Commons Sitting of 17 March 1952

Preamble
The House met at Half past Two o'Clock
PRAYERS
[Mr. SPEAKER in the Chair]
PRIVATE BUSINESS
  EALING CORPORATION BILL (By Order)
  Second Reading deferred till Thursday.

PETITION (BRITISH MUSEUM)
The Secretary of State for the Home Department (Sir David Maxwell Fyfe): I have been asked by the Trustees of the British Museum to present a Petition, which they have to submit to the House each year, explaining their financial position and praying for aid. The Petition recites the funded income of the Trustees, and points out that the establishment is, necessarily, attended with an expense far beyond the annual production of the funds, and the Trust cannot, with benefit to the public, be carried on without the aid of Parliament. It concludes with this Prayer:
"Your Petitioners therefore humbly pray Your Honourable House to grant them such further support towards enabling them to carry on the execution of the Trust reposed in them by Parliament for the General benefit of learning and useful knowledge, as to Your House shall seem meet."—[Queen's Recommendation signified.]
Petition referred to the Committee of Supply.

ORAL ANSWERS TO QUESTIONS
  NATIONAL INSURANCE

    Industrial Injuries (Ex-Service Men)
    Mr. John Hyndasked the Minister of National Insurance what payment in respect of lost working time is allowed to ex-Service men victims of industrial injury when attending regional limb-fitting centres for treatment.
    The Minister of National Insurance (Mr. Osbert Peake): I would refer the hon. Member to the replies given him on 5th and 25th February.
    Mr. J. Hynd: Is the Minister aware that those replies have no special reference to ex-Service men? Is he further aware that I am assured by his Department that, in the case of ex-Service men, these loss of time payments are, in fact, made up? If that is the case, can he explain what is the difference between an industrially insured person who happens to be an ex-Service man and one who is not?
    Mr. Peake: This is an insurance scheme, and all victims of industrial injury are treated alike, quite regardless of any past service in Her Majesty's Forces. Ex gratia payments for loss of time would really be quite out of place in an insurance scheme.

    Unemployment Benefit (Wife's Earnings)
    Mr. Leslie Haleasked the Minister of National Insurance whether it is the practice of his officers to ask for figures of wife's earnings on an application by a husband for unemployment benefit.
    Mr. Peake: This is done in cases where the husband is claiming an increase in benefit for his wife, or they are engaged in business together.
    Mr. Hale: Is the Minister aware that, in the case of which I have already given him notice, a man who had been working full time in the cotton industry was asked to produce a balance sheet and a profit and loss account for the very small shop kept by his wife, which showed a profit of £90 a year; and that he was warned to be very careful as to his conduct? In

    1897
    view of the fact that there are now 10,000 people wholly or partly unemployed in Oldham, will the right hon. Gentleman see that instructions are given to ensure that this does not happen again?
    Mr. Peake: No, Sir. The position is that, where a husband claims unemployment benefit and his wife is keeping a shop, it is necessary for the authorities to be satisfied that the man is not gainfully occupied when he is in receipt of unemployment benefit, and, for that reason, inquiries are made as to whether the husband is being employed there.
    Hon. Members: Hear, hear.
    Mr. Hale: Surely, the Minister is aware that, in the case referred to, the man was fully employed in the cotton industry and had been for years? Is it not a quite monstrous innovation that, where a man is fully insured in connection with his full-time employment, attempts are to be made by the Government to reduce the benefit because his wife has a different source of income?
    Mr. Peake: It is a condition of unemployment benefit that a man should not be gainfully employed, and, where his wife is keeping a shop, it is necessary to inquire whether, when the man is not engaged on his normal job, he is, in fact, taking part in the business activities of the shop.
    Mr. Martin Lindsay: Is not the procedure which my right hon. Friend has just outlined exactly the same as took place under the previous Government?
    Mr. Peake: That is so.
    Mr. Hale: In view of the very unsatisfactory nature of the reply, and of the applause which it drew from the Government benches, I beg to give notice that I shall take an early opportunity of raising this matter on the Motion for the Adjournment.

    Widows (Sick Pay)
    Mr. Eric Johnsonasked the Minister of National Insurance if he will take steps to correct the anomaly under which a widow of 59 years of age who becomes ill and unfit for work receives sick pay at the rate of 26s. a week but on attaining the age of 60 years and on being transferred to the contributory old age pensions
    1898
    scheme has the amount of her 10s. pension, when at work, deducted from the 26s. she receives when unable to work through illness.
    Mr. Peake: I am aware that certain widows who had rights under the earlier pensions schemes have been put in a privileged position by the preservation of those rights, but the group affected is steadily diminishing, and I do not think I need take any further steps in regard to them.
    Mr. Johnson: Is my right hon. Friend aware that there is still a considerable number of these widows and that this practice is a very real injustice which is causing a great deal of discontent? Will he reconsider the matter?
    Mr. Peake: It is one of the basic principles of the Beveridge scheme that insurance benefits are alternative and not cumulative. During the transitional period these widows were given a specially privileged position in that they were enabled, whilst under 60 years of age, to obtain two different kinds of benefit from the Fund.

    Pensioners
    Mr. William A. Stewardasked the Minister of National Insurance (1) if he will consult with the National Coal Board on the possibility of selling coal to pensioners drawing national assistance at concessionary prices;
    (2) if he will consult with the British Transport Commission on the possibility of issuing reduced fare vouchers to old age pensioners, owing to the recent increase of fares in the transport services in the London area.
    Mr. Peake: No, Sir. I do not think arrangements of this kind are practicable, but my hon. Friend bas no doubt taken note of the proposals for increased pensions made by my right hon. Friend the Chancellor of the Exchequer.
    Mr. Steward: With regard to Question No. 4, would not the Minister agree that the majority of old age pensioners are in far greater need of concessionary coal than are many miners? With regard to Question No. 5, would the Minister ask the Minister of Transport to consider this matter again because there is no practical difficulty? Old age pensioners could be treated as children. In other

    1899
    words, they could be charged at children's rates on production of their old age pension books.
    Mr. Peake: I think there would be general agreement that it is much better to give assistance in cash rather than in kind or by means of subsidies for special classes.

  PETROL

    Exclusive Selling Arrangements
    Mr. William Shepherdasked the Minister of Fuel and Power, when fixing prices for petrol, how far he considered the exclusive selling arrangements extensively entered into during recent months between petroleum companies and garages.
    The Minister of Fuel and Power (Mr. Geoffrey Lloyd): In the last review of prices I did not take into account costs incurred in connection with such arrangements. I am, however, seeking further information about them.
    Mr. Shepherd: Is my right hon. Friend aware that this arrangement may involve a restriction of consumer choice which may or may not be in the public interest, and would he consider referring this matter to the Monopolies Commission?
    Mr. George Chetwynd: Is the right hon. Gentleman aware that almost £2 million was spent on renovations and repairs to garages last year, and as the bulk of this has been paid for under this arrangement, does not he think it ought to be taken into account in assessing the price of petrol?
    Mr. Lloyd: In regard to the last supplementary question, I would not like to add anything to what I have said, which keeps the matter in a balanced form. With regard to my hon. Friend's supplementary question, I would inform him that it would not, of course, be a matter for me. The President of the Board of Trade did say recently that he would consider the supply of petrol as a possible subject of reference to the Commission when he comes to select further references.

    Distribution
    Mr. F. Beswickasked the Minister of Fuel and Power (1) whether, in order to reduce distribution costs and
    1900
    consequently the price of petrol, he will ensure that the rationalised pooled system of area distribution adopted during the war is re-introduced;
    (2) what arrangements exist for the distribution, under the pooled system adopted during the war, of improved types of petrol as they become available.
    Mr. Geoffrey Lloyd: The answer to the first Question is "No, Sir," and the second, therefore, does not arise.

  FUEL AND POWER

    Electricity Generating Stations
    Mr. Gerald Nabarroasked the Minister of Fuel and Power whether he will take steps to secure strategical deployment for defence purposes of all new power houses projected by the British Electricity Authority.
    Mr. Geoffrey Lloyd: Yes, Sir.
    Mr. Ralph Morleyasked the Minister of Fuel and Power what will be, approximately, the starting date of the erection of the new electricity generating station at Marchwood, near Southampton.
    Mr. Geoffrey Lloyd: About 1st July, Sir.

    Economy (Loans to Industry)
    Mr. Nabarroasked the Minister of Fuel and Power the commencing date for granting loans to industry in a total sum of £1,000,000 for fuel-economising equipment and insulation of industrial buildings; what is the prescribed completion date for installation of such equipment in accordance with his recent announcement; what is the administrative machinery of his Department for approving such loans; whether prior approval of the Fuel Efficiency Branch of his Department will be required; and whether he will publish in the OFFICIAL REPORT full details of this proposed scheme to embrace coal, electricity, gas and fuel oil conservation in industry.
    Mr. Geoffrey Lloyd: The detailed arrangements are being worked out, and I hope to announce them shortly.
    Mr. Nabarro: Will my right hon. Friend bear in mind the implications of the recent Budget statement, particularly

    1901
    in regard to the possibility of whether interest charges in respect of these loans will be admitted by the Inland Revenue as a charge for the purpose of computing liability to Income Tax, Profits Tax, and Excess Profits Levy?
    Mr. Lloyd: I certainly could not make any statement now as to the Budget.
    Mr. Nabarro: I was merely asking my right hon. Friend to bear the matter in mind.
    Mr. Philip Noel-Baker: Does the right hon. Gentleman's reply mean that this is in the nature of an experiment, and that if it succeeds the sum will be increased?
    Mr. Lloyd: I cannot add to anything I have said, but I said that it was an experiment.

  COAL SUPPLIES

    Opencast Mining
    Mr. Nabarroasked the Minister of Fuel and Power what part of the reduction of Vote 6, Civil Estimates for the Ministry of Fuel and Power from £6,900,000 for 1951–52, to £3,842,000 for 1952–53, is attributable to transfer of opencast coalmining functions from his Department to the National Coal Board; what are the causes of this substantial reduction in the Vote; and whether he will make a statement.
    Mr. Geoffrey Lloyd: I should be glad if my hon. Friend would await the publication of details of the Estimate in the normal course.

    Domestic Prices
    Mr. Morleyasked the Minister of Fuel and Power if he will give the current retail prices of domestic coal, per ton, in Newcastle, Nottingham, Bristol, Cardiff, Southampton, Portsmouth and London.
    Mr. Geoffrey Lloyd: With the hon. Member's permission, I will circulate the figures in the OFFICIAL REPORT.
    Mr. Morley: In view of the very great discrepancy as between one part of the country and another in the price of this product of a publicly-owned industry, will the right hon. Gentleman consider devising some means of equalising the price of coal as between different areas?
    Mr. Lloyd: I can quite understand hon. Members from constituencies far from the coalfields suggesting this, but, of course, I could also understand hon. Members from constituencies near the coalfields taking an exactly opposite view.
    Sir Waldron Smithers: Will my right hon. Friend state in round figures how much the retail price of coal has risen since nationalisation?
    Sir Herbert Williams: Will my right hon. Friend arrange in future that Hampshire strawberries shall be the same price in London as they are in Southampton?
    Following are the figures:
    The maximum retail prices in each town vary according to quality but prices of Group 4 coals, which are of average quality, are at present as follows:

    Per

    ton

    s.

    d.

    Newcastle-upon-Tyne

    …

    84

    10

    Nottingham

    …

    86

    1

    Bristol

    …

    108

    9

    Cardiff

    …

    95

    4

    Southampton and Portsmouth

    …

    124

    7

    London

    …

    118

    3

    These prices include the winter additions, under the summer-winter prices scheme, of 2s. 6d. per ton in Newcastle, Nottingham and Cardiff and of 5s. 0d. per ton in Bristol, Southampton, Portsmouth and London.

  MINISTRY OF FOOD

    Foodstuffs (Value)
    Dr. Barnett Strossasked the Minister of Food whether he will give an estimate of value, in terms of calories, vitamins and mineral salts, of the foodstuffs which are to be no longer imported, giving the figures for the next 12 months.
    The Minister of Food (Major Lloyd George): It would be misleading to attempt to express cuts in non-sterling expenditure as reductions in nutritional standards. The loss of supplies may be made up in part by additional sterling imports, by use of stocks and by greater consumption of the foods on which there is no restriction.
    Dr. Stross: Is the Minister aware that it is thought there may be an appreciable degradation in the standard of the

    1903
    national diet unless urgent steps are taken in the ways already outlined in his answer, and will he assure the House that he will constantly bear in mind the fact that the nation's health will depend on his action?
    Major Lloyd George: I can assure the hon. Gentleman that I am constantly watching the position, and that I will keep the matter in mind.
    Dr. Edith Summerskill: In view of the increasing shortage of rationed food, can the Minister say whether he is considering the introduction of a points scheme which would ensure an equable distribution of unrationed goods?
    Major Lloyd George: Not at the moment.

    Wheat Extraction Rate
    Dr. Strossasked the Minister of Food whether, in view of the restrictions which are to be imposed on importing many valuable articles of food, and in order to protect the health of the public, he will raise the rate of wheat extraction back to 85 per cent.
    Major Lloyd George: The nutrients most markedly influenced by changes in the extraction rate of flour are iron, vitamin B,, riboflavin and nicotinic acid. So far as can be forecast at present, none of these is likely to be affected by the recent reductions in the food import programme.
    Dr. Stross: Is the Minister aware that his answer is not exactly correct? My information is that there is some diminution in all the substances he has described, particularly with reference to cakes and biscuits, where the reduction is down to 78 per cent. extraction. In view of the threatened shortages of other foodstuffs of an important kind, will not the right hon. and gallant Gentleman look at this problem again and let us have our bread in as good a condition as possible?
    Major Lloyd George: From the best information I have at the moment, the answer I have given is the correct one. However, I will certainly make sure that the matter is kept very much in mind. The hon. Gentleman will appreciate that I am not an expert on what he is saying.
    Dr. Stross: If I send the right hon. and gallant Gentleman the information I have
    1904
    received from his own Department, which rather conflicts with the statement he has just given us, will he look at it?
    Major Lloyd George: Yes, Sir.

    Commonwealth Sugar Agreement
    Major Tufton Beamishasked the Minister of Food if he will make a statement on the eight-year Agreement recently signed by him with Commonwealth sugar exporters.
    Major Lloyd George: The full text of this Agreement was published in the Ministry Bulletin for 12th January, a copy of which I am placing in the Library of the House. The agreement is designed to provide within the next few years sufficient sugar from Commonwealth sources to meet the greater part of the requirements of the Commonwealth.
    All Commonwealth producers of sugar participate in the agreement and it should go far to meet long standing claims for greater economic stability in those producing countries which largely depend on sugar as their main crop.

    Eggs
    Mr. Eric Fletcherasked the Minister of Food (1) what arrangements have been made with owners of egg-breaking-up plants to supply them with quantities of English eggs for breaking up during the summer months;
    (2) what is his policy in regard to making available for the public all English shell eggs before allowing any to be broken up for sale in liquid form.
    Major Lloyd George: All shell eggs suitable for allocation are made available in that form. About 4 per cent. of home-produced eggs are graded "second quality" and are sold "off allocation." From March to August about one-fifth of this year's total production of second quality eggs will be broken out and frozen.
    Mr. E. Fletcher: Is not the Minister aware that this is a perfect scandal and that as long as there is a public demand for English shell eggs, no English shell egg ought to be sent for breaking up, particularly in these days of food shortage? Will he reconsider this policy?
    Major Lloyd George: I do not know where the scandal arises, for even if they are broken up they are used for food. A second quality egg is not a good quality egg. [HON. MEMBERS: "Oh."] It is graded second quality because of certain defects, and in the summer months it deteriorates very rapidly. In any case, every one of these broken-up eggs goes into food.
    Lieut.-Colonel Marcus Lipton: Will the Minister assure us that eggs that fail to hatch out in the incubators are sent to breaking-up plants and are not retailed off the ration to the public?
    Major Lloyd George: That is a different kind of egg. For the public safeguard there is an "H" marked on the side of the egg.
    Mr. E. Fletcher: In view of the very unsatisfactory reply, I beg to give notice that I shall raise this important matter on the Adjournment.
    Mr. W. F. Deedesasked the Minister of Food what is the estimated percentage of eggs rejected at packing stations because of blood spots; and how they are disposed of.
    Major Lloyd George: Eggs with blood spots are not rejected at packing stations, but are graded as second quality and sold as such off allocation.
    Mr. Deedes: Is my right hon. and gallant Friend satisfied that there is no undue wastage in the rejection of these eggs which are suitable for consumption?
    Major Lloyd George: I do not think the proportion is very high because the total of this grade of egg collected is not very high in proportion to the number of first-grade eggs collected.

    Catering Establishments (Hygiene)
    Dr. A. D. D. Broughtonasked the Minister of Food when he proposes to introduce legislation to supplement the Food and Drugs Acts for the purpose of establishing a standard of hygiene in catering establishments.
    Major Lloyd George: I regret that owing to the pressure of Parliamentary business it is not likely to be possible to introduce legislation during the present Session.
    Dr. Broughton: Would it not be much better if the Government were to abandon all their proposed provocative legislation, such as the National Health Service Bill, and provide us with time to discuss this important matter which is likely to be of a non-controversial character and action on which would be of real value to the public?
    Major Lloyd George: I can assure the hon. Member that I am most anxious to get this legislation discussed as soon as possible, but of course there is a Statute in existence which is being implemented. This matter is, of course, important and I am most anxious that legislation should be brought forward as soon as possible.
    Colonel Alan Gomme-Duncan: Was there not ample opportunity for the last Government to undertake this instead of the provocative legislation they brought forward?
    Dr. Broughton: Is the right hon. and gallant Gentleman aware that there is a growing suspicion that the Government have no policy to reduce the incidence of food poisoning other than their plans for reducing the amount of food available for consumption?

    Argentine Meat
    Mr. Frederick Willeyasked the Minister of Food with what representatives of pre-war meat importers he has had discussions about the procurement of meat from the Argentine; and if he will make a statement.
    Major Lloyd George: I have met individual representatives of pre-war meat importers informally and the procurement of meat from the Argentine has been one of the matters on which they have given me their views. These meetings were informal and the opinions expressed were simply those of private individuals. It would not, therefore, be proper for me to make a statement.
    Mr. Willey: Would the right hon. and gallant Gentleman deny that the gentlemen whom he has consulted refused to take part in the procurement of Argentine beef under the present arrangements?
    Major Lloyd George: I can only repeat the last sentence of my answer, which was that it would not be proper for me to make a statement.

