BUDGET PROPOSALS

HC Deb 13 March 1952 vol 497 cc1575-619

3.44 p.m.

The President of the Board of Trade (Mr. Peter Thorneycroft)

I think it will be for the convenience of the Committee if I indicate at the outset what is the range of the subjects I want to talk about. My speech can really be divided into two parts. I want to say, first of all, something about the Purchase Tax and the Utility arrangements, and what I propose by way of a new Utility scheme, both for the convenience of hon. Members who wish to intervene on the debate on that subject and also for that of the traders who are affected.

Second, I want to turn to the impact of the Budget on trade generally; to make reference to matters which we discussed earlier with relation to Australia, to Europe and to our export trade. I shall compress my remarks into as short a space as possible, but the Committee will realise that this is a rather wide range of topics to have to cover in a single speech.

Let me start with the question of Purchase Tax and Utility. I want to take the opportunity of explaining why it is that we want to tackle this problem at this particular time, and I shall seek to persuade the Committee that it was a problem which really would brook no further delay, and that the solution which we put forward is the right one. I do not think that anybody—and there are many in all quarters of the House—who is familiar with this very complicated field of Purchase Tax, Utility, and price control would imagine that it was a simple matter.

The complexities, and the handicaps that go with them, are not the fault of anybody of this Government or the previous Government. They are due to the hard logic of events, and the attempts which have necessarily been made to adapt a system which was originally designed for limited purposes in war to the much broader and more expanding purposes of peace.

My predecessors at the Board of Trade were as conscious of these problems as I am. The ex-Chancellor of the Exchequer appointed a Committee under Sir William Douglas to inquire into them, and, I think, whatever view we hold about the issue, all of us would like to pay a tribute to the energy and care with which that Committee directed its mind to these difficult problems.

The Committee was certainly very well qualified to consider them. Among others, it included the General Secretary of the National Association of Unions in the Textile Trade, Mr. Heywood, who, incidentally, is also a member of the Cotton Board; and on the consumers' side there was Mrs. Allen, who is a prominent member of the Women's Cooperative Movement. This Committee, having gone into all these matters, arrived at a unanimous Report. I want to say at once that the Government, broadly, accept the verdict of that Committee. We intend to implement the remedy which it suggests.

I will now refer to three specific problems to which anyone who confronts this issue has to find some answer. One group of problems is concerned with our exports; another group is concerned with our imports; and a third is concerned with the standards of quality of the goods offered to consumers in this country—to the men and women who go into shops to buy articles.

I shall deal with the export problem first of all. It can be quite simply stated. It is that, under the old Utility scheme, an important range of goods, particularly in the textile field, were not made at all for various reasons. Some of them fell in what was the "blind spot" range, which is above the top Utility price, where articles suddenly move into the sphere where they bear the whole weight of taxation. In such circumstances no one would buy them. Of course, in those circumstances, equally clearly, no one would make them.

Some others fell within the range in which, though they were comparable in price, they were excluded for technical reasons from the Utility scheme. There were new forms of fabric or new constructions which, for some reason or other, despite all the ingenuity of everyone who looked at them, could not be brought in. Certain types of the new rayon cloths fell into that category.

Recently, I was for a short time in Lancashire and Yorkshire. I was impressed by the weight of opinion which was expressed to me on these problems. I was satisfied that these were no imaginary complaints. It was—and I can say this quite fairly—it was the common view of everyone who spoke to me, whether employer, or whether a member of the trade unions, that something had to be done about this problem quickly—that the existing situation was frustrating and distorting the whole of the textile industry.

Miss Alice Bacon (Leeds, North-East)

Is the right hon. Gentleman not aware that he has received representations from the biggest firm not only in Yorkshire but in the country—Montague Burton Ltd.—that it is absolutely opposed to the abolition of the Utility scheme?

Mr. Thorneycroft

I am not saying that opinion is unanimous throughout the country on this matter at all. What I was saying was, and I repeat it, that when I visited Yorkshire and Lancashire a short time ago opinion was unanimous on the employers' side in the cotton and wool textile industry and on the side of the unions that something had to be done about the existing distortion and frustration of the textile industry, and it was put to me as, in their view, the most urgent problem which the President of the Board of Trade had to tackle.

The second group of problems concerns imports. For a fairly obvious reason it is not possible, with a few exceptions, to certify a large range of imported goods as Utility. In so far as the Utility specification concerns cost, nobody knows what was the cost of manufacture, and in so far as it is based on a construction test, it is very difficult to say exactly what the construction was in the country of origin. Moreover, it would be a vast administrative task to try to categorise the whole range of articles imported into a great trading country such as this.

Since they were not Utility, they could not be tax free, and in the result, the British manufacturer had the tax advantage of either 33⅓ per cent. or 66⅔ per cent. That was a direct breach of nearly all our trading obligations; not just a direct breach of the General Agreement on Tariffs and Trade, but a direct breach of the spirit of every commercial treaty which we have ever undertaken or, indeed, are ever likely to undertake.

I may say, too, that if other nations treated us in the same way and had a discriminatory internal tax over and above the tariff they imposed on our goods, we should be the first to protest. Indeed, the previous Government are well aware of this. They twice, first on the 11th December, 1950, at Torquay, and, secondly, on the 20th September, 1951, at Geneva, pledged themselves in the most specific terms, quite rightly, to do away with this discrimination. These pledges, I emphasise, were not given by us but by our predecessors, and we intend, as they would expect us to do, to honour these pledges.

I say this now for this reason, that those who criticise, as they may, in debate the Report and suggestions of the Douglas Committee, and the suggestions which I will put forward to deal with that issue, must produce an alternative which will deal with this problem. It is not enough to criticise what we do unless one can find some other and better way of doing it at the same time. The solution which was put forward by the Douglas Committee, which will come into effect on Monday next, has already been described in essence by my right hon. Friend the Chancellor of the Exchequer.

Put very briefly, it amounts to this: that about half the goods which are manufactured in any particular category will fall into the Purchase Tax free group, and the remaining half, instead of jumping suddenly into a range where they bear the full rate of tax, will have a gradually increasing amount of tax upon the amount which they exceed the tax free limit. This will, whatever can be said against it, have five substantial advantages.

First, it removes the tax discrimination against imported goods, as we are pledged to do. Second, it maintains a tax exemption for lower-priced goods. Third, it removed the "blind spot" to which I have referred. Fourth, it does to some extent reduce the tax differential between non-utility and the highest-priced Utility goods, such as exists between silk and rayon, and, fifth, it does avoid discrimination, which cannot be justified, between closely competing goods of equivalent value.

Mr. Frederick Lee (Newton)

I follow the logic of that argument and agree that something has to be done about discrimination. But is it not the case that while the right hon. Gentleman's right hon. Friend is doing everything possible to limit the flow of imports into the country, the right hon. Gentleman's decision on imports now will help to increase the flow of imports, when the whole policy is to lessen the flow of imports?

Mr. Thorneycroft

I have been talking about increasing exports, but I shall have something to say later in my speech on the control of imports.

To return to the field I am in at this moment—I will not ignore the hon. Gentleman—I want to make five comments on the Purchase Tax position. The points I would make about it under this new scheme are as follow: first, that a number of articles which previously were excluded from any tax exemption whatsoever now get some tax exemption. That is to say, all the new fabrics which are coming along and which, for various reasons, cannot be bought within the Utility range and, therefore, bear the full weight of the tax, are, for the first time, given some degree of tax exemption.

Second, a number of articles were previously missed out altogether from the Utility range and the tax free range. For example, the agricultural worker has had to pay 33⅓ per cent. tax on rubber Wellington boots. A typical pair, selling now for 42s., will be relieved of the entire burden of the tax of 7s. 6d., which is quite substantial for an agricultural worker. Third, this is not an increase in tax; it is a redistribution of tax.

I quite agree that in the redistribution of tax opinions can always honestly vary as to who is benefiting and who is being hurt. I would call the attention of hon. Members opposite to the views of the Douglas Committee on this matter—and remember that I did not appoint this Committee, it was appointed by them. The Committee said that in their view this scheme would not worsen and might well improve the position of the poorer sections of the community. That is the impartial opinion, not put forward by me, but by the Committee appointed by hon. Members opposite.

Fourth, while, on paper, some top grade Utility goods will bear tax, it is a good deal less than at first sight might appear. Take, for example, a man's three-piece suit with a top selling price of £14 9s. 2d. Theoretically, it would bear a tax of 26s. and sell for £15 15s. but the fact is that many of these suits are now selling for between £10 and £12, and a £10 suit bears a tax, under this scheme, of Is. I really cannot believe that that can be represented as a very harsh imposition.

Mr. John Paton (Norwich, North)

May I put this to the right hon. Gentleman? He has just cited a case that is exceptionally favourable to his own argument. What about the case of the shoe industry, with 98 per cent. of the total production now having to bear an absolutely new tax?

Mr. Thorneycroft

I must confess to the hon. Gentleman that I did cite that case in support of my own argument. I make no apology for that. I shall be taking an illustration from the boot and shoe industry for my next point.

