BUDGET PROPOSALS

HC Deb 12 March 1952 vol 497 cc1389-508

3.32 p.m.

Mr. Hugh Gaitskell (Leeds, South)

On previous occasions when it has been my lot to reply or to comment on the Chancellor's speeches I have, I am afraid, had to draw the attention of the Committee to the contrast between those speeches and others made by him and his right hon. and hon. Friends in the past, both during the Election and before. Sometimes there has been a difference in the analysis of the situation facing the country; sometimes there has been a contradiction between election promises and Government action. This time, we certainly have our fair ration of broken pledges, to which I shall come later, but the contrast I want first of all to indicate to the Committee is a different one.

It is the contrast between the first part and the latter part of the right hon. Gentleman's speech, between the picture of a grave crisis confronting the country, of warnings given by all sorts of people, some on the Front Bench opposite and some outside this Committee altogether, including the Prime Minister of Australia, that we were to have the toughest Budget on record, and the actual measures which the Chancellor proposes.

I ventured earlier to express doubts about the scale of the measures which had previously been announced, and I was immediately set upon by some hon. Members opposite who questioned my figures and implied that I was trying to play down the extent of the crisis. But now we are told that although there is a crisis we need not really do very much about it. We need not, for example, make any reduction in consumption this year at all. There is no need to tighten our belts. All we have to do is to keep our standard of living at the same level.

My first question to the Chancellor is this. If the only change to be made in the Budget is a change in the distribution of existing burdens, and if, in fact, the change has no relationship to the crisis, why did we have to have an early Budget at all? Perhaps there may have been some other reason. We should certainly be interested to know how this extraordinary discrepancy can be explained.

Before considering the actual proposals in the Budget, I want to spend a little time on the nature of the crisis, as I think it is, and I shall ask the right hon. Gentleman a good many questions of a genuine kind in an interrogative manner, that is to say, not to make party points—they will come later; hon. Members need not worry—but to clarify some of the facts and figures in what admittedly is a very difficult and confused picture.

I begin with what obviously must be the great concern of the Chancellor and of all of us. It is the rapid rate at which the gold reserves of the sterling area have been running out. The right hon. Gentleman told us yesterday that at the end of February they were down to the already alarmingly low figure of 1,770 million dollars. That is, of course, somewhat above the lowest level reached shortly before devaluation in 1949, but since then there has been a rise in world prices, and their purchasing power is, therefore, not very much, I should suspect, above that 1949 low level figure.

I am glad to see that the Chancellor seemed confident that within the next few weeks this trend would be reversed. I certainly very much hope it will be, but I could also have hoped that he would have given us rather more detailed arguments as to why he thought it would be reversed.

Perhaps I might spend a few moments on the causes of this immediate situation. As I see it, the causes of the continuing decline are obviously, first of all, the continuing excess importing of dollar and other non-sterling goods by the sterling area. But, secondly, I do not think there is the slightest doubt that speculative movements have played a very large part indeed throughout this period. At one time there was a tendency to throw cold water on that sort of suggestion, but now it seems to be generally accepted by all the financial pundits.

I would ask the Chancellor and his colleagues whether they are going to do anything more about it. Are they so confident about the situation that they can sit back and leave the matter as it is now? I realise, of course, that some small steps have been taken—the reduction, for instance, in the period for which acceptance credits may be granted to foreign importers; the restrictions on refinancing to which the Chancellor referred, but did not specify very much; and, of course, he would no doubt claim that the rise in the Bank rate would have some effect here.

I shall be coming to that question later but, in passing, I would like some explanation of exactly how the rise in the Bank rate is likely to affect this speculative possibility. After all, when people expect the£to be devalued—and I have refrained very carefully from asking the Chancellor any awkward questions on this subject, but I am bound to say this—which, undoubtedly, a great many do at the moment—one is not likely to have very much influence on them by putting up the rate of interest they have to pay for their short-term borrowing by 1 or 1½per cent. The gains to be obtained from not holding sterling and from holding on to dollars will far exceed any extra cost in the rise in interest rates.

I still think—and I repeat it—that the Chancellor should have taken some advice I gave him, first in November and again in January—[Laughter.] Perhaps hon. Members would wait, because I do not think they should be quite happy about the situation, and I do not think there is much dispute about the danger of speculative movements. As I was saying, I suggested then that it would be a good thing if the six months during which British exporters may collect and convert their dollar earnings should now be reduced to four months.

I do not really see why there is such a difficulty about that. I am not talking necessarily only about English people. They may well be foreign importers of one kind or another. There is nothing particularly sacred about this period of six months. If the payments could be speeded up it would make an immediate difference to the gold reserve situation

I am still very puzzled that the Chancellor has never really given us any details about what was agreed at the sterling area conference. I would ask him or the Minister of State or the President of the Board of Trade if there were precise agreements in the sense of the 1949 agreements laying down just how much in the way of non-sterling imports the different members of the sterling area were to bring in, or how much in the way of cuts in these imports they were to make. If there were such precise agreements I must say it is a great pity that the Chancellor, with the assent of his colleagues, did not say precisely what they were.

I say that not only obviously because the various countries concerned are entitled to that information, but because a clear picture of how we in the sterling area were going to deal with this crisis would have done more than anything else to restore confidence. I still hope we may be given more information.

The Chancellor told us yesterday, if I followed him correctly, that he has decided in recent weeks to set the sights for the sterling area higher and that he had been in touch with the Commonwealth Finance Ministers about it. Setting the sights higher is all very well, but it seems to me that the real trouble is that the original agreements have not yet been carried out. It seems to me more important to do that before we try to alter the aims. I should like to know what these additional aims are. All the Chancellor said was: These are aims far more comprehensive than ever before adopted by the sterling Commonwealth."—[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1277.] That is not really a pearl of clarity. One would like to know what is exactly meant by "more comprehensive," what exactly the aims were and how they are to be achieved.

I come next to the announcement of the cuts in imports by the Australian Government. I must say, first of all, that it is a pity that nearly two months had to elapse between the Commonwealth Finance Ministers' Conference and decisions on these reduced imports. I make no reflection at all, of course, on our good friends in Australia. But I put it this way—that I would have hoped that at the Conference itself we could have had agreements reached then and there.

After all, there is a telegram service at the disposal of the various Ministers. There is even a telephone available, and when the Conference was preceded by official discussions at which all the facts must have been laid, I should have thought it would not have been impossible to reach agreement on the spot. If agreement had been reached and it had been made public we should have been spared a great deal of anxiety in the last two months.

I come now to a different subject, also connected with Australia. That subject is not the delay in taking action, but their decision to reduce the import of goods from the United Kingdom. Naturally, that is the affair of Australia and none of us wishes to get into the position where we would criticise that. What I say, I say with all due deference to the point of view they no doubt have. But this is bound to cause serious consequences in this country. It is bound to create unemployment.

It is also bound to lead to reduced production in areas where there is already a great deal of unemployment; and I think I am entitled to ask the Chancellor whether this was something which was agreed at the sterling area conference. If it was not, one can only express one's regret that the Chancellor did not obtain, as he evidently did not obtain, a clear and precise agreement that this sort of thing would not happen.

I venture to remind the Chancellor of something I wrote in the "Observer" just before the Conference. I attach a great deal of importance to it. I wrote: Secondly—and this is vital—it must be agreed that as each country strives to achieve a balance, it should not be frustrated by the others. No member must try to achieve an overall balance by cutting out imports from the others. Each country must improve its balance by operating on its non-sterling trade. For this reason it will not be enough to rely on monetary deflation alone, which might simply lead to reduced imports from other sterling countries. Direct physical controls to foster sterling trade are essential. I am afraid that what I feared might happen is happening. We have all been set the task of getting into overall balance ourselves. That sounds very well, because if we are all in overall balance then the sterling area as a whole is in balance; but the trouble is we make difficulties for each other in getting into overall balance if we start this policy of cutting out each others imports. There is a glaring contrast between what is happening and the professed endeavours of the Government to stimulate Commonwealth trade.

I do not know whether we are to have more of this sort of thing from other countries, whether, for instance, South Africa is likely to reduce her imports from the United Kingdom. I very much hope not. Has the Chancellor any anxiety lest, to achieve our own particular goal of balancing our own balance, he may be forced to restrict sterling imports to this country? If he were so forced it would be a most ludicrous situation. Alternatively, if that is not his intention one really wonders exactly what was the plan.

Here I had better refer to something which the right hon. Gentleman said yesterday in connection with this altering of the sights. He said that our obligation was now changed. Originally, the undertaking that had been given at the Commonwealth Finance Ministers' Conference was that we should be in overall balance with the world as a whole. There would be no more than a deficit of£200 million with the non-sterling area, that is, the United Kingdom's deficit, and that would be balanced presumably by a surplus of£200 million with the sterling area. That was the original position. Now the Chancellor has told us we have a new target—a target that we must be in balance ourselves here in the United Kingdom, with the non-sterling world.

That is really a fairly serious change; because whereas under normal conditions a deficit with the dollar area of£200 million and a surplus with the sterling area to balance it of£200 million would conform with the pattern of trade, if we are to balance our own dollar accounts in the United Kingdom it is going to be an extremely tough proposition. One wonders exactly how it is to be done.

After all, we cannot expect to earn a continuing surplus in E.P.U. We have first to get into balance there. But it is quite contrary to the whole idea of the European Payments Union that any country should create a surplus and draw gold in this way. Let us consider the scale of this. The Chancellor told us that in the second half of last year we had a deficit with the non-sterling world running at the rate of£1,200 million a year, I believe. Correspondingly, presumably, since the overall deficit was£800 million there was a surplus with the sterling area of£400 million.

I think it would not have been easy even to cut back to the£200 million deficit, but if that has to be eliminated altogether it involves a tremendous problem for us. The Chancellor has underlined the immense difficulties for the United Kingdom in cutting down any further imports from the dollar area, but if we cannot cut down any further we have presumably to make up the balance by larger exports. I am all in favour of that, but do not let us have any illusions about it. It will not be an easy job.

Incidentally, in this picture of the sterling area, I should like to know what is to happen to the dollar surpluses of colonial territories, which are the most consistent earners of dollar surpluses. Since we do not need them, are they going to some other part of the sterling area? I ask this question in no desire to accuse any other Government or to get into a quarrel with any of our friends in the Commonwealth, but I think that the British Parliament and people are entitled to know exactly what has been undertaken by them as part of the common effort.

I come now to the position of the United Kingdom. As I have said, one cannot but conclude that this change, about which we were told only yesterday, has certainly made our task of getting into an overall balance very much more difficult, because of the resrictions imposed on us with regard to exports to the sterling area. As I understand it, as part and parcel of the whole plan, we are apparently to endeavour not merely to expand our exports to the dollar area but also to cut our exports to the rest of the sterling area.

I do not know whether the Chancellor has yet made that clear to industry. It is a very important change. Hitherto, there has certainly been some preference for dollar exports. Now it seems that no priority whatever should be given to exports to the sterling area. Perhaps we could have some explanation of this.

Leaving on one side that difficult background, we come to the question how we are to get into overall balance. Here, I find the figures confusing. Perhaps the Chancellor will listen to what I say and correct me as I go on, so that we may get the right figures. He said there would be another£100 million cut in imports. That make£600 million in all. First of all we had a cut of£350 million; then another£150 million, and now we have another£100 million. Yet the Chancellor said this was 10 per cent. of our 1951 imports, and 15 per cent. of the rate of imports in the second half of the year.

I have tried to marry the figures up; but the White Paper on National Income—which is the only official publication which gives a forecast of the balance of payments position last year—puts our imports in 1951 not at£6,000 million, which is implied by what the Chancellor said, but at£3,495 million. As I say, these are confusions to which, I am sure, there is some answer, but I do not understand it.

He told us that the gap to be closed was£600 million, not£800 million as some of his hon. Friends have previously suggested. I do not quarrel with that; I think the probable assumption is that although the rate of deficit was very high in the second half of last year, nevertheless there were abnormal features about that which would not normally be expected to continue.

Let us see how we propose to close that gap. The Chancellor told us that from improvements in the terms of trade and higher invisible exports he hoped to get£250 million, and he was good enough to let me know—following his speech yesterday—that the increase in invisibles would be£100 million. Presumably the increased improvement in the terms of trade would be£150 million, which was, in fact, exactly what I estimated in January. At least we seem to be in agreement there. [Interruption.] Hon. Members opposite seem to be very worried about my predictions. I can understand that it is annoying for them to see the Chancellor agreeing with me.

Sir Herbert Williams (Croydon, East)

The right hon. Gentleman is too sensitive.

Mr. Gaitskell

I am not sensitive to the hon. Member anyway.

How are we to deal with this gap of£600 million? We are to have import cuts of£300 million; but how is this to be explained in relation to the£600 million we are already told we have had? I do not understand it. Of this£300 million,£175 million is accounted for by changes in stocks, leaving a figure of another£125 million for reduction in available resources.

To that is added another£50 million for exports, and so the Chancellor gets from somewhere a figure of£200 million as the amount of reduction in resources for use at home. I think it is actually£175 million, but obviously there is no need to worry about a narrow margin like that. [HON. MEMBERS: "Oh!"] The Chancellor does not worry about it, anyway. He merely said, "£175 million or£200 million" and I do not quarrel with him. He then added£200 million for defence, giving a total burden of£400 million.

Against this he expected£250 million from increased production and£100 million from reduced investments or call it, perhaps,£150 million. Therefore, he reached what I think must have been to all of us the surprising conclusion that we need not reduce consumption at all this year. That is very gratifying, but I want to ask him a few questions about it.

What relation has this analysis to all the earlier decisions for cuts in imports—which I have mentioned already—and for cuts in investment? Towards the end of January the Chancellor told us that he was going to cut investments by physical means—supported by monetary measures—by£200 million. Is the Government going ahead with those cuts in investment on the physical basis? If so, why have they been suddenly cut down from£200 million to£100 million?

In that speech in January the Chancellor also mentioned the fact that there would be a reduction of£70 million in consumer goods supplied to the home market. He said nothing about that yesterday. Could we be informed whether these consumer cuts—in relation to television sets, wireless sets, gas and electric appliances, and so on—have all been dropped or whether they are going ahead?

There is one other question with regard to this extremely tangled story—and it is not my tangle. If the rate of consumption this year is not to be changed—if there is to be no reduction at all—are the cuts in consumption that have already been made—that is to say—the reduced imports from Europe, the reduced meat and the reduced textiles, and so on, which we were told about earlier—and if the Government are going ahead with the reduction in the supply of television sets, and so on, are all these reductions too, which would lead to lower consumption this year, to be offset by increases elsewhere?

I think we might have an answer from the Government on this, because it may be that it would be helpful to us. If, for instance, the Chancellor says that he thinks we could increase our consumption of textiles in areas where there is heavy unemployment, it would give a great deal of satisfaction, though policy would have to be adapted accordingly. But, if that is the case, I find it difficult to understand why the Chancellor can talk in terms of a great transfer of labour from consumer industries to the armament industry. He cannot have it both ways. Some of his hon. Friends have written letters to "The Times" and other publications, emphasising the importance of transitional unemployment and saying that we need not worry about unemployment in the textile industry because the unemployed would all drift into the armament industry. It may be embarrassing for them to realise the line he now seems to be taking.

I come now to the Bank rate. As usual, no case has been made out for the rise in the Bank rate. We are not told how it is to operate and what its consequences will be. I want to ask what the Government will do to ensure that it is made effective, to use a technical phrase, and, generally, what the consequences are. First of all, is there to be a rise in other interest rates? I remember the Secretary of State for the Colonies, speaking on this subject in November, explaining that, of course, automatically there was a rise in all other interest rates. Is there to be such a rise? Will it affect the Treasury bill rate?

I think I am right in saying that the Treasury bill rate is running at just over 1 per cent. at the moment. That change from the½per cent. at which we started cost the Exchequer, gross, something like£30 million a year. If, therefore, it is to go up, as "The Times" suggested, to 2½per cent.—by another 1½per cent.—then, according to my reckoning, that will involve an additional gross cost to the Exchequer of no less than£75 million.

Mr. Beresford Craddock (Spelthorne)

What is it net?

Mr. Gaitskell

Net? A little more than half—and quite enough, too; the hon. Gentleman is always preaching the virtues of economy to us, and perhaps he will now think about it.

That is not the only rate of interest with which we are concerned. We are very much concerned about the rate of interest to be charged to local authorities. Is that to go up? [HON. MEMBERS: "Answer."] If so—and I think the right hon. Gentleman might answer this one—can we have an assurance that the housing subsidy will once again be reviewed and raised? [HON. MEMBERS: "Answer."] The right hon. Gentleman does not accept my invitation to reply. I am sure that my hon. Friends will not be surprised at his unwillingness to speak on this subject, in view of the contradictory statements which have been issued on it in the past. I ask him, next time, to ensure that when the right hon. Gentleman the Minister of Health comes to the House, he tells the right story.

The Minister of Health (Mr. Harry Crookshank)

The Minister of Housing and Local Government.

Mr. Gaitskell

I beg the right hon. Gentleman's pardon; I meant the Minister of Housing and Local Government. I am sure that the Leader of the House would never make such a mistake.

Associated with this is, of course, the rate to be charged under the Small Dwellings Acquisition Act. [Laughter.] It is all very well for the Government to laugh about this, but I understood that they were rather keen on people buying their own houses. This is certainly a strange way to go about it—by making it a great deal more difficult for them to do so.

Are we to assume that, as a result of the rise in the Bank rate, there is to be a further tightening of credit? Is there to be a further reduction in bank advances, for example? What exactly has the Chancellor in mind here? Is it to try to induce traders and manufacturers to disgorge stocks? There may be something to be said for that, and I should like to know whether allowance has been made for it in the estimates of investment which the right hon. Gentleman has put forward, which seem to be pretty rocky anyway.

I was pleased to see—as were we all—that the Chancellor was apprehensive about the danger of unemployment in the consumer goods industries. I very much hope that he will not allow that good intention to be swept aside by a desire to turn the credit screw into a real deflationary policy. I do not for one moment deny that it may be necessary—it certainly is necessary—to keep a tight hold on credit in the present circumstances. Our quarrel has always been not on that but on the high rates of interest which the Government's policy have involved and which I do not believe to be necessary, although I do not want to go all over that again today. We should, nevertheless, say this to him: it is something which he has to watch very carefully indeed, because we could very easily get into a serious deflationary spiral.

I come to the subject of expenditure, and I should like to begin by reminding hon. Members of their attitude on this subject. The Prime Minister made a number of speeches in the last Parliament, and in the previous Parliament, in which he always produced the same words, which ultimately appeared in the Conservative Manifesto before the last Election. In his classical style, he said of the Labour Government …they have spent more than£10 million a day, or£22,000 million in their six years. No community living in a world of competing nations can possibly afford such frantic extravagances. That does not stand up very well in comparison with what the Chancellor of the Exchequer has done. I do not know whether that phrase was meant to indicate that we might perhaps, with great difficulty, make a cut of£50 million.

Then there was, of course, the right hon. Gentleman the Minister of Works. He made a speech suggesting that there should be a reduction of£700 million. I understand that the speech was circulated to all candidates, or members, of the Conservative Party at the special request of the Prime Minister. Again, it is rather a striking contrast. The Chancellor comes to the House and says, "I have done extremely well: we have saved£50 million."

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

The right hon. Gentleman is an expert economist. I think be might do me the honour of remembering that when I referred to£50 million I said I was referring to£50 million measured in resources.

Mr. Gaitskell

I quite agree; I was coming to that.

I asked myself whether there really was this saving of£50 million and, if so, how. Here again, I must say that I find the figures a little peculiar. The first thing to be said is this: that, leaving out the defence estimates, we have, nevertheless, an increase of£40 million in the Consolidated Fund, of which at least£25 million is increased interest charges. I presume that that is associated with the rise in interest rates.

It is no use the right hon. Gentleman leaving that on one side; we happen to disagree with the policy of raising the bank rate and the Treasury bill rate and, of course, he must take that into account. That puts up the total of civil expenditure above last year's level. The right hon. Gentleman says, "Oh, well, that is just a monetary change; the monetary change is greater, but the real change is less."

There has, of course, been a rise in costs over the last year but, if I may say so, there was a rise over the previous year, as the Financial Secretary was so very keen to point out when he was being assailed from all quarters in an earlier debate. Despite the rise, we managed last year to keep the civil expenditure broadly at the same level—despite increasing costs. The right hon. Gentleman has nearly done the same. That is what all these tremendous administrative economies amount to.

I would ask the right hon. Gentleman one last question on the total here. He claims that what he calls the other civil expenditure, which he now seems to realise—and I hope hon. Members opposite do, too—is very small indeed, is£432 million this year, which he says is less by£30 million than last year. I have been trying to find out the figures from the Vote on Account, which is the only complete statement we have had so far, and according to my figures I make the other civil expenditure this year£515 million against£520 million last year.

We should look at the reductions and how they have been made. Some have been just lucky for the Government—for example, the reduction of£6 million in civil aviation. Of course, most of that is due to the work done by my noble and hon. Friends who were Ministers of Civil Aviation, and certainly it is not for the Government to claim credit for it. Then there is the mysterious item called "Silver,"£4½million down, which, I suspect, is not exactly an administrative economy. Then there is the Festival of Britain, which gives another£4 million—and these are all lucky dips which the Government have had.

Now we come to some policy changes. There has been a reduction in Foreign Office grants of£5½million. Could we be told what the reductions were? Then there has been a reduction, which I am sure we all regret, of£5 million in expenditure on colonial development. I should be surprised if hon. Members opposite showed much enthusiasm for this.

Sir H. Williams

A saving on groundnuts.

Mr. Gaitskell

This has nothing to do with groundnuts, for which there was a separate Vote. There is a reduction on groundnuts, but that was due to us. I thought hon. and right hon. Gentlemen opposite wanted something to cheer them up, and so I let them have that.

Then there is a reduction in loans for Development Areas of£3 million. That is a very serious thing to do. There is a reduction in advances to Allies of£4 million and a reduction of£7 million in the Ministry of Supply assistance to industry. These items alone amount to nearly£40 million, and, therefore, as I say, I do not think that the right hon. Gentleman really can now make anything at all of those boasts about economies. That particular balloon has been well and truly pricked once for all.

I turn to the measures put forward. I do not propose to say much about the Excess Profits Tax. It does not affect the Budget this year. It is a very complex affair, and I should prefer to have a little more time to study the proposals in detail. However, I am bound to remind the Committee that the Excess Profits Tax brought in after the war was generally regarded by industry as a tax designed to encourage waste. I do not think that hon. Members who are in industry will disagree with that. It was, in fact, a thoroughly bad tax. Nevertheless, the Government are adopting it.

I should also like to know whether any of the yield of this tax comes in out of undistributed profits. This is, of course, a point which the Minister of State for Economic Affairs was very fond of making last year when he was sitting on these benches. Since he is so keen about it, perhaps he can find out the answer to it this time.

I come next to a much more important matter as far as we are immediately concerned, that affects this year's Budget very intimately, and that is the so called D scheme—the Douglas Committee Report proposals. All of us recognise, I think, that under the so called G.A.T.T. Agreement we had to do something to remove the charge of discrimination which is at present levied against us, and I think, too, we should agree that the "blind spot" caused when the tax changes is a disadvantage; but I am bound to say that the Douglas Committee, while recommending these proposals in general, did not make any specific recommendation on the level of D and, therefore, on the level of tax. What it did was to say, "You should have a scheme of this kind and the level of D should, at any rate, not be lower than half way up the utility range."

What will happen as a result of this in the light of the Government's specific proposals? The right hon. Gentleman did not tell us very much, but we are to have a tax imposed in the top, upper range of utility goods—goods which previously were wholly exempt from tax. That brings in extra money, but the Chancellor is not going to get that money. That is money to be given back in the tax on nonutilities—in varying degrees, admittedly—more on the cheaper items in the non-utility; but there will be some benefit to all non-utility.

Indeed, the effect of this is to be that those persons who normally buy non utility goods will gain and those who buy the upper and perhaps middle ranges of utility goods will lose. It is, therefore, on the face of it, a definite, though, I agree, a limited, redistribution of income in favour of better off people. It is—

Sir H. Williams

rose—

Mr. Gaitskell

Let me finish what I am saying. It is a forerunner of other things to come in the Budget. Now does the hon. Gentleman wish to ask me a question?

Sir H. Williams

Why did not the right hon. Gentleman apply the same principle to the Rolls Royce cars—I think it was—a year ago?