    Subsidies
    Mr. F. Willeyasked the Minister of Food what are the current unit subsidies on bacon, flour and cheese.
    Major Lloyd George: The unit subsidies for 1951–52 are estimated as follows: Bacon, 1s. 1d. per lb.; flour, 1s. 2¾d. per 7 lb.; cheese, 11d. per lb.
    Mr. Willey: As the figures given are average figures for the year, could the right hon. and gallant Gentleman give the current figures, in other words the rate at which the subsidies are running at the moment?
    Major Lloyd George: No, that is an extremely difficult thing to do, as the hon. Member knows. An attempt was made at one time to give figures for the quarterly periods but that proved extremely difficult, and therefore we have to give yearly figures.
    Dr. Stross: Is the right hon. and gallant Gentleman aware that of the three foods listed here, the most important is cheese? Whatever else happens, will he see that we get an abundant amount as cheaply as possible?
    Mr. Chetwynd: Can the right hon. and gallant Gentleman say whether there will be any food subsidies left on these three items when the new proposals come into effect?
    Major Lloyd George: All the future figures depend upon procurement prices. Cheese happens to be easy to estimate because the price of procurement does not alter very much, but where one gets variation in price and demand it is extremely difficult. On many of these things, of course, there will be a proportion left.

    Cheese and Bacon Rations
    Mr. Arthur Lewisasked the Minister of Food if he will give details of the amounts, and the numbers, of cheese and bacon rations that have not been taken up since the increases in prices, ranging from 10d. to 1s. a pound, were made.
    Major Lloyd George: We have no information about the number of rations taken up by consumers. As indicated in my reply to the hon. Member for Sunderland, North (Mr. F. Willey) on 5th March,
    1908
    wholesalers have taken delivery of practically their full entitlement of these foods for the past two months.
    Mr. Lewis: Is the Minister aware that old age pensioners and the lower income group are finding it difficult to take their rations and that those rations are going on to the black market? Is it now the policy of the Government to introduce rationing by price?
    Major Lloyd George: All I can say about that is that the actual take-up, particularly of cheese, is slightly higher than it was during the previous two years.
    Mr. Lewis: Is the Minister aware that the people really in need—the old age pensioners and the lower income group—cannot afford to take their rations, and that those who have the money are getting more than they are entitled to?
    Major Lloyd George: That is why, possibly, my right hon. Friend the Chancellor of the Exchequer decided to help the old age pensioners.
    Mrs. Barbara Castle: Can the right hon. and gallant Gentleman tell us whether his Department exercises any check on the use or distribution of rationed food particularly at the wholesaling stage? Does he not realise that what my hon. Friend the Member for West Ham, North (Mr. Lewis) said is in the experience of all of us—that some consumers are now being offered in the shops more than their ration because other consumers cannot pay?
    Major Lloyd George: I should be extremely grateful if the hon. Lady could give me any information on that point. She will appreciate it is not an easy matter to get that information, and if she or any other hon. Member has information I should be very glad to have it and to look into it.
    Mr. Lewis: Will the right hon. and gallant Gentleman take time off to come to the poorest working class areas and go into the shops, where he will see that this happens daily?
    Sir William Darling: Is my right hon. and gallant Friend aware that the hon. Lady the Member for Coatbridge and Airdrie (Mrs. Mann) has made inquiries and that she assures me that the statements made by the hon. Member for West Ham, North are not in accordance with the truth?

    Clean Handling
    Mr. F. Willeyasked the Minister of Food what steps he is now taking or proposes to take to ensure the cleaner and safer handling of food.
    Major Lloyd George: The general policy followed by my predecessors in office in this field is being continued and developed.
    Mr. Willey: Is the right hon. and gallant Gentleman aware that whilst he may be following that course he is not following it with the vigour shown by his predecessor?
    Major Lloyd George: Perhaps the hon. Member did not hear the last words of my answer, which were "continued and developed."

  ROADS

    Highway Code (Recommendations)
    Mr. Peter Freemanasked the Minister of Transport whether, in view of the large and growing number of accidents on the road, he will revise the Highway Code by recommending stricter conditions to be observed by motorists, pedestrians and other users of the roads.
    The Minister of Transport (Mr. John Maclay): I have just received a report containing recommendations by the Committee on Road Safety for improving the Highway Code and for making it a stronger force in promoting safety on the roads. I am giving this report urgent consideration.
    Mr. Godfrey Nicholson: Will my hon. Friend bear in mind that the Highway Code is an example of very bad English and will he see that any future edition is decently and clearly expressed?
    Mr. Maclay: I will certainly study that point very carefully.
    Mr. Freeman: Is the hon. Gentleman aware of the very serious increase in the figures for both injuries and fatalities, and will he take every step to have this published and made available for the public at the earliest possible moment?
    Mr. Maclay: Yes, Sir, subject to examination of the report.

    Construction and Maintenance
    Mr. Arthur Moyleasked the Minister of Transport if he will state the cost of highway construction and maintenance undertaken by contractors each year since 1947.
    Mr. Maclay: I regret that this information is not available.
    Mr. Moyle: Would it not be possible for the Minister to let me have the figures relating to trunk roads for the period concerned?
    Mr. Maclay: I will certainly examine that possibility.
    Mr. A. G. Bottomley: Is it not a fact that there has been a decrease, and that through this decrease the poor state of the roads has led to an increase in the number of road accidents?
    Mr. Maclay: The form of the Question makes it difficult to give an answer to that supplementary question.
    Mr. Moyleasked the Minister of Transport if he will state the number of county roadmen engaged by county councils on highway construction and maintenance in 1938; and the number engaged at present on such work.
    Mr. Maclay: I have no figures for 1938. In September, 1939, the number was about 61,000, and in September, 1951, it was about 44,000.

    School Crossing, East London
    Mr. A. Lewisasked the Minister of Transport if he is aware of the concern of parents at the dangerous crossing at Maryland Point School, Stratford, E.15, across the High Road; and whether he will have hand-operated traffic lights installed or consult with his right hon. and learned Friend the Home Secretary, to make certain that there is always a policeman at the crossing during school hours.
    Mr. Maclay: I am informed that this crossing is regularly controlled by the police when children are going to and from school.
    Mr. Lewis: Is the Minister aware that on several occasions the policeman has had to be called away because of serious accidents in the vicinity, and that recently

    1911
    the parents of children who go to this school signed a petition protesting at the fact that the policeman had been taken away? Will the hon. Gentleman see that there is always a policeman at this crossing and that he is never taken away during school hours?
    Mr. Maclay: I have heard of only one case in which a policeman was away for a short time owing to an incident elsewhere, and I am informed that the police do everything possible to be there during school hours.
    Mr. Lewis: What I am asking is that steps should be taken to see that a policeman is always there, and is not taken away for any incident whatever while the school is in session. Will the Minister see to that?
    Mr. Maclay: I have noted the hon. Member's remarks.
    Mr. R. J. Taylor: Will the Minister be prepared to oppose the removal of a crossing if there are not sufficient policemen to guard it, since school teachers refuse to take responsibility for children where there is no crossing?
    Mr. Maclay: I think that that does not arise out of this Question.

    Buses, London
    Mr. Stewardasked the Minister of Transport if he will take the necessary steps to amend the Transport Act, 1947, so as to allow the introduction of buses run by private enterprise in the London area.
    Mr. Maclay: No, Sir. This would involve an alteration of the structure of London Transport which has been in operation for nearly 20 years.
    Mr. Steward: Does not the Minister appreciate that if a private bus company were allowed to operate in London at the present time, if only as an experiment, we should have a comparison of costs and, possibly, a lowering of fares—and certainly a better service to the public?
    Lieut.-Colonel Lipton: Does the Minister propose to take steps to amend the Transport Act, 1947, for any other purpose?
    Mr. Maclay: That is quite another question.
    Mr. C. W. Gibson: Is it not a fact that the reason a Tory Government nationalised London Transport was the very fierce and anarchic competition which grew up in London then?
    Mr. Maclay: The hon. Member will realise that there is a difference between a nationalised industry and a public utility company.

    County Surveyor, Ross and Cromarty
    Mr. John MacLeodasked the Minister of Transport why his Department have agreed to pay a grant to the Ross and Cromarty County Council in respect of an increase in salary to the county road surveyor only from 1st August, 1951, when the council have paid the increase retrospectively from 16th May, 1951, in view of the fact that when increased salary scales are approved by Government Departments in respect of officers of the county council such as police, teachers, milk officers, etc., such increases are always paid retrospectively by Government Departments and the county council are expected to pay their share from that date.
    Mr. Maclay: It is not the practice to pay retrospective grants from the Road Fund. Special considerations arise when salaries are increased in accordance with a national agreement which itself provides for retrospective application.
    Mr. MacLeod: Surely if the Government admit responsibility for making a retrospective payment in the other Departments, they should also admit the responsibility in this case.
    Mr. Maclay: The position is rather different, because when there is a national agreement which itself provides for retrospective application, obviously one has to honour it.

    Accidents
    Mr. Peter Freemanasked the Minister of Transport the numbers of persons killed and injured, respectively, on the roads of Great Britain under the category of road users in 1938 and 1951, respectively; and what percentage variations in the various categories of road

    1913
    users the figures represent in 1951 compared with those for 1938.
    Mr. Maclay: With permission, I will circulate the figures in the OFFICIAL REPORT.
    Mr. Freeman: Do these figures not indicate that there has been a decrease in the proportion of pedestrians and pedal cyclists killed and injured on the roads, and an increase in the proportion of motorists, either as drivers or passengers, and motorcyclists, and if so will the

    CASUALTIES AMONG VARIOUS CLASSES OF ROAD USER IN 1938 AND 1951

    —

    Killed

    Percentage increase (+)or decrease (-)in 1951

    Injured

    Percentage increase (+)or decrease (-)in 1951

    Total

    Percentage increase (+)or decrease (-)in 1951

    1938

    1951

    1938

    1951

    1938

    1951

    Per cent.

    Per cent.

    Per cent.

    Pedestrians:

    Under 15

    870

    706

    -19

    30,720

    24,652

    -20

    31,590

    25,358

    -20

    Over 15

    2,176

    1,692

    -22

    43,473

    32,812

    -25

    45,649

    34,504

    -24

    Pedal cyclists:

    Under 15

    205

    130

    -37

    10,440

    10,188

    -2

    10,645

    10,318

    - 3

    Over 15

    1,196

    670

    -44

    55,287

    37,089

    -33

    56,483

    37,759

    -33

    Motor cyclists

    989

    983

    - 1

    24,618

    32,143

    +31

    25,607

    33,126

    +29

    Motor cycle passengers

    156

    192

    +23

    7,008

    9,362

    +34

    7,164

    9,554

    +33

    Drivers

    339

    321

    - 5

    18,054

    20,275

    + 12

    18,393

    20,596

    + 12

    Other persons

    717

    556

    -22

    37,111

    44,722

    +21

    37,828

    45,278

    +20

    Total

    6,648

    5,250

    -21

    226,711

    211,243

    - 7

    233,359

    216,493

    - 7

    Mr. Bottomleyasked the Minister of Transport how many statutory inquiries he held into road accidents and railway accidents, respectively, during 1951.
    Mr. Maclay: During 1951, 14 statutory inquiries were held into train accidents on passenger railways. There were no statutory inquiries into road accidents during that year.
    Mr. Bottomley: In view of the fact that 5,250 people were killed on the roads in 1951, can the Minister explain why he does not use the powers conferred upon him by Parliament under Section 23 of the Road Traffic Act, 1930, to inquire into causes of road accidents?
    Mr. Maclay: The right hon. Gentleman, I think, will appreciate that there is a great difference between the railway position and the road position. The operation of the railways is covered by
    Minister give special consideration to dealing with the matter in a new Highway Code and in Regulations?
    Mr. Maclay: The figures are really rather complicated, and I think the hon. Member would be well advised to study them, as I must before I can give an answer to the question he has asked. I could not give a straight answer to the question in those terms.
    The following is the statement:
    very strict safety devices, and inquiries are necessary in these cases to see that they are all working or to ascertain any alterations which may be desirable. In the case of roads, there are very many other factors, but in a large number of cases it is a question of error of judgment, and I doubt whether a statutory inquiry would be of any real use.
    Mr. Bottomley: Is the Minister saying that the powers conferred upon him by Parliament are unnecessary?

  TRANSPORT

    Tribunal (Information)
    Colonel L. E. Crosthwaite-Eyreasked the Minister of Transport what information, and from what bodies, he has seen fit to place at the disposal of the Transport Tribunal under Section 22 (2) of the Railways Act, 1921.
    Mr. Maclay: None, Sir. There was nothing that I could add to the very full presentation of the case for and against the scheme by the Commission and the objectors. It was, of course, for the Tribunal and not for me to decide the issues.
    Colonel Crosthwaite-Eyre: Is the Minister aware that under this Section he has power to see that very many bodies, including such organisations as the National Union of Ratepayers' Associations, who have not been received by the Transport Tribunal, have their case presented, if he thinks fit? Will he look at this point again?
    Mr. Maclay: A very large number of bodies were seen between the time the Tribunal started sitting and the time it concluded, towards the end of November. Of course, I will bear in mind what my hon. and gallant Friend says for any future proceedings.

    Passenger Charges Scheme, 1952
    Mr. Ernest Daviesasked the Minister of Transport if he will request the Central Transport Consultative Committee to consider the manner in which the British Transport Commission proposes to exercise the discretion allowed by the passenger charges scheme in relation to railways outside London, in view of its declared intention to increase railway fares thereon on 1st May.
    Mr. Maclay: No, Sir. I would refer the hon. Member to the reply which I gave him to a similar Question on 10th March.
    Mr. Davies: I have seen that answer. Does the Minister fully appreciate that the fares outside London are to be raised on British Railways on 1st May? A lot of the dissatisfaction which arose in London at the manner in which this increase in fares was implemented was because it took place at the same time as the change in fare stages. Will the Minister see, therefore, that when the rise takes place outside London, steps are taken to prevent a similar occurrence?
    Mr. Maclay: I am well aware of the substance of some of what the hon. Gentleman has said, but he must realise—and I do not want to go on repeating this, but I have to—that I am working under the structure of the 1947 Act and under that Act my answer was inevitable.
    Mr. Davies: Does not the Minister agree that he has full power to ask for information from the Transport Commission? Will he not use his power to ask the Commission in what way they propose to implement the increase in fares on 1st May?
    Mr. Maclay: That point was not put precisely in the hon. Gentleman's Question.
    Mr. Davies: The Minister says he has no power.
    Captain Robert Ryderasked the Minister of Transport whether, in view of the hardship caused by the repeated rise in transport fares over recent years, he will make a statement as to the directions he will issue under Section 4 of the Transport Act, 1947, to the British Transport Commission to ensure that this burden is evenly shared in all sections of the country.
    Mr. Maclay: The Passenger Charges Scheme, 1952, nòw governs the fares charged by the Commission in the London area and as from 1st May, will govern the fares charged by them outside this area. The scheme was confirmed by the Transport Tribunal after a public inquiry. This is the procedure laid down in the Transport Act and I am advised it would not be proper for me to issue directions such as those to which my hon. and gallant Friend refers.
    Captain Ryder: Will my hon. Friend bear in mind that when a man travels on the London Transport services, as many millions do to get to their work, he is called upon, as part of his fare, to make a contribution towards this central charges fund, whereas another man, using the municipal services in the Provinces, does not? Does not my hon. Friend think that this inequitable system ought to receive his attention?
    Mr. Maclay: I will certainly study what my hon. and gallant Friend has said.
    Mr. Hector Hughes: Does not the Minister consider that it would be a practical and useful thing to introduce a flat rate for passenger fares for workers going to and from their work irrespective of distance?
    Mr. Maclay: I understand that the hon. and learned Gentleman has designs for a debate on this subject in a short time.
    Mr. Hughes: Not on that subject.
    Mr. Davies: Would not this difficulty be overcome if the Transport Act of 1947 were amended—[HON. MEMBERS: "Hear, hear"]—to allow for the complete nationalisation of all passenger transport?
    Mr. Maclay: The first part of the hon. Gentleman's supplementary question was very tempting to me.
    Mr. Hector Hughes: On a point of order. The answer which the hon. Gentleman gave to my supplementary question contained a mistake of fact. I did not intend to discuss this matter on Friday. Will he not now answer the supplementary questicn which I asked?
    Mr. Maclay: I regret that I was unable to understand the terms of the Motion which appears in the hon. and learned Gentleman's name.
    [That this House, taking note of the fact that this island is treated as a unit for postal purposes but not for the carriage of essential commodities, such as fish, agricultural produce and coal; that the carriage of letters within this island is charged for by weight only and not by distance, while the carriage of such essential commodities is charged for by both weight and distance; and that this causes unfair competition, unnecessarily increases prices, restricts supplies and penalises producers and consumers all over this island, particularly those in remote districts; strongly urges the Government to introduce legislation to amend the Transport Act, so as to provide for standard freight charges, irrespective of the distance covered.]
    Captain Ryder: When my hon. Friend is considering the point which I made in my Question, will he also give some indication of how the central charges fund is assessed?
    Mr. Maclay: I do not think that arises out of this Question

    Building Licence, Southgate
    Mr, A. Lewisasked the Minister of Transport on what grounds he supported the application of Express Bodies, Rink-ham Way, Southgate, for the granting of a £7,180 building licence.
    Mr. Maclay: The Regional Transport Commissioner for the Metropolitan traffic area sponsored this application because he was satisfied that the space then available to the firm for carrying out the repair
    1918
    and maintenance of commercial motor vehicles was inadequate.
    Mr. Lewis: Is the Minister aware that people who find difficulty in getting houses are becoming annoyed at the fact that these garages seem to be receiving unlimited licences for building showrooms in which to sell, and to have on show, second-hand cars which are being sold at inflated prices? Will he see to it that he stops issuing these licences to garages for this purpose and directs the men and material to house building?
    Mr. Maclay: In my answer I made it clear that the Question which the hon. Gentleman asked arose out of the need for more space for doing repair and maintenance work on commercial motor vehicles. As the hon. Gentleman knows, we have to keep the road transport fleets on the roads if we are to keep going.
    Mr. Lewis: Is the Minister aware that this and other garages are using the new space and the new buildings for showrooms through which to sell and to show second-hand cars which are being sold at high prices? I repeat, this and other garages.
    Mr. Maclay: That, again, does not arise out of the Question.