Some critics of the scheme which I am putting forward assume, quite unwarrantably, that there was some justice or logic in the scheme which it replaces. But there was no logic or justice in the old scheme. As the Douglas Committee points out, the percentage of Utility supplies for different goods differed very widely; it was 50 per cent. for non-wool cloths and up to 98 per cent. for footwear.

The Douglas Committee said: …the Utility schemes are not consistent as a means of providing tax exemption, even for these classes of goods, for the main body of consumers in the lower income groups. It is clear, for example, that a large number of them are unable to buy non-wool dresses free of tax, whereas persons in the higher income groups are able to buy footwear free of tax. This is, in our view, a weakness of the present Purchase Tax Utility arrangements as a social measure to provide tax-free essentials for the lower income groups. To tell the truth, I am not underestimating the difficulties which are created by any readjustment of this nature, but when we get Utility shoes up to about £5 a pair it is difficult to argue that those are essentially things which are normally bought by the lower income groups, and the advantage of the scheme put forward by the Douglas Committee is that it has brought the range of tax exemptions well within the range of goods normally purchased by those incomes.

Mr. G. R. Mitchison (Kettering)

Has the right hon. Gentleman considered the double effect of putting a new tax on the boot and shoe industry and of removing what was, in effect, a supplementary tariff? Has he considered the effect on employment in towns—there are many of them—which depend practically entirely on this industry and where employment is already uncertain? Has he also considered it the more having regard to the fact that, with that measure of supplementary protection and that measure of benefit under Purchase Tax, boots and shoes are already fairly expensive?

Mr. Thorneycroft

I have just made an observation about the cost of boots and shoes. However, the answer to the hon. and learned Gentleman is simple. It is that if we take this field as a whole—we must take it as a whole if we are to approach the subject at all—what we find is that no more tax is being collected than was being collected before. With regard to the general question of the budgetary effect generally on consumer industries, I shall have a word to say about that in the second part of my speech.

Mr. Mitchison

What about Kettering?

Mr. H. Rhodes (Ashton-under-Lyne)

Is the right hon. Gentleman aware that the incidence of tax on boots and shoes will now bring in working men's boots and shoes which were previously free of tax?

Mr. Thorneycroft

It is true that in any re-arrangement of tax some goods will bear tax which did not bear tax before and some goods will be free of tax which previously bore it. The essence of the solution which is put forward is that, whatever view one holds about Purchase Tax, Purchase Tax should be divorced from the Utility Scheme. That factor is basic to any solution of the import and export problem to which I referred earlier.

I now come to the problem of what can be done about the Utility scheme as it exists today. The first thing that I would say about the Utility scheme as it exists today is that it has moved a very long way from where it started. It started with a few rigid specifications from well-known manufacturers' lines introduced in times of severe shortage and linked to price control and used on a sellers' market. In those circumstances it did enable consumers to know what they were buying and ensured, or helped to ensure, that they had some kind of value for money.

No one could suggest that the bulk of the old Utility scheme—I at once conceded that there are a few exceptions—today provides any guarantee of value for money. Anyone who reads the Report of the Douglas Committee with an objective outlook would agree with that. The Committee said: Most of the Utility schemes no longer justify the faith which many people still have in them as providing a guarantee of quality or of value for money. I emphasise once more that this is not my comment but a quotation from the Report of the Committee which was appointed by this Government's predecessors. The Report also says: Far from offering any assurance of value for money, the wool apparel cloth Utility scheme may well deceive the uninformed consumer on this very point. Therefore, the fact that this has happened is not the fault of those who have been managing these schemes. I see sitting opposite the hon. Member for Ashton-under-Lyne (Mr. Rhodes), who was responsible for administering a great many of these schemes and introduced a number of flexible specifications. If anybody wishes to accuse me of murdering the old Utility scheme, I should protest that I merely have the misfortune of being caught with the body. I have a very able accomplice—I will not claim more than that—sitting on the benches opposite.

In these circumstances, I have had to consider what is the best course to take. I will say at once that I propose to leave furniture as it is. It was referred to separately by the Douglas Committee. It provides a greater degree of quality specifications than others, and, for various other reasons, I propose to accept the Report of the Committee and to leave it for the moment—for the moment only—as it is while I conduct an inquiry to see what is the best to be done for the future.

For the schemes other than furniture, I have taken the necessary steps to revoke the 118 Orders which govern the old Utility schemes and to prevent the misuse of the Utility mark after their revocation. The 1,500 or more pages of Orders and thousands of specifications will cease to have effect as from Monday next. The prices of goods other than furniture and nylon stockings will cease to be controlled. Price control is, in any event, ineffective as the goods are not scarce.

I agree, however, that if we are to wind up the old Utility scheme we must provide some safeguard for the future. I believe that the best safeguard is the standard of the manufacturers and workers in this industry working in a competitive system and seeking to meet the demands of the consumers.

At the same time I am anxious to preserve those parts of the old Utility scheme which provide any real form of safeguard. In place of those schemes, I propose that there should be a new and much simpler form of Utility scheme, narrower indeed in scope, at any rate to begin with, but one which within its limits will really mean something to the consumer.

It seems to me that the right approach lies along the lines suggested by the Douglas Committee in their Report. That was, that the Board of Trade should encourage industries to apply minimum standards, worked out in conjunction with the British Standards Institution, and that these should be combined wherever it was possible with the registration of certification marks which will enable the consumer to know which goods comply with the standards laid down.

In recent weeks I have been discussing these matters, with the trades most con- cerned, to see how best it can be done. I am glad to say that I found among the industries themselves a real desire to see some such scheme put forward and a willingness to co-operate with the British Standards Institution. They agree that that is the right approach to it. The Institution, as all hon. Members who have been associated with it know, have an independent position and great experience of standards of all kinds in many different industries. Their constitution gives a place, not only to the technical and commercial experts, but also to the ordinary consumer.

The Institution have a very good Women's Advisory Committee associated with them. They are peculiarly well fitted for this task, and they have agreed to work out schemes on those lines. They have already a registered mark, which is becoming known as a guarantee of fitness for purpose for many kinds of consumer goods outside the technical field. Those who are accustomed to buy Utility goods will be glad of the assurance in the future that they are of British Standard quality. I like the term "British Standard."

The Institution have agreed to establish a range of British Standards (Utility Series) specifications for the purpose. I have received assurances from a number of trade bodies that they will at once proceed to devise with this Institution, specifications based on those Utility specifications which provide some guarantee of quality or performance for the consumer.

In particular, the cotton industry have told me that they propose within a few weeks to deal in this way with the most popular specifications, which cover a wide range of cotton cloths and household textiles up to about 75 per cent. of the trade in those particular types. For other cloths, the Cotton Board are seeing whether they can have some performance tests of one form or another. I make no apology to the Committee for recounting what these various industries propose to do, because it is of the greatest importance that we should safeguard the position in the future.

The British Rayon and Synthetic Fibres Federation have informed me that they will, as a matter of urgency and in collaboration with the Institution, devise tests for such qualities as shrink resistance and colour fastness, and will make provision for the marking of cloths which comply with these tests.

Mr. Rhodes

Is the right hon. Gentleman aware that the Rayon Federation have been studying what to do with rainproof cloth for two years, and have not come to a decision? Will he say when they will come to a decision?

Mr. Thorneycroft

I will deal with that in a moment. They are working at this, and they have assured me that there is no difficulty in working out performance tests on the two matters I have referred to, which were not rainproofing, but I cannot make any other promises about other performance tests at present.

The Wool Textile Delegation have told me that they intend to proceed, in cooperation with the Institution, with arrangements which are already far advanced for the voluntary labelling of wool cloths to indicate their wool content. In addition, they intend to start discussions with the Institution forthwith to see whether they can work out standard tests for the strength of cloths for children's wear, which is something which should be encouraged, and for the shower resistance of raincoat cloths. I am adding this for the benefit of the hon. Member for Ashton-under-Lyne (Mr. Rhodes).

For many kinds of light clothing and children's wear there already exist British Standard specifications worked out by the trade, which have been incorporated in the old Utility schemes and for others, such as waterproofs and overalls, such standards will be issued shortly.

Mr. F. Beswick (Uxbridge)

Can the right hon. Gentleman say whether any control of profit margins will apply to these things?

Mr. Thorneycroft

No. I did say earlier—perhaps the hon. Member did not hear it—that except in the case of furniture and nylon stockings I propose to do away with price control for the very good reason that the control is exercised by the market conditions today, as many hon. Friends with friends in the textile industry know very well.

Mr. Thomas Price (Westhoughton)

I am following the right hon. Gentleman's speech with interest and not without a good deal of sympathy, if I may say so, but is it intended, once these standards are laid down and adopted by the trade, to give the Institution no authority to prevent the abuse of this system by unscrupulous manufacturers?

Mr. Thorneycroft

I am coming to that point. In so far as they are licensed to use a certification mark by the licensor which will be the British Standards Institution, it would, of course, be actionable to abuse that mark. I am going to explore that point a little further in a few moments.