Mr. Gaitskell

That was a very special case, and it was in order to maintain production at all.

There is certainly no occasion for imposing an extra tax on utility. That is what we are complaining about. We are not objecting to a reduction in tax on non-utility: we are objecting to the increase of tax on utility. Incidentally, I would ask the President of the Board of Trade, who, I believe, is to speak later, whether it is definitely the case that children's clothing is completely outside the scheme so that it will continue to bear no tax. I just want a reassurance, because we have had approaches on that matter.

The other thing I wanted to say was this. We are much concerned to ensure that the Utility scheme in a stable form, an effective form, should continue. We read in the Douglas Committee's Report that weaknesses now exist. Some of my hon. and right hon. Friends thinks these weaknesses exaggerated in the Report. No doubt, they will explain their point of view later. However, I think we are agreed that if there are weaknesses they should be put right, and we do want to see a scheme giving a guaranteed quality article at a controlled price.

One other thing I would say is that, obviously, the introduction of this scheme will make it very much easier for imports to come in from abroad. The Chancellor will have to take that into account in considering the balance of payments problem. I do not propose to press him further on that now.

As to the Entertainments Duty, I am informed that the effect of this increased taxation on the football clubs is ex tremely serious. Many of them are already finding it hard to carry on, and I must say that we should like to discuss this in greater detail later. I do regret that the review of the Entertainments Duty which we undertook to make last year has not been carried out with more imagination than the Government seem to have displayed. After all, it is a very simple thing just to put up the tax on football and cricket and to bring it down on speedways. Surely we could have had something more scientific than that? [HON. MEMBERS: "Why did not the right hon. Gentleman do it?"]

Now I come to the main features of the Budget. The first thing, of course, that is abundantly clear is that none of the measures that I am now going to discuss—the main features of the Budget—is necessary to get our balance of payments position right or to complete the re-armament programme. The Chancellor fully admitted that there is no question of imposing an additional burden. All that is involved is a redistribution of existing burdens.

How is it to be done? There is to be an increase in the petrol tax, bringing in£66 million; there are to be food price increases bringing in£160 million; there is to be an increase in the National Insurance contributions by 7½d. per employee per week. I do not quite understand, and the Chancellor did not tell us, whether it is to be£25 million from the employees or£50 million taking the employees and the employers together.

I reckoned it out to be something like that, but we should like to know, and perhaps someone will tell us, because, after all, this is a burden imposed on the people of the country; and we should like to know. In addition, there is to be a further£10 million rise from increasing postal charges. These are the major increases.

As to the benefits there is an increase in the social services amounting to£80 million, and tax reliefs amounting to£180 million. So far as the social services are concerned, the Chancellor has made it quite plain that the increase in old age pensions is fully paid for by the increase in contributions. If I am wrong, perhaps the right hon. Gentleman will correct me. Reading his speech, it seemed to me to imply that at present contributions from employers and employees would fully cover that. If that is not the case, perhaps we could be told exactly how much in this case is the extra burden on the Exchequer. Indeed, it is a little difficult to see just how the Chancellor of the Exchequer arrived at that figure of£80 million as the total cost to the Exchequer, and the increase in the social service benefits.

Sir H. Williams

May I put a point to the right hon. Gentleman?

Mr. Gaitskell

The hon. Gentleman will surely have plenty of opportunity.

I come next to the Petrol Duty. I was told last year and the year before by hon. and right hon. Members opposite, who spoke with great eloquence on this subject, what disastrous and widespread effects an increase in the Petrol Duty of 4½d. would have on fares and prices generally. That was the view of hon. and right hon. Members opposite, when they were in Opposition, of an increase of a lower level at a lower level; and now they are proposing to put it up further to a much higher level.

No doubt the President of the Board of Trade will have an opportunity of explaining this change of mind. I am sure hon. Members opposite must be feeling a little uncomfortable about this, and I quite understand their position. We have already been told that the London Passenger Transport Board will have an increase of over£1 million and the Road Haulage Executive of over£5 million. This time the Government cannot escape responsibility for the ensuing increase in fares.

Now we come to what is really the central feature of the Budget, and I must congratulate the right hon. Gentleman on an extraordinary clever trick of presentation. It is not usual for Chancellors to produce rabbits out of hats nowadays, but he certainly was a very effective illusionist. What did he do? He took the food price increases and said "Well, that does involve some increase," and he set against them the increases in the social service payments and the reduced taxation, as though these two had to be compared with one another.

It is, of course, nothing of the kind. What are the figures? The tax relief costs£180 million and the social services another£80 million, giving a total of£260 million. The food subsidies, on the other hand, bring in£160 million. No wonder it looks very good if there is an extra£100 million stored up his sleeve. Of course, it was balanced, as he later explained—and I compliment him on his skill—by the increase in the Petrol Duty, the increase in the postage, and the final give-away of£24 million.

The fact is that the Government could have financed the whole of the increased social service benefits out of the increase in the Petrol Duty and the give-away of£24 million, or even less than that. I must say straight away that we support the increases in the social services, regarding them in present circumstances as in some respect inadequate. [Laughter.] Hon. Members can laugh, but they had better wait until they hear the explanation, because they may laugh on the other side of their faces before long.

Now let us take the food subsidy cuts, the rise in food prices and the tax reliefs and set them against one another, because that is the real issue which the Committee has to face. Is this a sound and right policy or not? We have all been made familiar with the point of view of the party opposite on food subsidies. There was Lord Waverley, who was very enthusiastically for them, and it is perhaps just as well that he is not Chairman of the Royal Commission on Taxation in present circumstances.

But while there has been one very honourable resignation, there is another noble Lord who has not yet resigned, and that, of course, is the noble Lord, Lord Woolton. "Not a word of truth," he said in his broadcast, "in the story that the Tories are to cut the food subsidies." We shall look forward with interest to the news and the exchange of correspondence which may happen in the next few days. No doubt the Prime Minister will also regale the country with a long list of Lord Woolton's attainments in the past.

Now I come to some of the things that the Chancellor himself had to say of this subject yesterday. I must say that I found some of his arguments rather strange. He talked about the necessity of bringing reality home to the people. Well, it certainly has been brought home to them—the reality about the Tory Government. But what an argument! He tries to shelter himself behind some words quoted at random from Sir Stafford Cripps. It really was not quite worthy of the right hon. Gentleman to imply the support of Sir Stafford Cripps for cutting the food subsidies by£160 million, when, in fact, Sir Stafford Cripps maintained the subsidies at£410 million. That really is not up to the Chancellor's usual standard, if I may say so.

What else did he say? He said some very queer things on people's morals. He seemed to take very ill to the idea—he made reference to it in his broadcast last night—of people having a little money in their pockets. "Subsidies," he said, "have put about 3s. 6d. in his pocket which he can walk round the corner and spend on cigarettes and beer, or the dogs or the pools. It does not matter if he is a Surtax payer; he gets it just the same." We will come to the Surtax payer later, and very interesting it is, too.

I do not know what the Chancellor is objecting to. If a man does go round the corner and spend it on cigarettes the Chancellor gets seven-eighths of it. I am bound to tell him that, as far as my constituents are concerned, the idea that the food subsidies have left them with enormous sums in their pockets to spend on inessentials is very very wide of the mark. What the food subsidies have done for my constituents is to enable them to buy their rations. I wonder whether, when these increases have taken place, we shall find the Conservative Party joyfully taking off rationing and proclaiming that they are at last fulfilling their obligation and pledge of removing controls?

I come finally to the most respectable argument of all. It is this. "Here," says the right hon. Gentleman, "are food subsidies going to everybody free of tax, rich or poor. It is a scandal. It is a waste of money. We do not see why it should go to the millionaire or the Cabinet Minister, but so far as the hard-up people are concerned we can make it up in other ways." This is what he actually said: we undertook to review the subsidies and other methods of paying out the public's money so that those in the greatest need get the most benefit. Then he went on to say: We subsidise the staple foods not only when they are consumed in the ordinary forms, but when they are ingredients in expensive luxuries."—[OFFICIAL REPORT. 11th March, 1952; Vol. 497, c. 1298–9.] Let us see what is the balance of gain and loss in this operation. The argument the Government put forward is, "We are going to take it away from the rich and make it up to the poor." Let us see how they do that. Let us take the position of a single person, to start with, earning£4 10s. a week or less. He gets no gain at all. If he is earning only£3 10s. a week he loses to the extent of 1s. 4d. a week.

Sir H. Williams

Where is he?

Mr. Gaitskell

There are plenty of women in my constituency, and may be even a few in the hon. Member's constituency.

These are the poorest of the poor, and they will be worse off as a result of this action. Take the position of a married couple without children. All earning£7 a week or less will be worse off. The£6 a week man, and there are plenty of them—are worse off to the extent of 2s. 1½d. per week. That is how the Government do justice. That is how they relieve hardship. That is how they redistribute income to take it away from the rich.

A married couple with one child have to earn over£9 a week if they are to gain at all. A couple earning£8 a week—a very common wage—would be 2s.1½d. worse off. I do not think that I need trouble the Committee with a great many examples, because hon. Members can work them out for themselves; they are provided very conveniently in the White Paper on the Financial. Statement.

If we take a married couple with two children, they still lose at£10 a week, and with three children at£12 2s. a week. I will give the exact figures. The£12 per week gain is£15 10s. and the loss£18 15s. on the year. [An HON. MEMBER: "What about family allowances? "] Family allowances could have been provided easily through the petrol tax without the food subsidies. [HON. MEMBERS: "Oh."] Hon. Members had better consider, if they do not like that, exactly what was the purpose of raising the petrol tax. [An HON. MEMBER: "Talk about sleight of hand."] Hon. Members will be interested in these figures—the benefits obtained by this redistribution.

A single person earning£1,000 a year is 12s. a week better off. Even the man with£1,000 a year of wholly unearned income is 7s. 10½d. a week better off. To go to the other extreme, a married couple with three children, at£1,000 a year, are 18s. 7d. a week better off—that is 17s. 11d. better off if the income is unearned. [Interruption.] I welcome the evident desire of hon. Members opposite to study the White Paper. The more they do so the better we shall be pleased.

Let me take the claim that 2,000,000 people have been relieved of tax. I wonder how many of those get any net gain out of this? Certainly the single people, the married couples without children, and the married couples with one or two children who are relieved of taxes are all worse off. I cannot say from the figures available how many are better off, but I challenge the Chancellor to tell us, and who they are.

I would like to say a word about old-age pensioners. We are told that there will be, or may be, an increase of 54s. a week for a married couple. I apologise to the Committee; what I mean is that the rate will be up to 54s. a week—4s. only. Of course, 3s. has already gone in the food subsidies. We have been warned of another£50 million food price increases to come, and, on the Chancellor's arithmetic, that seems to make another sixpence—

Mr. Butler

That is not so. Account was taken of any possible extras. I did intend to give the full facts to the Committee in the figure I gave of the possible increase of 1s. 6d. per week. So the extra£50 million to which the right hon. Gentleman refers is taken into account.

Mr. Gaitskell

We can then be assured by the Chancellor that there is no danger of any increase in food prices beyond the 1s. 6d. per week which he has announced.

Mr. Butler

The right hon. Gentleman must not be unfair. I have expressed already my admiration for the fact that he is a trained economist. I am relating this to a particular operation. I am not personally responsible for the conduct of food operations in this country, and it would be quite unfair for me to give any other guarantee than I have done. [HON. MEMBERS: "Oh."] The Committee must be sensible about this. I am giving the estimate of the effect of my Budget changes on the average household budget per head per week, to the best of my ability and as honourably as I can.

Mr. Gaitskell

The point was not whether the Budget changes had this effect, but whether the other£50 million had it. However, we accept the right hon. Gentleman's assurance on that. He has overlooked the fact that there has already been a substantial increase in prices, and I should have thought that most of us would agree—I know that we cannot do this every month because of the legislative procedure—that it was right to bring up the level of old-age pensions broadly in accordance with the rise in the cost of living. Since the last Bill was passed in July, I understand that the rise in prices amounts to 2s. 6d. per week. If that is so, of course it is quite obvious that even after the 54s. the old-age pensioners are still going to be worse off.

Mr. Spencer Summers (Aylesbury)

rose—

Mr. Gaitskell

I am very sorry—I really am going on too long.

But that is not all. Does the Chancellor really think that matters will rest there? Does he think that all these low-paid wage earners are going to be content to accept this rise in prices? Is it not absolutely certain that there will be an immediate demand for higher wages—and who would blame the lower paid workers for asking for compensation? After all, we are not, as a nation, being asked to reduce consumption. It is not a question of sharing out sacrifices; it is a just a question of taking away from these poor people and giving it to somebody else.

Here we have a major cause of upward prices in our economy. I would be the last person to deny that. I have described the effect and given warning about it to the trade unions, at the Trades Union Congress, and I have spoken about it time and time again in the House, as did my predecessor. It is most dangerous to take a step of this kind, which can but turn the inflationary spiral still faster. What will the effects be? I do not want to go over all the ground, but let us take one alone.

We all agree that it is essential to put our balance of payments right. Is the rise in wages going to improve our competitive position? Is it really going to help? Is not there some danger that this action will set in motion those forces of creeping inflation, as it is sometimes described—cumulative forces—whereby prices rise, people expect them to rise, wages rise and savings decline—all these difficulties which we have been endeavouring to handle in common with trade union leaders?

I do not pretend to the Committee for one moment that this is easy. I do not pretend that we have yet found a solution, but if we want full employment we have to find a solution. How do the Government intend to deal with this? I understand that the Chancellor saw the T.U.C. leaders right at the beginning of his term of office and has not seen them since. Well, he has to make his own engagements, but I hope very much that he will not be quite so distant, if I may say so, from them. I am sure it would have been a very valuable thing if, without disclosing any Budget secrets, he had at least discussed in general terms the wage position with them.

Mr. Butler

I think that I ought to say this, because it would be damaging to the country as a whole if it were thought that the Chancellor of the Exchequer did not wish to meet the trade union leaders. I feel sure that the right hon. Gentleman does not want to convey that impression.

For one reason or another there is a very important body called the National Advisory Committee for production in industry. For a reason quite beyond my control and the members' control, the meeting had to be postponed. That is very regrettable, but we are having that meeting at not too distant a date, and I assure trade union leaders that, through this opportunity, it is the desire both of myself and the Government to maintain the closest possible contact with them.

Mr. Gaitskell

I am very glad indeed that the right hon. Gentleman has made that statement, because I can assure him that it will clear up what might have been a very serious misunderstanding.

How do the Government intend to deal with this. Is it perhaps—believe me, there are suspicions of this kind going round, and it is not surprising in view of what some hon. and right hon. Gentlemen opposite used to say when they were on these benches—that they hope somehow or other to deal with the problem of the wage-price spiral by curtailing demand and producing enough unemployment to fortify employers in rejecting wage increases and weaken the trade unions in claiming them? If that is so, all I can say is that it is a most dangerous course to follow, because it is bound to lead to industrial conflict. Industrial conflict, or unemployment, which is the apparent alternative, will do infinitely more harm to production than anything which could possibly have been achieved by this redistribution.

This is, in essence, a clever Budget. As one of my hon. Friends said to me, it is just a little too clever. It was cleverly presented. If I may say so to the right hon. Gentleman—I do not mean it in an offensive spirit, but as a criticism[Laughter]—no, not in an offensive spirit—I thought it was just a little too cleverly presented.

It will please the Right Wing Press, for it is a party Budget. It may even reassure some of the more Right Wing critics of the right hon. Gentleman in his own party that a Tory Progressive is not really so terribly dangerous after all. That it breaks Election pledges is now, alas, becoming so much a common form that I imagine hon. Members opposite are hardened to it.

But, stripped of all disguises, it is a lamentable move to take from poor people and to give to wealthier. It cannot but encourage inflation, and its final effects will, in my opinion, endanger production seriously. Above all, at a critical moment in our history, when we needed a call to rally us to meet a common danger—[HON. MEMBERS "Oh."]—yes, we did it when we were on the other side—and to accept common sacrifices, to quote the right hon. Gentleman, this Budget divides and weakens us. It is not the "Right Road for Britain"; it is the wrong road.

4.42 p.m.

Mr. Ralph Assheton (Blackburn, West)

We have listened to the right hon. Member for Leeds, South (Mr. Gaitskell), addressing the Committee for a considerable time, but in the course of his remarks he has not added very much by way of constructive criticism. He must have forgotten very quickly how hard it is to make a Budget and how easy it is to criticise one.

My right hon. Friend the Chancellor of the Exchequer had, as "The Times" said, an appallingly difficult task. We all recognise that. Nevertheless, he discharged the task with courage, skill and imagination. I thought the headline of "The Times" leader, "A Hopeful Budget," was good, but I have also heard people in the streets today call it a fair Budget, and that must be very pleasant to any Chancellor of the Exchequer to hear. I believe it is a Budget which will impress the world overseas and thus increase confidence in this country, on which so much depends. It is certainly a brave and realistic Budget; above all. it is not a vindictive one.

I propose now to deal, perhaps somewhat scrappily, with some of the points which have been raised so far in the debate. The Chancellor has always had a good deal of time to think out his Budget speech, whereas those who have to speak on the next day have not had very much time to consider it. That is something which the right hon. Member for Leeds, South, must have felt very much during the last 24 hours.

One thing which has been criticised most severely so far is the rise in the Bank rate. There is one very important point about the Bank rate to which the right hon. Member for Leeds, South, did not refer, namely, that the Bank rate is a flexible instrument. A great many people do not remember how the Bank rate used to work in the old days. The system had the great merit that the Bank rate could be altered every Thursday, and it could even be altered on another day of the week if necessary.

The Budget only comes once a year, and, therefore, the plans and arrangements which we make in the Budget cannot very easily be altered as the year goes on, but the Bank rate can quite easily be altered. If the Chancellor feels it desirable, he can suggest to the Governor of the Bank of England any day either the raising or lowering of the Bank rate. That is an important point which should be borne in mind.

The question may be asked: Why should the Bank rate now be raised? There are a number of good reasons for it. In the first place, raising the Bank rate checks inflation. I do not quite know where the Opposition stand in regard to inflation. I read an article in today's "Daily Herald" by the right hon. Gentleman the Member for Battersea, North (Mr. Jay), in which he said that this was a most inflationary Budget. He said: This is really the first actively and openly inflationary Budget since the war. But the right hon. Member for Leeds, South, has been telling us that this is a deflationary Budget.

Mr. Gaitskell

I did not say that. I expressed some anxiety about the effects of the credit restrictions if they were carried too far.

Mr. Assheton

I do not want to misinterpret the right hon. Gentleman, but he had fears about that. In his article in the "Daily Herald" the right hon. Member for Battersea, North, said that this was an inflationary Budget, and I have been wondering if some hon. Members opposite fear that it is a deflationary Budget.

What are some of the reasons for raising the Bank rate? To begin with, it restricts borrowing, it restricts investment and it frees capital goods, which would have been bought by people at home, for the export market. It has a tendency to make manufacturers and others reduce stocks. A great many people have been carrying stocks which are rather too big. Once those stocks are released, there is a tendency for prices to come down, and I have no doubt that my hon. Friends and hon. Gentlemen opposite would like to see that happen.

One of the classical advantages of raising the Bank rate is that it draws in money from overseas because the higher rate of interest tempts people to send their money here. For example, someone in France may find it more attractive to put his money in London where he will get a higher rate of interest.

The chief attack made by hon. Members opposite on the occasion of the last increase in the Bank rate was that it put a lot of money into the pockets of bankers. I am glad that the right hon. Member for Leeds, South, has evidently made up his mind that that is no longer a valid criticism, for he said nothing about it.

It is not the bankers who get an advantage from the raising of the Bank rate. What happens is that the bankers have to pay more interest to the depositors. The deposit rate has recently been three-quarters of 1 per cent. In future it will probably be 2 per cent. It is those depositors who are going to get some of the extra interest which the Chancellor of the Exchequer has got to pay, and they are spread right over the community.

Mr. Ivor Owen Thomas (The Wrekin)

And who will pay the extra interest?

Mr. Assheton

The taxpayers will pay some of it and some of it will be paid by other people. Advances will be more expensive, as will Treasury bills. The right hon. Gentleman the Member for Leeds, South, asked if Treasury bill rates would go up. I am not in the confidence of the Government, but I can assure him that they will. It is quite clear that these arrangements would not have been made if Treasury bill rates were not going to go up. I think they will be about 2¼per cent., but we will see.

The bankers themselves are large holders of gilt-edged securities. If one looks at the Stock Exchange prices today, it will be seen that there has been a heavy fall, for example, in the gilt-edged stock created by the right hon. Member for Bishop Auckland (Mr. Dalton). It is standing only at 57 today. It has tumbled a long way from 100. I remember addressing the House when he was Chancellor of the Exchequer and comparing him with Humpty Dumpty, but I hardly thought his stock would fall as far as all that. I hope we shall not hear any more suggestions that the rise of the Bank rate will help the bankers. If the bankers succeed in breaking even as a result of the Bank rate going up, they will be very pleased indeed.

What else has gone up as well as the Bank rate? Pensions and allowances have gone up. That did not raise much enthusiasm on the other side of the Committee yesterday. I was sorry, because our constituents all over the country are very pleased about this. At the last Election we were very modest in the promises we made—[Laughter.]—about pensions. Perhaps I should quote it to hon. Gentlemen opposite. This was in our Manifesto, and this is what I included in mine: We shall review the position of pensions, including war pensions, and see that the hardest needs are met first. I should like to thank my right hon. Friend the Chancellor of the Exchequer for more than redeeming the modest hopes which we put forward. That is the right kind of Conservative way.

My right hon. Friend is in the process of increasing family allowances. That is not popular with everyone. Some of the older people say, "I never had any family allowances on which to bring up my children," but when they think again most of them will realise that it is a good thing.

Industrial injury pensions, war pensions, National Assistance rates and the pensions of many retired public servants, teachers, policemen and others, some of whom have been to us on deputations from time to time, and who have made such a very strong case, are all to be increased. I think we are all glad that something is to be done for them.

Of course, all these things are being done because the money has been found from other sources. It is easy enough for the right hon. Gentleman the Member for Leeds, South, and other hon. Gentleman opposite to condemn the reduction of the food subsidies and the increased petrol tax. That is where the money has come from to pay increased pensions to those people who need the money very badly. If hon. and right hon. Gentlemen opposite vote against the reduction of the food subsidies, they will in effect be voting against the pension increases which have been given.

I want to speak now of the Excess Profits Levy. In my opinion, it is bound to be economically harmful although it may be politically necessary. I should like to reserve what I have to say about it in detail for the Finance Bill, but it is a severe impost on industry, coming on top of everything else, and it will tend to restrict capital formation. None the less, this was promised and forecast in the Conservative Party's Election Manifesto, and here it is. I do not envy the Chancellor of the Exchequer in having had to draw it up and I do not suppose he liked it either.

The petrol tax is to go up too. We are all sorry about that rise because it means an increase in transport costs. But we must not forget that the loss of Abadan has greatly increased the dollar content in the oil that we have to buy, so when we pay more for our petrol let us remember Abadan and the right hon. Member for Lewisham, South (Mr. H. Morrison), the ex-Foreign Secretary, to whom so much of this is due.

What has gone down? The food subsidies have gone down. That is a very good thing; I never liked them. I do not mind confessing it now—it is a long time ago and I do not think any harm will be done in saying this—that when they were introduced I was an insignificant member of the then Government. I opposed the idea, for I thought it was wrong at the time and I did not see how we could get out of it in the future. However, wiser people than I thought it was right, and it was done.

It was effective for a long time in many ways, but the right hon. Member for Leeds, South, exposed to us very fully today how ineffective these subsidies are in many directions, how they give money to people who do not need it, and, in addition, how they obscure the true position. The party opposite reduced the ceiling of the subsidies, and Sir Stafford Cripps would have reduced them more if he had been allowed to by his party.

Hon. Gentlemen opposite ought to bear in mind the very serious point that if the defences of the pound broke down and we had a serious situation in regard to sterling, the rise in the price of food would be far, far higher than anything done by the reduction in the amount of the subsidies. Reducing the food subsidies is one of the ways of showing people overseas that we are determined to put our house in order.

Mr. I. O. Thomas

If it is correct to say now, as the right hon. Gentleman is doing, that the reduction of the food subsidies is the right policy, can he explain the categorical statement of Lord Woolton at the time of the Election that it was not the intention of the Conservatives to reduce the food subsidies?

