is his constant attempt to suggest that the whole D scheme is somehow the responsibility of the Douglas Committee, and not of the present Government, and even to imply that the decision to put the Purchase Tax at the median level was a recommendation of that Committee.
If the Chancellor really believed in his own proposals he would have had the courage to say plainly, from the start, that they were decisions of the Government, which the Government alone should defend. If any other evidence were needed that the Government simply accepted the D scheme, without objectively studying its economic consequences, it would be the decision to apply it to furniture as well as to textiles. Not a shred of rational argument has been advanced in favour of that, and there is everything to be said against it.
Secondly, this Bill is disfigured by the metamorphosed but still hideous—and I use the word of the hon. Member for Oldham, East (Mr. Horobin)—"gargoyle" of the Excess Profits Levy. The Chancellor congratulated himself on the Parliamentary discussions leading to changes in the E.P.L. But I must say that it seems to me a sad commentary, not merely on the incompetence of the present Government, but also on some of our Parliamentary methods that the Chancellor should force through the House a tax which has not a single supporter either outside or inside Parliament, in industry or the general public, among laymen or among experts.
We are all going to be made the victims of the now undisguised frivolity of the Prime Minister. To use his own words, he "stuck" this in one of his election manifestos, and so numbers of Inland Revenue officials and accountants are all to be butchered to make a Churchillian holiday for several years to come.
The irony of it is that since the Chancellor has now admitted we cannot distinguish—as we all knew—armaments profits from other sorts of profits, this pledge could easily have been honoured by raising the Profits Tax. If only the Chancellor had said, after the Election, that extra taxation on profits in the rearmament period had been promised, and that the pledge would be filled in the way I suggest, he would have been 2512 honouring the pledge far more faithfully and, indeed, sensibly than in almost any other instance we have had from this Government. But apparently they fulfil their pledges only when it is plainly not in the national interest to do so.
We on this side of the House firmly believe in moderately high rates of taxation on profits, in a mixed economy and in a period of full employment. I think experience both in this country and in the United States—where the percentage of taxation on company profits is about as high as it is here—supports this view. Such taxation has the merit of permitting a high rate of savings through a Budget surplus and also a more democratic distribution of property and incomes. But we think such taxation of profits should be levied in the most efficient, practical and simple manner, imposing the least labour on those concerned.
We prefer to be guided on methods by the experts on taxation rather than by manifestos written in an electioneering fervour. I agree with "The Economist" of 21st May which said:The Government's performance at the Committee stage of the E.P.L. will surely vie with the tangle over rail fares as a principal monument to its muddle-headedness.This is taxation of profits in the worst possible form. Indeed, the thinking of the party opposite about profit taxation seems to have got into an extraordinary muddle. We had heard for years all this lamentation about the terrible effect of profit taxation, on the rate at which companies could build up capital, and on incentive. But on the Report stage we had the hon. Member for Edinburgh, South (Sir W. Darling) making what I suppose was an important statement of policy for his party, and telling us that there is no exceptional difficulty for first-class competent business men in securing what capital they want at any time. At the same time, the Chancellor comes along and imposes this extraordinary new tax.
We think that this Bill is also bad, in that it embodies reductions in incomes not only in the case of the wage earner and the average salary earner—which we approve—but in that it adds as much as £50 million in relief to those with four-figure incomes and upwards. We think that is unnecessary, and it was 2513 partly for the sake of this that the Chancellor made his disastrous cut in the food subsidies.
His attempts to justify these tax concessions for those with the upper incomes on the ground of the effect on incentive, and so on the national output, are totally unconvincing. I will not repeat the arguments I set out in support of that on the Committee stage, in which I attempted to show that the effects of these tax changes on incentive are grossly exaggerated. I do not repeat them because the Government have so far given no answer to them. But it really cannot be seriously argued that that effect justified the fatal blow which the Chancellor struck at our whole internal stability through the cut in the subsidies. The Chancellor merely asserted today that the effects on incentives were "significant." but he produced no argument or evidence whatever in support of that.