Today I was asked a question on the subject of bedding. There are already British Standard specifications in force relating to the cleanliness of filling materials and to hospital type mattresses, and the Federation have adopted a general code of practice which they are discussing with the Institution to see to what extent it can be embodied in British Standard specifications.

Coming to the point which was raised by the hon. Member for Westhoughton (Mr. T. Price), I propose next Session to introduce legislation to amend the Merchandise Marks Act. My purpose will be to widen the definition of trade description, which is at present limited to such things as weight, number, origin and material and to include other qualities within the compass of the Act. This will mean that it will become an offence to describe wrongly the qualities of an article, such as its waterproofness or resistance to fading, which will come into this wider definition. I hope that meets the point put by the hon. Member.

Mrs. Jean Mann (Coatbridge and Airdrie)

Would the right hon. Gentleman also include goods described as wool which do not contain wool?

Mr. John MacLeod (Ross and Cromarty)

Can my right hon. Friend see his way to distinguish between hand-woven tweed and mill-woven tweed under this scheme?

Mr. Thorneycroft

I see that I am going to be under considerable pressure in this definition, and I hope the Committee today will not press me to define a wide range of textiles while standing at the Despatch Box.

For the future, many trade bodies have assured me that they will tackle this problem of improving and extending the standards, which will be issued without delay through the British Standards Institution and by working out performance tests and in other ways.

Perhaps I must just summarise the situation at which we have now arrived. There are now considerable stocks of Utility goods in various stages of distribution and these, of course, will continue to be available for some months while the arrangements that I have indidated are being outlined and put into effect.

Broadly, the effect of my proposals is to place on industry, rather than on the Government, the main responsibility of giving to consumers an assurance about the quality of the products which they buy. It will remain the Government's task to stimulate and facilitate this work, but I think it can be more satisfactorily carried out by the voluntary organisation of the industry in the way that I have described rather than by a mass of Statutory Instruments.

The public, too, can help themselves by demanding in future goods made in accordance with British Standards and bearing a certification mark, as they have in the past demanded goods bearing the Utility mark. Indeed, the public will be the deciders in this matter. If the public demand a certain mark I am quite certain that the manufacturers will be prepared to put that mark upon the clothing. I shall welcome suggestions and assistance from all concerned that will help us to make progress on these lines. I share the conviction expressed by the Douglas Committee when they said that Arrangements of this kind could give the consumer far more satisfactory assurances about quality than the present Utility schemes provide. Perhaps I might summarise my proposals up to this stage. I claim, first, that this scheme will help and encourage exports by removing those handicaps referred to as the "blind spot," that could not be corrected within the old scheme, and will encourage the inventiveness of this great industry and the introduction of new fibres, new fabrics and new methods of construction, which can be brought freely into the ambit of the proposals which I have put forward.

Second, it will enable our trade agreements to be kept. We are, after all, a great trading nation and we above all should be concerned to be meticulous in carrying out the things that we have undertaken to do. Third, a range of articles for the lower income groups is preserved wider than has so far existed, in which no tax, or very small tax, is imposed. Fourth, a system of quality safeguards is introduced which, while it is narrower than numbers of specifications within the old Utility scheme, will provide a basis upon which a more comprehensive scheme can, with care and patience, be built up.

Mr. Martin Lindsay (Solihull)

My right hon. Friend has been very patient in face of interruptions and I am much obliged to him for giving way. Can he tell me whether his ingenuity has managed to find a way to get round the very real injustice which occurs when Purchase Tax is lowered after the retailer has aquired the goods and paid the tax?

Mr. Thorneycroft

The question which my hon. Friend is putting to me is whether I have solved the problem of the hardship upon a retailer when Purchase Tax is lowered and the retailers already hold stocks. The answer is that up to the present I have not found a satisfactory answer to the question: and I am not alone in that position.

Upon this aspect of the matter, all I would say, in conclusion, is that during the past months I have given many hours of very close attention to the problems which I have discussed. I am convinced that the proposals which were put forward in the Douglas Report are the right way of solving the particular problems with which that Committee were faced. I am satisfied that the new Utility scheme and the proposals which I have put forward this afternoon will provide, in microcosm, the same sort of approach as the Budget has to the rest of our affairs. It will ensure the welfare of those who really need help and it will ensure that help is of the kind which they really need.

Mr. George Chetwynd (Stockton-on-Tees)

Would the right hon. Gentleman repeat the guarantee that he has given before, that children's Utility clothing is completely free of tax?

Mr. Thorneycroft

Children's clothing does remain outside the tax.

Mrs. Mann

In the White Paper, the hoods of coat-sets under 42 inches are subject to tax. Does not that affect the little coat-sets that children are wearing today?

Mr. Thorneycroft

I dare say that the hon. Lady may be right. I must admit, quite frankly, that she has stumped me. I have tried to answer a number of the questions that were asked, and now I think that any further question might be developed in the course of the debate. I have already kept the Committee for some time and I have yet another important range of subjects with which I would like to deal.

I would like to turn to the impact of the Budget on our general trading position.

Mrs. Barbara Castle (Blackburn, East)

Would the right hon. Gentleman—

Mr. Speaker

If the right hon. Gentleman does not give way, the hon. Lady must resume her seat.

Mr. Thorneycroft

If the hon. Lady has a question to put, I am sure she can put it later in the debate, and that my hon. Friend will answer it.

Mrs. Castle

The right hon. Gentleman will remember that I asked him specially to deal with a point in his speech, and I understood that he would. Might I ask him the question now, seeing that, apparently, he is not going to deal with it at all? In view of the fact that a large range of goods, up to now free of tax, is to come into Purchase Tax categories, can the right hon. Gentleman tell the House what he intends to do to meet the protests of those manufacturers who normally sell direct to retailers, and on whose selling price the Commissioners of Customs and Excise at present make a value uplift calculation for Purchase Tax purposes which increases the range of Purchase Tax by increasing the selling price?

Mr. Thorneycroft

The hon. Lady is raising a point of great substance. I fully appreciate it, but there is a whole range of complex questions connected with the uplift of wholesale prices, and I think they would be better discussed on the Finance Bill in the detail which they thoroughly deserve.

Now I will turn to the impact of the Budget on our trading position. The right hon. Member for Leeds, South (Mr. Gaitskell), accused my right hon. Friend of talking with rather different voices at the beginning and at the end of his speech. I am bound to say that the right hon. Gentleman himself led almost a Jekyll and Hyde existence during the course of his speech. He started off by indicating that he was, on the whole, rather worried that we had not been tough enough and towards the end he wanted larger social benefits without, as I understand, being prepared to take the food subsidies off. I am not criticising the right hon. Gentleman when I say that it is the essence of a good commander to attack on both flanks at once, and the right hon. Gentleman certainly did that.

Whatever else can be said about the Budget of my right hon. Friend, it certainly is a substantial step forward on the path of realism. A sense of realism has been sadly lacking in both our internal and external trading affairs. During the past few years the prices which we have had to pay for our vast quantities of food imports have been rising under the stress of world demands upon limited supplies. The food subsidies, whatever may be said about their social implications, did very much to disguise the realities of our world trading position from the people of this country.

It is—and I agree with this—the task of Government to seek to shield those who need to be shielded from the full force of adverse world-price movements, but it is one thing to defend the subsidies as a necessary means of providing protection to those who need it, and it is another to try to defend the granting of the same protection to those who manifestly do not need it.

It may be that in the latter part of the 20th century the millionaire and the navvy both have some claim upon our compassion, but the claim would be on different grounds and extended in rather different ways.

Mr. M. Turner-Samuels (Gloucester)

Why give the millionaire increased family allowances?

Mr. Thorneycroft

The Budget has made a substantial reduction in food subsidies, but it is obvious to anybody who looks at the matter fairly that substantial measures have been taken to ensure that those who need protection will continue to be given it. It would be both perilous and absurd for the Government to try to cushion both rich and poor alike against the impact of reality.

I come now to what I find a very difficult aspect of the matter, and that is that realism at home must be matched by realism in our external trade. If there is one lesson which we should have learned in these latter years, it is that inflation at home and relatively free trading methods abroad go very ill together. The inflation sucks in great quantities of imports for which the means of payment in full are lacking, save by drawing upon ever more limited reserves, and then, in a desperate attempt to remedy the situation, the brakes are slammed on, quotas are applied, contracts are broken, and the whole machine moves forward in a series of gigantic hiccups. That is the system which we have inherited, and other countries besides ours have had the same experience.

That brings me, of course, directly to the question of the Australian import cuts. They have been a painful reminder from Australia in the past few days that the inflationary boom in Australia does not last for ever, and that when the end comes, it comes with a very sharp jolt. Those who favour the physical as opposed to the fiscal method might do well to study the Australian example. The Australian sterling reserves in London have fallen from about £840 million to £500 million in eight months. That was not so much because her earnings had fallen, but because her rate of import expenditure had risen from £850 million a year to £1,250 million a year.

Mr. T. Price

As a direct result of the boom in wool sales.

Mr. Thorneycroft

There was a boom in wool sales, which may have sent up the rate of buying.