Mr. Assheton

I can tell the hon. Member this. When I was fighting the last Election in my constituency, this sort of question naturally came up. What was the sort of suggestion that came from our political opponents? This is what they said: "You intend to reduce the subsidies, and take the money away from the poor and give it to the rich." That was the gravaman of the charge. Hon. Members opposite are deeply disappointed to see that what has been taken away in the food subsidies has not been handed to the rich but is being used to increase pensions and decrease taxes.

But something else has gone down—Income Tax. Increased personal allowances and earned income allowances will provide greater incentive to work, and enable people to work overtime without reaching that level of taxation which makes overtime rather unattractive. I think it is a great pity that the Chancellor spread this incentive over too narrow a field, and I hope that by the time the next Budget comes he will be able to increase its scope. There is no monetary incentive for the higher-paid earners in industry and commerce.

There is very little incentive left for those very important people, the work providers. It is a good thing to give an incentive to the workers; it is also good to give an incentive to the work providers. It has not been very encouraging in recent years to be a work provider. It is still pretty discouraging, and I hope the Chancellor of the Exchequer will bear them in mind another year. Meanwhile, the work providers have to work harder and provide work for another year before they can get any recognition from him.

I am glad about the pre-war car tax being adjusted. That was sensible. The tax relief on investment incomes below£250 is almost the only indication the Chancellor has given that he has any sympathy for unearned income, which is the result of saving and self-denial in the past. I hope that the Chancellor will remember the importance of unearned income.

The right hon. Member for Leeds, South, has criticised the Douglas scheme and the way in which the Government intend to apply it. We want to be entirely fair. In Lancashire, where this is very important, it will be a help to the export trade. Lancashire is very worried about what is happening in regard to Australia. It is bound to give anxiety, as it has also done in places like Coventry. It is not for us to offer advice to the Australian Government, but if they were able to see their way to deal with contracts that already exist in the same way as the Chancellor proposes, there would be a measure of satisfaction every- where in this country, especially in Lancashire, which is worried about its export trade and its employment.

We have to get costs down in this country. That is one of the most important things we have to do. Unless we can do so, I am none too sure that the export programme, upon which so much of the Chancellor's calculations are based, will be realised. How are we to get them down? I should like to hope that increases in earnings will be the result, not of higher rates of wages, but of more, harder and better work, and that increases of profits will come with small profit margins and not larger ones.

I do not know whether this is a fair criticism because I know how difficult the matter is for the Chancellor, but I still feel that the Budget is balanced on far too high a level. I think he has to try hard to cut expenditure still more. There must be more retrenchment. It may mean giving up things to which we attach great importance but when we have to cut down we sometimes find that we have to cut on those things. It is vital to have some taxable reserve in the country.

I was glad that the Chancellor did not talk too much about economics; that was a great comfort. But he talked a little about the Budget surplus. I was glad that he did not over-stress the importance of having a Budget surplus. Views about a Budget surplus have been changing. I never liked a Budget surplus, but with a Socialist Government there were certain reasons for having one. If there is a Government in which the country and the world have confidence, the reason for a Budget surplus is very much less.

If the Chancellor looks at the surplus now, he may find that it is substantial, but it would not need to have been anything like so large if there were not this figure for local government borrowing—£360 million—below the line. I hope that the Chancellor will consider carefully the question of when he can allow a large part of local government borrowing to be done in the market, as it used to be, instead of being found by the Government. That would be a real advantage to him.

I regret that it has been found necessary to meet this crisis at the expense of industrial equipment and formation of capital, and by the depletion of stocks. I regret—and I hope that the Chancellor agrees with me—that the incentive to invent in industry or engage in commerce has been reduced. There is really no incentive in this Budget to the work-provider; in fact, his incentive has been lessened. The important question we have to try to answer is, will these measures be enough? Are they sufficient? I hope so, but they will be sufficient only if we work hard and loosen up our economy a great deal further, if we cut down Government expenditure more, encourage enterprise and the formation of capital.

I come now to a very important issue, the future of our currency. Sound money is absolutely essential to a great trading country. We cannot feed more than half the 50 million people of these islands. The rest of us live by trade and commerce. If we are to trade and have commerce, we must have honest money. Honest money means money which is convertible into other currencies, and until we can have a convertible currency our money will not be honest.

It is a sad thought that all these years after the end of the war it is still illegal to bring Bank of England notes into this country from abroad. It is a shocking commentary on what is written on those notes. We cannot survive without an honest currency. Therefore, we were all glad to hear, after the Chancellor's meeting with the Commonwealth Finance Ministers, that it was his intention to make the£convertible as soon as possible.

The point is, how soon can it be done? There are always people who say: "This is not the time. We must build up our reserves more. This is not the opportunity." Believe me, there may come a much worse time. Suppose the drain on our gold and dollar reserves goes on. Suppose we were to get to a point, towards autumn or Christmas, where they are nearly all gone? What shall we have to do then? We shall have to let the currency run free, or to devalue it, without having a reserve at all.

If we are able to let the currency run free then, why should we not do so when we have a substantial reserve of dollars amounting to£500 million or£600 million which can be used to iron out fluctuations in the market and deal with the speculators and the sharks whom the right hon. Member for Leeds, South, so rightly talked about? Those foreign speculators in currency naturally seek to take advantage of the position in which this country is, and at the present time they have a fairly easy game.

If the Chancellor found it possible to free the currency, the greatest need for more gold and dollar reserves would vanish, and he would then have to decide at what point to attach the currency to gold once more. Perhaps we may be able to follow the Canadian example, and start by allowing permitted transactions to be fixed by the ordinary laws of supply and demand.

This is a problem about which the Chancellor must be thinking a great deal. I hope he will be bold. I know that he is an admirer of Sir Robert Peel. A little over 100 years ago, Sir Robert Peel took some very bold financial action in this House which was thoroughly justified by the circumstances and made a great change in the whole climate of opinion, from which this country benefited for a long time.

Until the Chancellor is able to make the currency convertible, will he be able to do many of the things we said in our Election Manifesto that we wanted to do? Will he be able to let the private buyers buy? Will he be able to re-open the Liverpool Cotton Exchange in the full sense in which it operated previously? All those things are so dependent upon our having a free and convertible currency.

I think there is great hope for us now. There is more hope than we have had in this country for many years, and there is especially more hope for the hardworking and capable people who suffered so much under the Socialist Government. If there was one section of the community which benefited under the Socialist Government, it was the less hard-working and the less capable element of all classes in the community. I am sure the Chancellor intends to correct that.

There is a great deal we can all do to help and we can ask ourselves what we can do. Can any of us, I ask, give a little better value for what we are paid? That applies to everybody. If we could all succeed in doing that, it would solve quite a number of our difficulties.

The greatest hope of all for the future lies in the Commonwealth. Without the coming together of the Commonwealth, nothing can be achieved. The Chancellor had a meeting with the Finance Ministers some months ago. Now, when troubles occur in a family, the family often get together again even if sometimes they have got a little apart from each other. It is just the same in a great family of nations like ours, and I hope that out of that meeting of the Commonwealth Finance Ministers something important will grow.

I should like to see much more permanent machinery brought into existence. What happens now? If all these Finance Ministers are summoned from the ends of the earth, it raises a lot of interest and excitement in the world. It would be rather awkward to have such a meeting if there were a desire to make some alterations in currency. That is illustrated by what happened when the currency was altered by Sir Stafford Cripps—there was great complaint that there was not sufficient notice or consultation.

If we had permanently in session a body representing the Commonwealth, that difficulty would not arise. I know that certain members of the Commonwealth may be hesitant to adopt such a plan, but they could be brought to do so gradually, perhaps, if they realised that it would give them a share in influencing the activities of the central bank of the Commonwealth.

Make no mistake, when we nationalised the Bank of England, the merits of which action I do not want to argue now, we turned it into the Bank of England, because it then came under the Parliaments of Great Britain and Northern Ireland. That idea is not an agreeable one to our partners in the Commonwealth because Governments are apt to be swayed by party political motives and there is much more confidence in an organisation which is independent.

It is not always easy for others to see that the Bank of England is still the bank of the whole Commonwealth, but that is what it is. If we could only get some system by which the Bank of England was responsive to all the Governments of the Empire and Commonwealth, through some joint council such as I have suggested, we should make a tremendous advance and perhaps one day reach a stage when through the entire vast Commonwealth there would be one Queen's currency.

5.15 p.m.

Mr. Clement Davies (Montgomery)

I want to begin by congratulating the Chancellor of the Exchequer upon the clarity of his Budget statement, the lucidity of his explanation and, as one who suffers from an overflow of emotion, upon the unemotional way in which he spoke. Having congratulated the Chancellor of the Exchequer, I should now like to sympathise with the right hon. Member for Leeds, South (Mr. Gaitskell). I do not think I have ever seen a strong economist making a more gallant struggle to find means of criticising a Budget which he himself—

Mr. Percy Simmer (Birmingham, Sparkbrook)

rose—

Mr. Davies

It may be that the hon. Gentleman will be making a much stronger criticism, but I expect the stronger criticisms to come from behind and not from below the Gangway.

Mr. Charles Pannell (Leeds, West)

They will not come from the Liberal benches.

Mr. Davies

The right hon. Gentleman has accepted the need for a very heavy armament programme. The right hon. Gentleman has also accepted that there is a new and real period of crisis upon us, which is, to use his own words, dangerous.

Having made those two admissions: that one has to meet the heavy armament programme and that one has also to stop the outflow of gold and other reserves—in other words to stop the hemorrhage of our life-blood—what would the right hon. Gentleman have done if he had been at that Box instead of the Chancellor of the Exchequer? It seems to me that his Budget would have been much of a muchness.

Mr. Gaitskell

The right hon. and learned Gentleman has asked me a question. Of course he will not expect me to make a Budget statement impromptu, but I want to ask him this question: does he really disagree with the Chancellor that the entire Budget is irrelevant to the external situation? Because the Chancellor made that perfectly plain.

Mr. Davies

It is a very relevant one taken in conjunction with the other steps which the Chancellor and his colleagues have already taken. Before coming to the Budget at all, there has been a cut in imports now amounting to£600 million. That is a policy one would not adopt in normal times because it is a bad thing to do when things are normal. But things are not normal. We are dealing with abnormal times and with an abnormal situation.

The right thing for normal times is to encourage imports as long as one can pay for them in the normal way with exports. However, the position today is such that we cannot do so and, therefore, there has been a drain upon both our gold and other reserves. Very rightly, the Chancellor says there is to be a cut—which he has now increased—outside the Budget to the extent of£600 million. That is step number one.

The other one, which again is outside the Budget, is to make it more difficult for investment, more difficult for companies and private persons to get money with which to purchase goods from abroad. So the Chancellor allows the Bank rate to go up to 4 per cent. Is not that also a means of dealing with this situation outside the Budget itself—making money more difficult to get, and therefore more difficult for it to be spent upon either imported or other goods?

Those two steps in themselves have gone quite a long way. Then comes the Budget. I only wish this Budget had been introduced earlier. I only wish it had been introduced when the Government took office. I should even have preferred it to have been introduced by the right hon. Member for Leeds, South before the General Election, as I asked that it should be. In the meantime, there has been a continuous drain upon us until the steps were taken by the right hon. Gentleman of imposing these cuts and increasing the Bank rate. This continuous drain has been going on, despite that, in January and February.

Does the Chancellor of the Exchequer really say that his Budget is irrelevant to the external situation? He ended his speech by saying that it will probably mean a rise in wages and, therefore, that there will be more inflationary pressure, and he is taking, in compulsory savings over and above his expenditure, the sum of£520 million. That is one of the boldest things that has been done, with the exception, possibly, of the Budget of, I think, 1948, when the sum was greater.

Mr. Gaitskell

The right hon. and learned Gentleman would agree, I think, that that larger surplus could, and would, have been obtained without any of the changes in the Budget produced by the right hon. Gentleman.

Mr. Davies

But the Chancellor makes provision for holding back from the spending public£520 million over and above expenditure. Would the right hon. Member for Leeds, South, have added to it? Personally, I would have done so.

I do not know whether at present the steps that have been taken by the Chancellor are drastic enough to deal with the very dangerous situation that confronts us. The right hon. Member for Leeds, South, said that the position was dangerous. We now know that should this flowing out of reserves from the country continue at the rate of the last few months, in a few more months there will be nothing left in our storehouse, either of gold or of any reserves whatever.

How are we, then, to meet the situation? No such situation confronts any other country similar to ours, a country which depends so much upon foreign trade for its food for three people out of every five and for an immense quantity of its raw materials. If we run out of reserves, what is to be the position? I hear talk about unemployment rising. What is that compared with the unemployment which there would be in a few months' time unless this situation is met?

And so it is that on those matters I think the Chancellor has taken the right steps. I hope sincerely that they are sufficient. If not, he will have to come to the House and ask for more steps to be taken, even more drastic, in order to save us from the peril that confronts us.

Now I turn to other matters; first, the increase in pensions and in family allowances. I have always felt that in order to play fairly with the pensioner, his pension, whether it be an old age pension, one for war injuries or whatever it may be, ought to be related to the cost of living. That would be the fair thing to do, because one has said to those people at the time the pension was granted, "We are giving you a certain sum which will enable you to buy a certain standard of life." Undoubtedly, with the fall in the value of the£, it does not do that, and while I congratulate the Chancellor upon what he has done, my own view is that it is not enough to meet—

Mr. Shurmer

Not enough.

Mr. Davies

The hon. Member says that the Government have not done enough.

Mr. Shurmer

They have not done anything.

Mr. Davies

What has the hon. Member's party done? I remember—the hon. Member was not in the House in those days—when his party were opposed tooth and nail to family allowances. The whole of the trade union movement was against them. They were a real necessity in order to meet the extra claims of a family. I therefore congratulate the Chancellor on having increased them.

I should have liked him to have gone further. I still do not see why there should be no grant in respect of the first child. I should have preferred, instead of 8s. for every child after the first, to have seen it made a little less—say 7s.—and for the grant to have been made from the first child onwards. However, these are matters we can deal with again when we come to the Comittee stage of the Finance Bill.

Mr. Shurmer

Before he leaves the question of children's allowances, will the right hon. and learned Gentleman say why my party were opposed to them? Did not the issue arise during a time of unemployment, when the allowances might have been used to reduce wages?

Mr. Davies

I am grateful to the hon. Member for reminding me of that. I will deal with it when I come to food subsidies.

I turn now for a moment to the food subsidies. I have never liked them. I never liked them when they were introduced into the House—although one realised the need for them at that time—by the then Chancellor of the Exchequer, Sir Kingsley Wood. But at that moment we were a beleaguered nation. Our ships were being sunk. The amount of food that was coming in could not be increased. We were strictly rationed. We could not at that moment adjust wages to meet the increased cost of living, and that was why the food subsidies were introduced, as a temporary measure, by the then Chancellor of the Exchequer to meet that situation.

One hoped at that time that the subsidies would come to an end with the end of the war, but they have been continued since, and continued by a Government that should have said that the right way to deal with people is to give them enough to enable them to pay for themselves, and to increase wages so that the people could get a fair living and spend the money as they wanted, instead of taking them by the hand and saying, "Come and spend it in this way and we will help you, out of taxation, to buy what you need."

There was a time when employers did that kind of thing. They paid the remuneration that was due to an employee partly in money and partly in kind. Very rightly, this House condemned that and made it a criminal offence by passing the Truck Acts. I think that it is wrong in principle today. The right thing to do, if wages are not enough to meet the rising cost of living, is to ask for more wages and to get fair wages that will meet it.

What has happened? The previous Chancellor of the Exchequer made an appeal to the trade unions that there should not be a rise in wages. It was putting a tremendous strain upon the unions to ask them to do that. Moreover, it was a strain they were not able to carry. We all know that wages have gone up, and we all know that costs have gone up.

Then what happened? When the cost of living and the cost of food were going up and the subsidy figure, as the Chancellor reminded the Committee yesterday, in order to keep the cost of living at a fair level, was rising to the extent that out of taxation we should have had to pay more than£520 million, Sir Stafford Cripps said, "I cannot do it.£400 million is my limit."

This was a move in the right direction. The right thing is to let people have their fair and proper wages and let them spend their money in the way they desire, and not in the way that anybody else thinks they ought to spend it.

I come now to one of the taxes which I, like the right hon. Member for Blackburn, West (Mr. Assheton), criticised: that is, the Excess Profits Levy. It reminds me of a tax which was introduced by Mr. Neville Chamberlain in his last year as Chancellor of the Exchequer. Before the Finance Bill could be introduced, he had ceased to be Chancellor of the Exchequer and had become Prime Minister, but he continued in his folly and introduced the tax that he had in his Budget into his Finance Bill also. He gave it the name, which was very attractive and which attracted right hon. and hon. Members on both sides of the House, of the National Defence Contribution. Just like the Chancellor he standardised profits and said that profits for three years had to be averaged and anything over and above that he would tax.

At that time there were two of us who took the strongest objection to that tax, and said so. I was one of them, but a far more effective critic—I would commend this to the Chancellor of the Exchequer—a far better critic of the whole system the Chancellor is now re-introducing was the present Prime Minister. I am not going into detail, but I should like to refer the right hon. Gentleman to that criticism. He will find it in sonorous language, true Churchillian sentences, good logic. So deadly was it that the then Prime Minister withdrew that tax on that afternoon after the speech had been made, on 1st June, 1937—in Vol. 234 of the OFFICIAL REPORT, beginning at c. 882. I leave the matter at that for the moment, but the objections we made then are still sound.

There can be only one reason for maintaining this tax—that the situation at home is so absolutely abnormal that this is the only way in which one can deal with it. I am not sure that that is the situation today. The Chancellor admits that there has to be more production; there has got to be more encouragement to work. Therefore, he said, "I will relieve people who do more, work longer, work better, from the penalty of having to pay back a large part of what they earn in taxation." That will encourage people; that is the incentive.

The right hon. Gentleman is giving the incentive to the employee, but penalising the good manager. Where is the sense of that? The more profit a man is making, unless he has a monopoly against his competitors, surely the more effective is his management, the more he is producing and the country benefiting. Why, therefore, single him out for punishment of this kind?

Mr. R. A. Butler

I respect the views of the right hon. and learned Gentleman, but I am sure he understands that in framing the new levy full account has been taken of the defects of the National Defence Contribution and also of the Excess Profits Tax, and I hope that we shall be able to benefit by that.

Mr. Davies

I fully realise that, but it is still a penalty on increased production. One can deal with that when we come to the Committee stage of the Finance Bill.

These are abnormal times, and what we are anxious to see is that this year's Budget and the method of handling it will put an end to this series of crises from which we have suffered from 1945 onwards, year after year. If it is necessary to do something more drastic to put an end to that so that we can get back to normality, the Chancellor, if he does it, will have earned the gratitude of the whole country and of the sterling area as a whole.

5.34 p.m.

Mr. Eric Johnson (Manchester, Blackley)

I hope I may ask the Committee for the indulgence which by kindly tradition is usually given to those who are privileged to address the House for the first time. As the lack of dollars appears to be one of the main reasons for our economic difficulties and for the stringent measures my right hon. Friend has been forced to take in order to deal with them, I hope I shall not find it difficult to observe the usual custom of not saying anything unduly controversial in a maiden speech if I address myself mainly to this question of trying to earn more dollars.

To my simple mind, the best way to get something is to earn more, and I shall confine myself particularly to the question of earning dollars through trade with Canada. If I may excuse myself for doing that, it is on the grounds that I lived in Canada for several years and am constantly getting letters from Canadian friends expressing great concern at the falling off of their exports to us and also of their fear of being driven under the economic domination of the United States.

I hope, Mr. Bowles, you will not find I am straying too far from the subject of the speech of my right hon. Friend if I speak almost entirely of Canada. It is perhaps a happy coincidence that my hon. and gallant Friend the Member for Roxburgh and Selkirk (Commander Donaldson) is, I believe, seeking to catch your eye later in the debate. It is a coincidence because we both lived for many years in the same Province of Canada, British Columbia.

As the Committee know, my right hon. Friend has found it necessary to attempt to check the drain on our gold and dollars by drastic restrictions of our imports. I think he is following the example of his predecessors, and it would ill-become me to try to criticise the inevitable, even if one of our best friends, Canada, has been badly hurt in the process.

Canadians feel that we are making a mistake in trying to maintain our trade with Canada at too low a level. They think we are concentrating too much on saving and doing too little about earning more. They feel also that we are perhaps unduly concerned in making the sterling area self-supporting, while leaving Canada out in the cold. They think we are trying to produce goods, artificially and on a non-economic basis, in the sterling area which they can already supply, and they feel it would be much more sensible if we concentrated more on producing in the sterling area those things for which it is best suited and selling them in turn to Canada for dollars and using those dollars to buy Canadian products which they want to sell.

Perhaps I might illustrate my meaning by referring to a project which I believe is now under review, that of producing pig products and beef in British Honduras. British Honduras also happens to produce, and produce very well, bananas, and Canadians would be more than pleased to buy greatly increased quantities of bananas from British Honduras. If that were done, dollars would be earned and could be used to buy Canadian beef. I do not think anyone would seriously suggest that Canada is not a very much better country to raise beef cattle than anywhere in the tropics. I could, of course, mention many other commodities produced in the sterling area which Canada would very gladly buy.

The Committee, of course, are fully aware that Canada wants us to do business with them and they want to buy our goods. But we are equally aware that the Canadian market is perhaps one of the most highly competitive in the world. The way to get that market is to go out there and produce the sort of things Canadians want, even if that means taking risks. I am told by Canadian friends, and I should like to emphasise the point, that there is an immense demand in Canada today for, components of goods in common use in that country which they would gladly buy if we would make them. I think we ought to take the further risk of maintaining stocks so as to ensure quick delivery and of maintaining a supply of spare parts on the other side of the Atlantic.

I have in my own mind some doubt as to the efforts our businessmen are making to break into the Canadian market. It is a fact that between the years 1947 and 1951 the Treasury allowed an expenditure of£10 million for business travel to the United States and during the same period only allowed, or rather only£4,100,000 was taken, for business travel in Canada; a sum equal to the amount allowed for what is called personal travel in the United States of America. I would suggest that that item of dollar expenditure might well bear investigation.

The fact is that, although we spent less than half as much to try to get Canadian business, in those five 'years we did export£456 million worth of goods to Canada and only£420 million worth to the United States. It seems to me that if we had spent in business travel in Canada that extra amount of money used for personal travel in the United States, there would have been a reasonable chance of getting more business and selling more exports, because Canada is today the biggest importer of manufactured products in the world.

We all know that businessmen need some inducement other than exhortation to try to break into this difficult market. As we on this side of the Committee, at any rate, are constantly preaching the virtues of a spirit of adventure and competitive enterprise and believe they should reap their just reward. I would appeal to my right hon. Friend to see if he can devise some method of giving increased incentives to our manufacturers to get into the Canadian market. Although I suppose this would not really come under his Department, perhaps some preferential treatment in the allocation of raw materials might be made for Anglo-Canadian trade. Or perhaps there might be even a system whereby firms which are successful in earning dollars might be allowed to retain a small proportion of those dollars to use at their own discretion.

My right hon. Friend the Member for Blackburn, West (Mr. Assheton) did refer to the British Commonwealth. In these days I often hear reference made to increased trade with the British Commonwealth and then, in the same breath, we are told that we must take the lead in this country in the expansion of the sterling area. But those are not precisely similar things. I believe, whatever the attractions of the sterling area, that we should be making a great mistake if we shut ourselves off from the huge and ever growing markets of Canada which is, after all, the largest and, at any rate potentially, the richest member of the British Commonwealth of Nations. I believe that if we do shut ourselves off in such a way, we shall not only dissipate that immense fund of goodwill which still—I sometimes think rather surprisingly—exists towards us, but we shall drive Canada into the arms of the United States.

It is perhaps quite significant that Canada is today rapidly becoming a country inhabited by people of non-British origin and, although in 1926 the British share of foreign investment in Canada came to 45 per cent., today it is only 16 per cent.; whereas that of the United States is 80 per cent. I believe it is possible to maintain trade with Canada on a much higher level and that that would be a step of inestimable value to both countries. It would at the same time preserve the solidarity of the British Commonwealth on whose strength the peace and prosperity of the world so largely depends.

5.45 p.m.