§ Mr. R. A. Butler
In defence I should like to say that I was under the simple impression that I could not discuss the food subsidies. They are not in the Bill. Therefore, it was not appropriate on Third Reading, but every other speaker has discussed them and I now feel at a disadvantage.
§ Mr. Jay
The Chancellor misunderstood. I was saying that he gave no argument that his reduction in Income Tax, which is in the Bill, would have a major effect on incentives.
The whole course of events since the Budget has fully justified our warnings and those of the T.U.C. of what would happen as a result of the decisions then taken. Here, of course, is the real and deep conflict between us on the two sides of this House over this issue.
The Chancellor thought—I am sure sincerely—that by raising the Bank rate, making the cut in subsidies and the other measures in the Bill, he would perform a sort of confidence trick, which would affect the psychology of the exchange speculators, and so improve the short-term outlook for the gold reserve, as indeed in the short term it did. It is clear that the main purpose of the cut in food subsidies was to impress these exchange speculators. If it were not, there is no rhyme or reason in the Chancellor's claim that somehow it helped to "save the £."
2514 We said, on the other hand, that the decision to raise food prices would debase the purchasing power of the £ and let loose a spate of wage claims, which would force up our export prices and so injure our export prospects steadily as time went on. The Chancellor, strangely enough, hardly mentioned this even in his Budget speech. Yet no one would deny that what we predicted has in fact happened and that it was provoked by the Government.
The hon. Member for Oldham, East (Mr. Horobin) maintained that the rise in the cost of living had not been faster after the Budget than before. But the relevant point is that it was provoked deliberately by the Government through their Budget decisions. Clearly, that was bound to effect the psychology of wage negotiations. What has happened? The short-term speculative gains, which I agree were real for a time, are now waning. The real adverse effects of the Budget and of this Bill are beginning to appear.
Hon. Members opposite delude themselves if they think—I am sure sincerely —that the temporary unpleasant effects will bear pleasant fruits later on. I believe that exactly the reverse is true. Of course, food subsidies are an indirect export subsidy, and the injury to our exports is still to come. As the city editor of "The Times" put it very truly two days ago:It is only now that some of the difficult practical issues raised by the Chancellor's Budget three and a half months ago are beginning to come to a head.Then he talked about some of the wage claims before us. The fact is that the Chancellor has been reduced to pleading for wage restraint when he has no moral authority left to do so. It was only last week that I noticed that the National Union of General and Municipal Workers, very much in the spirit of the speech of my hon. Friend the Member for Newton (Mr. Lee) this evening, passed a resolution calling on the Government to review their economic and Budget policy in order to maintain the purchasing power of wages. That is a request to the Government to show the same moderation as is shown by organised labour, and for the Government to fulfil their part in maintaining internal stability.
What a tragedy it is that the Chancellor in his Budget showed so much less statesmanship on this issue than organised 2515 labour in this resolution which the "Manchester Guardian" described as an eleventh hour appeal to the Government. It is an appeal to which the Government could still respond. Many of those food price increases threatened in the Budget have not yet been made. So far as I understand the position——
§ Mr. Speaker
I do not want to interrupt, but the right hon. Gentleman is talking about food subsidies, and matters like that, which are not in this Bill. The right hon. Gentleman must try to confine himself on Third Reading to what is in the Bill.
§ Mr. Jay
I was following some of the speeches made by my hon. Friends and trying to reply to the debate. I agree, however, that this comes in only as part of the economic background.
I wanted to say, following my hon. Friend the Member for Newton, that I hope that the Government even now will heed this eleventh hour appeal. We urge the Chancellor to do so, for this is, as I think the hon. Member for Louth would agree, a fatal moment to strike a gratuitous blow at our export trade. As the hon. Member for Louth has said, the position abroad is difficult. Foreign competition is now being felt and it is likely to become worse as time goes on. If export prices are to be forced up at this stage by the measures in this Bill and by the Budget, then the outlook for British exports from now on will be exceedingly bleak.