    East Anglian Consultative Committee
    Mr. Stephen McAddenasked the Minister of Transport whether he will consider adding the name of Mr. Barry Flaxman, Southend, to the East Anglian Transport Consultative Committee.
    Mr. H. Hynd: On a point of order. This Question is no doubt in order, in view of the fact that it passed the Table, but, Mr. Speaker, would you care to give your guidance on whether it is a desirable sort of Question to go on to the Order Paper? Does it not open the door to all sorts of undesirable nominations?
    Mr. Speaker: The Question is clearly in order, and I would rather await until I have heard the answer before I give my Ruling. I know nothing about it myself, and hon. Members are themselves responsible for the propriety of Questions which they put on the Order Paper.
    Mr. Maclay: The answer to the Question is as follows:
    If my hon. Friend will send me particulars of this gentleman's qualifications, I will consider them when a vacancy next occurs on the Committee.
    Lieut.-Colonel Lipton: Would it not be better for appointments of this kind to be filled through the Ministry of Labour employment exchanges rather than through Questions to the Minister?
    Mr. Maclay: The answer which I have given is precisely the answer which I should have given to any hon. Member who put down a similar Question.
    Mr. McAdden: Is the Minister not aware that the gentleman named in this Question is a prominent official of the Railway Travellers' Association, indeed well known to the Ministry of Transport? Would it not be desirable to choose such a person, who could represent the views of those who travel on this railway, some of whom are spending 25 per cent. of their wages on railway fares?
    Mr. E. Shinwell: Has the Minister any information to the effect that the gentlemen whose name is suggested is a member of the Conservative Party in Southend?
    Mr. Maclay: No, Sir. I was giving a completely genuine reply when I said I had no knowledge whatsoever of this gentleman's qualifications.

  SHIPPING

    Ports (Cargo Handling)
    Mr. Kenneth Thompsonasked the Minister of Transport if he has considered a report on the freight-handling industry prepared by the Aims of Industry Limited, a copy of which has been sent to him; and if he will now initiate discussions with the trades unions and employers' organisations concerned, together with the National Dock Labour Board, to secure improvements in the rate of cargo handling at British ports.
    Mr. Maclay: I have a copy of this report. As I indicated in my answer to Questions by my hon. Friend the Member for Woolwich, West (Mr. Steward) and other hon. Members on 3rd March, my right hon. Friend the Secretary of State for the Co-ordination of Transport, Fuel and Power and I have been giving this
    1920
    matter our urgent consideration and, following my right hon. Friend's announcement in another place on 11th March, the Ports Efficiency Committee, has been set up to investigate port working in the United Kingdom.
    Mr. Thompson: While thanking my hon. Friend for his answer and the sympathetic attention which he has given to this problem, may I draw his attention to the great urgency of this matter, and particularly to the report of the Liverpool Steamship Owners' Association which was issued a few days ago, which stresses the urgency of this same point?
    Mr. Maclay: My hon. Friend will realise, I am sure, that my right hon. Friend's statement means that we fully recognise the urgency of the situation.
    Mr. R. J. Mellish: Is the Minister aware that there is disquiet about some of the appointments to this committee? Not one member of this committee is a dock worker. I should also like to know why this statement has come from another place and not from this House of Commons where Questions could have been asked on this matter last week.
    Mr. Maclay: I feel that the composition of the committee is as good as it could possibly be in the circumstances. It is a very strong body, and I would point out in addition that there will be consultations between that committee and the interested parties throughout the proceedings.
    Mr. John Paton: Is it not the case that Aims of Industry Ltd. is merely an instrument for the dissemination of Tory propaganda, and that it does not help in a difficult question of this kind to give special publicity to such partisan opinion?
    Mr. Thompson: Is it not a fact that all the statements contained in the report prepared by Aims of Industry Ltd. are nevertheless true and are supported by evidence?
    Mr. Speaker: This seems to be a matter for debate.
    Mr. Mellish: In view of the very unsatisfactory nature of the reply, and the fact that it will not do the docks industry a great deal of good, I wish to give notice that I will raise the matter on the Adjournment at the first opportunity.

    South Wales Ports
    Mr. James Callaghanasked the Minister of Transport why the Ports Efficiency Committee has not been asked to report on ways of making greater use of the South Wales ports, bearing in mind that shipowners and merchants still neglect them, despite the turn-round given by the dock labour force.
    Mr. Maclay: The terms of reference of the Committee would by no means exclude matters of this sort. They are directed to securing the quicker turn-round of ships by whatever means may be found most appropriate.
    Mr. Callaghan: As the terms of reference specifically recommend the committee to look at London and Liverpool, will not the Minister send some of the Liverpool shipowners to South Wales to look at the facilities and the dockers who are waiting there for work, and so get rid of some of the congestion?
    Mr. Maclay: The hon. Gentleman will appreciate that the opening words of the terms of reference are:
    "To investigate the working of the ports of the United Kingdom."
    Mr. Callaghan: With special reference to London and Liverpool.
    Mr. Maclay: No—
    "and in particular to the ports of London and Liverpool."
    It is by no means exclusive.
    Mr. Callaghan: But it does not specifically draw the attention of this committee to the fact that there are unused facilities awaiting South Wales.
    Mr. Maclay: I think the hon. Gentleman is pleading a special case in this field.
    Mr. Callaghan: Why not?

  DIPLOMATS (TRAVEL RESTRICTIONS)
  Mr. Shepherdasked the Secretary of State for Foreign Affairs if he will give a summary of the travel restrictions imposed upon our diplomats in countries under the Union of Soviet Socialist Republics control; and whether he has reached a decision as to whether
  1922
  reciprocal arrangements should be made in the United Kingdom.
  Mr. Chetwyndasked the Secretary of State for Foreign Affairs why he has imposed new travel restrictions upon the Soviet Ambassador, and the Rumanian and Bulgarian Ministers and their staffs.
  The Secretary of State for Foreign Affairs (Mr. Anthony Eden): The position as regards these restrictions is explained in the Foreign Office statement which was published in the Press on 11th March. I am circulating a summary of this statement in the OFFICIAL REPORT.
  Mr. Chetwynd: Is this not merely a childish act of retaliation, and is it not an added irritant to trade and intercourse between the countries concerned? Ought we not to set a good example rather than a bad one?
  Mr. Eden: No, Sir; I do not think it is. If the Soviet Government were prepared to relax the much more stringent regulations which they have placed upon our diplomats, we would, of course, gladly reconsider the position. I would also point out that these restrictions are in some cases less stringent than those placed on the Hungarian representatives by the late Government.
  Mr. Emrys Hughes: May I ask whether these restrictions make it impossible for Soviet diplomats to visit the more civilised parts of Great Britain, such as Scotland and Wales? Is the right hon. Gentleman aware that yesterday the "Observer" described these regulations as demeaning to civilised countries, and stated that we are making ourselves look absolutely absurd?
  Mr. Eden: Everybody is entitled to his comments. Should the Soviet representative wish to visit Scotland, or should he perhaps wish to visit Warwickshire, he is entirely free to do so. All he is asked to do is to give 48 hours' notice, and that is much greater freedom than our diplomats enjoy in his country.
  Mr. Shepherd: Is it not a fact that we have given the Soviet authorities and the satellite countries an ample opportunity to change this policy, and had they wished to reciprocate they could have done so a long time ago?
  Following is summary of statement issued by the Foreign Office on 11th March, 1952:
  Notes were delivered on the 10th March to the Soviet Ambassador and the Roumanian and Bulgarian Ministers informing them that (with the exception of the Bulgarian Minister or Chargé d'Affaires) neither they nor the members of their staffs would in future be allowed to travel more than 25 miles from Hyde Park Corner without notifying the Foreign Office, or the appropriate Service Department 48 hours in advance. The same arrangement would apply to Soviet representatives not members of the Embassy, such as the staff of the Soviet Trade Delegation and Soviet commercial or news agencies in the United Kingdom.
  The Bulgarian Minister or Chargé d'Affaires was exempted from this requirement since Her Majesty's Minister in Sofia was similarly exempted. Soviet officials would be allowed to travel to the Embassy's country house at Hawkhurst (Kent) by a regular route without notification. Members of the Hungarian Legation are already required, by a decision of the previous Government, to obtain permission for any journeys beyond 18 miles from London (the limit imposed on Her Majesty's Legation, Budapest).
  The movement of British subjects and of foreigners generally has for a long time been severely restricted in the Soviet Union. As a result of restrictions imposed in September, 1948, and increased in January of this year, virtually the whole of the Soviet Union east of a line running from Archangel to Astrakan is now inaccessible to members of Her Majesty's Embassy; and all the frontier and coastal districts (except Leningrad and Odessa) and the great majority of the main industrial towns are also forbidden. Members of Foreign Missions may only travel in those parts of the Soviet Union still in bounds by notifying in advance any journeys of more than 25 miles from Moscow. Even within this radius large areas are prohibited.
  A large area of Bulgaria, including all the frontier regions, has been out of bounds since December, 1949. In order to travel in other parts of the country members of foreign Missions must notify
  1924
  details of the journeys in advance to the Bulgarian authorities. The greater part of Roumania, including all the frontier regions, and virtually the whole of Transylvania, was prohibited to members of foreign Missions in May, 1949.
  Although members of foreign Missions are excluded from large parts of the Soviet Union, Roumania and Bulgaria, Her Majesty's Government do not propose at present to prohibit any parts of the United Kingdom to representatives of these countries.
  Mr. Emrys Hughesasked the Secretary of State for Foreign Affairs what facilities the Soviet Government gives to British Foreign Office employees in Moscow to visit Yasnaya Polyana.
  Mr. Eden: Members of Her Majesty's Embassy in Moscow are allowed to visit Yasnaya Polyana, which is about 120 miles from Moscow by road, and lies within a prohibited area, on condition that they notify the Ministry of Foreign Affairs forty-eight hours in advance and keep strictly to the main road. They are not allowed to travel there by train.
  Mr. Hughes: Is the Foreign Secretary aware that this is the birthplace of Leo Tolstoy? It is obvious that some hon. Members opposite were not aware of it. Does not the right hon. Gentleman think that it is in our interest to maintain cultural relations, even under the tension of the cold war, and can he explain this question of the 48 hours' notice? Why is it that a Russian diplomat in London can visit the grave of Karl Marx every day of the week without giving any notice but has to give 48 hours' notice to visit the tomb of Robert Burns? Does the right hon. Gentleman realise that it might be better for Soviet diplomats to be more acquainted with Robert Burns, and will he assure the House that facilities will be given for diplomats to visit Ayrshire when they wish?
  Mr. Eden: We have to try to cater for all tastes; but should it be the desire of a Soviet diplomat to visit Stratford-on-Avon, he can certainly do so not only by road but by rail, and he can even picnic by the roadside—which foreign diplomats are forbidden to do when visiting Tolstoy's birthplace.

  U.K. AND EGYPT
  Mr. Cyril Benceasked the Secretary of State for Foreign Affairs what steps he is taking to open negotiations with the new Egyptian Government.
  Mr. Eden: We are in contact with the Egyptian Government through the normal diplomatic channels. But I have no statement I wish to make on this subject at present.

  BRITISH COUNCIL (STAFF AND OFFICES)
  Mr. Hector Hughesasked the Secretary of State for Foreign Affairs how many offices of the British Council for work among merchant seamen were in operation during each of the last 10 years and what staffs they carried; what are the corresponding figures as to offices and staff at the last convenient date; what reductions have been made and are planned to be made in the immediate future; and what sum of money he estimates will be saved in this way.
  Mr. Eden: Since the reply is rather long, I will, with permission, circulate it in the OFFICIAL REPORT.
  Following is the reply:
  Before the war no work was carried out by the Council among merchant seamen from overseas. During the war years work among allied merchant seamen was done by the Council through offices in London, Brixham (covering Plymouth), Cardiff, Liverpool, Manchester, Newcastle, Glasgow, Edinburgh and Aberdeen. Elsewhere part-time officers gave assistance in smaller ports. It is not possible to give the precise number of staff employed during the war on this work, as the majority of officers were also carrying out other duties.
  After the war, work among overseas merchant seamen was continued at offices in Liverpool, Newcastle and Hull, and only very limited assistance could be given elsewhere.
  Overseas merchant seamen will continue to be welcomed at Council offices, but no specific activities will thenceforth be arranged on their behalf.
  This involves a reduction of six persons hitherto employed on this work with a resulting saving of £2,500.

  TUNISIA AND FRANCE
  Mr. A. Fenner Brockwayasked the Secretary of State for Foreign Affairs what instructions have been given to the United Kingdom delegation at the United Nations on the appeal of the Tunisian Government, sponsored by Asian, Arab and African nations, for intervention by the Security Council in the dispute between Tunisia and France.
  Mr. Eden: The hon. Member presumably has in mind the letter to the President of the Security Council, signed by fifteen Asian, Arab and African States, drawing attention to the situation in Tunisia. This was circulated to the Council on the 1st February, but so far as I am aware, the matter has not been placed on the Security Council's agenda.
  Mr. Brockway: I should like to welcome the right hon. Gentleman on his return to the House in good health. Might I ask him whether it is the view of Her Majesty's Government that the agreements with Tunisia in 1881 and 1882 allow for the rights of Tunisia as a State; whether his attention has been drawn to the report of events in the Cape Bon area by the Tunisian Ministers of State and Health; and whether he will be able to look at that report before this matter is handled by the United Nations?
  Mr. Eden: I know that two Tunisian Ministers did make a report to the Tunisian Prime Minister on this matter. The hon. Gentleman is also very well informed when he draws attention to the Treaty of 1881, under which these matters are for French domestic jurisdiction. I think we should be well advised not to raise these topics now, in advance of whatever decision may be taken by the Security Council.
  Sir H. Williams: On a point of order. Why is it that hon. Members can ask questions about Tunisia, over which we have no control, and yet cannot ask questions about railway fares, over which we ought to have some?
  Mr. Speaker: Apparently the Foreign Secretary has accepted responsibility for this Question and, in the case of railway fares, Ministers have not.
  Mr. Eden: I am not accepting responsibility.

  GERMANY (U.S.S.R. NOTE)
  Mr. Fenner Brockwayasked the Secretary of State for Foreign Affairs what action Her Majesty's Government propose to take in response to the official proposal of the Government of the Union of Soviet Socialist Republics for a four Power conference to draft a treaty of peace with Germany and the democratic unification of Germany.
  Mr. E. Fletcherasked the Secretary of State for Foreign Affairs what reply he is making to the official note sent to him by the Soviet Government calling for a four Power conference to work out a peace treaty with a united Germany; and if he will make a statement.
  Mr. E. L. Mallalieuasked the Secretary of State for Foreign Affairs if he will make a statement about the official proposal of the Soviet Government, made on 10th March, for a conference to agree upon a peace treaty with Germany.
  Professor Sir Douglas Savoryasked the Secretary of State for Foreign Affairs whether he has now received the Note on Germany, handed by Mr. Gromyko, the Soviet Deputy Foreign Minister, to the British representative in Moscow on Monday 10th March; and whether he is in a position to make a statement on the subject.
  Mr. Eden: Her Majesty's Government are giving the most careful consideration to the Soviet Government's note and are in consultation with the United States and French Governments about the reply to be sent to it. Her Majesty's Government are, of course, also in close touch with the German Federal Government.
  While these consultations are in progress, the House will understand that I am not in a position to make a further statement.
  Mr. Fenner Brockway: May I ask the right hon. Gentleman whether he will bear constantly in mind that the deepest desire of the German people is for the unity of their country, and whether he will seek to give expression to that desire so as to win their continued co-operation?
  Mr. Eden: There are many things which I have to bear in mind in this connection, and one is recent European
  1928
  history, from which Soviet responsibility is not entirely divorced.
  Mr. Mallalieu: Would the right hon. Gentleman agree that the raising by the German Government of German units with German officers is only too likely to give rise to further aggression by the most reactionary elements of the German nation?
  Mr. Eden: If I understand that to be a criticism of the recent Soviet note—
  Mr. Emrys Hughes: Not necessarily.
  Mr. Eden: If the hon. Gentleman will allow me to answer the Question, which was not put by him—if I understand that to be a criticism of the recent Soviet note, I would rather not make any comment on that or on anything else related to it at this moment, because this is a very important topic and I would rather not be committed by any chance answers given at Question time.
  Mr. Fletcher: While not asking the Foreign Secretary to commit himself, may I ask if he will bear in mind the very profoundly-held view here and in Europe that any settlement with Soviet Russia which permitted the re-emergence of the German Army, Navy and Air Force would be regarded as a menace not only to this country but also to Russia?
  Mr. Eden: There are any number of points of view which hon. Members of this House must hold about this situation. I have my views; but I think we should be wiser not to discuss them at this stage. I can only undertake to keep the House informed of events at the earliest possible moment, so far as it is in my power to do so.

  PERSIAN OIL DISPUTE
  Sir D. Savoryasked the Secretary of State for Foreign Affairs whether he is now in a position to make a statement on the talks which have taken place in London between representatives of the International Bank and the Foreign Office, with a view to the settlement of the oil question in Persia.
  Mr. Eden: With regard to the conversations in London with representatives of the International Bank, I would refer my hon. Friend to the statement made by my right hon. Friend the Minister of

  1929
  State on the 5th March, in reply to the hon. Member or Leicester, North-West (Mr. Janner).
  A communiqué has now been issued in Teheran stating that the Bank's negotiator is returning to Washington. The House will understand that I would wish to have an opportunity to study the report of the International Bank's Mission before considering whether a further statement should be made.
  Mr. Noel-Baker: Could the Foreign Secretary confirm the report that during recent negotiations the Persian Government have really made no serious proposals at all?
  Mr. Eden: There does not seem to me to have been any great advance—I agree with the right hon. Gentleman. I should like to see the International Bank's report. I think the process may have been educative in more than one quarter.