Mr. George Benson (Chesterfield)

It falls to me to undertake the very pleasant duty of congratulating the hon. Member for Blackley (Mr. E. Johnson) upon a very excellent maiden speech. I have spoken on more Budgets than I like to remember, but even now I envy the ease and confidence with which he addressed the Committee. I feel sure that we shall hear him again, and I hope frequently.

I now turn to a more aggressive topic. I generally agree with the right hon. and learned Member for Montgomery (Mr. C. Davies), but I do not think I have heard a speech of his with which I more completely disagreed than the one to which we listened today. He started by congratulating the Chancellor upon his clarity. All I can say is that as the Chancellor proceeded with his speech yesterday I got more and more muddled. And, when I tried to marry his speech with the speech he made on 29th January, I got more muddled still. I found much comfort indeed from hearing my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) say that he could not understand it either.

No, I would not say that the Chancellor was particularly clear in his explanation of the external situation and what he intended to do about it. Nor would I agree with the right hon. and learned Member for Montgomery when he said that this was a drastic Budget. It is not. It has left the global burden on the country unchanged to all effect. The only result of this Budget has been to shuffle the burden round from those shoulders which can afford to bear it to those that cannot.

I see that the right hon. Member for Blackburn, West (Mr. Assheton) is not in his place. I am sorry, because one phrase he used I was unable to understand. He referred to "work providers." I am not clear what work providers are. My mind went back to an occasion many years ago when my mother told me that I produced more work than 10 ordinary children. But I never gathered from the tone of her voice that I required either reward or incentive for that. This idea that there are some people who are work providers was a good mid-Victorian idea, but to have it trotted out in the House in 1952 really makes one wonder whether some of one's colleagues have moved very much during this century.

To me the most interesting thing about the Budget speech, and the Budget itself, was the contrast it revealed between the Tory Party in opposition and the Tory Party in office. Indeed, the antithesis was as great between the election pledges of the Tory Party and their performance. The Tories have been in opposition for the last seven Budgets, I believe: at least for the last six or seven years. In the Budget debates we have had one theme hammered almost ad nauseam; that is that the financial policy of the Labour Government was one of waste, extravagance and inefficiency.

That has been their constant theme, and I can see some hon. Members facing me now who have said so. We have had a picture painted of hordes of civil servants eating up the substance of the country like locusts. In the last Budget speech the present Secretary of State for the Colonies, the right hon. Member for Aldershot (Mr. Lyttelton), suggested, on this point of civil servants, that we could easily lop off an expenditure of£50 million a year.

On 29th January, when the Chancellor made his statement on the economic situation, he said that he had cut out waste. That was a proud boast. He claimed that he had already reduced civil expenditure by an amount which represented 1½per cent. of our gross national income. [Interruption.] If I am challenged on that statement, I would point out that it can be found in HANSARD. The Chancellor said: It means a fall in the proportion of the country's gross national product which the Government take for their civil expenditure from about 15 per cent, to about 13½per cent."—[OFFICIAL REPORT, 29th January, 1952; Vol. 495, c. 52.] That is a drop amounting to 1½per cent. of the gross national product. When the Chancellor said that, I had, for the moment, a glimpse of him dressed in the skin of the Nemean lion—Hercules cleansing the Augean stables.

Let us examine what this has meant. Let us examine the suggestion of the right hon. Gentleman the Member for Aldershot that we could lop off£50 million by getting rid of unnecessary civil servants. What has the Chancellor done? He hoped to save, not£50 million, but£5 million, with the possibility of some unspecified but obviously much smaller saving later.

But how has this been done? It has not been done by eliminating waste but by a definite instruction to the Departments that they must make a percentage cut in their employees. That percentage cut falls upon a Department whether it is over-staffed or under-staffed—and there are some Departments which are understaffed. That is not preventing waste. The effect of that in a large number of cases will be merely to introduce inefficiency. At any rate, where is the£50 million which the right hon. Gentleman the Member for Aldershot talked about?

How has this 1½per cent. of the gross national income been saved? In addition to this claim to be cutting out waste, which would have been much more effective if we had been given some evidence of it, the Chancellor had to admit that he had had to reduce, or to slow up, many useful services. We find from the Civil Vote on Account that there are three items which certainly do not look like cutting out waste. 'There is£55 million on the Ministry of Food Vote, there is a reduction in strategic reserves of£63 million, and there is a reduction in the Ministry of Food reserves of£59 million, a total of£177 million. How far that in any way includes the£150 million cut off food subsidies, I do not know.

I cannot marry these figures, and we shall not be able to do that until we get the Civil Estimates, but the major cuts which the Government have succeeded in achieving have been by slowing up or cutting out necessary and useful services and by these cuts in strategic reserves or food subsidies. I thought that I would look back to see what happened under the wasteful, inefficient and extravagant Labour Governments.

I examined what had happened in the last four years for which we have available figures—1947–48 to 1950–51. I found that our expenditure on Civil Estimates in those four years had decreased as a proportion of the gross national income by between 5 per cent. and 6 per cent. In other words, this decrease of 1½per cent. as a proportion of the gross national income in a year is not startling. It is not something that the Tory Party have done for the first time. We have carried that sort of thing in our stride.

We did not do it by cutting food subsidies or by slowing down useful services. Useful services were being developed then and, in addition, during those four years we increased the cost of the social services by£400 million a year.

Squadron Leader A. E. Cooper (Ilford, South)

Does the hon. Gentleman include in his progressive increases in the social services the ld. increase in the cost of school meals, the stopping of all school building, and the decrease in housing allocations from 200,000 to 175,000?

Mr. Benson

I am dealing with the actual cost of the social services during those four years.

Squadron Leader Cooper

It is what one gets for the money that counts.

Mr. Benson

The hon. and gallant Gentleman has merely raised a red herring. He has not attempted to answer my argument. The real reason the Tory Party, if they wanted drastically to reduce expenditure on civil account, have had to cut food subsidies and to run down the reserves and, in the Chancellor's own words, to postpone many useful services, is that there was no waste to be cut out and that, despite all the charges that hon. Gentlemen opposite have brought against the Labour Government in the last six years, that Government ran the business of this country efficiently, effectively and economically.

I should like to switch to an entirely different subject and to marry up two entirely different taxes. I wish to deal with the cut in Income Tax and the rise in the petrol duty. That may seem to be an odd marriage. I am doing it not because I particularly want to, but because of something which happened in the Budget debate of 1950. Sir Stafford Cripps increased the petrol duty in that year, and at the same time decreased the rate of tax on lower incomes, exactly as the Chancellor did yesterday. It so happened that the first speech of criticism of Sir Stafford Cripps's Budget was made by the present Chancellor of the Exchequer, and what did he say about these two taxes? He said: …it may well be that the benefit of the concession given under the Income Tax proposals will be taken away by the increased fares which the Londoner will have to pay in travelling and particularly does that apply to those living in the suburban areas. So this is another example of that wonderful system of transfer from one pocket to another, very often in the same pair of trousers, which is a feature of our national economy."—[OFFICIAL, REPORT, 19th April, 1950; Vol. 474, c. 155.] That is what the Chancellor said of Sir Stafford Cripps, but it is exactly what he himself has done.

Squadron Leader Cooper

The hon. Gentleman must compare like with like. In the 1950 Budget, the amount collected in petrol duty, if I remember rightly, was of the order of£60 to£70 million, and the Income Tax remissions were of the same order. The amount collected in petrol duty in this Budget is£60 million, and the amount of Income Tax remissions is£180 million, which is a very different thing.

Mr. Benson

The point which the Chancellor was making was that it would be rather ridiculous to raise the cost of living on the one hand and reduce taxation on the other, and he chose those two particular taxes—Income Tax and petrol duty—but he had completely forgotten what he himself said in 1950. Indeed, if the hon. and gallant Gentleman opposite does not like that, I would remind him that my right hon. Friend the Member for Leeds, South, put 4½d. on petrol last year, and the present Leader of the House, the right hon. Member for Gainsborough (Mr. Crookshank), during the progress of the Finance Bill through Committee, spent 4½columns of HANSARD in denouncing this increase as having come after an increase the previous year. This is the third increase which we have had running. Right hon. and hon. Gentleman opposite really should take some trouble to read their own speeches of 12 months ago. It is said that consistency is the bugbear of little minds; it certainly never troubled the Tory Party.

There is one further point I should like to make. I said at the beginning that this was a Budget that shifted taxation from the shoulders of those who could bear it to the shoulders of those who could not, and there were certain indications of disagreement—at least, I thought so—on the other side of the Chamber. I do not want to harp on the effect of the Income Tax remissions, which are certainly greater in their higher ranges than in the lower ranges, but I do want to refer to the change in Profits Tax and Excess Profits Tax.

There has been a reduction of the rate at which profits are taxed; particularly profits which are set aside for distribution. It is a reduction of 7½per cent. The Excess Profits Levy falls upon excess profits, whether they are to be put to reserve or not. What this reduction in the Profits Tax means is that, out of the profits made on the basic level, there is a remission of 7½per cent. on those profits which are declared as dividends; in other words, it enables dividends to be increased by 7½per cent. at the cost of the Chancellor of the Exchequer. [An HON. MEMBER: "Nonsense."] It is all very well to say "Nonsense," but there are the facts, and anybody with a knowledge of simple arithmetic can work it out for himself. This Budget not only reduces the taxation on profits paid out, but it gives a definite and deliberate incentive that those profits should be paid out.

6.5 p.m.

Professor Sir Douglas Savory (Antrim, South)

I was in the Gallery of the old House of Commons in March, 1900, during the South African War, when Sir Michael Hicks Beach opened his Budget, and, with bated breath, announced that, owing to the war, public expenditure had reached the colossal sum of£154 million, of which about£90 million was for the Army and Navy. With extreme reluctance and prolonged hesitation, he said that he was obliged to come to the conclusion that Income Tax would have to be raised from 8d. to 1s. in the£.

Now, the present Chancellor of the Exchequer is confronted with a Budget expenditure for the year 1952–53 amounting to£4,240 million. Out of this large sum, defence expenditure alone, after allowing for£85 million of economic aid from the United States, is estimated at£1,377 million, to which must be added£45 million for Civil Defence, giving a grand total of£1,422 million.

At the time of the General Election, we were spending£700 million a year more than we were earning, and our gross trade deficit in 1951 was£1,207.6 million. The gold and dollar deficit of the sterling area amounted to£114 million in October, 1951. For the two months of November and December, it was£158 million. In addition, we had to pay out£62 million on the 31st December as a first annual instalment of the principal and interest on the American and Canadian loans. The gold and dollar deficit in the fourth quarter was£355 million, and the deficit for the whole year. 1951, was£516 million.

I want to point out that the present crisis is far worse than the crisis of 1949, because, while in 1949 we had an overall balance of£21 million, we now have an overall deficit at the rate of over£600 million. We no longer have the American and Canadian loans; we no longer have Marshall Aid to replenish the gold and dollar reserves. The rate of the drain on the gold and dollar reserves in the last quarter of 1951 was over three times the rate at which the reserves were falling in the quarter before devaluation.

I am speaking of the devaluation period of 1949, and, in October, 1949, the reserves would have lasted 18 months at the rate of drain prevailing then. At the present rate, they will be down to the 1949 devaluation level by April, and our full reserves will be entirely exhausted by the end of September.

Professor Lionel Robbins, perhaps the greatest living economist, in his memorial lecture to Lord Stamp last December, said: Stop the inflation. Stop it at all costs. That is the paramount thing of the moment in the economic sphere. If we meet it, we still have a future of high promise. If we do not, then I fear that our days are numbered, certainly as a great Power, perhaps even as a stable society. It is surely absolutely essential that the Chancellor should give the world confidence that the speculative flight from sterling will at last be checked and reversed. Do not let us forget—and up to the present nobody has made this very important point—that£4,000 million are held abroad and many of the holders of these pounds could sell them immediately if confidence in sterling were not restored. As I heard over and over again when I was in America during the Recess, they could easily buy a pound for two dollars. In fact, the over-supply of sterling is one of the principal causes of the gold drain.

A distinguished group of Cambridge show that it is essential that consumption should be cut by£100 million. The recent blow from Australia to our export trade shows that even this calculation has been seriously under-estimated. Today's Budget will be regarded as a test whether Great Britain is determined or not to live within her income. By the impression that the Chancellor makes abroad by his Budget, he can make or mar the recovery of this country.

It must not be forgotten—and here is another point to which no reference has so far been made—that during the war we were compelled to divest ourselves of the greater part of our overseas investments, and then we ran the further risk of being expropriated by others, as, in fact, has happened in Persia. I would draw the attention of hon. Members opposite to the fact that the whole of our social services threatens to come crashing down since they depend entirely on the purchasing power of the pound.

With a population of 50 million, as we have today, we are faced with the fact that we have to rely on our current production in order to make and sell what foreigners will buy in order to pay for at least half our food and the majority of the raw materials for our industry. But let me repeat—and I feel very strongly on this matter—that our fundamental problem is the value of sterling, and sterling can only be strong when the world believes that it is a good currency to hold. This confidence must impose limitations on the public expenditure of Great Britain, and must compel the Government to keep at least a margin of taxable capacity in this country.

In the present circumstances, I feel that party recrimination—such as we have heard in too many speeches tonight—is altogether out of place.

Mr. Norman Smith (Nottingham, South)

What about the last Parliament?

Sir D. Savory

I did not indulge in it.

We must appeal to the determination and the discipline which are still at the core of the British people. We must economists has worked out figures to make our decisions without fear or favour. We must do our utmost to provide what is really the only correct solution, and that is the maintenance of sterling. There is a great difference between 1952 and both 1918 and 1945. I cannot help feeling that this time the skies look blacker than ever. There is very little more for us to be disillusioned about. Our chief hope lies in the men and women who went through either the first or the second great war. It is they who incarnate what is best in our national heritage. They helped to forge the steel of the nation's endurance in the years of war, and they will be her inspiration in these terrible post-war days.

This uniting idea is really creative. It draws the best from all and fights for the best in all. In order that we may—and we must—bring order out of chaos, we must eliminate the spirit of selfishness and the spirit of hatred. Let us try to substitute constructive action by ourselves for the destructive criticism of others. For the purpose of serving the country the aid of all is needed today.

We cannot help feeling concerned over the spirit of division which exists on our home front. We have class against class and party against party. The forces of disunity in our national life seem to me stronger today than at almost any time in our history. Surely, we must try to bring about mutual understanding between right thinking leadership on both sides of the House. What Great Britain wants is not a promise to get something for nothing, but a chance of giving everything for something that is really great.

We want something for which we can fight with equal intensity, not merely during the election campaigns, but throughout the whole duration of this Parliament. I am perfectly certain that the electors would welcome the simple and clear light that comes from men on both sides who are conscious of their country's destiny, and can see how she can serve her age and generation and know how to call the best out of each of us and unite us all against the false philosophy of a malignant materialism.

6.19 p.m.

Mr. Percy Daines (East Ham, North)

The rather prolonged rhetorical peroration of the hon. Member for Antrim. South (Sir D. Savory) reminds me of when, a couple of elections ago, I approached an elderly and timid lady with a view to getting her to vote for the Labour Party. She said she could not possibly do so because she always voted Tory as she did not believe in politics.

I want to confine my remarks as far as I can to a narrow section of the financial policy of the Government as far as it affects house ownership and the furnishing of homes. I think it is perfectly clear, when one examines the Douglas scheme, which the Government have adopted, that the young people of this country will again find a further increase in price when they come to furnish their homes.

I know the Chancellor has studied and has taken a profound, deep and sincere interest in the broader aspects of social problems. He would know, as I know, that if any couple set off to build up a home today, even with the minimum requirements of two bedrooms furnished and a lounge and a dining-room, if they get out of it at£650 to£700 they will be doing very well. One of the effects of his policy, by shifting taxation to the middle range of articles, is to increase that cost substantially.

The Chancellor also knows that most young people are forced by necessity to go in for hire-purchase when they start a home. His policy is extremely restrictive, and I advise him when he gets in touch with branches of the Young Conservatives, as I know he will, to encourage them to discuss this subject very frankly.

The Conservative Party profess to be very much aware of the need to encourage house ownership. I am in complete agreement with that principle. I believe it is a good thing for a man to own his own house. I believe that private possession makes for a more stable citizen. I believe also that it is sound economy, for instead of allowing the place to deteriorate because it belongs to somebody else, the house owner will do the small repairs himself and develop an art and craft of his own. Before I became a Member for Parliament, I visited thousands of homes in the course of my job, and I found that the standard of repair and upkeep was much higher in owner-occupied houses than in rented property. There is no difference between the right hon. Gentleman and his party and myself on this subject.

Over a period, under previous administrations, we had an effective saving on the cost of house purchase by mortgage through the sympathetic operation of the Small Dwellings Acquisition Act. By competition with the building societies, the Act enabled a substantial saving to be made. I should like to quote a case in point to show what happens now. A friend of mine obtained a licence to build some four months ago. The total cost of the house was in the region of£3,000. If the mortgage had been taken up then under the Small Dwellings Acquisition Act, the difference between the interest he paid and the interest he would have had to pay on Saturday last would have been 15s. per week. Already in the pursuit of a dearer money policy, the Chancellor has effectively stultified possible house ownership in this case to the degree of 15s. a week.

Mr. Peter Roberts (Sheffield, Heeley)

Are we certain that this increased Bank rate and these charges will apply to that Act?

Mr. Daines

I am quoting what has already happened. The rate now under the Small Dwellings Acquisition Act for loans of over 15 years is 4½per cent. But the most important aspect is not the limited amount of mortgage business done under that Act. Let me say, in passing, that I wish some of my own colleagues on local municipalities had taken a more active interest in this question. I have known many cases where public officials have deliberately sabotaged the working of this Act because they did not want extra business to come into the office and give them more work. I am glad to see that an hon. Member opposite with considerable experience appears to be agreeing with me on that point.

But I also ask the Government to realise the consequences of their financial policy in relation to house ownership in general. I do not think it is an overestimate to say that by the end of the year we shall be faced with an increase in the building society mortgage rate to 5 per cent. I do not think hon. Members realise, either, that 5 per cent. is largely a false figure, because in most building society schemes the interest is added at the beginning of the year and all the subsequent payments of capital are not taken off the interest charge. I have found by careful examination that the effective rate is about 5¼ to 5½per cent.

But it is not only new business that is involved. Practically all the building societies have escape clauses under which they can raise the interest rate for existing mortgages. Therefore, what the Chancellor and his colleagues have done in pursuit of a dearer money policy is not only to increase the outgoing on new mortgages but to increase it also on the whole range of existing mortgages. When I am told that the Conservative Party derive their major support from what I would call, for lack of a better word, the middle classes, I wonder what their friends are going to think when they are faced with an increased charge of this kind at the end of this year.

I should like to take another actual case to illustrate my point. Let us consider the case of a pre-war house then selling at about£800. Mr. A. wants to exchange with Mr. B., and both houses are of the same type selling at£800 pre-war. Today they sell at around£3,000. In order that the one man shall sell and transfer to the other, the total amount of money "killed" is£400. There is an estate agent's charge of£70 to£80, there is Stamp Duty—to which I will return in a moment—and there are the legal costs and so on. I submit that we should find some other way of tackling that problem than one involving these outrageous charges.

I do not know whether the Committee realise it, but it is a striking fact that even over the last few years—and I quote from the Registrar General's statistics—the general shift of population has been about 10 per cent. I believe that we want the greatest possible mobility of labour at the present time and, particularly in view of the policy of trying to enforce that mobility of labour by financial means, we should make it as easy as we can for people to move.

I want to thank the Chancellor for the decrease he has made in the iniquitous Stamp Duty on small property. I appreciate it very much indeed. It is a substantial gain. If I may say so and give myself a small personal pat on the back, I made a critical speech on this subject to the then Government last year. I will let it go at that. I presume that if one criticises one's own Government, more notice is taken of what one says.

Mr. R. A. Butler

I may say in compliment to the hon. Member that I have read his speech.

Mr. Daines

The right hon. Gentleman is so polite and suave and disarming that he is an awfully difficult "bloke" to hit about. I feel that more than ever now. I was always taught that the art of speaking in Parliament was to say nasty things in the nicest possible manner; but even that is difficult with the right hon. Gentleman.

I propose to go into a little more detail on the subject of house ownership. First of all, if we take the actual capital that is required for the new houses that will be built under the "houses for sale" policy, we would discover that the average cost is about£2,000 or£2,250. That means an initial outlay of about£450. If the right hon. Gentleman and his hon. Friends think that we are going to get back to the pre-war system of small deposits, I do ask them to look at the experiences we have had between the wars. It will be seen quite clearly that it is going to take quite a number of years to get back to that system, and that£400 to£500 worth of capital will be required for quite a long way ahead.

A second factor which I think has not been properly appreciated by right hon. and hon. Members opposite is that not only is an initial deposit of£450 required but there is also a very strict limitation by the building societies on the outgo that takes place on the house in regard to the income of the individual. Building societies today insist that the total outgo, that is, mortgage cost, rates and a low figure for repairs, must not exceed 25 per cent. of the individual's salary. That means the individual's own salary; it does not mean his wife's salary or the salaries of his children. The actual individual has to be in such a position that his salary is four times as great as his actual outgo.

Taking the kind of house I have mentioned—and I am quoting minimum figures, now—the total outgo would be in the region of£3 5s. to£3 6s. per week—I do not see how the Government can possibly escape the fact that the 50–50 policy for housing means that only about 2 per cent. or 3 per cent. of the population who are in need of housing will be in a position to afford a house even if they can make the initial outlay of£450. I submit that that financial background to the housing policy is one which makes incapable of implementation the professed policy of the Government as far as house ownership is concerned.

I now turn to another aspect of the financial and economic policy of the Government which, I am told, is a subject which has quite a lot of dynamite in it and which I should keep off. I am not afraid of it, and I propose to state my views on the extremely touchy problem of the controlled rents system of existing houses.

We have to face the fact that in this country we have hundreds of thousands of houses which are rapidly becoming dilapidated for financial reasons. I believe it is a bad policy for either the present or the previous Government to imagine that we can go on indefinitely seeing a slow process of dry rot setting into these vast numbers of houses without doing something to tackle the actual problem. [An HON. MEMBER: "Tell the other side."] Oh, no! By the time I have finished I am afraid that my suggestion will not commend itself to the hon. Member opposite.

I believe that what has happened in the case of the provision of houses to let has been that, right from the initial steps, after the First World War, our housing policy has been based upon an entirely false assumption that the building of houses to let in this country will again become an economic proposition and that private capital will do it.

What has happened? Previous Labour Governments adopted the policy of reducing rents by local and national subsidies, and I have not the slightest doubt that this Government are going to continue with the same policy. In all our constituencies—I think this applies to everyone—we find people, living in inferior housing accommodation and very often on low salaries, who are paying a subsidy to people in better houses who are earning higher salaries. It is not common sense, and the only new houses that are likely to be let for years are going to be municipal houses. It is only a question of time when we shall be left in the position of having more rented municipal houses than others, and then, where are we going to get the bolstering up of them from? We cannot continue this indefinitely.

My own constituency is going to shift 650 families a few miles away, to Brentwood. Those people will have no connection at all with my borough in 10 years' time, yet we shall have to pay a local subsidy to them for another 60 years. That is happening all round the country. I submit that the financial policy we have carried on in relation to housing is one which is based upon an entirely false assumption. No political party in this country, including the party opposite, have the courage really to face up to it.

We are going to be faced with exactly the same sort of situation as far as existing rented privately-owned property is concerned. I think there is an overwhelming case for the equalisation of rents not only in municipally-owned housing but in privately-owned housing. We have two alternatives. Either rents have to rise substantially in private housing or we have rapidly to evolve a policy under which all houses below a given rateable value are transferred to public ownership. I believe that the only solution we can possibly have for the housing of the people—which I hold most strongly to be a social service—is to bring them all under public ownership and have an equalisation of rents over the whole lot. The alternative is a very substantial rise in rents so as to make it possible to keep them in a reasonable state of repair.

I have tried not to be too controversial, but I believe what I have said to be true. I have tried to present my points in such a way that, if they are not wholly acceptable to the Committee, at least they will provoke thought amongst hon. Members.

6.38 p.m.