This is at a moment when the import cuts which we were promised have still apparently not materialised. The reasons for this failure to deal with the really practical problem before us are no doubt various. It seems to me that one reason is this: that the Government have been tending in their defence of the Bill and in their public statements to use a lot of rather woolly, mystical metaphors about these problems instead of talking clearly in terms of concrete fact. Indeed, in the case of the debt interest which we were discussing on one of the Clauses of the Bill, this mumbo-jumbo and verbiage cost the taxpayer about £80 million a year—a rather expensive type of economic mysticism.
We have heard a good deal of talk about "saving the £," about "con- 2516 fidence," and even—believe it or not in 1952—we heard today from the right hon. Gentleman the Member for Blackburn, West about convertibility. But we are not told, as again my hon. Friend the Member for Newton said, in concrete terms what this Bill will achieve in terms of increased production, and how that is going to affect our balance of payments. Perhaps again, one cannot expect very clear understanding and a right policy when the Prime Minister is talking about standing on trapdoors, and Lord Woolton, I see, depicts himself aslaboriously struggling to find a way out of a dark tunnel, and seeing, dimly in the distance, the light ahead.I think that all that sort of talk does a lot of harm to the understanding by the public for which the hon. Member for Louth was pleading just now.
Surely the real road to solvency lies by way of technical progress—which has been alluded to today; higher production; concentration on the dollar problem —first and foremost; ruthless economy in imports; and rising exports. This Bill, it seems to me, contributes to hardly one of those things. For the truth is, of course, that there are really only two broad policies which can, in our hard struggle—and I am glad that the Chancellor now recognises it, as he did the other day, as a hard, uphill struggle rather than a crisis—achieve a solution. One is to use courageously every possible device of planning, of control, and restraint to build up our exports and husband scrupulously our home produced and our imported resources. That means, of course—and must mean—more and not less controls and planning. That is what, I submit, the present situation manifestly requires.
But that, unfortunately, runs clean contrary to the doctrinaire prejudices of hon. Gentlemen opposite, about some of which we heard today from the hon. and gallant Gentleman the Member for Ayr (Sir T. Moore) and the right hon. Member for Blackburn, West. Hence, I think, the muddle and vacillation which we find enshrined in this Bill, and hence also the extraordinary discredit—or unpopularity, as it has been called today— in which this Government have fallen even with their own supporters. How disastrous it really is for the nation that at this moment we have in office a Government who are doctrinally inhibited 2517 from taking the measures that the situation really demands.
For the only other alternative policy to what I have advocated is, of course, de-control and deflation, carried to the point at which the public would be so impoverished as not to be able to afford to buy, in the absence of control, more imports than the country can afford. That is the sort of policy which the hon. and gallant Member for Ayr was hinting at today when he spoke of the privilege, I think he said, of having rather higher unemployment. But, of course, getting a solution that way would probably mean a 20 per cent. Bank rate and 5 million unemployed. Is that what the hon. and gallant Gentleman or any other hon. Members opposite are really perpared to contemplate?
For if they are not, and if they also are not in favour of our policy of thoroughgoing planning and control, if they will have neither of these, then, of course, chronic balance of payments crises are really inevitable, as long as this Government remain in office. The policy of this Bill, therefore, as it seems to me, hesitates feebly and uncertainly between those two practical alternatives. That is why we again condemn it as ineffective, unjust. irrelevant, and, in the last resource, injurious to the nation's hopes of achieving real economic independence
§ 7.46 p.m
§ The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter)
From time to time this debate has rather had the atmosphere of taking leave of an old friend whom one has seen a good deal of during the last few months; indeed, there were moments when this House got into the atmosphere of obituary notices, which, perhaps, are the only occasions on which public men really say nice things about each other.