The sterling area is a great, useful and powerful organisation, but no organisation yet devised by human ingenuity could permit any one of its members to live permanently beyond its income. As we supplied over 48 per cent. of Australia's imports we were bound to be the hardest hit when a halt was called to that particular rate of spending. I suppose that no British Minister, with the exception, perhaps, of my right hon. Friend the Chancellor, is faced with greater problems that I am as a result of these import cuts, but I have no hesitation in saying that I applaud the Australian Government's decision to set its house in order. These measures are in pursuance of the agreement that each Commonwealth country should seek to achieve an overall balance.

All I want to do is to re-emphasise this lesson, that unless a country's internal economy is kept in balance the necessity for such sharp and sudden action through physical controls becomes overwhelming.

Mr. Hugh Gaitskell (Leeds, South)

Are we to understand, then, that it was agreed at the sterling area conference that Australia should make these cuts in U.K. imports?

Mr. Thorneycroft

That was not agreed. What was agreed at the sterling area conference was set out very fully at the time. It was that each sterling area country should seek to live within its means and balance its account, and that the whole sterling area itself should balance the account. It is not, of course, within the power of this country, and nor would it be right for this country to attempt, to dictate to any other member of the Commonwealth the way in which it should live within its income. These are sovereign countries, and they have the right to conduct their affairs in their own way, in accordance with the decisions of their own elected representatives.

Mr. Gaitskell

The right hon. Gentleman must not seek to evade his responsibility and the responsibility of the Chancellor for the failure of a conference by rhetoric of that kind. I should like to ask this question: Was it or was it not agreed at the sterling area conference that there should be discrimination against non-sterling imports? Perhaps I might be allowed to remind the right hon. Gentleman that the Chancellor, in reporting to us on this conference, told us—or certainly gave us the impression—that the whole idea was that we should, each of us, seek to exclude non-sterling imports. How can he really suppose that it will be possible for this country to get into balance if one sterling area country after another cuts down imports from the United Kingdom?

Mr. Thorneycroft

It would be quite wrong to assume that sterling imports were the only imports which Australia cut.

Mr. Gaitskell

I did not say that.

Mr. Thorneycroft

I am sure the right hon. Gentleman did not mean to say that.

Mr. Gaitskell

I did not say it.

Mr. Thorneycroft

I do not want to misrepresent the right hon. Gentleman, as he knows. Australia cut other people's imports as well as ours, and that should be perfectly plainly said. It is not within the power of any one country in the Commonwealth to tell or to dictate to any other country in the Commonwealth how it shall live within its means.

Mr. Turner-Samuels

What was the agreement for?

Mr. Harold Wilson (Huyton)

Has the right hon. Gentleman made it clear to the Australian Government that when the roles were reversed a year ago, when we had a great deficit on our total balance of payments, and particularly on our balance of payments with Australia, we did not seek to cut down our imports from Australia into this country; and that we did not seek to start those sorts of things going within the Commonwealth? Furthermore, my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) and I both tried to bring home to the Australians at that time the need to control this inflation, and the need to prevent the situation which has since developed. Will the right hon. Gentleman not press that on the Australian Government?

Mr. Thorneycroft

The right hon. Gentleman is making a perfectly fair point. It is quite true to say that within the sterling area all of us would prefer that, in so far as cuts have to be made, they should be made outside the sterling area rather than within it. I entirely accept that point. At the same time, I think it fair to say that, looking at what Australia's position was and at the rate at which her sterling balances were runing down, she was coming to a stage where some slowing down in that process had to be put into effect.

I recognise, as everybody else in the Committee does, the harsh effect which those cuts have upon a whole range of British industries. I thought that Sir John Black hit the nail truly on the head when he commented, as reported in the press on Monday, that the Australia honeymoon was not going to last for ever; that British industry had relied too long on Australia to absorb a large proportion of its exports. The truth is that with or without Australian cuts, at the rate at which the sterling balances were being drawn upon, a very severe slowing up of British exports in the Australian market was inevitable.

Mrs. Mann

rose—

Mr. Thorneycroft

I have given way to the hon. Lady several times.

Our representative in Canberra is in close touch with the Australian authorities so that we may be clear, as soon as possible, about the precise manner in which it is intended to administer the cuts. The Australian authorities are conscious of the desirability of allowing bona fide contracts to be carried out, but it is obvious that, in general, the outstanding contracts are far in excess of the quotas which the Australian Government have fixed. I have reason to believe that Australia will deal as sympathetically as possible with special difficulties arising, for example, where goods are already in production and have been made specially for the Australian market so that they are not readily saleable elsewhere except at a severe loss.

There is one other point which I should mention, not only for the benefit of the Committee, but which I should like Australia to bear in mind. As a general rule, United Kingdom exports to Australia are not supplies against confirmed credits, whereas our competitors in other countries frequently demand such credits. Therefore, our goods may unintentionally be treated worse than imports from our competitors. I think that is a point which we ought to bring home to Australia, and I believe that their Government will consider this and other points which I and other hon. Members have mentioned as sympathetically as their balance of payments permits.

Mr. Walter Fletcher (Bury and Radcliffe)

Does my right hon. Friend realise that in what he has just said he has, in effect, whether he intended it or not, more or less condoned the act of the Australian Government, which is the repudiation of existing contracts, and that the effect of it will be just as fatal to the credit of Australia as it will be to this country? Does he further realise that the real point is not whether goods have gone on to the looms already but that the contract has been made and that the exporter, exhorted by the previous Government and this one, has taken the risk in writing that contract, and that if he is not to be protected by this or any other Government, it means the death knell of the export programme?

Mr. Thorneycroft

I assure my hon. Friend, who is well qualified to speak on these matters, that no one appreciates more than I do the importance of maintaining the sanctity of contract in trading relations. Indeed, I opened my remarks on this aspect of the matter by saying how much I deplored the state of affairs which led to countries waiting until the last moment and then relying on savage physical controls, whereas the position would have been dealt with better if it had been tackled earlier.

Mr. Gaitskell

Was there no discussion of the question of breaking contracts at the conference?

Mr. Thorneycroft

I am just about to talk of breaking contracts.

We know the Australian position all the better because we ourselves have had to pursue the same painful path. The measures announced on 1st November last had to be supplemented on this occasion—

Mr. Gaitskell

With the sterling area?

Mr. Thorneycroft

No, in the case of Europe. One of the first things that fell to my lot when I came to the Board of Trade was to administer the cuts and deal with the breaches of contract which we, in the same sort of circumstances, were compelled to inflict upon the Continent of Europe. I assure the Committee that I yield to no man in my detestation of this method of having to carry on a trading system. Indeed, if it is carried on for very long it will be the end of trading between countries, as my hon. Friend the Member for Bury and Radcliffe (Mr. W. Fletcher) said.

If I may, I will now turn to our approach to that subject in the case of Western Europe.

Mr. Gaitskell

Before the right hon. Gentleman leaves that subject, would he please answer my question? It really is most extraordinary that no discussion took place at the sterling area conference, on the possibility of these cuts, as I understand it, or, if it did take place, what was said about them. Was not the possibility that these contracts might be broken raised there? The Government seem to have allowed the entire system under which one sterling area country agrees to discriminate in favour of the others to lapse as a result of this conference—

Mr. Thorneycroft

indicated dissent.

Mr. Gaitskell

Can we please have a clarification on this matter?

Mr. Thorneycroft

The right hon. Gentleman is asking me specifically about a subject which is entirely within the responsibility and the power of the Australian Government. [HON. MEMBERS: "No."] There is no question about that. If the right hon. Gentleman is asking whether we discussed with the Australians the idea that they should break contracts as a specific method of dealing with this, the answer is "No." What we agreed at the Commonwealth Finance Ministers' Conference was, shortly and simply, this: that each country should accept a target, very urgently required at that time, to which it should seek to attain to live within its income. The methods were left and had to be left to the different countries concerned.

Mr. Gaitskell

rose—

Mr. Thorneycroft

I should like to turn, if I may—[HON. MEMBERS: "No."] I think I have answered the right hon. Gentleman.

Hon. Members

No.

Mr. Gaitskell

I am much obliged to the Minister for giving way. Is it the case that there was no discussion at the sterling area conference about the repercussions which the action of Australia, in trying to attain its target, might have on the capacity of the United Kingdom to attain its target? If so, it seems to be the most extraordinary muddle.

Mr. Thorneycroft

All those subjects were undoubtedly discussed but I would remind the right hon. Gentleman that the main problem which confronted the conference was that unless these countries succeed in living within their income, and unless the sterling area as a whole succeeds in doing that very thing, our balance of payments will turn savagely against us and our remaining reserves of gold and dollars will run out, with calamitous results and effects on this country and others in the sterling area.

Mr. M. Follick (Loughborough)

That is not an answer.

Mr. Thorneycroft

I now want to say a word about the new restrictions which we have had to impose on trade with Western Europe. Trade is obviously a two-way business and we have no wish to reduce our imports more than we must. I do not hold with the view that we should restrict trade with Europe to the same level to which we may be compelled at any given time to restrict our imports from the United States because of dollar shortage. To do that would be to reduce trade to its lowest common denominator.