  MOTOR INDUSTRY (HOME MARKET)
  Mr. Fenner Brockwayasked the Minister of Supply whether he will increase the quota of motorcars for sale in this country in view of the decreased opportunity for sale in the export market.
  Miss Elaine Burtonasked the Minister of Supply whether he is aware that the import cuts announced in Australia will cut by 80 per cent. the imports there of motorcar bodies and motorcycles; and if he will make a statement on the position arising therefrom with regard to the home market.
  The Minister of Supply (Mr. Duncan Sandys): Although full information is not yet available, it is clear that the Australian import restrictions are bound to have serious repercussions upon the motor and motorcycle industries in the United Kingdom. This development accentuates the necessity for manufacturers to intensify their efforts to expand exports to other markets. I am in touch with the motor industry about this problem.
  Mr. Brockway: Is the right hon. Gentleman aware that the motorcar production firms now have their floors blocked with manufactured cars which
  1930
  they cannot sell, and that while those floors are blocked in that way it will be impossible for those firms to do alternative work on Government supplies?
  Miss Burton: Will this cut in imports affect all vehicles or will it not affect vehicles exported c.k.d.? Some of our firms in Coventry have assembly lines over there which could cope with c.k.d. vehicles.
  Hon. Members: What are "c.k.d. vehicles"?
  Mr. Sandys: It will affect the c.k.d.—that is "completely knocked down"—vehicles to a lesser extent than other ones.
  Mr. Hugh Gaitskell: Will the right hon. Gentleman make representations to the Australian Government to try to relax their import restrictions on cars?
  Mr. Sandys: That is not really a matter for me.
  Mr. Walter Fletcher: Will my right hon. Friend press whoever is the Minister concerned to differentiate between cars that are subject to existing contracts and future ones, because a first rule of trade is broken if the Australian Government are allowed, without pressure from this Government, to break those contracts?
  Mr. Sandys: I did see a Question by my hon. Friend to the President of the Board of Trade a few days ago on that matter.
  Mr. Ralph Assheton: Is my right hon. Friend aware that a great deal of time and manpower are being wasted on repairing very old motorcars, and that, perhaps, some steps could be taken in this situation to supply rather more to the home market, and thus possibly save the economy of our country considerable waste?
  Mr. Sandys: Yes, I well appreciate the position but to decide to increase the quota for the home market does imply an increased use of steel for home consumption, with a corresponding decrease in the amount of steel available to be used for our exports at this critical moment in our balance of payments. It is, therefore, a decision which cannot be taken lightly.
  Mr. Brockway: Is the right hon. Gentleman aware that in my constituency workers have been on short time in the car industry from 3rd December because the export trade has collapsed, and that that situation has been made still worse by the Australian and South African decisions? Will he, therefore, now allow those cars to be sold in the home market?
  Mr. Sandys: Of course, short-time working in the motor industry has been going on much longer than since 3rd December. As I said in my original reply, the Australian action will have serious repercussions upon our export trade in motorcars, and that is a matter which I am discussing at the moment with the motor industry. I do not know about the particular conditions in the hon. Gentleman's constituency.

ORDERS OF THE DAY

  WAYS AND MEANS
  Considered in Committee [Progress, 13th March].
  [Colonel Sir CHARLES MACANDREW in the Chair]
  Question again proposed,

  AMENDMENT OF THE LAW
  That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance, so, however, that this resolution shall not extend to giving any relief from purchase tax otherwise than by making the same provision for chargeable goods of whatever description or by reducing the first, second or third rate of the tax generally for all goods to which that rate applies.

BUDGET PROPOSALS
3.35 p.m.
Mr. Douglas Jay: I should like, first of all, to support the appeal made by the Chancellor of the Exchequer last week to everyone to assist the National Savings Movement at this time. We on this side of the Committee regard that Movement as a national and non-party effort which should have the whole-hearted support of all, whichever party may be in power. I shall not, therefore, repeat some remarks made on this subject in a corresponding debate in 1949 by the present Prime Minister, because, I think, they would not be helpful to savings.
This debate gives us a chance to look at the larger problems which form the background of this Budget, and, indeed, of our whole national effort at recovery in the years ahead. We ought, I think, by now to have had enough experience of the post-war world to have learned some constructive lessons, and also—all of us—to have shed some illusions. It is in the light of those lessons that the right hon. Gentleman's economic measures and his very curious Budget must be judged this week.
We are all familiar with the contrast between the way hon. and right hon. Gentlemen opposite talked just before the Election and the way they talked just after it. But almost equally remarkable is the contrast between the way the Chancellor himself talked in December and

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January, and the way he has acted in March. It has seemed to me, during these first months of this Government's life, that the Chancellor under-rates the severity of the gold and dollar problem facing us and over-rates the severity of the lesser United Kingdom problems. For there are, of course, two perfectly distinct problems—though, naturally, they are interrelated—first, the dollar problem of the whole sterling area, and, indeed, of the whole world; and, second, the specific problem of our own balance of payments.
If we first look briefly at the dollar problem, I think the fist illusion we ought now to shed is that this is just a short-term crisis—so-called—of the immediate post-war years, after which we are going to return to some sort of "normality." The right hon. and learned Gentleman the Member for Montgomery (Mr. C. Davies), earlier in the debate, spoke of that—as I think, imaginary—normal period to which, he thought, we might return. We ought surely now to work on the assumption that the dollar problem is due to deep and lasting causes—to the rise in the United States' economic strength in the two wars, to the tariff and immigration policies of the North American Governments, and to other causes which are likely to endure.
Second—and I know this is obvious, though it seems to me so often forgotten—the movements in and out of the gold reserve which are, after all, what cause "crises" properly so-called, are due to the transactions of all sterling countries and not just of ourselves. It is true that, for historic reasons, the United Kingdom dollar deficit is normally the largest of that of the countries in the sterling area. But we can now see that the annual swings in the movements of gold in and out of this reserve since 1945 have really been very largely due to changes in the volume of imports into the United States, particularly United States' purchases of the great raw materials, wool, rubber, tin, and cocoa.
Indeed, it is a sobering thought that—and these are the Chancellor's own Treasury figures—in the first and third quarters of last year the sterling area's earnings from rubber alone exceeded the whole of the earnings of all United Kingdom exports to the United States. I think that the most realistic summing up of the causes of our dollar troubles since 1945 that I have seen is that of the U.N.O.
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Economic Commission for Europe Report on the year 1951, which says—and I think this is very fair:
"The balance of payments history of Europe and the United Kingdom in particular during the past two years can be told largely in terms of the boom and collapse of the market for these raw materials produced mainly outside Europe—rubber, wool, and tin."
What, then, was the real cause of the resumed outflow of gold and dollars in the second half of 1951, which was the basis of our troubles in the last six months? There again, the E.C.E. Report sums it up well in saying:
"In contrast to the vigorous buying of strategic commodities in the first six or eight months after Korea, the United States Government in the spring and summer of 1951 ceased altogether its purchases of wool and Malayan tin, and sharply reduced its purchases of rubber."
I do not say that to place any blame on anybody, but only in order that we may be as clear as possible about the facts.
In the debate on 9th November last I ventured to say that the Chancellor's import cuts of November would not stop the gold drain. I think that has proved right. For he has had another two bites at the cherry of European imports, which through the working of the European Payments Union were costing us so dearly in gold. I hope that the Chancellor now agrees that those import cuts—whether they are yet sufficient or not—have done more to save gold than his simultaneous efforts to impose health charges on the sick or to increase the size of classes in our schools.
It now seems clear also that the Government missed a big chance in the January Commonwealth Finance Ministers' Conference to halt this gold drain decisively. I am inclined to think that that was due to the failure to concentrate on the essential gold and dollar problem, and the tendency to take refuge in all sorts of mystical verbiage about convertibility, and so forth. Last Tuesday the Chancellor talked of realism, but all this phraseology about convertibility in that communiqué seemed to me the height of unrealism, and calculated in these circumstances, to divert attention and effort from the really essential problem.
What we did in the corresponding conference in July, 1949, was to agree with the other countries on a 25 per cent. cut in dollar imports into each sterling area country—

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Australia, for instance—which was to be replaced in those countries by increased imports from the United Kingdom. That, in fact, succeeded—indeed beyond our expectations; and I suggest that that is what the Government should have done this time.
Even after the speech of the President of the Board of Trade on Thursday, we do not know whether there was any cut and dried plan in terms of dollars, and it seems that the Government failed to persuade the Australians, in making these cuts, to discriminate against dollar imports—which is, of course, the whole essence of the problem. The Minister of Supply told us only 10 minutes ago that there would be serious repercussions on our own motor industry. It is plain, I think, from the rather evasive answers, if I may call them that, which the President gave us on Thursday that, either the Government failed to make the necessary representations to the Australian Government at the conference; or else apparently those representations have not prevailed.
Summing this up, I suggest that at least these conclusions of a constructive kind emerge from the last six or seven years experience of the dollar part of the problem. First of all, the most vital single action needed to get this under control is to reach a long-term arrangement with the United States Government for some system of more smooth and steady purchases of these great raw materials. We tried to do that, and I admit that we had not succeeded by the autumn of last year. But surely it is not beyond the wit of two great friendly democracies sooner or later to reach an arrangement of that kind.
Secondly, all the sterling area countries must continue to be ruthless in making, and maintaining, economies in their imports of dollar goods, and resisting the temptation to relax when things temporarily look a little better, while at the same time developing the maximum of trade within the Commonwealth countries.
Next, I think we have learned that the sterling area gold reserve is utterly inadequate to the present total of trade—here I think right hon. Gentlemen opposite will agree—and that it must be
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substantially built up over the next few years, before we talk about convertibility, or freer imports, or anything of that kind. Then we must achieve some machinery for more regular and more rapid consultations with the other sterling countries when these difficulties arise. There again, we sought to do it, and I admit that we had not fully succeeded.
We have all tended, I think, to over-import, perhaps because we failed to realise that in a world where deflation is rejected—and I hope the Government still do reject it—as the main method of correcting balance of payments deficits, permanent import control will be necessary—permanently—to be sure that we do not import beyond our exports; and no other country can reasonably expect this country, or any other, to make itself bankrupt by over-importing on that scale.
Let us, then, now look nearer home at the United Kingdom balance of payments and the Chancellor's Budget. The Chancellor told us in January that this country's economic situation had been deteriorating for 50 years. Incidentally, the Prime Minister said in Washington that we have had a continuous recovery since 1945. I think both those statements are true—though perhaps the Prime Minister was using a little poetic licence in selecting the epithet "continuous."
I think the causes of the United Kingdom long-term difficulties are far too well known and agreed for me to recount today. But what is perhaps not so well understood—again possibly because people tend to confuse the dollar and the United Kingdom problem—is the remarkable success with which the United Kingdom tackled the problem in the years 1945–46 and after.
It was, after all, only once in the 'thirties that the United Kingdom had a surplus on its balance of payments with the rest of the world. Yet we now know that as soon as the year 1948 we had a deficit of only £30 million; in 1949 we actually had a surplus of £20 million—in effect a balance in both years—and in 1950 a surplus of £238 million, which was the latest figure the Chancellor gave us last week. In effect, in those three years, taken together, the United Kingdom was paying its way with a little to spare.

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I think that proves how much less is the connection that some people think between our United Kingdom problem and the dollar problem. In 1949 the United Kingdom actually had a small surplus, although there was an extreme and acute dollar crisis for the sterling area in that year.
Mr. Godfrey Nicholson: Marshall Aid.
Mr. Jay: My calculations are made before taking Marshall Aid into account. These are the actual current balance of payments results for the years.
The next question that arises for us to look at is why it was that the United Kingdom balance of payments of £238 million in 1950 turned into a deficit of over £500 million, as the Chancellor said, in 1951. It was hardly at all, as far as I can judge it—though I know this surprises some people—due to our own United Kingdom re-armament programme last year. Of course, rearmament imposes a strain and limits consumption. Clearly, it must do that. But it was not the main cause of the balance of payments deficit in 1951.
That deficit was not due, if we look at the figures, to a decline in exports, compared with expectations, as it would have been, had it been mainly due to the strain of the re-armament programme. Exports last year reached, in value, virtually the Economic Survey target. I know that hon. Members opposite make fun of these targets. But that was one which was just about reached, and in volume exports increased by about 3 per cent. The cause of the deficit, on the contrary, was the huge rise in imports—50 per cent. up in value during the year—which far exceeded expectations.
That was partly due to the unexpectedly steep rise in prices, but it was equally due to the excessive rise in the volume of imports, which was 15 per cent. up last year. That increase, of course, was, in turn, partly because of the big restocking movement which both the Government and industry carried out last year. But it was also very largely due to the so-called liberalisation of trade—that is to say, removal of import quotas by this and other sterling countries on imports of goods from Europe.
That let loose a flood of imports of manufactured goods, textiles, paper and
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so on into this country. The extra industrial stocks last year were, in my opinion, worth having. But the large increase of imports of manufactured goods was more than we could afford, and so, it seems to me, was the real cause of this specific United Kingdom trouble in 1951.
Therefore, the speech of my hon. Friend the Member for Coventry, East (Mr. Crossman), in the defence debate, blaming it all on re-armament, seemed to me to derive much of its plausibility from an eloquent disregard of the facts. [An HON. MEMBER: "Not all."] In the major part. If anyone doubts my argument, perhaps he would like to look at the survey of the London and Cambridge Economic Service, which has produced a very good amateur economy survey in time for this debate.
The new controls placed by the Chancellor on imports are, therefore, broadly to be welcomed. Apart from import control, however, I believe that by far the most serious economic problem facing the United Kingdom is the threatened internal upward spiral of wages and prices, in conditions of full employment. Again, I agree that we did not fully solve that by the autumn of last year. But we had at least a policy—a threefold policy of food subsidies, of dividend limitation, and of wage restraint—reasonable restraint in wage and salary claims.
I think that it is significant that it was early in 1948, which was a year of rapidly rising production and exports by this country—perhaps the most successful year since the war—that Sir Stafford Cripps both introduced the policy of restraint and about the time of the Budget made a large increase in the food subsidies. This is where the present Chancellor seems to me to have now gone disastrously wrong.
What are the Government really doing in their economic policy in 1952? I think that the public is, not surprisingly, a little puzzled how it is that, after all the panicky warning that have been given, we now find that re-armament can be financed and the overseas deficit reversed, and, at the same time, large tax reliefs given mainly to the rich. [HON. MEMBERS: "No."] I see that even Professor Pigou is rather puzzled about it in "The Times" this morning so it is reasonable perhaps that we may be.

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So far as I can understand, this is what the Chancellor has really done over the last few months. He has slowed down re-armament, cut down home investment, run down strategic and industrial stocks, taken full credit for better terms of trade expected this year, and, incidentally, the higher revenue accruing from the tax increases we made last year, to maintain consumption and to give tax reliefs mainly to the wealthier people. [Interruption.] That is how I understand it on the Chancellor's arithmetic, not mine, and he can explain it tonight if he wishes to do so.
Viscount Hinchingbrooke: The right hon. Gentleman has to prove it.
Mr. Jay: The proof is partly in the Chancellor's speech, and substantially in his statement that consumption will not rise or be reduced this year.
I think that the most unfortunate part of this policy is the decision to run down industrial and strategic stocks this year. That is all the more remarkable coming from a Government which gave as their main reason for breach of Election promises before Christmas that when they came into power they found that the national "cupboards" were bare. This time last year the Minister of State for Economic Affairs, as he now is, when we were building up these stocks, was then rebuking us for doing so. Then, at Christmas—
The Minister of State for Economic Affairs (Sir Arthur Salter): It was in August, 1950, that I made the protest to which the right hon. Gentleman refers—not 1951, when it was quite obvious that the commodities in question were going to be scarce and that they were running down rapidly.
Mr. Jay: I remember that the right hon. Gentleman wrote a letter to the newspapers in 1950, but he rebuked us in the Budget debate on this point a year ago, and I made a reply.
It was at Christmas that the Prime Minister told us that the barrel had been "scraped," and the right hon. Gentleman the Leader of the House said that the "larder was very barren." Then the Chancellor of the Exchequer came along at the end of January and announced that one of his main proposals for balancing
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the equation this year was to run down our industrial stocks.
How next does the Chancellor tackle, in his Budget, the very vital problem of the internal spiral?
Mr. R. Maudling: If the right hon. Gentleman does not agree with the running down of stocks, would he specify what additional import cuts he would make to compensate for it?
Mr. Jay: I would be prepared to make stricter import cuts in manufactured goods, as I think the hon. Gentleman well knows. How does the Chancellor, in his Budget, tackle the really vital problem of the internal spiral? He had already balanced his equation, on his own argument, by the means I have described before he came to this part of the problem. That is assuming that he had somehow taken account of the extra bill for interest on the National Debt. I see that since the debate last week the interest on Treasury bills has jumped to 21 per cent.
If the extra ½ per cent. cost £25 million, this further rise to 2¼ per cent. apparently implies something like £80 million increased expenditure in total on the Budget this year. That, of course, vastly exceeds all the savings made by the right hon. Gentleman, and, incidentally, it exceeds all the extra revenue he hopes to get from the health charges. Perhaps he can tell us this evening exactly what the expected Treasury bill expenditure will be this year.
However, assuming for the moment that he had, as he said, balanced his account, the rest of the Budget was, of course, a clear matter of re-distribution based upon a political decision, and what the right hon. Gentleman in fact did was two things. First of all, he set going what is likely to be the sharpest rise in the cost of living that we have seen since the war; and, second, he made a substantial redistribution from the poor to the rich.
Let us now look at the arithmetic. The whole of the Chancellor's increase in social services, family allowances, old age pensions and the rest of it, which, he said, cost £80 million—that was the net total cost to the Exchequer and the Insurance Fund—could have been financed by the higher Petrol Duty and the increased postal charges, which he had already

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made. Therefore, he need never have raised the insurance contribution. That is a most regressive tax on the less well paid worker. Also, it follows that his cut of £160 million in the food subsidies was really made to give the relief of £180 million in Income Tax mainly to the better-off members of the community.
It is clear from the arithmetic that those two parts of the Budget stand together, and could have been omitted altogether. Hon. Members have now rather longer to work out how it all affects different classes of people than they had when the Chancellor sat down last Tuesday.
Sir Herbert Williams: The right hon. Gentleman has made frequent references to the relief of the rich. What is the maximum relief that any rich person gets and how many of them are there? May we have this information, to see if the right hon. Gentleman's argument has substance?
Mr. Jay: I am just coming to that, and if the hon. Gentleman does not interrupt me we shall get on quicker.
This is how it works out if we take into account the change in food subsidies, Income Tax, Purchase Tax, the insurance contribution, family allowances and other social benefits. First, because of the rise in the cost of living during the winter, the old-age pensioners will be worse off than they were last autumn, in spite of the increase which they have not yet got, and which does not seem to be quite definite. Second, of the wage earners below the Income Tax level, all who have fewer than five children in the family will be worse off; and, of course, that is an exceptional family.
Third, of the married couples without children, every family with less than £7 a week will be worse off, and those above that level will be better off. A couple with one child or two children will be worse off up to about £9 or £10 a week, and above that level better off. A couple with three children will be worse off up to about £11 or £12 a week, and above that level better off. All who are in groups with higher incomes than those are better off, and the gain grows as we go up the income scale, until we are somewhere a little over the £1,000 a year level, according to the number of children in the family. The Chancellor's principle is, "To those that hath shall be given."
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I have been using the Chancellor's own figures, taken from his Financial Statement. The latest report of the Inland Revenue, an excellent document which the Chancellor also publishes, shows that in 1949–50—I agree that that is a little out of date, but it is the latest figure that we have—16 million out of the 20 million incomes assessed for Income Tax were under £10 a week. Since almost all the families below the Income Tax level are worse off, as I have shown, it is clear that, even if we allow for the rise in earnings since 1949–50—I agree that we have to do that—the majority of the population, and probably about 75 per cent. of wage earners will be worse off as a result of the Budget. [HON. MEMBERS: "No."]
If hon. Gentlemen opposite do not agree with that, and if they are arguing that the majority are better off, let us look at what it means. The Chancellor tells us that consumption will stay where it is. If the majority are better off, it means that a majority of the community at the top will gain very substantially from a minority at the other end.
Sir H. Williams rose—
Mr. Jay: I hope that the hon. Member will show patience. It was a complicated Budget, but I shall be much shorter than the Chancellor was.
Since there is to be no drop in consumption, the gain goes to those at the top of the scale. A married man without children and earning £2,500 a year and upwards gets about £50 a year gain out of the tax change, against which there are a few pounds a year for the extra food costs. The married man with two children earning £2,000 a year and upwards gets nearly £60 gain out of the tax change.
What is the purpose of these benefits to Surtax payers? We should like to know. Is the Chancellor doing this to give an incentive for extra work? If that is the argument, can he tell us why he has given a cool extra £25 a year to a single man with a wholly unearned income of £10,000 a year? When all is said and done, why should such a man get an extra 10s. a week when the old-age pensioner is getting only another "two bob"? Why is it necessary to give the Surtax payers an incentive by way of tax relief, and the lower paid wage earners an incentive by means of a tax increase—for