However, I did notice that neither the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) nor the right hon. Gentleman the Member for Batter-sea, North (Mr. Jay) was able to resist the temptation to adopt the conventional gambits which are normally played from that Front Opposition Bench at the last stage of a Finance Bill; a conventionality, perhaps not unconnected with their Wykehamist background, which induced them 2518 to play the perfect Opposition gambit at the final stage of the Bill.
Either they say, here has been a brutal Chancellor who has disregarded the views of the House of Commons and driven his Measure through with ruthless disregard for the views of hon. Members; or, if the facts are so obviously against them that they cannot use that one, they say, as the right hon. Gentleman the Member for Leeds, South did, what a terrible number of Amendments have been made, to show a lack of planning and a lack of forethought at the beginning. That is the absolutely perfect dialectical Morton's Fork that Oppositions at this stage seek; and we could see the two right hon. Gentlemen thoroughly enjoying themselves in the process.
I thought that the right hon. Gentleman the Member for Battersea, North, whose display of metaphor was really magnificent, from his five-bladed knife to the changed horses, a little overdid the changes that have, in fact, been made during the course of these debates. But it is perfectly true, as my right hon. Friend said, that, in his conduct of his Measure through the House, he has thought it right and proper to pay full attention to the views expressed by right hon. and hon. Gentlemen on both sides, which I would say is the proper and constitutional way, when dealing with this great annual Measure, to treat the House of Commons.
It is the fact, party political considerations altogether apart, that this House does contain among its Members a very considerable number with very great practical experience and knowledge of the different aspects of our life and of economic effort, and it would be very foolish, and a neglect of opportunity, for any Government to fail to take advantage of the wisdom and experience which is to be found on both sides, which can very profitably be made use of in the discussion and in the consideration of the grave and difficult and delicate matters embodied in a Finance Bill.
But we must not exaggerate the changes which have taken place. The right hon. Gentleman the Member for Battersea, North referred to 200 Amendments in my right hon. Friend's Bill. Knowing the right hon. Gentleman's scrupulous care for statistics, I am sure it is 2519 right, though I have not myself counted them; but it is equally the case that a great many of them were wafted through the Committee of the whole House and the House on Report with the aid of that magic talisman, the word "consequential," and were, in fact, of no very great significance.
It would be a pity, too, from the point of view not so much of this House, which knows exactly what has been done, but of opinion outside, to overstate the changes financially which have taken place so far as this year's finances are concerned. It is important that the figure which my right hon. Friend gave in moving the Third Reading, that the changes so far as this year's finances are concerned total no more than £13 million, should be clearly stated.
Other changes affect the revenues for next year—the changes with respect to Excess Profits Levy—but their effect on the picture next year must depend on what other arrangements my right hon. Friend makes at the appropriate time for dealing with the affairs of that year. It is important to realise that for this year the changes, compared with the vast figures involved in a contemporary Finance Bill, are not of a very imposing nature.
The right hon. Gentleman, the hon. Member for Sowerby (Mr. Houghton) and my hon. Friend the Member for Horsham (Mr. Gough) referred to changes which have taken place in the Excess Profits Levy from the very practical point of view of their effect upon administration and upon the staff of the Inland Revenue who have to administer them. That is a very practical and important consideration.
I certainly do not yield to the hon. Member for Sowerby in my admiration for the devotion and skill of those public officers upon whom, as he rightly said, this House is by passing this Bill, imposing further duties. But I think hon. Members can reassure themselves to some extent upon this point, because, while it is true that some of the Amendments which my right hon. Friend made in order to prevent the levy falling with undue hardship upon particular industries or activities will undoubtedly complicate the tax further, it is equally the fact that the concession which he made 2520 with respect to the minimum standard, when the figure was raised from £2,000 to £5,000, will have the effect of taking out of the scope of the levy one-third of the companies which would otherwise have been within it, therefore giving very considerable relief to the strain upon the administrative machine.