Nor should it be forgotten that a nation which sells us a semi-luxury may also sell us a necessity of life or, perhaps, take our textiles in return. But we have to restrain our imports to the level which we can afford and, as hon. and right hon. Members on all sides have pointed out, we are at present paying 80 per cent. in gold through the European Payments Union.

Mr. Gaitskell

The whole sterling area.

Mr. Thorneycroft

Yes, the whole sterling area. I am much obliged to the right hon. Gentleman. Our present intention is to make a further saving of the order of £20 million in 1952 as compared with the imports we should otherwise have received for these goods from the Western European and other foreign countries to which the open general licences apply. But the size of the quotas will depend upon the way in which our situation develops, especially as regards our trade with Western Europe.

We are anxious to cause the minimum of harm to our friends, and for this reason we have exempted from the new cuts not only goods which we desire to import freely, but also such goods as wines and spirits and citrous fruit for which our European friends look to us to provide a vital market. For this reason we have also decided to admit all goods already in transit and to license freely all goods delivered against firm contracts already entered into. We do not intend that there shall be broken contracts in this matter. We hope in this way to minimise the dislocation of business that is unavoidable in the break of the few weeks while the quotas and licensing arrangements are being worked out. We have our financial difficulties, but we also have responsibilities as a great trading nation and we believe that this is the best method of honouring both.

Now I turn for a few moments to the question of exports. We have been compelled to take these emergency measures to reduce our import bill, but the real action required is, of course, to sustain and increase our export earnings in spite of the difficulties which confront our export industries.

Mr. Ivor Owen Thomas (The Wrekin)

Would the right hon. Gentleman—

Mr. Thorneycroft

I would rather not give way. I have already addressed the Committee for nearly one hour.

Our most important economic task is to reinforce our export drive. I believe that the Budget introduced by my right hon. Friend on Tuesday is one well calculated to help us in that task. Indeed, it has been conceived in terms of promoting our exports of engineering goods, for one very good reason, namely, that those are the goods which we can sell most readily abroad.

The Government, in raising the Bank rate to 4 per cent., have placed considerable reliance on monetary policy as an effective means of promoting the transfer of engineering resources from home investment to export production. It is our deliberate policy, not in the long term but in the short term, to curtail home investment, to reduce the supply of metal goods to the home consumer and thus to release capital goods for the export trade.

The Government have taken all these measures to restrain home investment with the greatest regret. We all know that the future efficiency and competitive power of British industry depends in the long run on building up our capital equipment, but there is no alternative to this policy in the light of the world trading situation as we find it today.

Many of our consumer industries have great difficulties at present, and particularly the great textile industry. The Budget recognised those difficulties, and the home demand on them certainly has not been such as to place an obstacle in the way of export trade. In present circumstances, therefore, it is not In the interests of the exports trade to depress the home demand still further.

The right hon. Gentleman opposite said that it was a clever Budget. That was a great tribute.

Mr. Percy Shurmer (Birmingham, Sparkbrook)

Too clever.

Mr. Thorneycroft

A less clever Budget, particularly from someone who was arguing for a tougher Budget—

Mr. Shurmer

Tough on the workers.

Mr. Thorneycroft

—and the use of other than monetary measures, might well have hit very hard the textile industry and have produced a very considerable degree of unemployment.

Mr. Shurmer

Time will tell.

Mr. Thorneycroft

I only say this further about exports. The real need is to increase our exports to the dollar area, above all to Canada and the United States. I know the difficulties which our exporters in the North American markets find. I know that it takes courage to enter those markets against the weight both of American industry and of the United States tariff. But industries in this country have successfully done it. They have broken into those markets and are holding them, and more must do so if we are to attain our goal.

In our financial circumstances today, it is not easy to find room for manoeuvre in which to give incentives for production, but we have made a substantial advance in this direction. It is no small thing to take two million people out of Income Tax. That is the way to give incentive to greater effort.

In conclusion, I say that the test of a Budget is not only how it affects our own people, but also how it influences the views and actions of the world outside. What matters is not only what we as a nation think of ourselves, but what others think of us. World opinion will be guided not only by the opinions which are expressed on one side or other of the House of Commons, but by the fact that the British people as a whole have acclaimed it as a great Budget and a fair Budget.

4.53 p.m.

Mr. Glenvil Hall (Colne Valley)

My right hon. Friend the Member for Leeds. South (Mr. Gaitskell), posed several questions during what, I thought, was a very lucid speech yesterday afternoon, but we were told later by the Minister of State for Economic Affairs that it was not his intention to attempt to reply to at least two of those questions and that today we should have the presence of the President of the Board of Trade who would answer them. I am delighted, therefore, to find that the President of the Board of Trade has answered them, for they are very important ones, at some length and in great detail.

There has been until this afternoon some confusion as to what were the intentions of the Government on the Utility scheme, and there also has been great anxiety as to whether the decisions of the Commonwealth Ministers Conference were as good as we were earlier led to believe by the Chancellor of the Exchequer.

I should like to deal, first, quite briefly with what the right hon. Gentleman had to say about the Douglas Report. I thought that he protested a little too vigorously, even for him, that the Douglas Report was not the result of any action taken by the present Government. Searching my mind for a reason why he should be so intent on getting that point over to us, I suddenly remembered that during the General Election and since the "Daily Express" has been running a campaign about the Purchase Tax. It occurred to me that the right hon. Gentleman was quite anxious to show that although now the Government were going to deal with this matter, it was not because he was obeying the crack of the "Daily Express" whip.

We realise, and have done so all along—at any rate, for a very long time—that something had to be done about the Utility scheme. The original scheme was excellent, but the classifications, as the right hon. Gentleman said, became unwieldy and the specifications very obscure. Above all, as we know, it was viewed by the signatories to G.A.T.T. as a violation of international agreements. It was for these reasons that my right hon. Friend the Member for Leeds, South, when he was Chancellor of the Exchequer, set up what we now know as the Douglas Committee.

The terms of reference of that Committee made it quite clear that so far as this party is concerned we did not want the scheme to be dropped. What we required and what we hoped for was that as a result of the inquiry then undertaken the criticisms to which I have alluded should be met. I think that we can accept, and do accept, many of the recommendations and the views expressed by the Douglas Committee.

I listened very carefully to the right hon. Gentleman, and it occurred to me that he was, perhaps, overlooking at least one of the recommendations that that Committee made. They quite definitely recommended that the deductions that were to be fixed should be fixed in such a way that a given proportion of current purchases of goods covered by the Scheme would be free of tax and—this is the important point—that this proportion should, as far as possible, be the same for all the classes at goods concerned, and be not less than one-half in each class. I am not sure from what the right hon. Gentleman said—this is a matter we shall come back to when we deal with this in greater detail in Committee—whether that recommendation will be included in the scheme which he has outlined to us today.

Mr. F. A. Burden (Gillingham)

It is made perfectly clear in respect of some garments, particularly women's clothing, that much more than one-half of the goods that were originally tax-free will now be tax-free. For instance, a utility coat hitherto was tax-free up to about £13; now, it will be free of tax up to about £9. This shows that my right hon. Friend has more than met the recommendation.

Mr. Hall

The hon. Member underlines what I am saying, and if in the direction of women's clothing what we want has already been met, I am sure that when we come to the Committee stage we shall have no difficulty in getting the right hon. Gentleman to meet us certainly as to one-half so far as other types of goods are concerned.

From interjections made by my hon. Friends behind me, it will be known that we are very perturbed about the situation that may arise with regard to, for example, footwear. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) last night made what I thought was a very powerful speech to show the effect that the scheme, as we understand it, may have on the area he represents and on the boot and shoe industry as a whole. We also think that it would be clearly wrong that children's wear should be subject to tax simply in order to get tidiness in this field. Although all of us want to be logical and all of us like to see an Act of Parliament and regulations and scales laid down as tidy as may be, when we do that we may create injustice in one direction or another. So although we agree profoundly that something should be done, we are anxious that when it is done it should be done with fairness and not create fresh anomalies or injustices to the buying public.

It appeared to me from what he said that the right hon. Gentleman assumed that we shall always have a buyer's market. I do not know that he is correct in assuming that. We are also afraid that these maximum prices will become minimum prices, particularly because I gather that the only people now being taken into consultation are the manufacturers. I am not complaining, but they naturally fix a figure which gives them the best return for what they produce.

My hon. Friend the Member for Blackburn, East (Mrs. Castle) interrupted, to ask a rather complicated question on Purchase Tax uplift and the right hon. Gentleman indicated that this was a matter we could discuss when we reached the Committee stage of the Finance Bill. I wish to ask him whether it really will be possible to deal with this when we reach the Finance Bill. It may be likely that the Chairman, when we attempt to raise the matter or to put down Amendments, should Amendments be necessary, may rule that out of order. Therefore, I would ask an assurance from the right hon. Gentleman that he will give us either now or later in the debate, that this will not be barred from discussion when the proper time comes.