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that is what is meant by the increase in the insurance contribution and the cancellation of subsidies?
Perhaps the Chancellor will answer this—either now or this evening: Was it on purpose, or was it by mistake, that at this time of national crisis—as he told us—he gave away an extra £25 to the single man with a wholly unearned income of £10,000 a year? If he did it on purpose, we should like to know what his purpose was. If he did it by mistake, does he think that is a very good advertisement for the way he made his Budget; and will he take note that we shall be very glad to co-operate in the Finance Bill in correcting that mistake?
It is also rather strange that last January, when the Chancellor introduced his health charges and the economies in education, we were told that the situation was so serious as to require cuts in purchasing power inflicted on the sick, the old and the school children. Why, then, do we have these free gifts to Surtax payers in March? Are we to assume that the health charges are no longer necessary? Is that why the Bill keeps disappearing into the distance?
Why did the Chancellor make the cuts in subsidies which produced these evil social results? He had one curious sentence in his Budget speech, saying that on some grounds he would have preferred to postpone it, which seemed to suggest some doubt. I hope it was not, as some of the Tory newspapers suggested, mainly intended to appease foreign exchange speculators and foreign bankers.
The Chancellor gave us only three pitiful arguments. The first was what he called:
"… the … intensity of our situation …"
Note the rather woolly phraseology. But if so, why then the benefits for the Surtax payers? Second, he said he did it because:
"… subsidies conceal from the consumer the real cost of what we have to pay … "—[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1298–9.]
If the Chancellor really believes that, why does he go on taxing beer and tobacco? Or, indeed, why does he believe in free education, about which he boasts so much? Why is it right to subsidise a child's school books and wrong to subsidise his milk?
The Chancellor of the Exchequer (Mr. R. A. Butler): The children's milk will not increase in price.
Mr. Jay: That is exactly my point. Why is it right to subsidise some of these things and not others? Man does not live by education alone. Why does the Chancellor think it right—he has said that the subsidy on milk remains—to subsidise food consumed by a child at school, and not right to subsidise food that the child consumes at home?
He next told us that it was wasteful to subsidise millionaires and Cabinet Ministers. This has always struck me as the most nauseating piece of humbug in the whole of this controversy, because the argument was always advanced to justify a policy which gave those very people tax reliefs. And that is exactly what the Chancellor has done. Can he tell us this? Why is it wasteful to provide relief for the needy in a way which gives Cabinet Ministers and millionaires 3s. a week, but not in a way which gives them 20s. a week? Can he tell us?
Sir A. Salter: The top Surtax payer gets less than 1d. out of the extra 3s.
Mr. Jay: The argument was that it was wasteful to give 3s. to the millionaires, but the Chancellor, on his own figures, has given them something like 20s. and upwards a week. Would I be straining the laws of arithmetic too much, if I were to suggest that it is at least six times as wasteful to give a millonaire 20s. as it is to give him 3s.?
I have always believed that the food subsidies are an excellent social service, as well as helping to stabilise food prices, because they automatically assist every poor family just in proportion to its poverty. For the poorer the family, the larger the part of its income it spends on food. No other service can do that precisely, because by any other method you have to define administratively the different classes of needy person—oldage pensioners, war pensioners, the industrially injured, and so forth—and no amount of administrative ingenuity can do that all over the field.
That is exactly what the Chancellor now finds. He has left out sickness and unemployment altogether, as I understand it. [HON. MEMBERS: "No."] We shall be glad to hear about that. But that is exactly what he has found, and that is

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the real reason why more people are worse off and not better off, thanks to the Budget. That fairly obvious fact was confirmed by the remarkably interesting conclusion of Mr. Seebohm Rowntree's recent book, that the food subsidies had done more than any other social service since 1938 to relieve poverty. I wonder whether the Chancellor reflected on that conclusion before he made this disastrous decision.
It has long been plain to all looking at this matter without prejudice that the subsidies have been the greatest support to wage and price stability, and therefore the greatest single assistance through Government action to the export trade, over these last few years. It was after the rise in the subsidies, in the spring of 1948, with the price stability which it gave us, that exports went up most. I believe—and the coming months will show, one way or the other—that the Chancellor delivered last week a really wounding blow at the prospects of our export trade.
The cut in subsidies is not made any better by the fact that hon. Gentlemen opposite categorically promised that they would not make it. It is not wise of hon. Gentlemen opposite to treat the whole matter of Election pledges as a joke. If it comes to be known that the members of a great political party regard the whole question of keeping faith with the electorate as a matter for levity, it will not be very good for that party or for the country.
Sir H. Williams: What about the approved societies?
Mr. Jay: It is rather wiser to take it seriously. It is not merely a matter of Lord Woolton. As for Lord Woolton, if he does not take the honourable course and resign, all I can say is that in future we shall accept his veracity as his own valuation.
Quite apart from Lord Woolton, there is the document "Britain Strong and Free," for which I think the Chancellor would accept some responsibility. It was the Tory Election manifesto last October. In it is a sentence which the Chancellor did not read out. It is on page 20, under the heading "Subsidies." After some remarks about subsidies, the paragraph goes on:
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"In present circumstances, when we are facing severe financial and economic difficulties, and while we are engaged in a full-scale attack on the cost of living, it would clearly not only be unwise but impossible to make any radical change."
—[HON. MEMBERS: Read on.]—The next sentence is the very one that the Chancellor read in his Budget speech. [HON. MEMBERS: "Read it out again."] I fully agree that one can always pick contradictory sentences out of this document. Indeed, Tory Election manifestos are rather like the witches in Macbeth who
"… keep the word of promise to our ear,
And break it to our hope."
Does the Chancellor agree with the words in that document, that we are still "facing severe economic and financial difficulties"? [HON. MEMBERS "Read on."] I imagine that he would do so. It follows that we are no longer engaged in a "full-scale attack on the cost of living." That is true enough. But it is not what the electorate understood, or were intended to understand, from that sentence.
Even this is perhaps not the most serious side. Wage rates are now going to rise. I do not imagine that hon. Gentlemen opposite deny that. The whole spiral is being given a twist upwards without restraint, when restraint at this point is just what the United Kingdom's economic problem needs. Thus the Chancellor is abandoning all attempt to tackle the most serious of our internal economic problems. There is to be no dividend limitation, no restraint on prices, no restraint on wage and salary rates. For the first time since the war the Chancellor, in his Budget, actively encourages a cost inflation.
The right hon. Member for Blackburn, West (Mr. Assheton), not unnaturally, last week suggested that we were calling this Budget both "inflationary" and "deflationary" at once. But does he not understand that not merely is it possible to have an inflation of costs and a deflation of demand at the same time, but that that is precisely the classical cause of depression and unemployment? It is what happened in the United States in 1929. It-is really terrifying if hon. Gentlemen who are in charge of our affairs do not understand that. The Bank rate operates by deflating demand, and this Budget is pushing up costs. No wonder, in those

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circumstances, that unemployment is tending to increase.
Surely the best hope of stability in a modern industrial community is some sort of harmony of aim between the organised work people and the Government. That, I believe, existed for 10 years, at least in some measure, up till last week. Now the Chancellor has thrown it away. This gratuitous attack—which is not even excused as helping the balance of payments—on the poorer members of the community by a Government, who, incidentally, had no majority at the Election, will be long and deeply resented.
What the Chancellor has done is to provoke conflict where there might have been co-operation, and bitterness where there might have been at least toleration. Not merely is this the most reactionary Budget for many years. It seems to me the most reactionary measure of any kind that has come before this House. The Chancellor has not only inflicted hardship on the poor, but he has made the wealthy still better off at the same time. Even in 1931, although the poor suffered most, the rich and the poor at least suffered a reduction of their incomes together. I wonder if the Chancellor can tell us of any Budget since 1906, which has at once made the poorer worse off and the richer better off, on a substantial scale and at the same time. That reverses the whole trend of modern Budgets.
Mr. Julian Amery: The right hon. Gentleman has made a great deal of play with the question of the rich and the poor. Does he deny that a very large number of skilled workers, over one million, will benefit from the Budget proposals of my right hon. Friend, and are we to understand from what he said that the skilled workers are now regarded as the class enemies of the party opposite?
Mr. Jay: If the hon. Member had been listening he would have heard me deal with his point.
Mr. Malcolm McCorquodale rose—
Mr. Jay: No I will not give way. Finally—
Mr. McCorquodale rose—
Mr. Jay: I am sure that the right hon. Gentleman will get his chance later. I think I had better finish now.
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Finally, I will only add this to my argument. In an earlier speech, I think in November, the Chancellor of the Exchequer said that this was a moral issue. I believe it is. I believe there are immense economic difficulties facing this country, and that when times are hard, and there is less to go round, the moral case for fair shares is not weaker, but stronger. The present Prime Minister, in one of these debates, described our policy of controls and fair shares as being one of "equality of misery." If the right hon. Gentleman likes the word "misery," what his Government now offers is inequality of misery. If that is to be the economic choice, we are on the side of equality. And if that is the Chancellor's political challenge, I can assure him that we are happy to accept it.
4.23 p.m.
The Secretary of State for the Colonies (Mr. Oliver Lyttelton): The right hon. Gentleman the Member for Battersea, North (Mr. Jay) has made another phoney speech in the phoney war against this Budget. It is quite remarkable how very few hon. Members opposite have thought it worth while to attend the debate at all. Before I go into the main points of my speech, let me start by saying why I say that the right hon. Gentleman's figures were phoney. I will leave my right hon. Friend the Chancellor of the Exchequer to deal with the bulk of the misrepresentation in his speech, and I will pick out one or two things. He said that a married man with no children was worse off on £7 a week than before the Budget. In fact, he is 1s. 1d. a week better off.
Mr. Jay rose—
Mr. Lyttelton: Wait a minute. The right hon. Gentleman has had his go and he must allow me mine.
He said that the married man with one child was worse off on £9 a week whereas, in fact, he is 1s. 4d. a week better off. That is all the difference between worse off and better off, between facts and inaccuracies. Let me explain how the discrepancy probably arose. The right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) and the right hon. Gentleman the Member for Battersea, North, both conveniently omitted the 3s. increase in the family allowances, and estimated the reduction of subsidy at

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1s. 6d. instead of 1s. 2d. Finally, they deducted the 7½d. increase for the National Insurance contributions. [Interruption.] The right hon. Gentleman the Member for Battersea, North, omitted the 3s. family allowances on the ground that it could have been financed out of petrol. [Interruption.] At any rate, I am sure it is not for me to penetrate the depths of this argument. I confine myself to those two statements to show how wholly inaccurate his arguments were.
Mr. Jay: As a matter of fact, I can assure the right hon. Gentleman that my figures took into account the 3s. family allowances, and I suggest to him that the discrepancy is due to the fact that he did not allow for the increase in the National Insurance contributions or the rise in Purchase Tax.
Mr. Lyttelton: Let us take one of those figures. I might add that I am going to devote a good deal of my time this afternoon in examining these facts, but I must at this point try to put the right hon. Gentleman in his place.
Let me look at this argument about the National Insurance contributions. The right hon. Gentleman forgets that though paying an increased contribution he gets more than he puts in because the employer's contribution goes up more. The figures given by the right hon. Gentleman are entirely inaccurate. The married man with no children on £7 a week is better off. The right hon. Gentleman said he was worse off. The man with £9 a week and one child is better off under this Budget. The right hon. Gentleman said that he was worse off. There are three sets of inaccuracies, and that is why I described his speech as a phoney speech in a phoney war against the Budget.
I hope that we shall have no more suggestions, as there have been some in this debate, that the economic, financial, export and production problems are other than grave and urgent. They certainly are and I believe—and I say this with every sincerity—that if the party opposite had remained in power, and had not taken steps as drastic as we took the moment we were elected, we should already be facing national bankruptcy. Those are the facts.
I do not know what national bankruptcy means to the man in the street, but
1950
what it really means is that we should be unable to command the foreign resources necessary to buy the balance of the food we require to nourish our bodies and the necessary raw materials to nourish our factories and our furnaces. Hunger and unemployment are what national bankruptcy means, and let hon. Gentlemen opposite understand that once and for all.
All the things which we now have to do must be judged against the background of impending national bankruptcy with which we were faced and not against the background of what we did when we had large external aid—[HON. MEMBERS: "Oh!"] Unfortunately, it is a fact, so it is no good saying "Oh!"] like that. We had large external aid and we could do better with it than without it—or is that point too elaborate for hon. Members opposite? Nor can we judge the measures we have to take by what we would like to do.
Criticism of the Budget is directed more or less to the following points, and I had better address myself to them. First, the sharp rise in the Bank rate; second, that the Budget does not benefit the wage earner; third, the danger which the present crisis presents to multilateral trade, particularly in the sterling area, and that the visible evidence of this danger is shown by the Australian standstill in imports. Last, there is the criticism that we are reducing capital investment and running down stocks. These are some, not all, of the points which the right hon. Gentleman raised. If I omit some of them, my right hon. Friend will catch them later in the day.
Let me turn first to the use of the Bank rate. Is this a drastic measure? Hon. Members opposite do not answer, but I tell them it is a very drastic measure and I have already spoken in the House on the subject. I have given it as my view that we should never get our economy into a healthy state unless some of the traditional methods of controlling the volume of credit were put into force. The use of the monetary spigot, for instance, does not require a mass of control. [HON. MEMBERS: "What?"] The right hon. Gentleman the Member for Bishop Auckland (Mr. Dalton) ought to know what a spigot is, from his antecedents. It does not involve a vast appara-

1951
tus of control, but can be applied by a handful of men. [HON. MEMBERS: "The City."] The Bank of England happens to be situated in the City, but it also happens to be owned by the Government, so the point does not seem to me to be very well taken.
Mr. M. Follick: Owned by the Government or the State?
Mr. Lyttelton: Hon. Members were saying it was the City, which was an ignorant sneer that only darkens counsel. If the Bank rate is successfully used—and we know it is a very skilful matter to use it successfully and that it has to be carefully timed—it squeezes out the marginal proposition. Of course, it is true that in planning extensions to an industrial plant, or, indeed, in planning any new enterprise, the mere rise in interest rates from 2½ per cent. to 4 per cent. will not by itself deter the industrialist from putting up new buildings or buying plant and machinery.
His calculations have to be made on a broader basis. He has to calculate upon amortisation, on the extinction of the capital liability which has to be spent over a comparatively short time. And all the more so now because up to 73 per cent. of his profits—it is part of the class warfare of this Budget—are taken to finance the Government, a matter upon which the right hon. Gentleman is silent. They are taken away from him to finance the Government rather than to finance his business.
However, a rise in the Bank rate does not only mean that what an industrialist has to build will cost him to finance. It is also a sign that lots of other people will have to pay more interest on their projects and that their consumption of a large range of marginal things will be reduced. So that a rise in the Bank rate not only makes a marginal proposition less attractive by increasing the cost of finance, but it also gives a warning that th demand for marginal products will fall. It is worth remembering that the general level of business activity, even of boom and slump, is governed in the main by the demand for capital goods, and that the demand for consumer goods fluctuates far less throughout the business cycle.
In short, a rise in the Bank rate, which mainly affects capital goods and capital
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investment, is disinflationary, to use a word of Sir Stafford Cripps. Above all, however, the monetary spigot is entirely flexible for the Bank rate can be altered every Thursday, and if by watching the various barometers it is proved that disinflationary measures, or the contraction of credit, have gone too far, then easier monetary conditions can be provided overnight.
I see the right hon. Gentleman the Member for Bishop Auckland in his place. He, I think, was the author of the felicitous phrase "too much money chasing too few goods." I do not know whether it was his own invention or whether he cribbed it from somebody else.
Mr. Hugh Dalton: It was my own.
Mr. Lyttelton: It comes rather curiously from the lips of the right hon. Gentleman because, from the very nature of the epigram, the remedy for too much money chasing too few goods must either be to make more goods or create less money or a combination of the two. The main criticism I have to make of the financial policy of our predecessors, and of the right hon. Gentleman the coiner of the phrase in particular, is that so far from reducing that "too much money" to which he refers, he and they kept money artificially cheap and plentiful, and that at a time when we had to promote our exports and consequently the volume of goods available for sale at home was likely to be reduced.
Record company profits on which the previous Government had been financing themselves, while complaining that they were inflated, was another evidence of the same thing. Yet no one who believes in too much money chasing too few goods could believe in keeping money artificially cheap. They were the authors and the architects of the inflation from which we have been suffering and out of their own mouths their economic policy is condemned. If anyone, such as the right hon. Gentleman, the Member for Leeds, South, attempts to control inflation by writing pious letters to bankers asking them only to lend selectively, and by supposing that any body of planners, even should it include some Socialist Ministers, are able to decide upon a series of national priorities, let me say that any such system is bound to fail, as it has failed in the last six years.
Mr. Jay: May I point out to the right hon. Gentleman that his right hon. Friend is doing precisely what he describes.
Mr. Lyttelton: I think that that will be found to be entirely wrong. If the right hon. Gentleman will contain himself and will listen to my arguments, he will get the answer.
It is quite impossible for any body of planners to tell whether the extension of a plant to make galvanised sheets or plastic insulations is the higher national priority. It is all a sham to suppose that any body of men can look into the future in that way. They are entering at once into the realms of clairvoyance—
Mr. Hugh Gaitskell: Perhaps the right hon. Gentleman will explain, in that case, how he manages to license buildings?
Mr. Lyttelton: There are, of course, certain things—[Laughter.] All I am saying is that if one attempts to plan all national priorities one is bound to fail, as the right hon. Gentleman and his right hon. Friends have so signally failed during the last six years.
Mr. William Hamilton: The right hon. Gentleman himself is not doing very well, either.
Mr. Lyttelton: The right hon. Gentleman the Member for Ebbw Vale (Mr. Bevan), once used the phrase, "Why read the crystal if you can read the book?" But, of course, the crystal is the only effective instrument of planning in the system of the right hon. Gentleman. It is only necessary to add Hitler's astrologer to the body of Ministers—
Mr. Frederick Peart: Or Lord Cherwell.
Mr. Lyttelton: In practice, the marginal proposition can be deferred to a time when we can afford it only by applying the hard and practical criterion of whether the entrepreneur thinks the project is likely to be profitable; or, in other words, how long it will take him to amortise and expunge the liability which is created by building the assets. Right hon. Gentlemen opposite, when they get older, will find out whether this is true. The right hon. Member for Leeds, South, says that the use of the Bank rate is a severe measure.
Mr. Gaitskell indicated assent.
Mr. Lyttelton: I agree. I admit that it is a most drastic measure. But what becomes of the right hon. Gentleman's argument that the Budget does not acknowledge the severity of the crisis? He is not jumping up now. He cannot have it both ways. This is matched by—
Mr. Gaitskell: It is such an obvious point that I should not have thought that the right hon. Gentleman needed to be told. The Bank rate could have been put up without the Budget. It is not part of the Budget.
Mr. Lyttelton: The arguments at other times are that this year we have not had the usual Economic Survey and general survey of economic conditions; hon. Members opposite have deplored this. Yet when we come, as part of the Budget statement, to say that the monetary weapon is to be used, the right hon. Gentleman differentiates in this peculiar way. All I can say is that the argument is extremely thin and is matched by some of the other arguments we have heard—
Mr. Gaitskell rose—
Mr. Lyttelton: The right hon. Gentleman should allow me to get on.
It is also matched by some of his other arguments that the Budget is inflationary and at the same time that the rise in the Bank rate is too deflationary. One argument destroys the other.
Now, I come again to the catchword or slogan which is evidently to form part of the Socialist Party's "Hints to Speakers." They are going to say, and will go on saying, I dare say, that the Budget takes away from the poor to give to the rich. Before I embark upon this subject, let me say that comparisons which are drawn between basic wages and the effects of decreased food subsidies, increased old-age pensions, tax exemptions and increased family allowances, will not give the true picture. Comparisons can only fairly be made between earnings and the effects of the pluses and the minuses.
Very often quite wrong conclusions are drawn in other connections when it is said, and especially abroad, that at a time of national crisis we are working on a 42 or 44 hour week, and the laity