The right hon. Member for Leeds, South touched upon an issue of great importance; that is to say, the effect of these changes upon considerations of restraint in demands for increases in wages. He knows, no one better, the importance of that matter, and I am sure he was speaking with a due sense of responsibility in what he said, but I thought he failed to give the full picture.
It really is not perhaps the complete picture to refer in this connection to alterations of the food subsidies—which, incidentally, are not in this Bill at all— while not referring in this context to the very substantial reductions in Income Tax payable by a very large number of the people concerned. Both are part of the picture, and both, I am sure, will be given full consideration by those who have to concern themselves directly in these matters. It is important that the picture should be looked at as a whole, and it should be realised that there are very substantial increases in net earnings which the adjustments in Income Tax contained in this Bill will effect.
§ Mr. Gaitskell
I did refer to both. My complaint was that the Chancellor referred only to Income Tax concessions and made no reference to the way in which the money for them was found.
§ Mr. Boyd-Carpenter
Perhaps my right hon. Friend had a more punctilious regard than the right hon. Gentleman for the rules of order and was concerned with the fact that the Income Tax concessions are in this Bill whereas the adjustments to the food subsidies are not. I do not want to quarrel with the right hon. Gentleman, but he realises as well as any hon. Member that it is important that no false picture of the effect of these changes should even appear to go forth from the House.
My right hon. Friend the Member for Blackburn, West (Mr. Assheton) spoke, as he always does, with great force and authority on the subject of the burden of contemporary taxation and of its adverse effects. No one, I think, will dis- 2521 pute a good deal of what he said. It would be a mistake to underrate the effect upon industry and the economic strength of our society of taxation maintained over a long period at this sort of level, and the right hon. Gentleman knows, I think, that the difficulties which arise from such a state of affairs are very much borne in mind. He equally realises the problems which face my right hon. Friend of grappling at the same time with the balance of payments difficulty and maintaining a very large re-armament programme.
The hon. Member for Bristol, North-East (Mr. Coldrick), who I am sorry to see is not now in his place, raised a point which he was good enough also to raise with me personally. He raised the somewhat technical point of the treatment of co-operative societies for the purposes of Profits Tax. He himself described it as a technical point, and the only thing that I would have said to him were he here would be that he has already submitted to us in writing details of the point he has in mind, and we shall certainly give it the fullest and fairest consideration, because it is not our desire that this tax, or indeed any lax, should operate unfairly to any organisation or body.
Then my hon. Friend the Member for Louth (Mr. Osborne) referred to my right hon. Friend's undertaking with respect to two committees to investigate certain aspects of Purchase Tax law. My right hon. Friend is pressing on with the arrangements for those committees. He is anxious to set them up as rapidly as possible, and as soon as the terms of reference and the membership can be settled an announcement will be made to this House.
My hon. Friend the Member for Horsham referred to another technical point, on which he also has been good enough to communicate with me. It relates to service payments—a horrifying and complex subject which, although it is one with which the hon. Gentleman is himself wholly familiar, is not perhaps very acutely in the forward consciousness of the majority of hon. Members at this moment.
I can certainly assure my hon. Friend that during the course of the year we will look most carefully at the point which he has been good enough to put forward since, if I may repeat what I said a moment ago, it is our desire that the 2522 taxation system should operate fairly, and it is not our desire that the necessary stopping up of a loophole in the Ninth Schedule should be carried too far, and carried to the point of effecting unfairness.
The right hon. Member for Battersea, North, who I thought was thoroughly enjoying himself in the concluding moments of his speech, came back to a subject on which he has touched more than once during the course of our debates. In referring to our Income Tax concessions he was good enough to say that he welcomed them up to a point; up to a point, as I understood it, on the Income Tax level. That is to say, he welcomed it—I think I understood him aright—up to £1,000 a year but disapproved of it beyond that point.
Well, I cannot agree with him in that view. Tax concessions of this sort, as my right hon. Friend has explained more than once, are designed to give a stimulus to the making of extra effort, the exercise of extra skill on the bearing of extra responsibility, and I cannot accept for one moment the proposition of the right hon. Gentleman that the need and the value of those incentives terminates at an income level of £1,000 a year.