Mr. P. Thorneycroft

I have a horrible feeling that the right hon. Gentleman may be right about the Rules of Order, but I can assure him that if it is out of order on the Committee stage of the Finance Bill, that at some stage the hon. Lady will have an answer to the question she has asked.

Mr. Hall

I am much obliged to the right hon. Gentleman. Having had previous experience on the Front Bench opposite when we were discussing matters of this kind, it occurred to me that it may be impossible to raise it in the way suggested, and what the right hon. Gentleman has said confirms that belief. But just an answer to my hon. Friend is not enough; it is a matter which affects both sides of the Committee as hon. Members in all quarters are interested in this very complicated subject.

The right hon. Gentleman gave quite a long list of associations and groups who have advised him and are still advising him, I understood, in these matters. I may have missed it, but as far as I know he did not mention that there were any consumer bodies represented in those talks and negotiations. I think it would be well if the consumer were brought in; otherwise it means that we might presently get a monopoly if manufacturers only took a hand in these discussions and fixed the scales that were to be laid down.

I approach the other main topic dealt with by the right hon. Gentleman with some timidity and a great deal of deference. It is true, as he said, that our sister Dominions are sovereign countries. No one denies that for a moment. They are also entitled, very properly so, to come to their own decisions in these matters. But I think all of us, on whatever side of the Committee we sit, view with disquiet any loosening of the bonds between members of the sterling area, particularly between members of the British Commonwealth of Nations. What has happened in Australia—I make no comment or criticism on that—might conceivably extend. Already this morning, as others who have read the papers will have noticed, South Africa is talking of taking the same road. It is, I think, very desirable that in matters of trade as well as in other directions we should walk together, and if all we hear is true this is quite definitely a retrograde step.

Mr. R. J. Mellish (Bermondsey)

Will my right hon. Friend make a comment on the fact that it is inevitable that Australia should take this decision if we in the first place slash imports by £500 million? Does it not necessarily follow that many other nations are going to take similar measures?

Mr. Hall

I do not think it should follow at all. Incidentally, this problem is not new. In 1949, when there was a similar Commonwealth Conference, it was agreed between those concerned that we should cut down non-sterling imports and not, as appears to have been the agreement this time, almost make a start—or so it appears to us—with the trade between the Dominions. We desire closer unity and interdependence between members of the Commonwealth, and nothing is more calculated to loosen the ties that bind us together than to believe that this can be achieved by each going our own way in complete isolation and lessening the economic ties that at present exist and which, I thought, the party particularly wished to see extended.

I come now to the Budget statement by the Chancellor of the Exchequer. I wish to add my congratulations to those that have already been extended to him. He came through the ordeal, we all feel, with great distinction. We on this side of the Committee have a great regard for the right hon. Gentleman, because many of us remember his work for education in the final years of the last war. His speech had not, perhaps, the long, involved, periods that previous generations of hon. Members remember when the great Gladstone opened his Budgets, but in my view what the right hon. Gentleman had to say was none the less acceptable for that. In fact, I think that to most of us on this side of the Committee it was much more acceptable than it would have been if he had attempted to emulate the rhetorical flights of some of his predecessors.

Sir Edward Boyle (Birmingham, Handsworth)

I think the right hon. Gentleman win remember that Gladstone took three hours explaining his Budget to the Cabinet and six hours to explain it to the House. I think the right hon. Gentleman will agree that we live in more speedy times.

Mr. Hall

Yes, and as one who has been privileged to read those orations, sometimes during the quiet hours of the night while the House has been sitting, I must say that I wonder at the strength and sense of loyalty which must have animated those who sat through so lengthy a period.

The opening of a Budget by the Chancellor of the Exchequer is the centre of a great deal of interest, and in some ways I suppose it could be likened, on this occasion at any rate, to a christening. Perhaps that is not the proper word to use, because normally when we are christened we are unconscious of the occasion. One might perhaps more properly liken it to a wedding day, though I think it would be difficult for hon. Members on this side to marry what the Chancellor said on Tuesday with all the ballyhoo which preceded it, both in the House from hon. Members opposite, and in the Press.

Before the Budget was opened we understood that we really were in for something quite outside the range of ordinary Budget statements. We had been informed that the situation was unprecedented that there was nothing left in the barrel to scrape; that when the Conservative Party came into office the stocks of food in the country were so low that no bonus could be given to the housewife, and that altogether it was necessary that a Budget of a most serious kind must be introduced.

I remember when I was quite young and was taken to the seaside for my holidays I was always fascinated by a row of machines on the pier. Among them was one which invited me to view "what the butler saw." It is quite obvious here that what the Butler—with a capital "B"—saw in November is not what the Butler saw in March; and we think that what the Butler saw in March bears a much greater likeness to reality, so far as the internal situation is concerned, than what he and others asked us to believe was the state of affairs in November.

It is certainly quite different from what Lord Woolton saw during the election. Up to now, both in the House and outside, we have treated what Lord Woolton said with some levity. But we on this side of the House do view his statement during his broadcast with the utmost concern. The decencies of public life and honesty in politics demands that this matter should not be left where it is.

I have a fairly long memory in politics, not so long as many other hon. Members, but it is a fairly long one. I can remember when I and others raised the question of the mutiny at Invergordon, and the then First Lord of the Admiralty definitely promised us from the Government Front Bench that no reprisals would be taken against the men who had been the ring-leaders in that mutiny. Reprisals were taken, not of course by himself, but by the First Lord who followed him.

I also remember when Lord Snowden came to an agreement with the leaders of the Conservative Party about the land Clauses in his Budget. Later on that agreement was apparently broken, and Lord Snowden as a result left the Government in disgust.

Sir Herbert Williams (Croydon, East)

That was not the main reason why he left. He disagreed over tariffs.

Mr. Hall

I remember the incident very well. Then there was a Member of this House—he sat for one of the Birmingham constituencies—Mr. Higgs, who had the temerity to say on a public platform that it was essential for the national economy that we should have 10 men looking for nine men's jobs. The present Prime Minister repudiated him and indicated, not unnaturally, that Mr. Higgs was speaking only for himself and not in any sense for the party opposite, which of course was quite true.

But here we have a case which is entirely different. One can forgive a politician who throws off an observation in the course of a speech. One is speaking then perhaps in reply to an interruption, or in the heat of the moment. But this was said in the course of a broadcast. There is not the slightest doubt that when one speaks over the air one weighs most carefully every word one says. The speech is written down, and so it seems to me to be the sort of statement which should have been cleared with the leader of the Conservative Party.

The promise was given quite categorically. Lord Woolton said "there was not a word of truth in the story that the Tories would cut food subsidies." There is not the slightest doubt reaching millions as it did, and coming as it did from the Chairman of the Conservative Party, the man who had been responsible for collecting funds for that Party, that it was taken as a statement of policy which would be adhered to. We cannot overlook these facts or let it pass lightly from our memories.

The noble Lord apparently made other promises during the Election. He made one to the brewers, not over the air, but privately in a letter. And the astonishing thing is that that promise has been fulfilled, or is in process of being fulfilled, whereas this one, which is of the utmost moment to millions in this country, has been broken.

Mr. Godfrey Nicholson (Farnham)

I am not a brewer, but I am in what is called the drink trade, and I hope that the right hon. Gentleman will be very careful before he makes remarks like that. What is the evidence for such a remark? If the letter to which he refers is suitable for quotation he ought to quote from it; but I personally do not believe it.

Mr. Hall

I do not know where the hon. Member has been these last weeks, or whether he was present when we debated the New Towns Bill. But this letter, which I understand Lord Woolton has refused to allow to be published, is obviously in existence because he has not denied, so I understand, that the promise was made.

Mr. Nicholson

May I correct the right hon. Gentleman? This letter was not addressed to the brewers. It was addressed to a Licensed Victuallers' Protection Association in the Isle of Wight. I assure the right hon. Gentleman that, to the best of my knowledge, which is not all-embracing in this respect, no promise was made to the brewers to whom I have spoken. They are extremely alarmed about this situation, and up to a few weeks ago they had had no assurance on this matter. I repeat to the right hon. Gentleman that, out of regard for his own high reputation, he should not make what amounts to a most serious and definite charge without better evidence than he has produced.

Mr. Hall

I, of course, have no desire to cross swords with the hon. Member. I am only stating what I thought were generally accepted facts.

Mr. Nicholson

Well, they are not.

Mr. Hall

I did not mean to say, and I do not think I did say, that a letter had been addressed to the brewers. I said a promise had been made to the brewers, and that fact has not been denied. In fact, the hon. Member himself said it had been made to a brewers' association—

Mr. Nicholson

No.

Mr. Hall

I do not know what can be more closely related to an association of brewers—

Mr. Nicholson

I am sorry to interrupt the speech of the right hon. Gentleman so constantly, but I said that the letter was addressed to an association of licensees of public houses and not to the brewers. We do not know even if it referred to these matters. The whole thing is mere speculation, and if the right hon. Gentleman talked with the brewers he would find that they are ignorant of any such promise having been made. As far as I know, there is no foundation whatever for this.

The Chairman

I have refreshed my mind about what we are discussing. I think that we are very wide of the mark.