Commander C. E. M. Donaldson (Roxburgh and Selkirk)

I crave the indulgence and the courtesy of the Committee in rising for the first time to speak in this debating Chamber. I am conscious that this House is said to be the most critical assembly in the world. At the same time, I am conscious of the fact that it is one which affords the most sympathy and consideration to those who are in the position in which I now stand, of making their first speech as a Member. It is this very fact which sustains me at present. I am quite sure that this is by no means liable to be my finest hour; but it is certainly going to be one of my more nervous moments.

I feel that in making a maiden speech on the subject of the Budget one is being watched by hon. Members on both sides of the Committee who have had a great deal of experience in past years. It may already be in the consciousness of bon. Members on both sides of the Committee that I have not always resided in these islands. I have only resided here as a civilian during the past five years, or a little more. I trust that the broader background of my Canadian adherence may prove acceptable to this House, which has set the high example of Parliamentary procedure and democratic Government which has been followed not only in Canada but in all countries of the Commonwealth and Empire.

Early in the Chancellor's introduction of his Budget, he brought in the subject of the Empire and the sterling area. I should like to refresh the memories of hon. Members on what my right hon. Friend said: Hon Members will note that later in my speech I shall have to take account of this new factor as it affects our prospects. I have had stirring answers from that stalwart leader, the Prime Minister of New Zealand, and from my friends the Finance Ministers of India, Pakistan. Ceylon and Southern Rhodesia. and so on. To me that was a very heartening thing. My right hon. Friend went on to say: All these Commonwealth countries, together with the colonial territories whose contribution to the economy of the sterling area is so vitally important, are taking determined action to ensure that the sterling area as a whole is not merely in balance with the rest of the world, as we planned together when we met in January, but will be in surplus with the rest of the world in the latter half of 1952. These are aims far more comprehensive than ever before adopted by the sterling Commonwealth. The right hon. Member for Leeds, South (Mr. Gaitskell), referred to that earlier this afternoon and, placed as I am, it is not my part to be provocative or controversial. Perhaps I shall be led into temptation before long on another occasion. However, I am quite certain that that is the essence and basis of the recovery of this country. Faith in the Commonwealth sterling countries, associated with the undoubted support which we shall receive, if we ask for it and seek earnestly, from Canada and other countries associated with the Commonwealth of Nations—that is the sure foundation on which this Budget has been planned, and I am sure that my right hon. Friend has been correct in basing it on that foundation.

I subscribe to a theory that by "faith and works" miracles can be wrought, not only in our private lives, but in national and international life as well. I strongly urge, and put myself on record as saying, that only by increasing work in this country—indeed we must all make up our minds that we have to work harder and be more productive—shall we succeed in this purpose and in sustaining ourselves in this crisis. By that faith and those works we shall, under Providence, with the Commonwealth and Empire countries be able to survive. We have survived the hurricane of war and the blizzards of a series of financial crises in the past few years in this country, and if we make up our minds and set our wills as a united people we can, if we direct our thoughts on the lines my right hon. Friend has set out in this Budget survive the present difficulties with which we are faced. That is my conviction.

I was very glad, and I am sure hon. Members on both sides of the Committee were delighted, to see a reference to the Irish Republic—a brief reference: I have also received a message from the Minister of Finance of the Irish Republic indicating his Government's understanding of the gravity of the situation and their deter mination to play their part in resolving it. I think that was a fine and healthy sign. I am sure it will bring satisfaction to hon. Members on both sides of the Committee and to the people of both Northern and Southern Ireland and all those men who have gone out from that island to other countries. It is a sign of re-affiliation: at least I trust it will prove so.

The point I wish to stress is related to Purchase Tax, a subject which seriously affects and has affected the constituency I have the honour to represent on the Scottish Border, the Counties of Roxburgh and Selkirk. Not only there, but throughout the country, especially where textiles are the basis of life, the basis of income, there will be a sense of relief and satisfaction that consideration has been given to Purchase Tax and its relationship to the utility scheme. The Chancellor said: Secondly, we propose to remove an obstacle which up to now has stood in the way of the full development of our export trade, particularly in the vital field of textiles."—[OFFICIAL REPORT, 11th March. 1952; Vol. 497, c. 1276–9.] That is the point in relation to the Purchase Tax which I have seen working adversely in my constituency and I know that hon. Members on both sides of the Committee have had a similar experience.

I believe Purchase Tax was instituted in the first place as a deterrent to inflation, at a time when too much money was chasing too few goods. That may have been its original purpose and undoubtedly it was a proper one, but surely we have long since reached the point when Purchase Tax ceases either to be a purely money-raising tax, a tax for that purpose alone, a revenue producing tax. Perhaps it might have become—I must refrain from controversial matters—even more or less a political instrument.

Be that as it may, there is no doubt that if the application of the Chancellor's remarks is made in a proper and progressive way to the textile industry, we will see relief and in many areas I believe we shall see a rapid return to full employment, whereas in the last few weeks and months, and even prior to the last General Election, we saw the beginning of trade recession, particularly in relation to the woollen trade and woollen manufactures, certainly in relation to the border tweed mills.

The application of Purchase Tax has a two-fold deterrent effect on the Scottish tweed mills. It has always been a basis of export trade that the experimentation and selection of fabric, wools, colours and all the necessary stuffs required to weave these textiles for the export market, was of necessity sustained by the financial basis of the sales of similar goods in the home market. That, of course, was eliminated by the application of Purchase Tax, a tax up to 66⅔ per cent., and at the same time the introduction of the Utility scheme.

There was another feature which had a detrimental effect. The border mills were endeavouring to build up, as they had done with considerable success, the export of Scottish tweed. Such tweed holds a much more important place in the dollar markets of America and Canada than any other export in relation to its capital.

We produce quality goods. We do not in this country in the main subscribe to the same mass production methods of manufacturing high-quality materials, whether textiles or other manufactured commodities, as some other countries do. We do not maintain the same high standard of mass production, but we do maintain an even higher and better standard of quality goods—a standard attainable only by the work and skill of our craftsmen, designers and artisans. This skill is invaluable to us. The goods are valuable to us. The skill and the production can be sustained only by the support of the home market, allowing for sufficient experimentation with goods intended for export to dollar countries in order to get the dollars needed to keep our financial balance in line.

I do not wish to dwell too long on this point. I am convinced that the lightening of the Purchase Tax as indicated by the Budget will have a far-reaching effect. Many will be grateful for it. That, I think, will be agreed on both sides of the Committee. I am sure also that there will be—and certainly in my constituency—gratitude in the agricultural areas that certain things that are necessary for the farm workers—rubber boots and other articles of clothing—have been freed from the tax. That is not controversial, and I am sure that this relief will encourage the workers in agriculture, especially as it is combined with other benefits which derive from this Budget.

I should like to make a brief reference to my hon. Friend the Member for Blackley (Mr. E. Johnson), who also made his maiden speech today. As has been said, it is a happy coincidence that we have both selected this day—without collusion—for our maiden speeches. It is a coincidence that we should both have lived in Canada, although I have spent considerably more years there than he.

I am very glad that we join other hon. Members of this Committee who have associations and affiliations beyond these islands—associations and affiliations of a wider scope than those limited to this country. I believe that those associations are a good thing. I believe that that will work to the benefit of all the countries concerned. I think that it is a form of Imperial Preference—an interchange of imports and exports of ideas between the Mother Country and the Dominions and Colonies. I think it is a good thing and will make for better understanding. I am delighted that my hon. Friend has made his maiden speech on the same day as I have made mine.

The Budget we are debating today is the first Budget of this new Elizabethan era. I think that that is significant, too. I believe that, even while we face the present grim financial facts, we can look forward, if we have faith in ourselves, which we ought to have, to a great future—to another age of glory and success like that of the first Elizabethan era. We have the determination and we have the greatest craftsmen in the world and the most inventive brains.

If we work with sufficient energy and determination, now that we have been offered incentives in all walks of life to do so, this may well be the beginning of a new Elizabethan era, and I believe that in the next, the third quarter of this century, with the benefit of scientific research, and, perhaps, the application of atomic research to peaceful purposes, we may attain a state of civilisation and a greater improvement in our way of life than any we have hitherto expected to be possible in the latter half of this century.

We should do well to try to forswear for ever national introspection. When I came to live in this country at the end of the war it seemed to me that the nation had become introspective politically, economically, and in many other ways. This should be thrown over. We should be outward looking. Therein lies not only salvation but greater glory in its truest sense, with the greater possibility of working with other Empire countries and with all others of good will for the maintenance of peace. We must raise our sights and vision beyond the horizon, remembering that that is our environment, too, and that there are natural resources we need.

There are many topics I should like to mention, but I cannot speak of them all in a Budget debate. The Committee may feel inclined to take me to task for some of these ideas. At some later time I shall be glad to have occasion to follow the famous signal of a famous seaman, "Engage the enemy more closely," and engage in controversy with hon. Members opposite if they wish to take me to task. For the present, I thank the Committee for the courtesy it has shown to me in listening to me as it has done on this, the first occasion on which I have had the honour to make a speech in this Chamber.

6.56 p.m.

Mr. R. J. Mellish (Bermondsey)

I am very glad indeed to have the opportunity of following the hon. and gallant Member for Roxburgh and Selkirk (Commander Donaldson) and to congratulate him on his maiden speech. It does credit not only to him but to his constituents and also to the people of Canada. We are fortunate indeed that today we have had, speeches from two hon. Members who come from Canada. I speak, I am sure, for all hon. Members when I say that we are glad to welcome them and thus, in some way, to show our affection for that great Dominion. We look forward to the next speech of the hon. and gallant Member, and if he wants to throw some shots at us across the Floor of this Chamber we shall be glad to receive them and to throw some back a bit heavier.

All hon. Members should look at this Budget not only from their own points of view but from the points of view of their constituents. They must see how their people react and what the effects of the Budget are upon them—what good or harm it does to them—and balance those considerations with the interests of the country as a whole. That is the way I have tried to face this Budget.

I am glad to associate myself with others on this side who have complimented the Chancellor of the Exchequer on the way he delivered his speech and held the interest of the Committee for two hours, and on his clear exposition of many of the problems; but it occurred to me that he tried to pose as a sort of Robin Hood; he was going to take away from the rich to give to the poor. Having had some experience of the poor, living with them a long time, it seemed to me that the right hon. Gentleman had no right to adopt such a pose.

He also tried to describe this Budget, as the Tory Press has done, as a Budget to give incentive to the workers. If it does not do that, then it is a bad Budget, and I hope to show that, in fact, it will not provide the incentives the right hon. Gentleman had in mind. Many of the people I represent are already necessarily working for the national economy, because they are dockworkers engaged in what is probably the most important industry in the whole country. Whatever charge may be laid against the late Labour Government, at least they raised the standard of living of the poorest people in the community to a level that they had never had before in their lives. It would be true to say, and certainly of many of my constituents, that for the first time in their lives poverty was removed from them. What I am worried about, and genuinely worried about, is that, perhaps unintentionally, they are to be driven back to that state of poverty again.

The last Labour Government were accused of mismanaging the affairs of the country, yet the Budget shows that the Chancellor had a surplus to start with of£500 million. It does not seem to me to be bad mismanagement to have a£500 million surplus to play with. It is true that the external position of our country deteriorated badly in the last few months, but no decent, honest man would say that that was entirely the responsibility of the last Labour Government. Internally this£500 million could have been used to much better effect.

Let us look at it through the eyes of men working in dockland. We hear a lot about dockers when they are on unofficial strikes, and I dare say hon. Members have been sickened to death of reading about them. There has been a£500 million import slash, and we are now told there is to be another£100 million imports slash. There is already a great deal of unemployment, and it is obvious that there will be still further unemployment amongst these people, because they are the people who unload the ships bringing in the imports.

The dockers have been told that incentives are being given to them through tax reliefs; they are told that a man with a wife and two children can earn up to£17 10s. a week before paying the higher rate of Income Tax. How many dock workers earn, or will in future earn, anything like that? That is no incentive. They cannot possibly hope to earn that. This applies not merely to dock workers but to millions of people who work no overtime, such as bus drivers and shop workers who are on a basic rate, to whom this so-called concession will make not the slightest difference. It cannot help them and is of no benefit to them.

The slash in the food subsidies will send up the price of almost everything these people buy. It was argued by the Chancellor that it was anomalous to have food subsidies so that Cabinet Ministers could, to use his own words, "go out and buy food that is subsidised." Do not Cabinet Ministers have children and draw the children's allowance? The argument that it is anomalous for people of all sections of the community to benefit from food subsidies—introduced mainly by the Labour Government—whether or not they needed it, should also apply to children's allowances.

Squadron Leader Cooper

The hon. Gentleman said that the food subsidies were largely the creation of the Socialist Government. They were created in the early days of the war, at the time of the Coalition Government, by Sir Kingsley Wood.

Mr. Mellish

I know that, but in fairness it must be agreed that they were sustained by the Labour Government and it is a Tory Government which is slashing them. I am obliged to the hon. and gallant Gentleman for making that point, because I am reminded of the famous speech of Lord Woolton, when he said in a broadcast on 13th October of last year: It is all nonsense that the Tories will cut food subsidies and put up the cost of living. It is a Socialist trick. We now see how much of a Socialist trick it was. The Government have been in office only a few months and they introduce this slash in the food subsidies, which automatically affects the essential foodstuffs for which the people I represent must now pay more. I claim that the so-called incentive of this tax concession will not apply to millions of our people, and that will cause a great deal of unrest.

The duty on petrol and oil has been increased, which will mean inevitably a rise in fares. I hope hon. and right hon. Gentlemen opposite will do something about it when that occurs again. We have just had one outburst after the recent increase in fares, which has been blamed on the Labour Government. Let us see what the party opposite do when fares go up again. They probably will not have the courage to go into the Central Lobby to meet their constituents. Certainly they will not have the courage to go to the country on the issue of this Budget.

This is not a good Budget. It is a Budget which will hurt the people at the lower end of the scale far more than help them, and it is about those people that we should be most concerned. In addition, the Utility scheme is to be abandoned. Do the Government believe that traders will maintain the same standard at the same cheap price as before? I do not believe it. Almost everything within that scheme will be affected.

There have already been price increases as a result of previous instalments from the Chancellor, in such things as vegetables and farm prices, and the people who can least afford it will suffer. What benefit will the man earning£8 a week with a wife and two children get from this Budget? The tax reliefs do not apply to him; he gets nothing out of it. He faces only a higher cost of living—the one thing the Tory Party said they would not do, namely, to increase the cost of living. Their posters are still up on the hoardings in many places "Vote Tory and pull down the cost of living now." The Budget is so designed that the cost of living goes up on the one hand while some form of compensation is given to certain sections of the community on the other.

The one thing about this Budget which I can praise is the increase in disability pensions. I am delighted that the Chancellor has been able to do this. What I am about to say is my own view, which I do not think is shared by my party. I wish that more money could have been made available for pensioners with 60 per cent. disability and over. The vast majority of disability pensioners come in the category below the 60 per cent, disability. There are not so many 100 per cent. disabled pensioners on the full 100 per cent. disability rate, who will get the extra 10s. a week, while the 60 per cent. disabled will get a proportionate increase. Yet in the main those people need this increase almost as much as the 100 per cent. disabled. I hope that this can be looked at again, but there will be time for this in Committee.

I recognise that the import cuts were inevitable. To be fair, I believe that a Labour Government would have had to do the same thing. I also believe it is necessary for our people to work much harder to make the national cake that much bigger so that we can all have a larger slice, but the first responsibility and duty of any Government is to look after the people at the bottom of the scale, which is what this Government has not done. When the cost of living is raised out of all proportion, the people at the bottom end of the scale will not be able to make ends meet.

Mr. P. Roberts

In following the hon. Gentleman's argument very carefully I cannot help looking at the total figures of personal incomes, where one sees that the figure for rents, rates, fuel and light is£1,100 million, whereas the figure for drink and tobacco is£1,500 million. I hope the hon. Gentleman will refer to that side of it, because I am sure it comes into his argument.

Mr. Mellish

With great respect, the sort of people I am talking about spend almost nothing, if anything, on those sorts of things. [HON. MEMBERS: "Oh!"] They do not. The whole trouble with the Conservative Party is that they indict masses of people because of the foolishness of some. For example, when they talk about the general wages of dock workers, they say "We know of dock workers earning£16 a week." I know of dock workers who earn only£5 6s. a week, even under the Labour Government. Do they spend all this amount of money on cigarettes? Of course not. That type of man has to make his own cigarettes. He has been economising for a considerable time now, and may find himself out of work because of the import cuts. Will he be safeguarded in the future?

The Labour Government improved the standard of living of our people and gave them a better outlook on life than they ever had before, and I warn the Government that they will not accept a drastic lowering of their conditions which would mean a return to the bad old days; they just will not take it. They cannot understand why shipowners, with their vast profits—and they are still vast, with all the taxation—should get away with it, as they put it, while they themselves have a reduced standard of living.

It is said that there are inflationary tendencies, and we must soak up the spare money. There has not been any inflation in my part of the country for the last three years; certainly there has not been the problem of too much money chasing too few goods. There has been a demand for a reasonable standard of living. I believe that this Budget will knock off the bottom rung of the famous ladder of which the Prime Minister spoke, for many of the people I represent, and, on their behalf, I warn this Tory Government that we shall not stand for it.

7.11 p.m.

Mr. Rupert Speir (Hexham)

I should hardly have had the courage to address this assembly, particularly on this occasion, were it not for my confident reliance on the indulgence which the House always extends to newcomers and has already extended to two other maiden speakers this evening. The complexity of the modern Budget is frightening, and I am encouraged that even such experts in economics as the late Chancellor of the Exchequer confessed himself perplexed this afternoon.

There can be no democracy, nor even Parliamentary Government, unless the Budget is capable of being reduced to simple terms. In attempting such a simplification, I would suggest that the position of our country today is somewhat parallel to that of a family with an income of say£1,200 a year and an expenditure approaching£1,300 a year—something like an excess of expenditure over income of£80 a year. If we multiply that 10 million times we are getting close to the problem which faces this country at the present time.

Such an excess of expenditure is serious, but it is not calamitous unless we refuse to treat it seriously, and unless we refuse to see that our only choice is to stop buying so much from overseas countries and to start selling more to overseas countries. We must begin by realising two things. First, we must recognise that our present standard of living, low though it is, and lower though it be than that to which we may think we are morally entitled, is nevertheless today a great deal higher for the people of Britain than the standard of living of 90 per cent. of the population of the world, and probably 99 per cent. higher than that of any of their ancestors.

As Mr. George Schwartz recently put it—"If you are earning£6 a week in Britain today, you are one of the upper ten." Whenever we consider this problem of the standard of living, we should remind ourselves of what Lord Balfour of Burleigh said in another place: If the British people are to maintain a high standard of living, they have got to do it, as they always have done, by their own efforts. Realism demands so much admission—it would be pessimism, if not defeatism, to go further, and to assume that this balance of payments gap is so wide that we cannot possibly fill it, or that the inflationary pressure is so great that it is too tremendous to counter or resist. If we fail in this problem, it will be for want of resolution here in Britain, and failure would mean not only the ruin of this country, but would be a greater threat to Western civilisation than any that has yet been imagined.

I am convinced that the sooner we face our difficulties, the sooner they will cease; and that it will pay the public to face the facts, to grasp the nettle here and now and to support the Government in the measures which they are proposing to restore the value of the£and to regain a sound currency. Surely we can take encouragement from the fact that leading economists are confident that with a small additional effort and with slightly more sacrifice we can put this country back on the road to recovery and expansion once more.

The£sterling is worth only what foreigners consider it should be worth, and it will only be worth more when the world at large wants sterling. My right hon. Friend the Member for Blackburn, West (Mr. Assheton) spoke about the need for an honest currency—a currency which can be trusted; and yet what is the position? The position is that we are desperately short of steel in Britain today, that the Japanese have the steel, that they are willing to sell it to us but only against dollars because they do not trust the£sterling. So it is in regard to meat. We could get more meat today from the Argentine but for the fact that they, too, are distrustful of the£sterling. And even the Scandinavian countries are beginning to express their doubts.

That road, as we know, can only lead to higher prices, to scarcity of raw materials, to unemployment and to hunger. Everything depends upon our facing up now to that problem and so does the survival of Western Europe. This country of all countries is dependent upon world trade and on what the foreigner thinks of our money—and, after all, money in that connection is only another way of saying "the capacity to produce."

Yet this country of all the great countries was almost unique in reducing the hours of work after the war. We worked shorter hours after the war when we had become the greatest debtor in the world than we did before the war, when we were a great creditor country. Before the last war, every individual in this country had a claim overseas of£80 a head. Today, every individual owes a debt abroad of some£55. Surely this is not the time to cut down the hours of work. If we want to eat, we must work; if we want to eat more, we must work more. It is as simple as that.

But if we are to ask our people to work harder, we must give them greater remuneration—and why not? Wages should be unlimited—provided the goods are produced. As I so often told the long-suffering electors of Hexham during the election campaign, the worker should be paid more than the shirker, and he should be allowed to keep more. The Budget goes far in that direction and for that reason is deserving of support.

Time and time again, it has been said that if only we could export another 20 million tons of coal a year we should be well on the road to winning the battle of the£; if we could produce 11 tons of coal for every 10 tons which we now produce, all would nearly be well. I think that it is a heartening sight that there is now some sign of politics leaving the mines. That is the impression I gather from my contact with the mining industry and the miners in the Hexham division, which has some 20 mines within its boundaries, although some of them are admittedly small.

I am delighted that under a Conservative Government the miners were recently awarded the largest increase in pay that the coal mining industry has ever had. In spite of the remarks of other people, I think that, by-and-large, the miners of Britain have played the game manfully since the end of the war, and it would certainly be difficult to find a more decent, friendly type of constituent. Considering the very hard times which many of them went through in the 1920s and the 1930s, they are remarkably lacking in bitterness. I have always said that the miner who produces the goods deserves more pay and should be allowed to keep more pay. The Budget encourages this. The miner will benefit, and the country will also benefit.

Now that the miners have their pay increase, I should like to address a plea to the Chancellor on behalf of the Service man in Korea. It would give satisfaction to all hon. Members and to everyone in the country if my right hon. Friend could do something, even during the current year, to assist the Service man financially. The British Service man is the lowest paid of all contingents in the United Nations Forces in Korea, with the one exception of the South Koreans. If something could be done to help these men as a mark of appreciation of the splendid fight which they have put up there, it would give universal satisfaction.

An economic hurricane is now approaching these shores and we cannot possibly hope to avert it, but by good seamanship and good helmsmanship we can ride it out and win through to calmer, better and brighter days. The Chancellor had a singularly difficult task to perform. He has proposed strong measures. We might say of some of his measures in the words used by the Prime Minister when he recently addressed Congress and which caused such a stir, that they are "prompt, resolute and effective." The Chancellor has had the courage of his convictions and for that history will honour and applaud him.

At the present time attention is naturally directed to the raising of the Bank rate and to the cuts in the food subsidies, but in another year's time the test will be whether my right hon. Friend has been successful in dealing with the inflationary pressure and this combined rise in the cost of living. Today, throughout the world friend and foe are waiting and watching, as they have watched ever since the end of the war, to see whether this once proud nation still preserves its greatness and its realism. The Budget proposals give a clear answer in the affirmative.

7.24 p.m.

Mr. R. E. Winterbottom (Sheffield, Brightside)

On the last occasion when I spoke in a Budget debate I had the pleasure of congratulating an hon. Member upon his maiden speech. I have that privilege again. I congratulate the hon. Member for Hexham (Mr. Speir) on a very excellent speech. I propose to go into some parts of that speech in a few minutes' time, but meanwhile I would just say that I remember that a very honoured Member of this House represented Hexham before the hon. Member was returned for the division and I hope that the hon. Member's service in this House will be no less valuable than that of his predecessor.

I want to compare the speech the Chancellor of the Exchequer made yesterday with the speech he made in the last Budget debate. An old friend of mine once told me that if one wanted to understand a speech or a book one had better first understand the man responsible for it. I readily confess that I do not know the Chancellor personally, and so I must reverse the process and try to find out something about the Chancellor from the speeches that he has made.

The Chancellor is a glaring case of dual personality. The strange thing is that the right hon. Gentleman the Member for Saffron Waldren (Mr. R. A. Butler), speaking in the last Budget debate, contradicted the spech which the Chancellor of the Exchequer made yesterday. What a curious paradox that is!If we examine the two speeches side by side, we find that what the right hon. Gentleman said last April can be quoted against what he said yesterday. The story of Dr. Jekyll and Mr. Hyde almost pales into insignificance against this, because that was fiction and this is fact.