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think that workpeople work 42 or 44 hours. Of course, they do nothing of the kind. They work at basic wage rates for those hours, and extra hours that they put in are subject to overtime—time and a half, double time, and so forth. It sounds a simple point, but I am always having to explain this difference to foreigners who are not in touch with industry, and otherwise quite unnecessary criticisms are levelled at our workpeople.
For example, in the industry which I have just left, the basic week is 44 hours but the average time worked is 46½ hours. Therefore, the sneer, "Why do you work 44 hours when the country is up against it?" is entirely unjustified.
Mr. Cyril Bence: Our party made no sneers.
Mr. Lyttelton: Time and again I have been on this point in the House.
Mr. Follick: What do you want incentives for?
Mr. Lyttelton: The converse side also has to be taken into account. In comparing how the industrial worker will fare from the gains or losses which he gets from the Budget, critics must base their argument upon earnings and not upon basic wages.
I always listen to the speeches of the hon. and gallant Member for Hull, Central (Captain Hewitson) with great attention and respect, but he made the same mistake in a speech in the debate last Wednesday. I gave him warning that I would mention this matter. The hon. and gallant Member said:
"This list gives the wage rate of a number of industries. I have taken from that list 99 industries, and that 99 contains the whole section of the great chemical industry. The average wage in the 99 industries is 120s."—[OFFICIAL REPORT, 12th March, 1952; Vol. 497, c. 1486.]
He then proceeded to build an argument upon those figures. He was right—those were the basic wages.
I have been at pains to find out what were the earnings. I refer, first, to the whole group of chemical and allied trades, because the hon. and gallant Member quoted them. They include such trades as chemicals and dyes, paints and
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varnishes, and a host of others. The average earnings for the last pay week in October, 1951, were 169s. compared with the basic wage of 120s. which the hon. and gallant Member mentioned. It is the figure of 169s. which is operative for the purposes of this study.
Ignoring for a moment the chemical industry and taking all industries covered by the Ministry of Labour inquiry into earnings we have a figure of 166s. 1d. as the average earnings. Upon these average earnings—
Mr. Percy Wells: What are the average earnings of the skilled agricultural workers?
Mr. Lyttelton: I am giving the average earnings of the groups of industries, which do not include agriculture. I am talking about industrial workers.
Mr. Wells: Would the right hon. Gentleman accept that it is under £6 a week?
Mr. Lyttelton: The hon. Member must allow me to proceed. I am talking about industrial workers, and the criticism has mainly been that they get no advantages out of the tax remissions. [HON. MEMBERS: "They do not."] Upon the average earnings of £8 6s. a week, the income tax payable by a single man comes down from 20s. 4d. to 15s. 11d.; a married man without children, from 11s. 11d. to 6s. 5d; and for a married man with one child, from 4s. 6d. to ls. 3d.
Sir Richard Acland: And a married man with two children?
Mr. Lyttelton: About level, with tax. I shall come to the point later.
It is possible, of course, by taking exceptional cases and by basing the comparison on wage rates instead of on earnings, to find what might be called a blind spot in the scheme. Anybody who looks at these figures objectively must acknowledge that. Let me repeat that at £8 6s. the single man is better off, as, also, is the married man without children and the married man with one child. But these calculations—I think they are striking—obscure the object of this particular budgetary measure, because the great majority of industrial workers can earn overtime and piece rate bonuses—
Mr. George Chetwynd rose—
Mr. Lyttelton:—but it is not much fun earning if a large proportion has to be paid out in Income Tax. There is nothing very new in this. All those connected with industry have been worried about this matter for several years. It has been a feature in our industrial scene and it has worried everyone.
The new tax exemptions give a very large number of workers—the overwhelming majority of them—the opportunity not only of offsetting the rise in the cost of living, but of being better off. In doing so, they will have added to the volume of national production, they will have helped the country, they will have improved their own position and in many instances, even without taking into account the increase in family allowances or the increase in old age pensions, they will be better off.
Several Hon. Members rose—
Mr. Lyttelton: I will give way later.
The Chairman: If the right hon. Gentleman does not give way, hon. Members must resume their seats. There are over 70 Members who wish to speak, and if we do not get on quickly very few will be able to do so.
Mr. Lyttelton: I have given way a great deal.
Take, for example, the miners. The average earnings of underground miners in the second quarter of last year were 204s. a week. A single man will now have his tax reduced from £1 12s. 11d. to £1 5s. 7d. If he then works overtime and earns another £1, the tax on this is reduced from 7s. 7d. to 5s. 10d.: he keeps 14s. 2d. On the same earnings, a married underground miner who has no children has his tax reduced from £1 0s. 8d. to 15s.; and on an additional £1 earned in overtime, the tax comes down from 5s. 3d. to 4s. 3d.
I agree with hon. Members below the Gangway on the other side, that the argument cannot stop there. It is perfectly true—and we must acknowledge the exception as well as the rule—that there are others who from the nature of their work cannot earn either overtime or piece rates. They are special cases; they represent a very small proportion of the total industrial core. If they are to be
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given an increase in wages by the ordinary machinery it would be a national tragedy if wage increases were pressed by those who have the remedy for the increase in the cost of living in their own hands by working overtime.
Mr. Walter Monslow: May I tell the right hon. Gentleman that under the present scales—and I have worked them out—a £7 a week man now earning £1 extra gets 15s. extra? Under the Budget he will get 15s. 1½d.
Mr. Lyttelton: I admit that there are particular cases where the gains are very small indeed, but when the right hon. Member for Battersea, North, says, on a series of quite false assumptions, that 75 per cent. of the industrial workers are worse off, he is saying something which is palpably inaccurate.
Mr. Jay: The right hon. Gentleman has not dealt at all with the Inland Revenue figures I gave of the percentage of Income Tax on the incomes below a certain level. Those are incomes, that is to say, earnings, not wages. Therefore, the whole argument of the right hon. Gentleman about wage rates has nothing to do with the argument I advanced.
Mr. Lyttelton: I am advancing my argument on earnings and I have taken the average of earnings of a very large group of industries and shown that the average gives the workers a considerable advantage. I admit that the average is made up of some who are above and some who are below, but that is the average. I know that the right hon. Member for Huyton (Mr. H. Wilson) thinks this is all unnecessary and that he would cut rearmament, increase subsidies and hope for the best abroad and at home. He would expect to get higher production by decreasing incentives.
I have one thing more to say on food prices; that is, to beg for a sense of proportion. I think I can say it without offence because I smoke tobacco and drink beer. Last year the country spent, as a whole, £605 million in tax upon tobacco and £265 million in tax on beer; £99 million in tax on spirits and £17½ million in tax on wines. This is not the cost of the tobacco, the beer, or the spirits. or wines, but the tax paid on smoking and drinking. That is a total of £986 million, more than 2¼ times the total

1959
spent on food subsidies, £410 million, being paid in taxes on beer and tobacco.
Apart from any other argument, here is another striking example how in this sad life we do not get anything for nothing. It should also bring the argument about food prices into some kind of perspective. For example, if a man were to smoke two cigarettes fewer every day and three fewer every other day he would more than offset the reduction in food subsidies. [An HON. MEMBER: "Only some smoke."] The hon. Member thinks that a small proportion of the population smokes. It is typical of hon. Members opposite to put a particular point and try to argue from a general point. The man who thus smokes less would more than offset the decrease in food subsidies and he would have the increased family allowances, increased tax exemptions and the extra old age pensions thrown in for nothing.
Mr. Chetwynd: What about the loss to the Revenue?
Mr. Lyttelton: That is quite another question. I suppose it is suggested that we should encourage people to spend more money on things which are unnecessary and then complain if they have not enough for necessities. That is not an argument that appeals to me very much, but I know the hon. Member is rather new to these economic questions.
If the man cut his drinking by half a pint of beer a day he would achieve the same result. I quite agree that the hon. Member for Ealing, North (Mr. J. Hudson), who appears to have left the Chamber, would not benefit. He is an exception, because he is a tax evader on a big scale—he is engaged in the most laudable form of tax evasion, because I do not think he either smokes or drinks—[HON. MEMBERS: "He smokes."] Well, he is only half a tax evader and he perhaps makes up in smoking what he loses in beer and I am certainly going to join him in some way before long.
I turn to another question which has caused considerable anxiety in the Committee. I listened with great attention to the right hon. Member for Huyton. His was a serious speech and I would like to address myself to some of the points in it and, in particular, to the danger in multilateral trade involved by the overall deficit in the sterling area upon balance
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of payments and the consequent reduction in imports. It is unnecessary to go into the terrifying rate at which the drain on gold and dollar reserves is increasing. The Chancellor told us that the deficit was running at an annual rate of about £325 million and in the second half of the year the annual rate was nearly £1,200 million, about £4 million per working day.
If we went on at this rate the whole gold and dollar reserve would run out—
Mr. Gaitskell: To get this right, may I point out that I think the right hon. Gentleman was talking of the United Kingdom non-sterling deficit. In the first half of 1951 there was a surplus in the sterling area.
Mr. Lyttelton: I may have made a mistake. I was referring to the United Kingdom. The right hon. Member for Huyton is not suggesting that, faced by this deficit in the sterling area as a whole, it would be possible to continue to import upon last year's scale. He was arguing, and I think it was perfectly correctly taken, that what we must do is to try to promote the largest volume of multilateral trade between the countries using sterling and to reduce as far as possible by discrimination—and let us face the word—the imports from outside the sterling area. No one, I think, would quarrel with that analysis and in that direction must lie the hope for the future.
How does the action of Australia work in with this? Let me first reassure the right hon. Gentleman that the cutting down of imports was discussed at the Commonwealth Finance Minister's Conference. I was there with 11 advisers from the Colonies and inevitably a large part of the time was devoted to the subject of balancing the accounts and part to trimming imports. Equally, no time was spent in discussing the undesirability of cutting down sterling imports, which is obvious and axiomatic.
Mr. Gaitskell: It is very important.
Mr. Lyttelton: One does not have to have been at Winchester and New College, nor be an ex-President of the Board of Trade to have found that out. If everyone in the sterling area were to cut down sterling imports and expect it to increase sterling exports they would be heading for a breakdown.

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Let us look at Australia. She has been having an orgy of importing designed largely to combat the inflation from which she has been suffering. Her position has been deteriorating at an alarming rate. Her total national reserves, including gold and sterling balances, were falling steeply; in fact, they fell from £834 million, Australian pounds, in June, 1951, to £544 million at the end of December.
The Australian Government estimated that unless urgent action was taken the reserves would have fallen well below £300 million by the end of June, 1952, and I would remind hon. Members that it is during the months of July, August and September that Australia is normally in substantial seasonal deficit. Australia, faced by such a crisis, had no alternative but to reduce her imports to the level of her currently available resources. Those are the words of Mr. Menzies, the Prime Minister.
I will analyse the figures. Australia estimated that between July, 1951 and June, 1952, her total overseas expenditure would amount to £1,300 million—Australian currency—of which £1,250 million represented the cost of imports c.i.f. Of this £1,250 million, £770 million would have been spent on imports from the sterling area and not more than £480 million on imports from the non-sterling area.
Against this total of £1,250 million, Australia's total earnings from exports, which was an all-time record except for the boom wool year, were estimated at £660 million.
Let me repeat the figures. Expenditure on imports, £1,250 million; total export earnings £660 million. So if Australia had to live within her income she would have to cut her expenditure on imports by no fewer than £640 million. Since her total imports whether essential or non-essential from non-sterling sources represent only £480 million, it is perfectly obvious that imports from the sterling area had to be cut.
There is only the one alternative, and that, I know, the right hon. Gentleman would reject, to balancing that account in another way, and that would be by this country making a loan to Australia. Such a policy is only a temporary policy, but I, must impress upon hon. Members that a cut in sterling imports was absolutely
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necessary if Australia is to live within her needs. It is also complete nonsense to talk about cutting one another's throats—
Mr. Gaitskell: Before the right hon. Gentleman leaves that point, would he tell us what the proportionate cut of non-sterling and sterling exports into Australia will be?
Mr. Lyttelton: I am not in a position to answer that. I imagine—and here I am embarking into the world of surmise—that the complete standstill, because that is what I think it is, at the moment, in Australian imports is because they are perfecting a licensing system to confine imports from non-sterling areas to the barest essentials while trying to stimulate the total amount of imports from sterling areas. But I cannot yet tell what those proportions will be.
I think it necessary to review these figures and to see where Australia stands. I would also emphasise that they are temporary measures and will provide their own remedy. Mr. Menzies said:
"What I have said will indicate that we are not proposing to set up a permanent licensing system. Just so soon as our balance of payments permits we will be able—and indeed are anxious—to modify and eventually remove these controls."
It is clear to every Government in the sterling area that the objective of sterling area policy must be to carry the maximum inter-sterling trade and import the minimum and only necessities from the non-sterling area, including the dollar area. I would again emphasise that these measures are temporary.
Before I leave the speech of the right hon. Member for Huyton I must say a word about stocks. The right hon. Gentleman devoted some time to this subject, but he left out one or two factors. The first is to define strategic stockpiling. That means the holding of stocks by the Government of certain specific strategic material not ordinarily carried by industries. These stocks have been run down somewhat, but Her Majesty's Government are satisfied that the cuts are not such as to endanger our powers of waging war if that terrible event should fall upon us.
Moreover, I think that everyone in this Committee admits that at present the stocks carried by industry are large, in

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some sections even over-large. That has been one of the features of this inflation, and, of course, all stocks under conditions of modern war are strategic stocks in the true sense of the word. The stockpiling which the Government undertook was a stockpiling of certain specified materials.
I was much amused to find that the right hon. Member for Huyton has now become, in his own estimation, a defence protagonist. He resigned from the previous Labour Government because he said that too many resources were being devoted to defence and that we ought to concentrate on economic security and hope that military security might follow as a result. Exactly how, he did not say. Now he thinks we are not devoting enough resources to stockpiling, running risks over re-armament, and so forth.
At one time he was the nigger in the stockpile. Now—and perhaps it is because of his contact with private enterprise—he is singing another tune. He is now saying that we are not devoting enough of our resources to stockpiling. He is asking questions about how many additional destroyers will be needed to secure our stocks of timber, and so forth. He is on the way to be the arch trimmer—
Mr. Harold Wilson: The right hon. Gentleman is attempting to represent what I said last week. Is he not aware that it was a decision which I announced in this House on 16th April last year which enabled those stockpiles of timber to be built up? Even though he has just said that in the view of the Government there will be enough stocks to wage war, does not he agree, on his own assumptions and on the assumptions of the Government about defence, that every ton or every hundred thousand tons by which they reduce any of these stocks means that scarce resources of shipping would have to be devoted in war-time for that increased requirements of the defence programme?
Mr. Lyttelton: I understand the argument of the right hon. Gentleman perfectly well. I also think it difficult to understand an argument which says that we can safely reduce our expenditure on re-armament but we cannot safely reduce our stockpiling. The right hon. Gentleman cannot have it both ways.
Mr. Wilson: I am sure that the right hon. Gentleman would not wish to misrepresent me. I was not saying, either from the point of view of the timber position generally or from any other, whether it was right or wrong to reduce these stockpiles. What I did say was that it was illogical to run them down on the assumption made by the Government that defence must come first, and that this is a defence Budget.
Mr. Lyttelton: These things are a matter of balance. The right hon. Gentleman is trying to argue that a reduction in stockpiles is very dangerous but that a reduction in re-armament would be perfectly safe. That argument does not hold water, and he knows it.
I wish to say a word about the reduction in capital investment. I am sorry to detain the Committee for so long, but I have been very much interrupted. I do not think anyone would deny, certainly not the responsible leaders of the Opposition, that in present circumstances some reduction in capital investment is a necessity. Let us recognise straight away that it is retrograde. It must be.
Upon the continued high rate of capital investment in our industries lies one of the principal hopes of increasing our productivity and consequently our production. To cut capital expenditure is, of course, retrograde, but it has to be done now. In his speech the right hon. Gentleman went very much off the rails on this particular subject. I interrupted when he said, and these were his actual words:
"… the Government are saying, 'We can spare nothing for replacements in Britain'."
When I intervened he altered the phrase to:
"'We are cutting capital investment'."[OFFICIAL REPORT, 13th March, 1952; Vol. 497, c. 1629.]—
and generously admitted his mistake.
Starting from my blunt admission that cuts in capital investment are retrograde, we must, nevertheless, get them into perspective. During the last six years, partly owing to inflation and the consequent high rate of company profits, capital investment in new plant and buildings has been running at a very high figure. All we are now saying, and nobody can possibly gainsay the necessity, is that in our present economic position we cannot afford to continue at the same rate of