§ Mr. Boyd-Carpenter
I emphatically disagree. It is above that level, and perhaps at a small point above that level, that a good deal of the creative and constructive ability of this country is to be found of a section of society which has endured many things during recent years, and on which this country depends for a great deal of its necessary work, professional, administrative, skilled and technical.
I think that it would be utterly wrong to say that incentives could rightly be provided up to £1,000, and to say to the man who by the sweat of his brow or the exercise of the skill of his brain is earning £1,000—a category which necessarily includes all hon. Members—"Your extra effort, your extra skill are not worth making tax adjustments for. "I think that such discrimination would not only 2523 be wrong and unfair in principle but very short-sighted from the point of view of the purpose of this adjustment and of giving to the people of this country an extra stimulus, and it is a very real stimulus, of knowing that a greater proportion of extra earnings will be retained in that way.
One knows that there are a great many people, and one respects them, who work solely for the love of the job; but it is a fact that the appeal also of being able to earn a little more for oneself or for one's family touches a very deep fundamental human instinct, and to have ignored it at a time when the skill, industry and vigour of our people is so urgently required would have been a terribly short-sighted thing to have done.
The right hon. Gentleman the Member for Battersea, North finally touched on another of his hobby horses. He wanted more physical controls. If I were to follow him, Mr. Deputy-Speaker, in a discourse on that curious fancy, I should, no doubt, find myself incurring your displeasure. I would say once again that the effect of this Bill is to provide that the physical controls which have to be retained are enabled in a much greater degree than has been the case in the past to work with and not against economic and monetary forces; and physical controls where they are necessary are more efficient if they are not directed to damming up the tide of economic pressure flowing in the opposite direction; and if both physical controls and economic tendencies can be arranged so that they work in the same way, that is a more practical method than that which the right hon. Gentleman appears to favour.
During the course of our not unduly restricted debates on this Bill hon. Members have differed with sincerity and sometimes with passion as to the effectiveness or value of certain of the provisions of the Bill. I hope that I am right in saying, and I believe that I am, that although many hon. Members have differed as to the means by which this Bill seeks to achieve its end, none of us differ in desiring the end itself, and that end, as my right hon. Friend has said 2524 more than once, is the restoration of the strength and greatness of this country. I am sure hon. Members who have prophesied that these measures will not work to that end would be only too delighted in the event of their gloomy prognostications being falsified.
I am sorry that the Financial Secretary has made no reference to the question of the economics of the industrial areas and especially to the textile situation.
§ Mr. Boyd-Carpenter
I meant no discourtesy to the hon. Gentleman, but I think that my right hon. Friend, in moving the Second Reading, dealt very fully with that aspect of the matter. We have made it clear—and here again we are on the edges of the rules of order— that in our view one of the best ways of helping these areas is by the giving of direct Government orders. I cannot discuss that on the Third Reading of the Bill, but the fact is that within the structure of this Bill there is little more to be said on this subject. Reference has already been made to the Purchase Tax adjustments put into the Bill, and that, I think, makes it unnecessary for me to do more at this stage, but that does not mean that we are not deeply concerned with the future of these areas and doing everything that is reasonably practicable to alleviate their problems.
The Bill itself is sincerely and honestly aimed at the ends to which I have referred—to the end of restoring the solvency and, therefore, the independence and greatness of this country. Our people have had a pretty hard and difficult time in the last 13 or 14 years, and they deserve, and we want to be able to assure for them, something of sincerity, something of serenity, something of stability and something of peace. No responsible person can suggest that that state of affairs is easy of immediate achievement, but as a step in that direction, as a solid and workmanlike instrument with which our people can themselves work in that direction. I commend this Bill to the House.
§ Question put, and agreed to.
§ Bill accordingly read the Third time, and passed.