I urge hon. Members to ponder upon some of the words used by the right hon. Gentleman yesterday. Last year he criticised my right hon. Friend the Member for Leeds, South (Mr. Gaitskell), saying that his Budget speech had: …practically shelved—from the point of view of the ordinary citizen, not the economist—the whole question of the rising cost of living. He also said: Just as the Chancellor now condones profits—for the good reason that he wants to take them away—in the same way he ignores the rising cost of living to the housewife but says, in his economic exercise, that he has relieved inflation, when everybody knows that a severe cost inflation is going on."—[OFFICIAL, REPORT, 16th April, 1951; Vol. 486, c. 1574.] Those are the two quotations which I wish to use. They are not simply taken out of the context of the right hon. Gentleman's speech last April; those words are the basis of all he said. He accused my right hon. Friend of ignoring the appeals of the supporters of the Labour Party and of many people in the country and of not making an attempt to shield them from the principal economic difficulty of that day, which was the rising cost of living.

The right hon. Gentleman criticised my right hon. Friend, but the Chancellor's offence is much greater. He not only ignores the rising cost of living by taking away a good proportion of the food subsidies, but he also ignores the many people who are crying out at the high prices of commodities. He even ignores the now discredited insipid adjunct of the Tory Party, the Housewives' League. He does this by deliberately increasing prices by taking away the food subsidies which have provided a certain amount of protection at any rate to those with the lowest incomes. The reduction in the food subsidies will be strongly resented in this country.

Mr. P. Roberts

rose—

Mr. Winterbottom

I will give way if the hon. Gentleman will permit me to finish this point. I know that the Chancellor can plead he has made concessions to the old people, the sick, and the unemployed and has given tax reliefs. For those things we are thankful.

Mr. Roberts

The hon. Member wants to be fair, but he cannot attack my right hon. Friend because of the reduction of the food subsidies, on the one hand, and then compliment him, on the other, for the reduction of taxes. The two things go hand in hand. I know the hon. Member will be fair, because we in Sheffield like to see things done straight.

Mr. Winterbottom

I wish the hon. Member had not been so quick in getting to his feet and had let me finish my point, because the attack is not finished yet. When I look at the concessions which the Chancellor has made, there is not a single one or a collective set of them which covers fully the increase in the cost of living since the Tory Party came to power, irrespective of the rise through the taking away of so much of the food subsidies. That is pretty strong, but I believe it to be the feeling of the people of Sheffield whom I represent and who have to work very hard for their living.

Mr. Roberts

Go back and find out.

Mr. Winterbottom

I understand that the hon. Member is going to the Firth Brown factory in my division. I do not need to find out; he will.

What about the childless couples who are not covered by any concession made? Some of them on the basic rates for many of the heavy industries of this country receive no more pay than£5 10s. for a full week's work. They have got no concessions. What about those living in council houses who are going to be affected by the increase in the Bank rate as well as being affected by the previous increase? How about those whose income is too low for taxation at all? They have got no concessions, and if they have no children there is no relief for them. On low wages there is no relief by way of Income Tax. These are issues which the Chancellor has either not taken into consideration or has deliberately ignored.

What about those who are not fully employed, who are losing a few hours each week through short time and who have no opportunity to sign on at the employment exchange and get the necessary relief there? Many of these ought to be transferred to re-armament or the export industry, but there is no guarantee that there are enough raw materials to keep those industries going.

My right hon. Friend the Member for Blyth (Mr. Robens) said the other day that unemployment would reach one million in this country during the year. Having regard to the Budget statement, that was an understatement. This Budget will inevitably create unemployment and so will make all the tax reliefs and concessions idle and futile.

Mr. R. A. Butler

Would the hon. Gentleman suggest that this Budget should pay less attention to the needs of civilian consumption, which appeared to be one of the things of concern on the other side of the Committee?

Mr. Winterbottom

I would have the Chancellor pay attention to the needs of consumption especially at the lower end of the social scale, and this the Chancellor has forgotten to do. The people I represent, and many others, are going to suffer because the right hon. Gentleman is producing an anti-subsidy policy which was hidden from the electors during the Election. Hon. Members have used the words of a noble Lord in another place. I am not going to do so because he is in another place and cannot therefore answer me. But I will use the words of his right hon. Friend the present Secretary of State for the Colonies, who in the Budget debate last year used these words which the Conservative Party has completely ignored. In answer to my right hon. Friend the Member for Leeds, South, the present Colonial Secretary said: If it would help the right hon. Gentleman, our view is that food subsidies should not be reduced at this time."—[OFFICIAL REPORT, 16th April, 1951; Vol. 486, c. 1574 and 1588.] Is that the view of the official Tory Party, or has there been a change? There has been an election, and this is now the position. I protest most strongly at the taking away of£160 million from the food subsidies of this country, and I make that protest irrespective of the compensation which has been given in very short measure to the people I have mentioned.

I want to put one or two questions to the Chancellor of the Exchequer. Shortly after I entered this House in 1950, Sir Stafford Cripps was resisting pressure to reduce the food subsidies. He said, in effect, that it was inevitable that the poorest would suffer, that they could not afford the increased prices and only the well-to-do would be able to afford certain commodities. Is that the opinion of the Chancellor of the Exchequer today? As a logical conclusion to his policy, I want to ask, is this the prelude to de-rationing? Is this the start of rationing by the purse? I hope I shall have an answer either from the right hon. Gentleman or whoever replies for the Government.

I have another criticism to make which is totally different because it deals with the industrial life of the country. This is where I come on to the same ground as the hon. Member for Hexham. The Chancellor will agree that we cannot separate the many complicated aspects of our economy. Our economy is a whole. I agree with the Chancellor and others that increased productivity is the key to the future provided we can overcome the restrictions in the free world and in this country. I know the difficulties which are exemplified in Australia and France, and I have every sympathy with the difficulties which those countries are facing. But we have no kick against them for preventing our exports going to them, because the Chancellor is doing precisely that here. He has cut to the extent of£600 million in three attempts since the party opposite came to power.

I agree that production is complementary to other activities; defence, world negotiations, prices, exports, balance of payments and so on. But I do not agree that this Budget will reach that objective, and I will state why. One of the big problems of this country and of the present Government is to establish confidence with the workers of this country, especially the productive worker.

Let us take it a little further. It does not lend itself to the confidence of the productive worker—and I will come to my capacity, or my right, to speak for the productive worker shortly—when we take away food subsidies and increase the cost of living. I have already referred to that and will not deal with it any further. But it does not add to that confidence when they know of the horrible uncertainty which there is at the present time in the labour market.

I represent a constituency in Sheffield, and I think that the hon. Member for Heeley (Mr. P. Roberts) will agree that in my constituency there is over 60 per cent. of the steel-making and steel manufacturing plant. Coal and steel are the most vital commodities affecting our economy. If I had a magic wand and could conjure up 2 million tons of steel and 30 million tons of coal, we could be free of most of our economic difficulties at this moment. But unfortunately I have not a magic wand, and wishful thinking will not get coal or steel.

Regarding steel, and we agree this is vital to the economy of our country, I have one criticism of the Prime Minister—[HON. MEMBERS: "Only one?"] That is all at the moment, but I have a good many years of life yet. The Prime Minister made an agreement in America for a million tons of steel to come here. How is he getting that steel? It is by means of ore from Sweden and from Spain and scrap from Germany which is taken to America by American ships and brought back here as steel, whatever kind of steel it is. Why did not the Prime Minister make the necessary agreement with America for the ore from Sweden and from Spain and the scrap from Germany to come directly here, so that we could have the convertibility value?

Mr. P. Roberts

The trouble, as the hon. Member knows, is that the late Government made an agreement with Germany reducing the scrap coming to this country while America was getting the scrap. Hon. Members on this side of the Committee pressed the late Government to allow that scrap to come here, and it is because of the muddling of the late Government that we have to go to America to bring it back again.

Mr. Winterbottom

If there is any muddle at all, I thing I could bring it much nearer to the hon. Member than I could to the late Government. In point of fact, the business negotiations for steel in America did not start until after the present Government had assumed office—[HON. MEMBERS: "No."] I wish to pay a great tribute to the miners and steel workers of this country for the magnificent job they have done which has produced whatever we have at the present time.

I wish to return to the subject of Sheffield, because Sheffield epitomises the situation as it may be found in so many of the heavy industrial districts of the country. In Sheffield we have a problem of under-employment and unemployment, and a growing problem of short-time in steel. We also have vacancies for many people in the armament and export sides of the industry. On the face of it, the problem seems simple. Why not transfer the workers from the industries now suffering short-time into industries engaged in the armament programme and export?

That would seem a simple solution, but unfortunately things do not happen like that in the industrial world. Is it not reasonable to suppose that a man will keep the people he has trained to be skilled men as long as he possibly can? It will have to be an extreme emergency before he releases them to go across the road to the other fellow who, because he is lucky, may be engaged on armaments or export work. An employer will keep his skilled men for as long as he can, even if he has to buy a lot of brushes to keep them busy.

Again we need confidence in a Government, because all Governments today have to work by priorities and priorities are very transient things. This problem of under-employment may change Government priorities in the twinkling of an eye. If the best employees are lost to an employer, he will find it difficult to replace them. That is one of the problems this Government have to face, which I hope will be noted by the Parliamentary Secretary.

Then there is the problem of the worker. I warn this Government to beware that their efforts in this Budget do not create a queue of unemployed which they cannot control. That is where this Budget slips up. It can be read to give the impression that exports cannot be increased. It could be read that we are groping for markets which we cannot find. It restricts everything and yet, with those restrictions and those contractions, this Government through this Budget commit the unpardonable crime of allowing the price of money to go up. Can we wonder that the biggest task of this Government is to get the confidence of the workers and especially of the productive workers?

We cannot expect that confidence when the workers know that the declared intention of this Government is to contract, to institute cuts, and to pursue the policy of restrictionism, not in the interests of the country, and not for the welfare of all, but in the interests of free enterprise, for that is the situation.

The Chancellor spoke yesterday of the three steps he had taken to institute cuts to cure the balance of payments problem. But he forgot one thing which is the first declaration of this Government. The Gracious Speech at the beginning of this Parliament stated: My Government will seek to promote flexibility in those industries which have been brought under public management and to stimulate free enterprise by giving it a fuller share in our economic activity. They will be mindful of the great demands on our productive capacity, and will consider all methods for creating that spirit of partnership between management and workers on which industrial harmony and a higher level of productivity must depend.— Then it goes on: A Bill will be placed before you to annul the Iron and Steel Act with a view to the reorganization …"—[OFFICIAL REPORT, 6th November. 1951; Vol. 493, c. 52.] How can we expect the confidence of the workers when every aspect of Government policy is partisan? One of the problems we have to face is the problem of fear of unemployment which at the present moment runs like a contagious disease through the whole of the Indus trial workers of this country. Some of them say rightly, "What about this deployment of labour? Why change our job when if we do we shall be the last men in and the first men out?"

That is a very important consideration for the man who has been in work for six-and-a-half years but has had many years of unemployment before that. I have never been to a university in my life, except as a visitor. Mine has been the economics of living with men and women who have had to work for a living, and work hard at that. These people are the salt of the earth. I am talking about realities. It is necessary to understand these men and we cannot do that by remote control. One can only understand them if one has had to live their life. Professor Laski said that one could not alter the capitalist room by monkeying about with a thermometer.

This Budget is a partisan Budget. It follows the line of repression and restriction which the Government have followed ever since they came into office. They talk about steel de-nationalisation. They expect the steel workers of Sheffield to have confidence in a Government, the Prime Minister of which is making the important industry of steel into a political shuttlecock.

If the Government really want this confidence which hon. Members have talked about in their Budget speeches, and which they do not understand, they must make a gesture to the workers which is of more practical value. I suggest that the Government should reconsider the cuts in the food subsidies and also that they should seriously consider throwing into the waste paper basket the plan to de-nationalise steel. Then they might have a chance.

7.55 p.m.

Mr. J. Langford-Holt (Shrewsbury)

I suppose that any hon. Member who has sat through Budget debates, as I have, year after year, will agree that there are three types of speeches to which we have to listen. First there is that made by the economist, amateur or professional. Then we have the hon. Member who trots across the pages of HANSARD, drawing behind him a string of quotations and red herrings. Third, we have the hon. Member who makes the type of speech which I hope to make. I refer to the speech devoted to a narrow aspect about which the hon. Member either thinks or hopes that he has some knowledge.

It is customary on an occasion such as this to declare a personal interest. I am a director of a firm engaged in the industry to which I wish to direct attention. Any figures which I quote are based on the experience which I have gained there. The industry to which I wish to call attention is the oil re-refining industry. I very much doubt whether many hon. Members have heard what this industry does or, at any rate, I doubt whether many hon. Members have stopped to consider its activities. I have drawn its activities to the attention not only of this Administration but the previous one.

The oil re-refining industry seeks to put back into use for industry lubricating oil which has been used already once or more. The industry was really started in this country in 1940, though to a lesser extent it had existed here previously. The chemical facts are that once oil has come into existence, its lubricating properties cannot be destroyed however many times it is refined or re-refined. What is done in the original refining can be done many times subsequently. Another fact is that when waste oil is re-refined, one gets a product which in quantity amounts to about 70 per cent. of the original. Her Majesty's Government, and all Governments since 1940, have made considerable use of re-refined oil.

Before I go further, I should like to mention the dimensions of this industry and of this problem. The latest figures which I could conveniently obtain are for the last half of 1951 when, if my information is correct, we imported—and this takes into account the re-export of certain amounts of oil—£8,750,000 worth of oil. The firm with which I am connected estimate that it re-refined oil to the equivalent import value of one million dollars—and it is only a small concern.

It should be borne in mind that lubricating oil, unlike many other oils, not only has a dollar content but that that dollar content is almost 100 per cent. In fact, almost all our lubricating oil comes from dollar sources. That has a great bearing on the balance of payments problem with which the Chancellor of the Exchequer is confronted. The one million dollars which I say that my concern is saving represents only 60 per cent. of our potential with the equipment which we have at the moment.

The oil industry—I am not now concerned with one firm only but all of it—is faced with two problems. The first is instability of supplies. Whether one considers a garage or a firm, it is much easier to tip a gallon of waste oil down a drain than it is to tip it into a tank to be subsequently collected by a tanker and taken away.

The second problem is that the market for re-refined oil is restricted because of the sales resistance. People have a feeling that re-refined oil is not up to the standard of the original. That sales resistance represents a very serious problem. With the equipment at its disposal, the industry, if it were fully occupied, would be capable of saving something like 2½million dollars per annum. With a very slight increase in expenditure that amount could be increased by something like 25 per cent.

What is possible with this industry? We import 20 million dollars' worth of oil and 70 per cent. of the waste oil is recoverable. Some countries are able to save the other 30 per cent. of their oil imports, but I do not think we can do this in this country. I am indicating the maximum possibility.

Governments have used this industry to a great extent. Sir Stafford Cripps and the right hon. Member for Leeds, South (Mr. Gaitskell), have known perfectly well all about it. At the moment, one Government Department has instituted a system which will make it impossible for smaller firms to be able to compete in this matter. We collect oil from practically every garage and concern in the country. Wherever oil can be preserved, it is not thrown down the drain. It is all collected, re-refined and offered back to industry again. We will continue to collect it, despite the instability with which the industry is faced by fluctuations. At one moment it is difficult to get necessary supplies, and at another moment it is difficult to get the waste oil. This makes for instability in an industry which we should do our best to preserve.

It is a matter of some regret that my own personal interests are coincidental with the national interests. I wish they were not. One's impartiality would be more likely to be believed. We are faced with the problem of preserving, conserving and watching at every turn, the oil resources of this country. It is our contention that this waste oil, like wastepaper and salvage of every sort, must be preserved by the country in its own interests. I earnestly implore the Chancellor of the Exchequer and his colleagues to look into this matter. I am sure that they will regard it benevolently, as did the previous Administration, but there is great room for improvement, which can be easily achieved.

8.4 p.m.

Mr. G. R. Mitchison (Kettering)

I hope that the hon. Member for Shrewsbury (Mr. Langford-Holt) will excuse me from following him into the rather slippery medium in which he appears to be interested. He has convinced me that he performs in some respects the same function as the equaliser in the public house to which my hon. and learned Friend the Member for Hornchurch (Mr. Bing) is so deeply and persistently attached.

This is a clever Budget, because the concessions made in it are apparent and obvious, while the effect of the changes to the detriment of the ordinary man are not obvious and may not be fully attributed to the Chancellor of the Exchequer. When they happen to the ordinary man he may think that they come from the malevolence of shopkeepers, because of world prices or for some reason other than the actual one.

The Budget illustrates very well the limits of the connection between Budgetary matters and the financial position of this country in the world. We have been told that a disaster is rapidly approaching, but when we come to look at the measure of it we see that it depends almost entirely on the course of world prices in the past. The success of whatever may be done to meet the difficulty is equally bound to depend on the course of world prices in the future.

I am not saying that that is the only matter, but it happens to be the only one of the causes for which the Chancellor provided a figure in his Budget speech. He pointed out, after saying that the deficit on the balance of payments was£400 million more than was expected, that the increase in volume of our imports—which he described as a big factor—was about£300 million, and it was because of higher prices that the total increase in the import bill was£1,100 million. I regard the Budget as an interesting admission by the Tory Party that there are very definite limits to what can be done to meet our trading and balance of payments difficulty within the frame of an annual Budget.

One comes to the inevitable conclusion that the difficulties we face from time to time in this country are dependent on something much more fundamental than mere Budgetary questions. It is obvious that the root of the problem is that the population of the world, its needs and its wants, are growing faster than the available supply of food and raw material. It is for that reason that the terms of trade and the tasks of successive Chancellors become increasingly difficult.

In that position, what we can at least consider is how best we can protect our citizens from the difficulties that are bound to hit hard a country that is primarily a manufacturing one and is more dependent than any other country on imports of food and raw materials. In the light of those considerations, I regard the major change in this Budget, the very large reduction in food subsidies in order to make certain Income Tax concessions, as disastrous.

I am not concerned for the moment with Tory election propaganda and Tory election promises. They have been broken, as has been said before, and it does not surprise me at all. I have been in politics for some time, and I have my own opinion about Tory propaganda and Tory promises, and I can only say that recent events have not in any way changed that opinion.

What does distress me is the effect that this change is bound to have. We were told that it would bring us back in some way to reality. I wonder if right hon. and hon. Gentlemen opposite appreciate two things. We are concerned with food prices, and if they will look, as I have looked, into what are, I think, the latest available figures relating to food prices in the January, 1952, issue of the Statistical Bulletin of the Food and Agri- culture Organisation, they will find two curious things.

The first is that, if we take the proportion of retail food costs to the cost of living generally—that is to say, if we try to estimate the proportion which retail food prices bear to the general cost of living—and if we take 1948, as these figures do, as the standard, we find that, up to the time to which the latest available statistics relate—the end months of last year—the rise in food costs in this country, as a proportion of the cost of living, has been greater than in any other comparable country—considerably greater. Apart from any general rise in the cost of living, our food prices in this country have shown a larger rise than food prices in any other country. When I say any other comparable country, I should add that I looked through all the obvious Western European countries, and, for good measure, I added the United States. There is not the least doubt about that, and at this late hour I do not propose to go into the figures.

Mr. A. C. M. Spearman (Scarborough and Whitby)

That looks as if the food subsidies have not been very effective in keeping down prices.

Mr. Mitchison

I do not think that is the conclusion to be drawn. I think the conclusion that should be drawn is that food subsidies, given their limitations, and given world prices at present, are not holding back a rise in our prices which, of course, corresponds with the rises in most other countries, but is proportionately greater here, and, if I may add my own opinion, proportionately more unfortunate.

What I think the hon. Member for Scarborough and Whitby (Mr. Spearman) and others have to consider is that, when we open the floodgates, as we do by cutting down food subsidies, the pressure behind them in this country is remarkably heavy, as it is bound to be in a country which is so dependent on imports. Again, if we look at the actual rise in prices, we find the same is true; they have risen here equally with prices in France and more than in any other comparable country.

I think the hon. Gentleman the Member for Scarborough and Whitby, who interrupted, is perfectly correct, and I entirely agree with him, in saying that food subsidies can only be some sort of check on the general rise in world prices, and, without going into details, the whole of the Budget speech, including the reference to the position of the consumer during this year—and that is what I am considering now—depends upon the assumption, for which the Chancellor gave remarkably few reasons, that prices will remain roughly the same during the year.

That is not my impression. I should have thought that there was an indication already of a very sharp rise in prices. I should very much like to know whether it really is expected that prices for imported meat, for instance, and the prices of what we may obtain from our own Dominions, notably cheese, will remain the same if we eliminate, as the Chancellor proposes to do, a number of what I might call competitive cheeses

I should have thought that the whole indication was that prices were likely to rise, and to remove the food subsidies to the extent of nearly half their amount at this moment seems to me to be an absolutely disastrous thing to do. We are bound to have not only an immediate rise, of which we have some indication again in present prices, but also, afterwards, the workers of this country, and especially the lower-paid workers, making irresistible and unanswerable claims for increases to meet that rise. We are bound in that way to start an inflationary spiral as regards wages in conditions in which, dependent as we are on imports from abroad, we shall find it more than usually difficult—I was going to say impossible—to stop it.

It is said that the cuts in food subsidies are an advantage to everyone. That is not fair. I am reminded of the 1931 position, when it was said: "Let us all have a 10 per cent. cut." I remember a cartoon that came out at the time which showed a ladder, the lower half of which was standing in water. Well above the water level was a man in a top hat, and another man below with his head just above the water line. The man in the top hat was turning round and saying to the other "Now, it is quite easy, brother; we all go down one step." It would have put the man in the choker under the water, and left the gentleman in the top hat well above the danger level.

That is what will happen about these food subsidies. They are absolutely necessary for some families in this country in order to keep alive. If we are going to start again the kind of thing I have just recalled, then we are going to re-introduce into this country a form of poverty which is an absolute disgrace to a civilised community that claims to stand for democracy and progress.

I have only one other thing to say, and this time I want to speak about the Douglas Report and Purchase Tax. This is, to some extent, a constituency matter, and I hope I shall be excused for raising it, because it has another aspect. We all have feet, and, on those feet, we wear boots and shoes, and, during the past few years, 98 per cent. or more of the boots and shoes produced in this country have been Utility, and, therefore, have not paid Purchase Tax. The effect of what is now suggested, following, I agree, the Douglas Report in this matter, will be to put Purchase Tax on a very considerable number of boots and shoes. That is one effect which it will have.

There will be a second effect. By virtue of the Utility exemption from Purchase Tax not having been applicable to foreign imports, the lower ranges of our boot and shoe production particularly have benefited by a sort of supplemental tariff. I agree that it was quite wrong, and that it was in breach of the G.A.T.T. Agreement, but there it was. What is now proposed is to open that door to foreign competition and, at the same time, to put a new tax on the higher grades in the industry. I say to the Chancellor, "This industry has not, in fact, paid Purchase Tax to any appreciable extent before. If you do those things now, you are putting a new tax particularly on those who can bear it least whatever theoretical justification and nice tidiness of arrangement you think it will have."

That industry is now tottering on the verge of unemployment. It is finding it difficult to sell its boots and shoes. That is not reflected in the unemployment statistics because there is a guaranteed week in the industry. There are, however, far too many men in Kettering and in other places at the present moment on that guaranteed week. If the Chancellor delivers at the moment the blow of which I have been speaking, then he will knock the boot and shoe industry in Northampton and in other parts of the country uncommonly hard.

After all, the industry has to make these boots and shoes because we shall still have the feet, and we do not want to reduce my right hon. Friend the Member for Huyton (Mr. H. Wilson), to the bare-footed condition of his childhood about which he has told us from time to time, and we do not want to knock large numbers of people out of employment in an area where, because it is the main source of employment, the effect will be enormously widespread.

I appeal to the Chancellor not to be too tidy-minded either about the Purchase Tax or about the Douglas Report. Let us see what we are doing, industry by industry, and let us remember that this nice tidy-looking idea of taking a half-way line and putting a tax on the excess above it may be grossly unfair in some cases, and have a certain illogicality about it at bottom. I do not think the Douglas Report or those who wrote it ever really contemplated what the effect of their proposals would be in particular cases.