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capital investment as that at which we have been engaged during 1950 and 1951. The figures for 1949 were £1,563 million; for 1950, £1,672 million and, for 1951, £1,860 million. I quite admit that they look more impressive when expressed in money than they would expressed in plant or buildings, because of the great fall in the purchasing power of money. But however one looks at it, private industry has ploughed back into its business larger sums of money than we can afford in the present economic crisis—
Mr. H. Wilson: Will the right hon. Gentleman allow me to interrupt?
Mr. Lyttelton: Really!
Mr. Wilson: I quite agree that the right hon. Gentleman interrupted me last week to correct a careless phrase, but I believe I went too far in accepting all of his correction. Would he now confirm the truth of what I ought to have said, and did not express properly, that under the new capital investment restrictions not a single licence can be issued for any firm for the pure purpose of increasing the efficiency of that firm unless that firm is concerned with defence work or dollar exports, and that this will mean no licence for increasing the efficiency of British industry generally? Will he not confirm that that is true?
Mr. Lyttelton: No, I do not think that that is correct. I will ask my right hon. Friend to go into greater detail. I can only say, having been asked, that I do not think that it is correct.
Mr. Monslow: May I put a further question?
Mr. Lyttelton: I have been subject to continuous interruption. I have not been at all provocative, either.
Mr. A. C. Manuel: Not for the right hon. Gentleman.
Mr. Lyttelton: Wait until I try.
One of the arguments for this reduction in investment in capital goods is that it will free the market for export. Everybody knows that the demand for capital goods the world over is at an unprecedented level. Deliveries of heavy plant of almost all kinds take two, three or four years. As part of my right hon. Friend's economic policy, we are reducing the de
1966
mand for capital goods largely by the use of the monetary policy, so that the resources of the metal-using industries can be diverted more to export and less to home demand than they have been. I acknowledge that this process will certainly involve some painful readjustments.
I should like to conclude by some general remarks about the future of the sterling area and of the colonial and other countries in the Commonwealth outside the independent Commonwealth in particular. I have been engaged in business inside the Commonwealth for many years. I have carried on business in Australia, South Africa, Canada, Rhodesia, Burma, Malaya, Nigeria, India and Pakistan. I thought that from my experience I knew about as much as most about the great possibilities of development.
I have seen at work some of these developments myself. It is as well to remember that the great Rhodesian copper field only began in 1925—within the working life of many of us here. I have seen the fabulous wealth of Burma, of Noranda mines in Canada, start from almost nothing; the huge expansion of Broken Hill, in Australia, and of International Nickel in Canada; and the great strides made in the technique of dredging and mining tin in Malaya and Nigeria. I have played a part in all these. Yet when I came to the Colonial Office I gained a new view of the possibilities of development in the future.
It is here in the development of these resources that lies, first, the great hope for the advancement in the standard of life and of education and health of all those people who live in these lands; second, the opportunity to grow more food and win more scarce materials for the relief of the world; and, third, a means of redressing the economic balance between the new world and the old. It is not an impossible flight of imagination to think that that might be achieved in the next two decades.
One of the dominating reasons for organising the sterling area, of working again, however painful it may be, towards convertibility of the £, and of restoring it to its pristine place as the great mercantile currency, is to enable not only the independent Commonwealth but all the other countries in the Commonwealth and under the Crown to develop further their

1967
resources—to harness the Zambezi, to mine the coal of Tanganyika, the copper of Uganda, the new iron ore bodies of Sierra Leone—to take some instances at random—to search for and find more of those raw materials of which the world is short.
I am old enough to have been a member of the Colonial Marketing Board whose task was to search for markets for colonial produce, and very difficult it was. What a change it is today. All those products are wanted. The problem is to find and produce them and, of course, to finance them. But we cannot invest a deficit in developing the Colonies, nor can the independent Commonwealth invest deficits. In running, as we have been last year, an immense deficit upon balance of payments, the British Commonwealth has, so to speak, been investing £500 million or £600 million in other people's trade.
By regaining a surplus, painful though the process may be, we shall be enabled to invest in our own trade in the future. At the Commonwealth Finance Ministers' Conference these subjects were for the first time ventilated, and for the first time work has begun upon them. I cannot this afternoon, without straying too wide, give my views on the methods to be used, beyond saying that we must be able to attract capital in the next few years from outside the sterling area. Our own surpluses will not be enough to do the job with which we are faced.
Every time hon. Members opposite snarl and growl and sneer at capital they are retarding this process. That outside capital will not be forthcoming unless the investor from abroad can rest his confidence on two things—the convertibility and strength of the £ and the political stability of Great Britain and the Colonies and other dependent territories. In terms of current trade the sterling area will reach, I sincerely believe, a balance; but it will be a precarious balance for the moment, depending somewhat on restriction. The future, the solidity of the sterling area, will depend upon movements of capital to explore, to expand, to sell and to market these developing resources.
In this lies our future. I admit that today we have to recoil here and there. But we must beware of an arthritic
1968
solvency. These balances have to be used to enable us to jump forward. If we are allowed enough freedom to use our enterprise, our skill, experience and integrity, based upon a respected and convertible currency, then we have the future in our hands. That is the long-term reason why we must now make sacrifices. My right hon. Friend's Budget has shown a new philosophy and outlook on these matters and given me hope that we shall emerge from our present difficulties.
Mr. A. Woodburn: I gather that in cutting down our own capital investment the Government hope to achieve a surplus for investing abroad in the Colonies and Dominions. Is this being done according to any plan? If we are cutting down investments at home, is there some plan for it?
Mr. Lyttelton: The right hon. Gentleman has not followed the argument.
5.17 p.m.
Mr. Roy Jenkins: Although some of the remarks made by the Colonial Secretary towards the latter part of his speech commanded more general agreement than other parts of it, I think that the main purpose of putting him up in one, of these financial debates must have been to make us aware how comparatively lucky we are to have his right hon. Friend as Chancellor of the Exchequer. The right hon. Gentleman brought before the Committee some really quite extraordinary arguments.
I was particularly interested to hear the right hon. Gentleman in the early part of his speech trotting out an argument, which I think I heard him give almost verbatim once before, in favour of the fact that one could not determine the priority of any capital investment over and against another except by the criterion of profitability. I was most surprised to hear him as a member of the present Government putting forward that suggestion. I should be most interested to hear whether he thinks that the steel allocation scheme which his Government have brought forward recently is based upon the criterion of profitability or whether the Government are there endeavouring to apply certain social priorities.
Mr. Lyttelton: The hon. Member is right. Where the Government are themselves the buyer of the commodity one

1969
can then apply a system of national priorities. Of course, then it possible to pick out one or two priorities and give them their proper place; but it is not possible, as right hon. Gentlemen opposite tried to do for six years, to plan national priorities on a comprehensive scale.
Mr. Jenkins: Does the right hon. Gentleman suggest that the only reason why the Government are bringing forward a steel allocation scheme is that steel happens to be a nationalised industry at present?
Mr. R. A. Butler: Because it is short.
Mr. Jenkins: Precisely—but are not capital resources also short? Did not the right hon. Gentleman give us a most eloquent passage in his speech in which he said that no responsible hon. Member could object to the cutting down of capital investment? I think tit," right hon. Gentleman who interrupted gave the case away on that point.
I think that six days after the Budget statement the main impression we have of the speech of the Chancellor is that half of it need not have been delivered at all. After announcing that his aim for this year was to maintain consumption at the level at which it was running last year, he said:
"To prevent consumption increasing, I must keep the Budget surplus substantially unchanged."—[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1290.]
At that point the right hon. Gentleman could have sat down and left the whole of the rest of his Budget speech undelivered. Up to that point he had been engaged in an interesting intellectual exercise in the application of the Keynesian technique to national income accounting. I do not think he did it quite so clearly or with quite the sureness of his predecessors, and certainly, to judge from his letter in "The Times," he left Professor Pigou very confused. But the net effect of this was to prove that we need not have had a Budget at all.
There are three things which follow from this. The first is that the right hon. Gentleman has abandoned a lot of his friends, both inside this House and outside, who had been taking the point of view that, in order to balance our trade and carry the defence burden, we had to have a great attack on living standards and the social services and an enormously
1970
increased Budget surplus. The right hon. Gentleman also abandoned "The Economist," which took what comfort it could out of the fact that the right hon. Gentleman had adopted its pet policy of cutting the food subsidies but had abandoned its very much more important policy of increasing the Budget surplus and cutting down consumption.
The right hon. Gentleman also abandoned the ideas expressed in the speech of the Parliamentary Secretary to the Ministry of Defence in the defence debate a fortnight ago, in which he attacked the policy of the Labour Government and implied that a great restriction of consumption was absolutely essential in order to carry these things through.
The Chancellor also undermined the unfortunate argument, as I thought it, of one or two of my hon. Friends—that in present circumstances one could not have both the Welfare State and our present degree of fair shares along with the burdens that we now have to carry. I do not think that that argument any longer holds, in view of what the Chancellor has said. We could have maintained the food subsidies and the social services to the full, even with our present burdens, and could even, if it was thought desirable, have raised direct taxation and extended the social services.
The second point which follows from the fact that the Chancellor brought himself to a standstill halfway through his Budget speech is that we are entitled to ask what has happened to the crisis. What really is the reason for the emergency Budget? Why, in order to carry out a little regressive redistribution, had we to have a Budget without an Economic Survey, without a full National Income White Paper, without knowing the full Revenue out-turn for the year—a Budget to take a little away here and give a little more there? It was not necessary to bring forward such a Budget a month earlier. I hope the Chancellor, when he winds up the debate tonight, will tell us a little more about his reasons for this.
The third point which follows is that the very serious changes which were announced in the second part of the Chancellor's speech—in that part which followed after he could very well have sat down—have all to be justified in relation to each other. The food sub-

1971
sidies cut, the increased petrol tax and the rest cannot possibly be justified in relation to our national difficulties, the gold drain or defence, but must be justified solely in relation to the concessions which the right hon. Gentleman was able to give. That means that the flagrant disregard of Lord Woolton's election pledge on food subsidies, on which so much has already been said, cannot possibly be justified on the ground of national needs. It was an unforced, unnecessary choice.
This Budget is an unnecessary Budget, and the next question which we have to answer is whether, as well as being an unnecessary Budget, it is also an unfair Budget. Some of my hon. Friends have already given pretty clear answers to the question, led by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell) in his speech last Wednesday, and I must say that I was amazed during the weekend to see the response of Lord Waverley in the "Sunday Times," which many hon. Members will no doubt have also seen.
Mentioning the speech of my right hon. Friend, Lord Waverley, no doubt in order to underline how impartial and independent he is on all these financial matters, came out in support of the Budget, but regretted very much that the Chancellor had not gone much further. His great attack on my right hon. Friend was that his speech had consisted of a lot of little petty sums, because he said:
"It is always easy to criticise any Budget on the score of giving or taking too much here and too little there, and I was sorry to see that Mr. Gaitskell was reduced in his broadcast to calculating the effect of the Budget in terms of a few shillings a family per week. That is not a statesmanlike attitude. It is not always possible to avoid anomalies entirely without running into undesirable complications and, in any case, these are surely not the facts to be applied to a Budget that is designed to save the nation from disaster."
I think that if we take that in conjunction with the speech which he had on Wednesday night from the Minister of State for Economic Affairs, we find that we are really getting into a very curious position.
The Minister of State told us that it was rather improper to calculate arithmetically the size of the Chancellor's task. He said that we could not have everything calculated in detail, but now we have Lord Waverley coming out and saying that not only is it improper to
1972
calculate arithmetically the scope of his task, but that it is most improper to try to calculate the effect of the proposals on particular individuals and so to weigh up the social results. We are really getting into a very curious position. Indeed, we have an almost mystical approach to matters of finance, and I should like the right hon. Gentleman to tell us whether he accepts this mystical role which his supporters and assistants are now laying down for him.
I should like to go on to deal with a few of these petty sums myself following on partly from what my right hon. Friend the Member for Battersea, North (Mr. Jay) said. I could not at all understand the point which the Secretary of State for the Colonies tried to make, in answer to my right hon. Friend, and I am not sure that he quite understood it himself, but perhaps if he disagrees with my calculation he will say so and interrupt as I go along.
I want to do a few sums myself in order to bring out the point that this Budget is not, in my view, merely bad because it takes money away from the poor generally and gives it, by and large, to those who are better off, but that it is also a bad Budget, despite the increases in the family allowances, as between those who have large families and those who have small ones. There was some unfairness there, and I think that here is a very important point.
If one leaves out of account the tax changes, if one sets off the cut in the food subsidies—and I am accepting the correction which the Minister of State made on Wednesday night of the impression which we originally received from the Chancellor's speech, and I am taking into account the figure of 1s. 2½d. and not that of 1s. 6d.—taking into account, on the one hand, the cut in the food subsidies, and, on the other hand, the increases in the family allowances and the increase in the National Insurance contributions, a man has to have four children in order just about to break even, and more in order to make some small profit on this particular equation. For instance, a man with three children is 6s. up on the family allowances. But he will be 6s. 01d. down on food, and also down on the National Insurance contribution, leaving out of account any changes—very difficult to

1973
measure—which come as a result of the petrol duty and the Purchase Tax changes.
Of course, it is perfectly true that some of these people will, in addition, get Income Tax reliefs. But the point I wish to make is that if a man has a sufficient number of children to break even on this family allowance and food subsidy equation, we have to go higher and higher up the income scale before we begin to get any Income Tax benefit at all out of this Budget.
Mr. Beresford Craddock: Will the hon. Gentleman tell the Committee to what scale of income he is referring? Is it to that of a married couple with three children, or what?
Mr. Jenkins: I think the hon. Gentleman is a little premature, because I have not really got to that part of my argument. I have not yet made any assumption at all about Income Tax scales. However, I will come to that, and I hope I shall make it clear to the hon. Gentleman, when I make the assumption, exactly what it is.
As far as I can see, a man with three children will have to be earning £11 before he starts to make up the losses which follow from the other equation I have already mentioned. With four children, where admittedly a man just about breaks even, one has to earn £12 10s. before making any real gain at all. Therefore, one is in the position that so far as the Income Tax concessions are concerned—which, of course, are the most important part of the relief—the bigger the family, the higher one's income has to be before getting any benefit at all.
I think it important that we should not get into the position of believing that this Budget is a good Budget, despite the family allowance increases, from the point of view of people with large families. I think it important that in dealing with this whole question of the cut in food subsidies we should expose one of the arguments which the Tory Party put forward most strongly, that they were against the food subsidies because they were wasteful and did not help the people who most needed help. That is the argument we, have heard time and time again. It can be summed up in the phrase that the millionaire and the Cabinet Minister are subsidised just as much as poor people.
1974
That argument might have had a degree of respectability if, when the food subsidies were cut, the money saved thereby had been used to concentrate reliefs upon those people most in need of them. But what, in fact, has happened? We have saved £160 million on the food subsidies and taken money away equally from everybody, from the millionaire and the poor person alike. But the Government have given it back far more to the millionaire than to the poor person. They have given back to everybody with an income of above £2,000 something like £60 a year. Does the right hon. Gentleman deny that? What have the Government given, which is remotely equivalent to that sum, to anybody with any sort of family earning below £500 a year? It is perfectly clear that this method of distribution is far more wasteful than the food subsidies system of giving equally to everyone.
I think the Labour Party's attitude on the food subsidies has been made pretty clear. I agree that from a long-term point of view they may not be the best way of doing the job, but we have always taken the view that the short-term practical arguments far outweigh these long-term theoretical arguments. The cutting down would almost inevitably be distributively aggressive; there was bound to be a distribution of wealth away from those less well off in favour of those better off. This Budget proves how very right we always were to take that line. It shows, in fact, that a cut in the subsidies has meant exactly what we said it would mean.
I now want to say a word about the petrol duty. I have spoken twice on previous occasions during the Committee stage of Finance Bills in favour of such an increase, and therefore I am not perhaps in a very strong position to speak against this particular tax. But I think it important that we should bring up some of the points of view taken by hon. Gentlemen and right hon. Gentlemen opposite to previous increases in the petrol duty which brought up the price of petrol to a very much lower level than the present one.
In 1950, when the price of petrol, even after the new increase then announced, was very much lower in proportion to the general price level than it will be at the present time, we had the right hon.