Mr. Hall

I accept the correction made by the hon. Member for Farnham (Mr. Nicholson). The letter was written to an association of licensed victuallers. I know that there is a difference, although many of the public houses of which the licensed victuallers are tenants are tied to various brewers.

We could have understood this shocking failure to keep a pledge if the Chancellor had shown in his Budget speech that the step he took was essential. But, as my right hon. Friend the Member for Leeds, South, said yesterday, the cut in food subsidies does nothing towards redressing our balance of payments difficulties, which is the one reason given for introducing that cut and other changes.

The Chancellor himself does not make any claim that the food subsidies were essential from this point of view. On the contrary, the possibilities are that in spite of the concessions which have been made, the cuts in food subsidies are likely to increase the price of our exports by increasing the cost of living which will lead to higher wage demands and possibly—although we hope not—industrial unrest. Therefore, I repeat that for the sake of democracy, the good name of politicians and the decency of public life, this matter should not be allowed to rest where it is.

I pass now to some of the speeches made yesterday. I listened with the greatest care to the speech of the right hon. and learned Member for Montgomery (Mr. C. Davies). He is looked upon in the House as the Leader of the Liberal Party, though just quite what he leads it would be difficult to say. As far as I know, there is only one Liberal in the House. Every other Liberal, wherever he may sit, is here with the support of the Conservative Party. To do them justice, the Liberal Nationals acknowledge their obligation. But the right hon. and learned Member apparently believes that he and those who sit with him are here as Liberals pure and simple.

Mr. Percy Daines (East Ham, North)

Simple but not pure.

Mr. Hall

Actually, there is only one Liberal who was returned, in spite of the opposition of the Tory Party—the hon. Member for Orkney and Shetland (Mr. Grimond), and one could not go much further north than that. He is, as it were, almost hanging on to his seat by his fingernails.

The right hon. and learned Gentleman found the Budget an excellent one. He criticised my right hon. Friend the Member for Leeds, South, on the ground that had he been opening a similar Budget he would have introduced one which was, so he said, "much of a muchness." I assure the Committee that my right hon. Friend would not have touched the food subsidies. He would not have made this drastic cut. As I listened to the right hon. and learned Gentleman, I wondered what some of the old Radical pioneers would have said had they been here to listen to such sentiments. At any rate they, according to their lights and their philosophy, fought for the masses and the under-privileged. They would have been aghast to hear the leader of that once great Liberal Party say, as he did yesterday, that he was not only in agreement with what the Chancellor had done but almost suggested that he had not gone far enough.

Another speech upon which I must comment was that made by the hon. Member for Morecambe and Lonsdale (Sir I. Fraser). I regretted his intervention. During his years as a Member of the House of Commons he has done a great deal for disabled ex-Service men. We admire what he has done for them. He began by saying that he intended to make a non-party speech but, as so often when a Member begins in that way, it developed most definitely into a party speech of the most aggressive kind.

His speech was designed to prove that by the allowance of the extra 10s. on the basic pension the Government had established a new principle. The facts do not bear out that suggestion. In fact, he mentioned himself that the Labour Government in 1946 added 5s. to the basic allowance made to 100 per cent. disabled ex-Service men. Therefore, the principle was already established. He did not add, as he should have done in common fairness, and as my hon. Friend the Member for Brierley Hill (Mr. Simmons) pointed out, that the Labour Government, during their period of office, did a tremendous amount for ex-Service men.

Although we do not object to the 10s. which is now to be added to the basic pension—in fact we heartily approve of it—we have every right to say, too, that, compared with what the Labour Government did, it is a very small increase falling far short of the demands made by the British Legion of which the hon. Member for Morecambe and Lonsdale is a Leader. They are asking for 90s., and until recently the hon. Member stood by that application. He demanded that and nothing less.

I can remember that when the 1939 Warrant was issued the basic rate for a totally disabled man was 32s. 6d. We have advanced considerably since then and practically all the increases, except for this 10s., have been given by a Labour Government. We were the first to give the right to a pension when a man married after he had been disabled. We abolished the seven-years limit. We have given tax-free and insurance-paid cars to many totally disabled ex-Service men. We have increased widows pensions and pensions for orphans, and we have made other changes to assist ex-Service men. It is wrong for anyone in this Committee, in whatever quarter he may sit, to pretend to the ex-Service men that the 10s. is nearly all that they have received for many years and that the present Government is the only friend they have.

I wish to revert for a moment to the speech of my right hon. Friend the Member for Leeds, South, who I thought exposed with great clarity and force the hollowness of the contention that, although the cut in the food subsidies increased the expenditure of all of us by 1s. 6d. per week, this and more was being made up to those least able to bear it. When he was giving figures to prove his contention it was pointed out to him that he had failed to include family allowances in his calculations, and that this nullified in some way the calculations he had made.

The Minister of State returned to this point when replying to the debate last night, and sought to prove that because my right hon. Friend had not included family allowances in his calculations that falsified my right hon. Friend's contention. I have since examined the figures he gave and I find that what my right hon. Friend said was correct; that even if the family allowances are added to the figures he gave, a very large number of workers will still be worse off than they are now.

A married couple with two children with an income of £9 or less per week was one of the examples he gave. Under the Chancellor's proposals they will lose 6s. a week on food subsidies; the man will also have to pay 7½d. a week insurance contribution, which means that they will be 6s. 7½d. out of pocket in any given week. What are the gains to set against that? According to the Government the gains are greater than the losses. But are they? He will gain 3s. on the second child by way of family allowances, and in addition he will in all probability get about 1s. 9d. tax relief, making a total of 4s. 9d. a week gain, which makes a net loss of 1s. 10½d. on those items alone, to say nothing of other items which are bound to go up in price.

Mr. William Shepherd (Cheadle)

Does the right hon. Gentleman not agree that it is rather unfair in making this calculation to assume that the extra cost for a child is 1s. 6d.? If he looks at the items of food covered in this connection he will realise that the 1s. 6d. extra for an adult does not apply to the child.

Mr. A. Edward Davies (Stoke-on-Trent, North)

The increase of 1s. 6d. was given as an average. If it is less than 1s. 6d. for a child, it must be more for an adult.

Mr. Hall

I was taking the figure given by the Chancellor, who indicated that it was a fair figure to take. There are people who have worked this out, and who are of the firm opinion that even 1s. 6d. is not sufficient to compensate for the loss which will be suffered by the cut in food subsidies. But I did not want to be unfair to the Chancellor, and I took the figures he gave. What is undoubtedly true is that, as the cost of these foods begins to rise the cost of uncontrolled foods will rise in sympathy, and I am positive that some people will be tempted to put up the price of their goods because a rising cost of living seems to be the order of the day.

Another instance given by my right hon. Friend was that of a married couple with three children living on £11 a week or less. They will lose 7s. 6d. on the food subsidies; the husband will have to pay 7½d. a week insurance contribution, making a total of 8s. 1½d. On the family allowances he gains 6s., so he has a dead loss of 2s. 1½d. a week. It may be argued that this is not much, and that the loss is trivial, but to the ordinary working-class family 2s. or more is a lot, particularly when we remember that the drain will not stop there. We all know that prices are bound to rise. Entertainment charges are going up; as a result of the increase in the petrol duty fares will too have to be increased; postal charges also are going up, and in a number of directions the cost of living will be increased.

Mr. Burden

Would the right hon. Gentleman also bear in mind that there are very many goods which are falling in price, particularly textiles? If he is quoting one side, in fairness he should quote the other side.

Mr. Hall

I am delighted to know that the price of textiles may be coming down.

Mr. Burden

It has come down.

Mr. Hall

But we do not buy suits, for example, and other items of clothing every other day.

Mr. Burden

I should like to get this point clear. If the right hon. Gentleman knows anything about the trade he will realise that this does not involve only overcoats and suits. It applies equally to tablecloths, table-napkins, and many of the things which women use in their houses every day.

Mr. Hall

I am sorry if I gave the impression that I thought of textiles in terms of clothing only. That would be absurd, of course. Nevertheless, I do not think that makes my point invalid. These sums for food and insurance which a man has to find are constant week by week, and the family allowance is constant, but with the extra cost of goods in other directions the family with three children on an income of up to £11 a week will suffer definite loss each week.

I wish the Chancellor could have seen his way to extend the family allowances to the first child. If he had done that, this gap which will undoubtedly be there in many households might have been closed, or at any rate greatly lessened. In Committee on the Finance Bill, therefore, it may well be that my hon. Friends may put down Amendments in order to try to reduce the loss which will undoubtedly come to so many thousands of the poorer section of the community.