I have given, I hope, some reasons for suggesting that this Budget may look all right. As the "Manchester Guardian" said this morning: There is a good deal more than you think in the Chancellor. There is a good deal more than one thinks in this Budget, too, and I suggest that what look like fiscal adjustments of the burden will operate with cruel and improvident hardship on sections of the population who cannot at present afford to bear that burden, and will result in national injustice of such an order as will make all of us ashamed if ever we see it in this country again.

8.24 p.m.

Sir Ian Fraser (Morecambe and Lonsdale)

I hope the hon. and learned Member for Kettering (Mr. Mitchison) will excuse me if I do not follow him in his remarks. My reason is a very simple one; it is that I want above all to make a non-party speech, and perhaps I may be excused if, having regard to a very long sustained concern of mine, I deal with one particular subject, namely, the position of disabled ex-Service and other people. It is not that I am unaware of the needs of the country as a whole or of the repercussions of this Budget upon all my constituents and all classes in the community, but there is not time for all of us to speak about everything. Therefore, I propose to devote the few minutes I shall speak to this one subject.

There are some 750,000 ex-Service men and a few women who have been disabled in the two wars, about half in each. During the six years since the end of the second war, this country, through its Ministry of Pensions, has increased by special arrangements and by special allowances the compensation paid to those most severely disabled, representing about 6 per cent. of the whole, to a very material extent. Therefore, most of those very severely disabled men now receive in money something like twice as much as they received when the war came to an end.

I am not going to argue tonight whether that is wholly adequate for any or all of them. There are still many whose compensation would be thought by any impartial inquiry to be inadequate, but, by and large, the very severely disabled have been cared for by these special allowances, and in the process an addition of between£10 and£12 million has been added to the Budget of the Ministry of Pensions since the end of the last war.

The partially disabled—all those who have lost one limb or part of a limb, or who suffer from illnesses and disabilities which while very hurtful and while robbing them of many pleasures and handicapping them in their work are, nevertheless, not in the severest categories—have been left with practically the compensation they were receiving before the war began, or when it came to an end. My right hon. Friend the Chancellor has set aside some£10 million in order to raise the basic rate of war pensions by 10s. a week for those very severely disabled men and by proportionate amounts for those less severely disabled, and for widows.

I want to examine briefly the facts in this matter to see whether we are doing what we should, and to give credit where credit is due. As I have said, the increase in the expenditure of the Ministry of Pensions over the past 6½years has been some£10 or£12 million, and yesterday, in one Budget, a further increase of£10 million was made. Some think that is a substantial amount to find in one Budget. Whether it is enough or not, it is nevertheless a substantial amount. It comes, of course, at a time when there are peculiar difficulties in the country and when we are told that economies generally must be the rule. Therefore, it seems to me that we have to judge it in the context of national affairs as we see them at the present time.

This amount of 10s. added to the existing pension of the most severely disabled man has, when taken into consideration with the 10s. comforts allowance introduced for some of these men in June of last year, and extended to a wider number a few weeks ago, raises the compensation of that class by quite a substantial amount.

But the partially disabled, numbering 650,000 or thereabout, have had no rise since 1946, when they received a percentage of the 5s. It has been contended that any rise of that magnitude was hardly worth the making, but it was made by the Government in power in 1946. The 5s. was added to the basic rate and I Os is now added. I regard it as a useful amount, whether it be the 10s. added to the pension of the severely disabled or the 5s. that is added to the compensation of the 50 per cent. disabled man. Had he not been singled out for this addition to his weekly income he would have had to meet, without any help from any other source, the full difficulties of the present time. As it is, most of these men will be more than compensated for the rises which the Budget will entail.

The amount that those who suffer from the slightest disabilities—in the 20 per cent. and the 30 per cent, grade—will receive may be considered to be but a token. Nevertheless, it is twice as much a token as they received in 1946.

Summing up my views of this matter, I think there will be some disappointment amongst ex-Service men generally that the amount of this increase does not match even the minimum figures which have been produced, and which can be repeated, to show what should have been done for them to bring their compensation to the point at which it should stand now having regard to the fall in the value of the£. I will not elaborate an argument with which the Committee is so familiar. I only want to place on record that the amount does not meet requirements calculated on the most conservative basis.

Nevertheless, it recognises certain principles which are very important. One is the principle that the standard basic rate was an attempt on the part of Parliament and the State to compensate these men for the disabilities from which they suffered as measured by a medical assessment. The fact that this additional grant has been made to all as an addition to the standard basis rate, and not selectively and not subject to any means test or to employability test, meets one of the principles which many of us have thought very important indeed.

Secondly, at a time when the only other payments being made to citizens through the Budget are based strictly upon need amongst the very poorest this compensation, which is based far more on equity than on need in the strictest sense, is particularly appreciated. There is also in the Budget provision for considering how best to improve the pensions of long-service men. I am glad that is so. 'They are a class who deserve our sympathy and I am very glad indeed that the Government have met the plea which has been made to them from so many quarters for this improvement.

I want to express my thanks to the Chancellor of the Exchequer and to the Minister of Pensions for meeting the requests made to them from many quarters to the extent that they have done. I should like to thank the House of Commons for the support which has been forthcoming from many quarters and to thank particularly those on all sides who have taken a special interest in the cause of disabled ex-Service men and disabled industrial workers.

Strange as it may seem, and possibly unusual, I should like to thank the taxpayers who pay the bill for their forbearance about demanding things for themselves, and the workers who make the goods and provide the services, which these men will be able to buy additionally with the extra money.

I hope that the Committee may not think it amiss if I say that we, in all parts of the Committee, appreciate the way in which the British Legion and other organisations have brought this matter to our notice through their national bodies and their branches throughout the constituencies. No doubt the British Legion, in the years to come, as in the past, will continue to represent these men's views individually and collectively. No doubt they will hope that the admission of the principle in the present Budget means that that principle will stand, that it has been reinforced and that as soon as affairs in our country render it possible further steps will be taken to bring the compensation of their disabled comrades into line with the present value of money.

I said I did not want to say anything that would be controversial or of a party nature. Nevertheless, it would be churlish to sit down without saying a word about the Budget in general. I conclude, therefore, with this single statement: I consider that this is a Budget which will appeal very widely on a non-party basis, and I earnestly hope it will give our country a fresh start.

8.38 p.m.

Captain M. Hewitson (Hull, Central)

I was very sorry to hear the hon. Member for Morecambe and Lonsdale (Sir I. Fraser) give such effusive thanks for the pittance that is being offered to the disabled ex-Service men. We are living today in a world atmosphere in which again we may be pitchforked into another war. When that takes place we shall have our meetings and patriotic gatherings, we shall say to the boys who have been called away, "We shall look after you. We shall look after your families and if anything should happen and you should become disabled we shall not forget." And when the war finishes, as in 1918 and 1945, we shall say with our hands on our hearts that at the rising and the setting of the sun we shall remember them.

It was with regret that I heard the hon. Member for Morecambe and Lonsdale give these effusive thanks when one would have expected him to be standing up and demanding more from the Chancellor of the Exchequer for those men who have given so much for our safety and well-being and for the good of our nation.

The 50 per cent. pensioner will get 5s. per week if he is a married man with two children and is going to be penalised by the reduction in the food subsidies to the tune of 6s. per week, if we take the figure of 1s. 6d. per head used by the Chancellor yesterday. This pensioner is going to have his social service stamp increased by 7d., making a total of 6s. 7d., and a generous Government are going to give him 5s. to meet that cost alone. The whole thing is manifestly unfair.

Sir I. Fraser

I know the hon. and gallant Member for Hull, Central (Captain Hewitson), voted against the Labour Government in a debate on war pensions. He was one of two who did. If 100 had joined me then we should have got what we wanted three or four years ago.

Captain Hewitson

One should at least be consistent, and I suggest that the hon. Gentleman should have been consistent in his demand for higher pensions. I regret that he has not been.

Coming to the larger issues, at the present time we are facing difficulties of which we cannot see the end. Appeals have been made for greater production and answers have been given to those appeals. When the present Government won the Election, two or three months ago, we had an urge, throughout the country: "Let the great trade union movement break this Government by industrial power." We are all fully aware of the cry which went round. What happened? The T.U.C. immediately came into the open and made a public statement—a statement to the world. They said, "Although the Government has been changed, the interests of the country stand pre-eminent so far as we in the industrial workers' movement are concerned. So long as the Government play the game we shall give to this Government—although we do not like it—the same support as we gave to our colleagues when they occupied the Government Benches."

During the last two or three weeks, when urges have been made from several industries and several parts of the country to declare for industrial action to fight against the proposed cuts in the social services, the Trades Union Congress and the unions of the country have again advised their members, "Take no such action: the correct action is on the Floor of the House of Commons. As soon as ever we mix industrial action to combat anything that takes place in the House, we are sowing the seeds of dictatorship and the breakdown of the State we know at the present time." That is the attitude we have adopted with regard to Her Majesty's Government.

In his speech, yesterday—about a Budget which has been acclaimed by hon. Members who back his party as a wonderful one—the Chancellor possibly did more damage in this country than has ever been done by any Chancellor for very many years past. He stood up yesterday, with his hand on his heart, with his robe of piety wrapped round him, and told us of all the good things he was giving to the poor down-and-outs and the downtrodden.

Mr. Shurmer

He did not tell us what he was taking away, though.

Captain Hewitson

I have in my hand a list of wage rates being paid in a number of industries. I do not think right hon. Gentlemen opposite would dispute them; they are published by the Ministry of Labour. This list gives the wage rate of a number of industries. I have taken from that list 99 industries, and those 99 contain the whole section of the great chemical industry. The average wage in the 99 industries is 120s. That means that the men in those industries are not paying Income Tax to commence with.

If the 1938 inquiry into the cost of living by the Minister of Labour is taken as a correct record, the average family in this country is 3.73. Taking that figure to mean a man, woman and two children, and taking the Chancellor's own statement yesterday, that the cut in food subsidies would mean an extra 1s. 6d. per head, that family will have to pay 6s. There will be 7d. extra on the man's health service stamp, 3s. will be given to him for the second child, which means that he will be 3s. 7d. out of pocket each week.

The Secretary of State for the Colonies (Mr. Oliver Lyttelton)

I do not want- to interrupt the hon. and gallant Member more than necessary, but the 120s. is a basic wage, not an average wage.

Captain Hewitson

I am pleased the right hon. Gentleman has said that. I was hoping that someone from the other side would say something similar, because I have worked it out for another industry. But taking the loss as 3s. 7d. it means that I, as a responsible trade union official, would be entitled to state a wage claim for 1d. per hour in a 44 hour week. I should be entitled to say to the employer, "I am not prepared to take 'no' for an answer." The Chancellor yesterday made statements about the good it was going to do to the lower-paid worker, but I suggest that he looks at his own Department. The grades known as the M grades are on M rates, which are 114s., with very little overtime.

I understand that tomorrow the Chancellor's officers are resisting an application for 6s. a week increase, which would bring them up to 120s., the average of the 99 industries. We are taking the lowest level. The right hon. Gentleman said that is the minimum base rate, and, of course, it is; we make all our applications on minimum base rates. The effect will be that the dam by which we have been holding back for the last two or three weeks the demand for industrial action, the stand made by responsible trade union leaders in this country stopping that industrial action, will be undermined by such statements as that which we heard from the Chancellor yesterday.

Mr. P. Roberts

The hon. and gallant Member said that what was happening was undermining the stand which had been taken against a proposition that matters of this kind should not be dealt with in the House of Commons. I understood him to say that. As I follow his statement, there is now an argument that the lower-paid workers might put in for increases in wages, but that is not undermining the democratic suggestion—

Mr. Shurmer

My hon. and gallant Friend did not say that.

Mr. Roberts

I know, but I am trying to make the point quite clear.

Mr. Shurmer

The hon. Member is twisting it.

Mr. Roberts

With respect, I am trying to help the hon. and gallant Member in his argument. This affects us in Sheffield, as the hon. and gallant Member appreciates, and we have appreciated the stand the trade unions have taken on this matter. What I am hoping the argument is leading to is that political action could continue to operate in the House and questions of wage increases will remain in the industrial field.

Captain Hewitson

I thought I had made myself clear, but evidently I have not. I say again that it is the policy of the T.U.C. and the majority of the trade unions in this country to prevent as far as we possibly can any industrial stoppages organised against anything which may take place in the House. That is the stand we have taken. But we could reach a point where unofficial stoppages could overwhelm us. Pin-pricks here and there can do that, and this Budget has that tendency.

If I may now turn to the tax on petrol and light hydrocarbon oils, I would point out that we have heard from hon. Members the effect that the increase will have on bus fares and transport. In the light hydrocarbon oils the 7½d. a gallon will have a terrific effect upon the paint industry of this country. This is where I come to the question asked by the right hon. Gentleman.

The paint industry has a base rate of 123s. 6d., but the all-in rate, according to the Ministry of Labour figure, is 149s. 2d. That is the all-in rate, the average rate for the industry throughout the country. The average rate throughout the country does not come within the purview of taxation—they are not taxed, and therefore the tax reliefs offered by the Chancellor yesterday do not apply. Using the same calculation of a man, woman and two children as the average family, it leaves that worker approximately ld. an hour on his base rates worse off than he was. The 7½d. per gallon on light hydrocarbon oil means, spreading it over the wage bill, approximately 30s. to 35s. a week for every adult worker.

If a trade union officer at this moment put in an application for 30s. a week increase to the paint industry, especially with the relations we have in that industry—they are of the highest order and have had a joint industrial council for 25 years—they would think that something had happened mentally to the trade union officer. But the Chancellor has put that on the industry.

The price per gallon of paint will go up, and everything we export. The Chancellor may argue that on paint in bulk we get a rebate, but everything we export in machinery and manufactured goods is painted and there is no rebate on that. The extra cost per gallon will be on that and our export commodities will go up in price. The same will apply to the whole of the paint used in this country in building, engineering, motor car manufacturing, and everything where paint is used. It would not be out of place for the workmen in that industry to demand more wages. This argument can be put. If the Government can put this burden on this industry, then the men and women working in the industry are entitled to something from it in their wage packets. That will be an argument in this case, and that will be an argument by the whole of that range of lower paid workers.

I have here a list of the wages councils of the 99 industries. In the case of 35 of them the present wages are less than£6 a week, and in the case of 12 of those they are less than 100s.—and the Chancellor talks about giving relief. He gives relief by putting 1½d. on a loaf of bread.

In many of these industries there is no chance of working overtime; there is no chance of working piece-work; there is no chance of getting more than the basic rate that is being paid. I do not want to excuse my colleagues for what they did when they were in the Government. I have made this point before in this Chamber. This Chancellor and this Government have made the same mistake in respect of the lower grade workers as my right hon. Friends did in the two previous Governments. I do not want to be mealy-mouthed about that. That mistake has been made.

I would suggest that between now and the time we finish the Finance Bill we find some means by which to give some relief to this great mass of lower-paid workers. Moreover, the same arguments can be made in respect of the old-age pensioners and other people whose incomes are on the lower grade. This is my reaction to this Budget: it has been a very orthodox Budget prepared by gentlemen in Whitehall; an orthodox Budget presented in an orthodox way by one who, I would say, is a backwoodsman with a mustard plaster mentality living in a pencillin age.

8.57 p.m.

Squadron Leader A. E. Cooper (Ilford, South)

I have listened with very considerable interest to the speech of the hon. and gallant Gentleman the Member for Hull, Central (Captain Hewitson). He speaks for an industry with which I also am very closely concerned and, to a degree, I should like to reinforce what he has said.

In the first place, I have never been able to understand why successive Chancellors of the Exchequer, whenever they have made an increase in petrol duty, should by the same token immediately increase the duty on light hydrocarbon oils. It has no basis in logic, but its effect on productive industry is very considerable. All that the hon. and gallant Gentleman has said in connection with the paint industry is also true of the greater chemical industries, and this increased duty undoubtedly will have a serious effect upon our costs of everything in which these oils appear and which are to be exported.

The hon. and gallant Gentleman is at least consistent in that he made the same speech last year and the year before on this subject, but I am afraid that we have had a very great deal of synthetic indignation from other hon. Members on that side of the Committee today who, on the two previous occasions when increases such as this were made, made no protest whatsoever. Increases in petrol duty were allowed to go quite unchallenged by hon. Gentlemen opposite when they formed the Government, and it really will not do for them to come to this Committee on this occasion this year to make their protests when they should have taken action themselves at least two years ago.

They should remember also that the further imposts it has been necessary for my right hon. Friend to make this year are very largely the result of the mismanagement of the past six years, and hon. and right hon. Gentlemen opposite will not be able to ride that one off. We have had a great deal of nonsense talked by hon. and right hon. Gentlemen opposite, especially by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), on this question of food subsidies and broken Tory promises.

Let us see just how far the Tories have broken their promises. In 1950 we published a document called "This Is The Road," upon which the Conservative Party fought that General Election, and in which we said quite frankly: In any approach to the problem of food subsidies made necessary by the urgent need to improve the purchasing power of the£we shall be borne by this pledge: There will be no reduction which might influence the price of food without compensating increases to those most affected. We then went on to say: These compensations will take the form on the one hand of larger family allowances, pensions and other social benefits, and on the other of reductions of taxation, direct and indirect, that will increase incentives among the mass of the people. Maybe hon. and right hon. Gentlemen opposite do not bother to read Conservative Party manifestos, but if they do not it ill-becomes them to come here and accuse us of broken pledges.

Mr. Wilfred Fienburgh (Islington, North)

Would the hon. and gallant Gentleman care to list the reductions in indirect taxation which will operate under this Budget?

Squadron Leader Cooper

That is a fatuous interjection. The Conservative Party have formed the Government of this country for about 19 weeks. There will not be a General Election for about five years, and I suggest that he asks that question nearer to that day.

Now let us come to the General Election of 1951.

Mr. Norman Dodds (Dartford)

When Lord Woolton said it.

Squadron Leader Cooper

This is the popular edition—

Mr. Dodds

It is not popular now.

Squadron Leader Cooper

It was popular enough to get us into power.

Mr. Shurmer

The Liberal Party got the Tories into power.

Squadron Leader Cooper

Whatever the reason, and however unhappy hon. Members opposite may feel, they should remember that we are sitting on this side of the Committee now.

The popular edition was called "What The Conservatives Will Do." It was published in many millions and circulated to constituencies all over the country. In dealing with food subsidies it finished by saying: Later we hope to simplify the system and by increases in family allowances, taxation changes and other methods, to ensure that public money is spent on those who need help and not, as at present, upon all classes indiscriminately. Is there anything wrong in that? We are accused by the party opposite of promising the world, of promising a Utopia. We concluded this document by saying: There in outline is our programme. The Conservative Party offers no short cuts to prosperity or comfort. We tell the country plainly that hard work and sacrifices all round are needed. What we do promise is that we shall clear up the legacy of muddle left by the Socialists and make work and effort more possible and more worthwhile.

Mr. Douglas Jay (Battersea, North)

rose—

Squadron Leader Cooper

The right hon. Gentleman will be intervening in a moment, and he may not like the answer I may give to the point I believe he wants to put.

Let us see how well right hon. Gentlemen opposite dealt with the problem of food subsidies themselves when they were the Government of the country. In 1948–49 subsidies had risen to the figure of£485 million, which was equivalent to nearly half the total Government expenditure in 1938–39. In 1949–50 subsidies would have risen still further to£568 million if Sir Stafford Cripps had not limited them to the ceiling of£465 million. In the following year Sir Stafford Cripps reduced the ceiling again to£410 million. In other words, the late Socialist Government reduced food subsidies in two years by no less than£158 million without any compensatory payments whatsoever.

Mr. Jay

Perhaps the hon. and gallant Gentleman will now let me intervene, because his statements are entirely incorrect. The difference between the£465 million and the£410 million was not in food subsidies proper but in fertiliser subsidies and various other supplementary subsidies of that kind. I wanted to ask this question. I am sure the hon. and gallant Gentleman will agree that Lord Woolton is a most important member of the Tory Party. Would he, therefore, also read out what Lord Woolton said in his very important election broadcast?

Squadron Leader Cooper

May I say to the right hon. Gentleman that£410 million was the total figure of food subsidies put into the national Budget by Sir Stafford Cripps, and he cannot ride off that by saying that it was for this, that or the other. The figure was£410 million. The figure before that was£465 million, and there was a cut imposed by the late Labour Government of£55 million, which was followed immediately by increased prices of many foods. So far as the famous broadcast is concerned, I would suggest to the right hon. Gentleman that he should read the whole of the broadcast and study the Conservative Party manifesto.

I want now to say a few words in connection with petrol. I am very sorry that my right hon. Friend has found it necessary this year to raise the petrol duty again, and I think that regret is shared by many hon. Members. Those of us who represent London divisions have been impressed by the strength of public opinion on the recent increase in fares—not the fault of this Government but because of the faulty legislation of the Socialist Government—and I should like to put to my right hon. Friend a very serious suggestion on this matter.

It may well be that he needs this extra money to assist in the fight against inflation. Perhaps it may be considered on analysis that the private motorist can support this extra 7½d., although it is a very great burden, and I suggest that the re-introduction of red petrol or some other means should be found to allow public transport to have petrol at a cheaper rate. I do not think that it would cost very much money, particularly when we are to have a fairly substantial surplus, but I think that it would be a step against possible further increases in fares, and I seriously ask my right hon. Friend to consider it.

My final word is to reinforce that speech made by my hon. Friend the Member for Morecambe and Lonsdale (Sir I. Fraser) on the subject of disability pensions. I think that this class of people has been very badly misused over the past six years. There are many anomalies in taxation problems in connection with war widows and so forth which, I think, demand the fullest investigation at this time. Having regard to the new climate which now exists in the Treasury, I hope that it may be found possible to bring about further radical changes which will be to the benefit of these people.

9.8 p.m.

Mr. James Simmons (Brierley Hill)

I am sorry that the hon. Member for Morecambe and Lonsdale (Sir I. Fraser) is no longer in the Chamber, because I feel constrained to say a few words in reply to some of the statements which he made during his speech. He went out of his way to be very nice to his Front Bench, after stressing the fact that he was going to make a non-political speech. In the same breath, he inferred that the 10s. increase in the basic pension more than compensates the 100 per cent. disabled men for the economic loss they will suffer as a result of the Budget.

I am not altogether surprised, because I read a letter by the hon. Gentleman in the "Legion Journal" in which he made it clear that what he said as the President of the British Legion would not necessarily influence his action on the Floor of the House. He said: The time may come when I may be a judge instead of an advocate, when the issue is voted upon in the House of Commons. He indicated that he might even be constrained in certain circumstances to vote against the Government if they refused to accept the plea for an increase in the basic pension.

The British Legion has been campaigning, under the hon. Member's leadership, for a doubling of the basic pension of our disabled ex-Service men, of which I am one, in order to meet the existing economic situation. Yet that hon. Member now comes to the Committee and defends his Front Bench for having given a 10s. increase to meet this very grave and aggravated economic situation.

Sir I. Fraser

I balanced what I said. I said that the increase was not adequate, but I also gave thanks where I thought thanks were due. The hon. Member was Parliamentary Secretary to the Ministry of Pensions in the Labour Government and he will remember that I thanked at least four Socialist Ministers for giving about one-tenth or one-twentieth of what has now been given by the Budget.

Mr. Simmons

I do not want to go into details about what the Labour Government did for the ex-Service men, because that would take far too long. However, the Labour Government did it for the ex-Service men who had the greatest need. Some hon. Members will be rather surprised to see what has actually been done in relation to the 10s. increase.

Reading about the 10s. increase, the general public will think that the ex-Service man is beginning to live opu- lently. The truth is that out of 700,640 war pensioners only 51,517 will get the 10s. increase, 144,222 will get only 2s. a week, 235,888 will get only Is. a week, and 35,000—fewer than 20 per cent.—will get nothing.

Yet all these ex-Service men will have to meet the increased food prices. They will also have to pay more to see their favourite football team—and they like to see a football match. As the hon. Member for Morecambe and Lonsdale knows, all these ex-Service men have to pay the National Health Service charges not only for themselves but also for their families, and the increased fares will particularly hit the badly disabled ex-Service men, except those who have cars as a result of the action of the Labour Government. The 10s. all-round increase takes no account of greatest need.

A great opportunity has been missed because, as the result of reducing food subsidies, money was available for other purposes and war pensions could have been dealt with in a more comprehensive way. For instance, the gap between other ranks and officers could have been narrowed. After all, the limbs of a private soldier are as valuable as the limbs of an officer, and there is no case for a differentiation in the pension.

It should be borne in mind that the Chancellor claims to have given£10 million, but£2,500,000 is the amount by which this year's pensions' Estimate has been reduced. That brings the£10 million down to£7½million. The old age pensioner and the limbless man of over 50 years of age would have some consideration if this matter had been left to a Minister of Pensions with a policy to meet the needs of the people for whom he is responsible.

I myself have been minus a limb for many years past. In the early days I laughed at it and got about quite easily, but 34 years of putting the weight of the body on to the one sound limb has made it an unsound limb. There is a case for an increase in the pension of the limbless ex-Service man over the age of 50. I was told by the Minister only this week that it would cost only£1,115,000 a year. I feel that the 10s. increase on the basic rate of pension was just the easiest way out of dealing with the problem and the flashiest way of throwing a sop to the ex-Service man.

What I am concerned about is what the Legion will think about its President, who in this Committee gives support to these proposals while his demands in the country have been so much in excess of it. I cannot let pass the statement made by the hon. and gallant Member for Ilford, South (Squadron Leader Cooper), who condemned the treatment of ex-Service men by the Ministry of Pensions during the past six years. I had the honour and privilege of serving in the Ministry as Parliamentary Secretary for nearly three years. The hon. and gallant Member talked about a new and fresh wind blowing through the Treasury. I found a new and fresh wind blowing through the Ministry of Pensions from the time that the Labour Government took over control.

Squadron Leader Cooper

The hon. Member, I know, was a Minister in the Ministry of Pensions in the last Government. He had a case of mine of a man who still has shrapnel in his buttocks from World War I. He had reached the age of 60 and his general health was failing in direct consequence. The Ministry for which the hon. Member was responsible would not give that man any pension, saying his complaint was due to advancing years. The shrapnel is still there.

Mr. Simmons

I promised I would sit down at 9.20, and if we are going to go into individual cases I may very well exceed that time. The hon. and gallant Member should know that the Minister of Pensions is bound by the advice of his medical officers, and the medical officer is far better able to judge the condition of a man than a Member of Parliament or even the man himself.

I must say a final word about the general position. This is a clever Budget in the political sense. It is a "Spot the pea-under-the-thimble" and "Find-the-lady" Budget. But many of those who are busy counting their gains will get a crack on the skull before they have finished. It is a delayed-action bomb Budget. While dancing over the economic minefield, rejoicing in increased pensions and Income Tax rebates, the revellers are likely to step on many unperceived booby traps. Some may not explode until May or June when the local elections are held. The spiv is clever, but no housewife will buy laddered nylons from the same one twice.

9.20 p.m.

The Minister of State for Economic Affairs (Sir Arthur Salter)

We are only about half way through this debate, but what is presumably the main criticism of the Opposition has been deployed this afternoon in the weighty speech of the former Chancellor of the Exchequer. I propose to deal as far as I can with some of his principal points. Many important and interesting questions have been raised in other speeches, and I hope they will be dealt with tomorrow and on Monday. In the meantime, I shall turn principally to what the right hon. Gentleman said this afternoon.

I shall not be able to answer all his questions. It takes much less time to ask questions than it does to answer them. Moreover, I cannot dispose of as much time this evening as the right hon. Gentleman did this afternoon. For that reason, as I cannot cover all his questions, I must, before setting out to sea, lighten the ship of some of its load.

Mr. James Hudson (Ealing, North)

Get rid of the pilot.

Sir A. Salter

The late Chancellor asked questions about the plan drawn up at the Commonwealth Finance Ministers' Conference, covering, as it did, all sorts of questions as to the present and prospective pattern of trade. They will be dealt with tomorrow by my right hon. Friend the President of the Board of Trade. He will also deal with the questions, equally specific and penetrating, asked about the Purchase Tax and the "D" scheme. In the third place, questions with regard to cuts in civil expenditure will be dealt with later in the debate.

I now come to the questions which, so far as time permits, I will try to deal with myself. The right hon. Gentleman asked me about the Excess Profits Levy and its probable effect upon reserves and undistributed profits. He addressed his question to me personally because he said that I had criticised previous proposals as to taxation of profits because of their effect on the reserves of companies. That is quite true, but I would point out two things.

In the first place, when I was criticising the effect of certain taxes upon the reserves I was referring to taxation of all companies, whether they were more or less prosperous than in the past, whereas this Excess Profits Levy only takes a defined proportion of the excess profits in relation to a defined standard. In the second place, quite obviously, although the Excess Profits Levy will fall for technical reasons directly on the reserves, it must have an effect upon dividends and to that extent come out of the fund which would otherwise be devoted to paying dividends.

In both those respects what I have said in the past has no reference to the particular question which the right hon. Gentleman raised today, but as he has asked me that question I would like to ask him his own attitude towards the Excess Profits Levy. Is he for it, or is he against it? Very prudently he prefaced his remarks by saying that he proposed to put them in an interrogatory form and not from the party point of view. However, he did not go very far with his discussion of that question because, as he rightly said, it does not very much affect the balance of revenue and expenditure with which we are now dealing because it is not contemplated that it will bring a substantial amount of revenue into this year's accounts. I will therefore pass from that subject to the next subject on which he asked me questions.

The right hon. Gentleman asked some specific questions about the change in the Bank rate. His questions were to some extent covered and answered by the interesting speech of my right hon. Friend the Member for Blackburn, West (Mr. Assheton), but I would like to add a little to what he had to say. The right hon. Member for Leeds, South (Mr. Gaitskell) asked what will be the effect of interest rates generally. Well, short-term rates are bound to rise to some extent. This is already reflected in the buying rate for prime bank bills which has risen by 1½per cent. to 3 per cent. and in the deposit rate which the clearing banks pay for money; this has already gone up from 1½per cent. to 2 per cent. I expect the Treasury bill rate will rise sympathetically, but obviously it is quite impossible to say at what level the tender rate will eventually settle down. But too much should not be made of this point.

The disadvantage of the higher borrowing rate for the Government will, in our view, in the end be more than offset by its counter-inflationary effect and by the general benefit to the economy which will result from a more realistic monetary policy.

Mr. Hugh Dalton (Bishop Auckland)

Is the right hon. Gentleman able to give us any estimate as to the extent to which the rise in the Bank rate will raise the total of the service of the floating debt?

Sir A. Salter

No, Sir. For the reason I have just mentioned, we do not know at present at what rate the tenders will settle down. But we have a large surplus which we are devoting to ensuring a counter-inflationary effect and we are convinced that the counter-inflationary effect of a rise in the Bank rate will give much better value for money than the use of the same amount of a surplus for that purpose. That is why we think, as I say, that we shall get a much greater benefit than its cost from this act of policy. It will give us the benefit of a more realistic monetary policy, particularly from a closer appreciation by everybody of the vital question of costs and prices.

As regards the long-term rate, the effect is even more difficult to predict with any precision at this stage. Initially the market has today sagged somewhat.

Mr. Dalton

It has sagged ever since the party of the right hon. Gentleman came into office.

Sir A. Salter

Not only since we came in. I do not know whether the Committee has in mind the rate of "Daltons," as they are called, which sagged long before we came in. Initially the market has sagged somewhat, but I do not think this need be regarded as more than a preliminary adjustment of prices. It is not necessarily an indication of the level at which market prices would settle down. It is therefore too early to say anything about the rate at which the Government will itself lend.

There is, I suggest, some danger that if we persue these isolated aspects of the increase in the Bank rate we shall lose sight of the real purpose of the operation as a whole.

Mr. Jay

May I ask whether the right hon. Gentleman can answer a very specific question which my right hon. Friend put today; that if there is a further rise in the Public Works Loan Board rate as a result of this latest change, will there be compensating increases in the housing subsidy, as there have been in the previous Budgets? That is quite a precise and simple question.

Sir A. Salter

It is a contingent and conditional question. It is, as I said, too early to estimate the rate at which long-term lending will eventually reach its level. It is even more premature to make estimates as to what we should do in different possible contingencies.—[Interruption.] I must continue my argument. It is an integral part of our strategy to deal with the balance of payments by establishing a realistic credit policy in our domestic affairs. In particular, it should induce a more cautious approach to the financing of capital investment—including unnecessarily large stocks—on the part of everybody; and it should, therefore, reinforce the other steps towards the same objective of reducing demand for investment goods at home and thereby freeing for export a greater proportion of the output of those goods.

The use of the Bank rate has been criticised as indiscriminate in its effect. But, as my right hon. Friend said yesterday, efforts to use the other methods have failed for a long period against the overwhelming monetary demand. The result of dearer money is that the industrialist who is doubtful of being able to "carry" it in his costs draws back. This relieves the pressure upon the order books of firms making capital goods. Delivery date is not less important than price for an expansion of exports. It is here that marginal investment is squeezed out. There is undoubtedly, especially in plant and machinery, a good deal of "speculative investment" and also investment which, though useful, is not immediately necessary for the efficiency of production. These types of investment will be checked, and ought to be checked. The resources which they are monopolising are peculiarly suitable for an early expansion of export of investment goods.

Before I pass from the question of the Bank rate I should like to remind the Committee of the assurance given by my right hon. Friend yesterday. He said: I would console the Committee by reminding them that the Bank rate is a flexible instrument, and I give this assurance it will be watched to ensure that its operation brings about conditions helpful to the strength of our economy."—[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1285.] That is all I am able to say on the subject of the Bank rate at this moment.

I should like to turn to one or two questions the right hon. Gentleman asked where he has been unable to understand some of the figures that we put before the Committee. He asked, in the first place, about the relation between the total of£600 million for the successive cuts in imports which have been announced—£350 million in November,£150 million in January and£100 million announced yesterday—and the fall in imports of about 10 per cent., or a little over£300 million. The answer to that is quite simple. The£600 million is the reduction on the programmes of imports as we were confronted with them when we came into office. The 10 per cent., or over£300 million, is an economy by comparison with the imports in the year 1951 as a whole. That does not mean that there is anything unreal about the£600 million reduction, because in the latter part of 1951 the rate of imports had risen approximately to the same level as the new programmes.

The second point about which he had some difficulty was the reduction in investment. If he will study the Chancellor's speech he will see that we have a fall of over£150 million in the rate of stock-building of imported commodities. That is not a fall of that amount in our stocks. It is a fall by comparison with the stock-building of last year. In addition, there is a further fall of at least£100 million in fixed investment and stockbuilding of home-produced goods combined. The total fall in investments of all kinds is, therefore, over£250 million. That was the figure for which the right hon. Gentleman was asking.

The right hon. Gentleman went on to make some complaint against my right hon. Friend for not having been rather more precise in detail in the particular items in his assessment of the prospective distribution of our economic resources. I think myself that my right hon. Friend was extremely wise not to be so detailed and so dogmatic in his assessment of particular economic developments as his predecessors have been in the past. I think we have had too many definite and dogmatic prophecies in Economic Surveys and in Budget speeches—

Mr. Emrys Hughes (Ayrshire, South)

And in election promises.

Sir A. Salter

—which, in the event, have almost invariably been falsified. By comparison with that, my right hon. Friend was much more cautious, and, in particular, I think it is well to recall, seeing that there has been a great deal of publicity about it, what he really said about the prospective level of civilian consumption. What he said exactly was this: We must work for an increase in the volume"— that is, in the volume of production— of about the same or more than last year"— that is,£250 million. Then, later on, he said: It follows that even if we attain the same increase in production as last year no more than the same amount of resources as last year can be spared for the ordinary civil consumer at home."—[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c 1283 and 1285.] Well, that is a conditional statement about a maximum which is very different from an unconditional prophecy of a future fact. I think my right hon. Friend was very wise and prudent in making his statement in that form, and, if I wanted to be confirmed in my view that more dogmatic and definite statements are unwise, I could not do better than go back to the former Chancellor's Budget Statement of April last. I am the more entitled to recall this, because of the comments I made at the time in the same debate.

The Committee will remember the way in which the right hon. Gentleman built up a rather elaborate series of different items in a total estimate of£150 million of what he called the inflationary gap. Commenting on that, almost immediately after, I pointed out that quite obviously neither he nor I nor anyone else could be sure within a wide margin of error of the accuracy of each of the large number of items which added up to that convenient total. I expressed the opinion that he had probably jumped at what he thought was the total extra tax he could impose, and, having arrived at a figure of£150 million, he added up particular items in such a way as they conveniently totted up to that total. I believe that was true.

I also said that I was not prepared to say that the amount of inflation in 1951 would be very different to the amount which he expected because I thought that his mistakes in one direction would very likely be cancelled out by two mistakes in another direction. I said, for example, that we should develop a greater overseas deficit than he had reckoned on and a slower rate of re-armament. Later, we saw that both these expectations were unhappily, only too true.

Indeed, if we look back at the right hon. Gentleman's prophecies, we find that in practically every major item he was not only wrong, but widely wrong. I will give only two major instances. I had said that I expected the overseas deficit would be greater than the amount he had calculated, which was about£100 million. It was, in fact, over£500 million. And when he came to calculate his Budget surplus, he reckoned on an abovethe-line surplus of£39 million. It was, in fact,£360 million. These are only two instances of the extremely dangerous method of purporting to reach a precise policy by arithmetical conclusions from the addition of a number of separate items, hardly any one of which, in the nature of the case, can be even approximately accurate.

Mr. Glenvil Hall (Colne Valley)

Does that argument mean that the right hon. Gentleman is suggesting that no estimating of any kind should ever be done?

Sir A. Salter

No, Sir. I will tell the right hon. Gentleman exactly what I think we should do and have done. I think we should fortify our minds by carefully considering every relevant argument and factor. Having done that, we should then arrive at our conclusion, as my right hon. Friend said, as an act of judgment. That is what we have done, and that is why, I think wisely, we have not been more dogmatic and definite in these particular figures.

These are some of the main points to which I wish to give some kind of answer to the right hon. Gentleman. There is one other important question to which I will refer a little later—the balance between the burdens and reliefs proposed in this Budget. I think these and the other particular points to which I have referred are best set against the background of the Government's general policy. The Budget supplements the emergency action already taken to deal with the balance of payments crisis. It is, of course, this crisis which now dominates the whole situation.

The Committee will recall the£350 million programme of cuts in November, the further£150 million as part of the Commonwealth Finance Ministers' plan in January, and the further£100 million announced yesterday to which I have already referred. These measures, though the actual cuts operative this year are only a little over half by comparison with 1951 as a whole, are bound, of course, to cause hardship and loss and to aggravate the problem of domestic inflation.

No one who considers the facts given by the Chancellor yesterday can doubt that these cuts are necessary, but we should not underrate either the hardship or the loss, or the restriction of external trade which they must involve. It is well, I think, that as these effects become evident in the months to come, we should all realise what would have happened if this action had not been taken and if the deficit in our balance of payments and the drain on our reserves had continued as in recent months and if the situation had been allowed to drift.

It is easier to discuss this now because we have taken measures to see that the situation will not be allowed to drift. Had it been allowed to drift, our reserves would have been exhausted in a very short time. We no longer have Marshall Aid to bridge the gap between what we earn and what we spend. We might in that case not have been able to buy enough food for bare sustenance or enough raw materials to keep our factories working fully. There would then have been extending—and rapidly extending—areas of semi-starvation and of mass unemployment. That is by far the greatest danger of large-scale unemployment which has menaced this country in recent years; that is what we are preventing by these austere emergency cuts and the other measures which have been explaind to the Committee.

None of us believes for a moment that the real and permanent solution of our problem is to be found in austerity and restrictions. It must be found in increased production and exports—in expansion. But in a crisis' such as we now have it is only cuts and restrictions which operate quickly enough. It is only the first chapter. Yesterday's announcement with its new cuts added another page to that chapter. But it also opened the next and more hopeful chapter of increased production and exports encouraged by new incentives.

The real answer, in the long run, to the balance of payments difficulty is not to cut out imports, but so to purge and strengthen our economy that it keeps in balance of itself. The first conditions of raising our exports to a level at which they will pay for our essential imports is to arrest inflation, to prevent an easy and soft home market from absorbing an undue proportion of our resources, and allowing prices to rise too high to meet external competition. That is the inescapable relation between the internal and the external economy. There never was a country less capable of basing its policy on a close economy and living as an isolated and insulated community than this little congested Island of 50 million with few raw materials, except coal, and not more than about half the food we need to feed our population.

Mr. Roy Jenkins (Birmingham, Stechford)

If the right hon. Gentleman is now saying that the great virtue of this Budget is the remarkable change from the soft economy left by the Labour Government to a new purged economy, as I think the phrase is, will he explain how that is achieved by a Budget, the effect of which is to give away£28 million?

Sir A. Salter

I will answer that in a moment. The Budget represents the internal aspect of our policy in this problem. Its leading ideas may be simply stated. The surplus, as estimated before yesterday is left, with a very small subtraction, to counter inflation. The new revenue this year from new taxation and savings through the reduction of the food subsidies are all devoted to relieving the worst hardships and injustices that have arisen with inflation and rising prices and to providing incentive tax concessions to workers.

Here are the two aspects of the Budget. I should like to comment first on the use of the surplus in relation to inflation. Is it necessary and is it sufficient? And here I will answer the hon. Member for Stechford (Mr. Jenkins). Some will perhaps say that, after having surrendered in this current year a realised surplus of between£300 million and£400 million for the extinction of debt, we might have used at least a substantial part of this anticipated surplus of over£500 million to relieve a people burdened both by excessive taxation and the higher cost of living.

I would ask such critics to remember that all the new measures we are necessarily taking to deal with the balance of payments crisis—the reduction in imports and the increase in exports—are of course inflationary in effect because they reduce what is available for consumption without a corresponding reduction in spending power. This is an additional factor to the inflation arising from increases in wages and incomes over production and an excess of investment over savings. I do not think that it can be reasonably contended that it was not necessary to do as much as we are doing to counter inflation. We should have betrayed our trust if we had squandered our surplus.

But is what we have done sufficient? Should we, as some have urged, have increased the surplus by net additions to revenue as well as by economies? I would ask such critics to consider the following points in their cumulative effect.

We are leaving the surplus practically intact. Indeed, if we make some allowance, as we might reasonably do, for the considerable deflationary impact on industries this year of the£100 million contemplated next year from the Excess Profits Levy and the Profits Tax we might be said to be in effect even adding to the surplus which acts as a counter-inflationary force.

The surplus is£538 million above the line on a conventional basis. This compares with£39 million budgeted for last April. The above the line surplus is£687 million under the alternative classification introduced in 1948 by Sir Stafford Cripps to distinguish more accurately between current and capital items. But what is more striking, there is a small surplus even of all receipts over all outgoings, capital and current alike. This contrasts with a deficit in last year's Budget of£457 million.

Next there is a cut in civil expenditure, about which questions have been asked of my right hon. Friend the Chancellor. That will be dealt with later in this debate. But there is a cut, a definite cut, even in terms of money in spite of higher prices. This means that over the whole of this range we are more than absorbing inflation. Then there is the cutting down of civil investment, partly by physical allocation and partly by financial measures, to an estimated extent of£100 million in real terms. In this connection a very important factor is the increase in the Bank rate from 2½per cent. to 4 per cent. to which I have already referred.

The same critics should also remember that in deciding to give incentive tax reliefs in the lower brackets we have not, 'heavily taxed as we are, hesitated to impose extra taxes to provide the means.

Mr. Donald Chapman (Birmingham, Northfield)

What about those who are not paying tax?

Sir A. Salter

It should also not be forgotten that the real weight of taxation is increased without change in the rates by the effect of higher prices; because a man whose income only rises in proportion to increased costs comes into a higher income bracket. A substantial part of the concessions we are making on the lower income ranges is to correct this injustice. We must further remember that we are now in a condition which is not one of pure and unmixed inflation. We have inflation in large parts of the economy, side by side with large patches of deflation in some other parts. Moreover, some of the action taken by Commonwealth countries to correct their own balance—such as Australia's restriction on imports from us—will be deflationary in their effect here.

Lastly, the whole tenor and purpose of the changes in taxation and expenditure is to give new incentives to effort instead of subsidies to rich and poor alike, which disguise the real cost of expensive imports from abroad. In a word, we are making economic motives and inducements the servants and allies of public policy and the public interest, instead of their enemies.

For those reasons, I think it can be justly claimed that if what we have done about the surplus is necessary it is also sufficient. The right hon. Member for Leeds, South, said that there was a curious contrast between the first part and the last part of the speech of my right hon. Friend, the Chancellor. He said that the first part was very grave—and I gathered that he agreed with the gravity of the situation which was described—and he suggested that at the end the Budget was rather soft. I should like to know what are the views of the right hon. Gentleman and his party. Is this Budget too tough, or is it too soft? Having accused my right hon. Friend of an inconsistency the right hon. Gentleman was guilty of a much greater inconsistency himself. He said that we could have given our concessions without reducing the food subsidies. I do not know how he was going to make up his sum, unless he took a great deal from the surplus and so made the Budget softer.

Mr. Jay

The right hon. Gentleman has issued a challenge. We see no reason for the giving of tax relief of£50 a year to a Surtax payer living wholly on investment income. Will he tell us, on the grounds of incentive and the checking of purchasing power, what is the purpose of that bonus to the Surtax payer?

Sir A. Salter

I will come to that in one moment. We have given no relief whatever in relation to Surtax. All the relief is to the lowest slice of income, which is common to all.

Mr. Jay

rose—

Sir A. Salter

I am sorry, I cannot give way again. Incidentally, the Surtax payer, in addition to having what I explained just now as an automatic increase in the real weight of taxation without change in his real income status, has that a second time over in the Surtax rates, and we have given no relief whatever for that.

I turn now to the question—

Mr. R. Jenkins

rose—

Sir A. Salter

No, I am sorry, I cannot give way any more. I now turn to the question of the reduction in the food subsidies and the reliefs from taxation, about which the right hon. Gentleman made so much play. He accused the Chancellor of sleight of hand in presenting his case on this question but I believe the Committee did not fail to notice at the time that the right hon. Gentleman really was guilty of rather more of what he accused my right hon. Friend of. In the first place, he made this very grave error. If we follow all his calculations we find he has forgotten the family allowances.

Mr. C. R. Hobson (Keighley)

Which are subject to tax.

Sir A. Salter

He has forgotten the family allowances. In the second place—and here I think the mistake was excus- able, but it was a mistake—he did not realise how the 1s. 6d. increase in food prices to which the Chancellor referred covered also the rise in prices outside the effect of the reduction in the food subsidies—that is to say, there would have been about 3½d. to have been added even if we had kept the ceiling exactly where it was at£410 million. The increase that is due to the reduction of the ceiling to£250 million is equivalent not to Is. 6d. per head per week but to 1s. 2½d.

Mr. Jay

It must be 1s. 8½d.

Sir A. Salter

No. Those two errors in fact falsify all the right hon. Gentleman's calculations and for that reason I do not propose to follow them further. I do not pretend that there are no workers whatever who would not pay slightly more in increased prices of foods than they would get in the form of reliefs of taxation—

Mr. H. A. Price (Lewisham. West)

Including old-age pensioners?

Sir A. Salter

But judging these proposals we must in fairness look at them as a whole. Let us see what we have done. We have brought in£160 million from food subsidies,£66 million from an increase of petrol tax and£10 million from increased postal charges. We have devoted£80 million to improving the social services and£180 million has been given in Income Tax relief, to the increase in the personal allowance which benefits primarily those at the bottom of the scale and increases in the earned income relief and in the graduation—

Mr. Emrys Hughes

On a point of order. The right hon. Gentleman has several times said that he has no time to reply to questions. Is it in order for the right hon. Gentleman to continue his speech tomorrow as there is plenty of time?

The Chairman (Colonel Sir Charles MacAndrew)

This debate continues tomorrow and on Monday.

Sir A. Salter

Let me just say—

Mr. Hughes

Do not be a coward.

Sir A. Salter

If this Budget distribution fails in strict justice in any respect it is that whereas we have drawn the resources from all classes of the community we have not, as I confess I wish we could have afforded to do, carried the earned income relief well into the professional and managerial classes.

Several Hon. Members

rose—

The Chairman

If the right hon. Gentleman does not give way, hon. Members must resume their seats.

Sir A. Salter

In conclusion, this Budget is, I believe, just. It is a courageous Budget and an incentive Budget and, as my right hon. Friend said yesterday, it has the inestimable advantage of combining both realism and hope.

Chairman to report Progress, and ask leave to sit again—[Mr. Oakshott.]

Committee report Progress; to sit again Tomorrow.