I was very disappointed by the speech of the Minister of State when winding up the debate last night. I listened to him very carefully, but I thought he failed to answer any of the serious criticisms made by my hon. Friends—perhaps not unnaturally, as he heard so few of them. At any rate, we did expect that he would answer the main points put to him by my right hon. Friend the Member for Leeds, South. He was asked the definite question whether the increase in the bank rate would lead to a further rise in the Public Works Loans Board rate, and whether this in turn would be compensated for by an increase in the housing subsidy. The right hon. Gentleman said—and if hon. Members opposite can make anything of it they are cleverer than I am: It is a contingent and conditional question. It is…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."—[OFFICIAL REPORT, 12th March, 1952; Vol. 497, c. 1500.] In other words, he was saying that he would not commit himself. We cannot let the right hon. Gentleman and the Government get away in a cloud of words of this kind. Local authorities everywhere have got to make commitments about housing. Quite obviously the rates will go up in quite a number of directions. Building societies and others are bound to put up their rates, and it is more than likely that the Public Works Loans Board—

Mr. W. Fletcher

Will the right hon. Gentleman explain how a rate goes up "in quite a number of directions?"

Mr. Hall

I was using phraseology which is quite common and is well understood. The Bank rate goes up, deposit rates go up, Treasury bill rates go up, and in all directions we find all kinds of interested bodies, including the banks, putting up their rates of interest. We believe that inevitably the rates for long-term lending by the Public Works Loans Board will also have to go up. I think we should press the Government to tell us whether, supposing it does—and there is every likelihood that it will at a not-distant date—the extra charges which will undoubtedly fall on local authorities will be compensated for in the way that the recent rise has been compensated for.

The Minister did not answer the intervention of my hon. Friend the Member for Stechford (Mr. R. Jenkins), who asked how the change-over from the so-called soft economy left by the Labour Government to a new purged economy is to be achieved in a Budget which, in fact, increases the spending power of the people by at least £28 million.

The plain fact is, of course, that although this has been described as a tough Budget—the City expected something tough—it is not a tough Budget at all to the well-to-do. It puts greater burdens on the poor than they previously bore; its incentive to the workers is largely illusory, and it will undoubtedly raise the cost of living at a time when such cost needs no incentive to rise. It also increases the burden of the National Debt, a subject on which we shall have something to say when we come to the Committee stage. The good things it contains—and it does contain some—we shall wholeheartedly support, but we shall fight the obnoxious parts of it when the time comes to the utmost of our strength.

5.43 p.m.

Viscount Lambton (Berwick-upon-Tweed)

It is with great deference that I rise to follow the right hon. Member for Colne Valley (Mr. Glenvil Hall), and I only hope that in this, my first attempt, I may in some slight way emulate his skill. During the past few days we have been discussing the Budget, but it seems to me that after the first stunned amazement with which the Budget was received, very few genuinely constructive criticisms have come from the party opposite. One has been amazed at the spirit in which the Opposition have received this Budget. It almost seems as if they were surprised at the way in which the Chancellor dealt with the situation and wished that his predecessor had done the same in earlier times.

The question which struck me directly the Chancellor finished his Budget speech was whether he had been firm enough. During these last months, the country had been gradually worked up through the medium of the Press and by speeches of hon. Members on both sides of the House to the fact that we had to face a very great and severe crisis. I believe that the country was ready to face any great impositions placed upon it.

We have had a cut in the subsidies, and I am quite certain that, despite all the opinions of the Opposition, that was a considerable move in the right direction. What I regret is that the Chancellor has not gone further in that direction. During the last few years we have been standing on what might be described as the quick-sands of Socialism. We have to get away from that position and back to a sound economic position.

Until we have done away with all subsidies, and until this country stands on a firm basis, I do not see how we can have a continuous move forward. By that I mean that the country should go forward through extra efforts and that extra efforts should be rewarded by reliefs from taxation. As long as these subsidies remain there is always the danger, or so it seems to me, that at perhaps some not so distant date we shall have to take a step backwards in order to do away with them. This country should now go forward by continuous effort; that effort should be rewarded by relief from taxation, and, in its turn, that relief should encourage extra effort.

There is another point I wish to emphasise. It deals not so much with the present crisis, but with what lies ahead of us. It seems to me that there is a very great danger that we may regard the crisis which faces us today as being one which can easily be conquered, and that when it has been overcome, an easy time lies ahead of us. I think the exact opposite is the case, and I wish to emphasise the state of affairs, the seriousness of which will be apparent in the years to come, regarding the population of this country.

We know that in a few years' time the wage earners of this country will have to support a large number of aged people. If we look at the Government's review of population for 1947, we find that in every thousand those over 65 number 104, but that by 1977 they will number no fewer than 160. The burden placed upon the wage earners of this country will increase by no less than 50 per cent.

Also mentioned in that review is the cost to the Exchequer of retirement pensions. Without making any allowance for any future fall in the mortality rate, the cost is estimated to increase from £238 million in 1948 to £501 million in 1977. This assessment was made before the present rise in the cost of living and before the present increase in pensions. Therefore, in a few years time this country will be faced with a crisis which is likely to overtake the very greatest efforts of the wage earners unless that fact is realised and faced today.

While one can but admire the way the Chancellor dealt with the problems of the present one wonders how he intends to deal with this great problem of the future. One cannot encourage this generation to produce more by saying to them, "Produce more and you will get extra comfort in five or 10 years' time." They produce more in order to support the greatly increased number of dependents.

How is this problem to be solved? The right hon Member for Ebbw Vale (Mr. Bevan), wants the social services retained intact, but we must consider the enormous implications that that would involve. We must have regard not so much to the words of the social service legislation as to its intentions. It was the intention of social service legislation originally that every man and woman in this country should be helped from the cradle to the grave by the State. So difficult are the problems that lie in front of us that I think we shall have to consider very shortly whether or not the total aims of the social services should not be reduced and whether, in order to provide security from birth to responsibility and in old age, the full weight of maintaining the health services, without any amelioration, should be laid upon every man and woman during his or her period of full activity.

Indeed we may also have to consider the whole question of pensionable age. One thing is certain—that before us lies a crisis which is certain to mount as the years go on. This generation must realise that one cannot hide behind the word "State," for that term in matters of production only means that section of the population which can produce; and upon how much that section of the population can produce depends what the old people and the children can obtain. We must meet this threat to our future. Today's generation must realise that they will be the old age pensioners of the future; and unless we are careful we may by present prodigality endanger future security.

5.54 p.m.

Mr. Harold Wilson (Huyton)

It is my privilege to congratulate the noble Lord the Member for Berwick-upon-Tweed (Viscount Lambton), on a maiden speech to which we have been all delighted to listen. It is in tradition that in a maiden speech one preserves a delicate balance between being controversial and being non-controversial, and I believe that the noble Lord kept that balance pretty well to the satisfaction of the whole Committee.

I am sure that we would all agree upon one thing—that he is clearly an honest Tory. There is no nonsense about his "me-too-ism" of the Chancellor of the Exchequer; and the noble Lord did not in any way attempt to disguise where he stands on the social services. I am sure that when he addresses us on subsequent occasions and he is able to be really controversial, we shall have a fighting speech and that many of my hon. Friends will be very keen to take him on.

I must say that I rather regret the form in which this debate is taking place. It is different from most Budget debates we have had in these post-war years in the sense that on previous occasions we have had always an Economic Survey before us and have been able to debate the economic situation as well as the Budget proposals. Sir Stafford Cripps, in particular, used to devote a great deal of his time to discussing the general economic condition of the country as well as his own financial proposals.

The Chancellor's speech was almost purely financial and bore so little relation to the economic needs of the country that I could not understand why we had to have this early Budget. We might as well have waited another month. It does not contribute anything to the solution of our economic problems. It is quite clear that the Tory attack on this problem is of a purely financial character, aiming at deflation and a cut in real wages by allowing and even forcing prices to rise.

It is true that the Chancellor said something about real resources, but he said nothing about the problem in real terms and very little about production. He dealt with the total volume of resources in money terms. The speech of the President of the Board of Trade today has carried the debate into consideration of real facts as opposed to monetary facts for the first time, and particularly his references to the Utility scheme, to Purchase Tax, and to the export trade, to which I should like to turn in a moment.

The main complaints about the Budget that have been registered from this side of the Committee are, first of all, about its actual contents—what it has done to redistribute wealth and income, and redistribute them in the wrong way; and, second, the fact that it is treated as a purely financial operation and is not related to the pressing and urgent needs of the country.

On gleaning the speeches of the Chancellor of the Exchequer and the Minister of State for Economic Affairs—and particularly the latter's—I find there has been no attempt to deal with the economic problem at all. Indeed, the speech of the Minister of State was particularly disappointing. He did not try to speak as a Minister of State for Economic Affairs, but rather as a full-blown Financial Secretary to the Treasury; he made no attempt at all to discuss the problems of production. In a moment I will come to the point made by the right hon. Gentleman the President of the Board of Trade, because I think this was the first real and honest attempt he has made in this Parliament to address himself to the problems of his Department and to tell us something about the future of export trade in this country.

The Chancellor has been favoured with one very valuable legacy from his predecessor. That is the Budget surplus of £360 million, against a surplus of £39 million estimated by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell). Of course, that windfall gained on last year's account goes straight into redemption of the National Debt under the New Sinking Fund provisions. It is a striking fact that last year we paid off from the Budget itself the whole of the debt incurred by William Pitt in fighting the Napoleonic wars. It is a very nice thing to be able to do—