1975
Gentleman the Secretary of State for the Colonies saying:
"Secondly, there are massive trade reasons which make this duty thoroughly unsound. It will raise the cost of production and the cost of distribution, for example, by increasing fares all over the country and by making the transport of components within the various assembly plants in industry more expensive. Thirdly, it represents the pursuit of the anti-motoring and anti-motorist policy which is a feature of the intentions of the present Government."—[OFFICIAL REPORT, 14th June, 1950; Vol. 476, c. 228.]
Mr. Lyttelton: Perhaps the hon. Gentleman will tell us what were our gold and dollar reserves at the time I said that?
Mr. Jenkins: I am bound to say that the arguments of the right hon. Gentleman which I was in the middle of reading when he interrupted me—
Mr. Lyttelton: Go on with them.
Mr. Jenkins: I am not sure that they are worth going on with. It seems to me they are not very closely related to gold losses. They seem arguments of very general principle which could be held to apply in all circumstances.
If the right hon. Gentleman rests his case on the excuse of our diminishing gold reserves, which is the universal excuse for everything the Government are doing, will he tell us what help it is to raise money in higher petrol duty and then to give it away in Income Tax reliefs? Is that directly related to our gold and dollar difficulties?
I want to mention one more set of arguments which we had from the Front Bench opposite. They came from the right hon. Gentleman the present President of the Board of Trade. On 14th June. 1950, he said:
"I agree with my hon. Friend who said that no tax could have been better designed to force up prices and to increase export costs."
Holding these views so strongly must make it very difficult for the right hon. Gentleman to continue in office as President of the Board of Trade, where he is directly concerned with exports at the present time. He went on to say:
"We believe that the whole of this tax is unnecessary, is vicious, and is calculated to do all the things which the Chancellor, if he was a wise one, would not at present be attempting
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to do."—[OFFICIAL REPORT, 14th June, 1950; Vol. 476, c. 267 and 269.]
In conclusion, I want to deal with that old issue about which we have heard such a lot during the Committee stage, whether this Budget is an inflationary or a deflationary Budget.
Great doubts were cast by the right hon. Gentleman the Minister of State for Economic Affairs upon the way in which the inflationary gap was calculated this year. We should like information, for instance, about the Chancellor's estimate of the level of company savings, and how he would regard an improvement in our invisible trade balance as something which made no call at all upon resources at home.
I should have thought that if people were prevented from spending money in Swiss, French or Italian hotels, it would have meant more purchasing power at home, but no allowance was made for that. But these are points of details and in spite of the doubts the Minister of State shared about the way in which the Treasury did its work this year—
Sir A. Salter: I suggest that a calculation of which the most important item was £100 million deficit on overseas balance, which proved afterwards to be a deficit of more than £500 million, is not really a very valuable basis for policy.
Mr. Jenkins: This is extremely important. Is the right hon. Gentleman now saying that no such calculations were made in the Treasury before the Budget was produced this year? Would he explain briefly why the Chancellor, no doubt with his expert advice, arrived at the conclusion that consumption might be cut and a Budget surplus provided?
Sir A. Salter: If the hon. Member would refer to what I said last Wednesday, he would find that I answered that with some fullness. I quoted exactly what the Chancellor said, and I also said that I thought what was right was what we had done, namely, after fortifying our minds with a careful consideration of every relevant factor, we had based our policy on an act of judgment.
Mr. Jenkins: The right hon. Gentleman is making one of his very frequent interventions, trying to explain what he really meant on a previous occasion. Either

1977
one makes a series of assumptions on the basis of which one comes to a conclusion and sticks by it, or one says the whole thing is absolute nonsense, and the Chancellor could equally well have cut expenditure by £500 million or put it up by £500 million. It does seem that some of the general principles in previous years were followed in calculating the size of this inflationary gap. That, of course, undermines a good deal of the criticism which came from the benches opposite about the soft finance they said we continually had from Labour Chancellors of the Exchequer.
But, of course, this Budget is very different from the Budgets of Sir Stafford Cripps and his colleagues. It is a much more unfair Budget. It is a Budget which, as my right hon. Friend the Member for Battersea, North said, is probably the first Budget in this century deliberately to increase the purchasing power of the fairly well-to-do and to reduce that of the lower income group.
It is liable, for that reason, to be an inflationary Budget, because it will put a great number of people in the position in which they naturally and rightly seek wage increases in order that within a constant level of national consumption they may take the share they had before. The Chancellor has put them in the position that only by seeking wage increases can the lower-paid workers take their fair share of a constant national consumption.
How does the Chancellor envisage this position working out? Does he believe that those wage increases are to be granted and, if so, given the concession he has already made to people higher up the scale, how will he maintain the total consumption constant? Or is it his assumption that these wage increases are not to be made? If that is his assumption, and they are not to be granted, then he must be working on the assumption of a very different labour situation to that we have known in the past six years or so. He must be assuming that the bargaining position of these people will be much weaker.
When the Chancellor comes to wind up this debate it would help us all if he could tell us what his assumptions are here. Are they that these wage increases will be granted and that in that way these people will maintain their purchasing
1978
power constant? Or is he going to get into a position in which he will be able to resist the increases and maintain the redistribution away from the poor and towards the rich that he has brought about in the Budget? If that is so, we shall be very suspicious about the whole economic climate which he is seeking by this Budget to bring about.
5.46 p.m.
Mr. R. Maudling: The hon. Member for Stechford (Mr. Roy Jenkins) always speaks with great fluency, as on this occasion, and I hope he will forgive me if I do not follow him directly, though I wish to refer later to one or two things he said.
In their attacks upon the Chancellor's proposals the Opposition have been singularly divided and sometimes discordant. On one thing they have been quite unanimous. They have not tried to put forward any alternative suggestions for dealing with the very serious crisis this country is facing. We have heard about difficulties caused by import cuts. There have been some suggestions of further cuts, but I have not heard any concrete proposals.
We have been told by the right hon. Member for Huyton (Mr. H. Wilson) about the importance of increasing exports, but we have heard no proposals. Hon. and right hon. Gentlemen opposite do not approve of the increase in the Bank rate. But how do they propose to set about checking the speculative attack on the £ to which they have referred? They have attacked the Chancellor's proposals but they have not not put forward any proposals of their own.
This time we cannot tinker. This time we must have urgent and effective action. The one statement in the Chancellor's speech to which little reference has been made and which should mean more than anything else was his statement about the gold reserve—that the drain on the gold reserve in the last two months has been proceeding at a rate which would mean that our total remaining reserves would be exhausted within less than 30 weeks. We must set everything we are arguing about in this debate against that background.
That is background, of course, of which the former Chancellor of the Exchequer should have been well aware for a long

1979
time. He was aware of it before the Election, no doubt. The right hon. Member for Battersea, North (Mr. Jay) referred to a recent report of the O.E.E.C. In that same report it was, I believe, stated that there never had been a crisis which could so easily have been foreseen and against which action, incidentally, could so easily have been taken.
Let us take this question of speculation against the £. The right hon. Member for Leeds, South (Mr. Gaitskell) has said in the course of this Budget debate:
"… I do not think there is the slightest doubt that speculative movements have played a very large part indeed throughout this period. At one time there was a tendency to throw cold water on that sort of suggestion, …" —[OFFICIAL REPORT, 12th March, 1952; Vol. 497, c. 1393.]
I do not know who threw cold water. Nobody on this side of the Committee did.
If the right hon. Gentleman was so well aware of speculation against the £, why did he not do something about it? What suggestion had he to offer? He had a suggestion that the period during which British exporters could collect and convert dollar earnings should be reduced from six to four months. If that is an effective measure why was it not taken by the right hon. Gentleman while he was in power?
The fact is that the right hon. Gentleman and his friends greatly over-estimate the power of physical controls. Undoubtedly physical controls have some power, but they cannot do everything. Currency is confidence. Without confidence, currency means nothing, and many physical controls destroy rather than create confidence. A currency which has been propped up with physical controls is not a currency that will attract the attention and support of people in other parts of the world.
The right hon. Gentleman showed his excessive faith in physical controls when he introduced Section 36 of the Finance Act last year—the infamous ring fence around the sterling area. I am sorry that no mention has been made this year of withdrawing that particularly offending Section. We do not say—and this is the fallacy which hon. Members opposite give way to—"Away with all physical controls; rely entirely on monetary controls." We say that we must have a combination of the two.
1980
It has been shown clearly that physical controls have not been adequate to deal with speculative action against the £. But the Bank rate is proving an effective factor. Evidence of the success of the increased Bank rate has been visible in the last few weeks in the increase in the sterling exchange rate on the foreign exchange markets of the world. That is the figure which we must watch at the moment. Upon the way sterling performs in the world's exchange markets depend the financial position of this country and the strength and stability of our reserves.
I hope that this strengthening of the Bank rate may be followed by a move in the direction of the floating value of the £ on the Canadian level, because I do not believe that there will ever be the full confidence there should be in the £ sterling, nor shall we be able to check speculation, and particularly one-way option speculation, until we have the floating rate of the £ instead of moving, as it does at the moment, in a series of hiccoughs from one rate to another.
I should like to say a few words about the balance of payments. The Chancellor has proposed some reductions in United Kingdom imports. Do hon. Members opposite agree or disagree with those cuts? Are they too small or too big? The former Financial Secretary seems to think they are too small. He wants to cut more imports of manufactured goods. I do not know exactly what he means by that, but he said this afternoon that he wants to cut those imports. The hon. Member for Bermondsey (Mr. Mellish) was saying only last week that the import cuts already undertaken would set off reactions all over the rest of the world. What do hon. Members opposite want? Do they want more import cuts or less, or do they agree with what the Chancellor has done?
I should like to say a word about the Australian import cuts, because there seems to be a certain amount of misunderstanding about them. It was pointed out by the hon. Member for Gloucestershire, South (Mr. Crosland), with whom for once I find myself in complete agreement, that it is possible to exaggerate the importance of these Australian import cuts. Surely the cars, textiles and other things that we have been sending to Australia in recent months have been largely unrequited ex-

1981
ports. They have been sent to Australia in exchange for the running down of Australian balances in London.
It is worth while recalling how often my right hon. Friend the Secretary of State for the Colonies pointed out in 1949 and 1950 to hon. Members opposite that their financial policy was being accompanied by a steady piling up of quick sterling liabilities in London which at some time would have to be met. That is what has been happening in the last few months. The Australians have been drawing upon the balances which they built up in London during the time when hon. Members opposite were in power.
The point is that if these exports to Australia from this country are unrequited, they are doing no service at all to the total balance of the sterling area. They may, in fact, be diverting the manufacturing capacity of this country from making goods which could be sold in other non-sterling markets. While it is true that the transitional stage will be difficult and there will be considerable difficulty in Lancashire and Birmingham, it is not reasonable to expect this country to go on maintaining an export trade to Australia in goods which are largely unrequited.
My next point is the question of exports. It would be the ideal solution to increase exports of consumer goods but it just cannot be done. The right hon. Member for Huyton, in the course of his thoughtful speech, pointed out clearly how the export markets for consumer goods all over the world have been diminishing as other countries have been building up their own industries. It is a fact which we have to face; it is unfortunate, but it is a fact.
It means that if we are to expand our exports we can do so only by expanding exports of capital equipment. We have no alternative. The Government are not deliberately starving British industry of capital equipment. That is the last thing the Government want to do, but the fact is that we can only sell abroad the goods that other countries are prepared to buy.
I do not think there can be any argument on either side of the Committee that the Government are right in aiming to expand our exports of capital equipment. The way they intend to try to assist that process is by this increase in the Bank
1982
rate. As my right hon. Friend the Minister of State for Economic Affairs pointed out last week, one of the most important points in regard to exports is not only prices but delivery dates. By thinning out the order books of manufacturers of capital goods produced for industry in this country it is possible to improve delivery dates to other countries. This cannot be done by physical controls alone; neither can it be done by monetary controls alone.
The Bank rate, I agree, is a clumsy weapon, but it could not be clumsier than physical controls because they often create their own scarcity. One has only to look at the story of steel allocation, and the United States copper position during the war. Neither physical controls nor the Bank rate in themselves are adequate weapons, but—and this is our criticism of hon. Members opposite, for they have never tried this combination—the combination of the two will make it possible to divert a considerable quantity of goods from home consumption to exports.
I should like to say a further word about the Bank rate. We have not heard in this debate the story of the Government making a great present to the moneylenders. I wonder why. Is it perhaps because hon. Members opposite have realised that that is a thoroughly bad argument? The increase in the Bank rate will not mean added prosperity to the gentlemen they call moneylenders, by whom I imagine they mean the large financial institutions of the City of London and the rest of the country.
One of the main effects of the increase in the Bank rate has been a serious cut in capital values on the Stock Exchange. If a capital gains tax were introduced now it would not produce enough to feed a mouse. What happens to the extra amount which the banks earn? It is passed on to the depositors in the form of higher interest rates. That is an encouragement to savings, and do we all not wish to encourage savings? This is a very effective way of doing it.
There is the question of how much the cost of the increased rate on Treasury bills will be to the Exchequer. Here I think the figures given by the Opposition Front Bench have been most misleading, including the figures given earlier by the

1983
right bon. Member for Leeds, South, who was interrupted by my hon. Friend the Member for Spelthorne (Mr. Beresford Craddock). He asked whether the figure was gross or net, and he was told that the net figure represented about half the gross cost to the Treasury. But the right hon. Gentleman left out of account the Excess Profits Levy. Of any additional profits made by the banks or the financial institutions as a result of the higher rate of the Treasury bills, 75 or 80 per cent. will be taken back by the Chancellor.
Mr. Woodburn: Is the hon. Gentleman aware that during the war, when the Excess Profits Tax was 100 per cent., the Chancellor of the Exchequer said that the banks had never had to pay any excess profits because of the amount of bad debts?
Mr. Maudling: The Bank rate is the first step in the Chancellor's plan for restoring confidence in the £ and establishing a healthy economy in this country.
I now wish to come to my right hon. Friend's Budget proposals. I cannot help thinking that hon. Members opposite are a little over-angry with the Chancellor because he has destroyed their opportunity of making their favourite point. They were looking forward to a tremendously disinflationary Budget, with slashes in consumption, so that they would be able to go up and down the country saying "Look at the terrible things, that the Chancellor has done."
Now that he has not done those terrible things, hon. Members opposite are cross with him. They say "Where has the crisis gone to?" They ought to be rather pleased that the Chancellor can face up to the situation without those terrible consequences which they had warned him to avoid. There really is no pleasing some hon. Members opposite. I think the Chancellor steered a central course between the two schools of economic thought that one might describe as the masochists and the Micawbers. The masochists are the gentlemen who believe that inflation is a sort of economic original sin and can only be expiated by suffering. They do not take time to reflect that the general suffering they prescribe may result not in a transfer of resources to defence or exports, but in a waste of resources.
1984
I think the best example of the Micawbers is the right hon. Member for Bishop Auckland (Mr. Dalton), who will wind up this debate for the party opposite. He declared that inflation was practically over in 1946 or 1947. That was the time when he described his contribution to our monetary situation as "lubricating the economy with a sufficiency of purchasing power." I think that is a classic phrase, only to be compared with his wonderful phrase about companies putting their money into new equipment rather than "chucking" it around in bonus shares.
Is the surplus too large or too small? I do want to hear from hon. Members opposite what they really think about this. I think it is a little confusing. The right hon. Member for Leeds, South, speaking on Government policy on rates of interest, said:
"… It is something which he"—
the Chancellor—
"has to watch very carefully indeed, because we could very easily get into a serious deflationary spiral."
Later, speaking on the subsidy changes, he said:
"It is most dangerous to take a step of this kind, which can but turn the inflationary spiral still faster."—[OFFICIAL REPORT, 12th March, 1952; Vol. 497, c. 1402 and 1403.]
I know the Chancellor does some terrible things—he is creating an illiterate nation and starving women and children—but how he can create an inflationary and a deflationary spiral at one and the same time passes my comprehension.
I share the apprehensions of the right hon. Member for Huyton when he said he did not intend to join in the
"… and and sterile discussion as to whether the Budget is inflationary or deflationary."—[OFFICIAL REPORT, 13th Mach, 1952; Vol. 497, c. 1630.]
But is the surplus too big or is it too small? If the argument is that the surplus is too big and it should be smaller, is it really argued that the Chancellor could budget for an increase in the total consumption over the next year?
There was a complaint by the hon. Member for Stechford that this was a pretty poor crisis if consumption could be carried on at its present level. I do not think he can say that consumption should be increased; so I do not see how he can argue that the surplus is too big. On the other hand, if the surplus is too small,

1985
how would hon. Members opposite increase it? I should like to know from what angle they are attacking this Budget. They have attacked it from both sides and once or twice they have met head on in the process.
Turning to the actual proposals contained in the Budget, little has been said about the Excess Profits Levy although a great deal has been said about the benefit which will accrue to the rich. Not a single word has been said about the new Excess Profits Levy, which will be very heavy. It is another £100 million on the taxation already borne by industry. I think these proposals will need very careful consideration in Committee when we come to the Finance Bill because great unfairness can arise unless they are framed with very great care.
Mr. Roy Jenkins: As the hon. Gentleman says that we have not complained about the Excess Profits Levy, will he tell us whether he thinks it is a good tax?
Mr. Maudling: I do not think it is a good tax. In many ways I think it is most unsatisfactory. I have heard all the arguments on the other side. It is true that it militates against efficiency and so on but I cannot see, in present circumstances, how a better alternative could be devised. This must be a temporary tax. The point is that it is a further drain on the capital resources of industry.
I think that many of the statements that have been made about the drain on the capital resources of industry stopping re-equipment or expansion, and so on, are not sustainable. When the capital goods industries are working at full stretch it is not arguable that lack of money prevents capital expansion. I think the Excess Profits Levy can be borne by industry at a time when capital investment has to be reduced; but the time will come when industry will need cash resources to maintain the demand needed to keep the engineering industry fully employed.
This will not be easy for the Chancellor. If he increases the initial allowances, that will be merely a temporary loan of working capital, whereas the Excess Profits Levy takes away money once and for all. The thing is that one can increase taxation on industry
1986
in times of boom and reduce it in times of slump, but if taxation is reduced at a time when industry is making little profit, it is precious little benefit to industry. I hope the Chancellor is looking ahead to the times when the shortage of cash will affect industry, which may not be so very far away.
Turning to the Budget arrangements, I welcome the arrangements the Chancellor has made with regard to the subsidies, Income Tax and the increase in social benefits. I have been saying for a long time that that is what we should do, and I have been trying to persuade my hon. Friends that that is the line we should take. I am sure that is the only way to get out of the intolerable situation, which developed before this Government came into power.
What are the consequences of these measures? I think that a lot has been said from the other side of the House that really is misleading. We have heard the right hon. Gentleman, the former Chancellor, say that these measures fall hardest on the "poorest of the poor." The poorest of the poor are not the people with the lowest wages, with small families and in households where, perhaps, one, two, or three incomes are coming in: the poorest of the poor are the old age pensioners, the war pensioners, people drawing industrial injuries benefits, the sick and the unemployed, the people with large families, the people drawing National Assistance. They are the poorest of the poor and they are precisely the people whom this Budget is benefiting.
I think it is worth reminding hon. Members opposite that some of these benefits are long overdue. At the time when they went out of power there were more people in this country receiving National Assistance than ever before in our history, and those people will benefit under this Budget.
Mr. James Griffiths: On that point, which is absolutely true, would the hon. Member care to tell the House that that was due to the fact that the terms on which assistance was available had been made much more generous?
Mr. Maudling: It was also due to the fact that the value of the pound fell rapidly throughout the period when the Labour Government were in power. It is perfectly true that in a large operation

1987
of this kind—the alterations of taxation, subsidies and so on—a number of people will be worse off. I have heard arguments on both sides of the House—that most people are better off or that most people are worse off. If consumption remains steady some are worse off and some better off.
If we are to give incentives to greater output to the people who can produce greater output, it is inevitable that the people who, by the nature of their jobs, cannot do that, will be left a bit worse off. That cannot be avoided in modern industrial society. If we are to give greater financial incentives to the people who can work on piece rates and who can work longer hours, it is obvious that the other people, who cannot do so, will suffer by comparison. That is inevitable if we are to try to increase production, and it is upon increased production that the well-being of our nation depends.
Mr. Manuel: Is the hon. Gentleman's case now that because of the necessity of added production there will be certain inducements, in a sectional way, to certain workers in the country? If that is so, does he imagine that the other workers will not use their industrial strength, with their trade unions and through the negotiating machinery, to get increases which will give them shopping ability with the other workers?
Mr. Maudling: I think that is very much a question on which the responsibility and statesmanship of the trade union movement will show itself. Undoubtedly, there will be a stronger case for wage increases among the lower-paid workers in industries where no piece work can be worked. It is equally true that if that is followed by a move upwards in wage rates throughout the whole of industry, then the possibility of increased production will be lost.
It is a difficult problem, although an important one. It is all very well to talk about "fair shares for all" but "fair shares of nothing at all" is less attractive. The position is that if we cannot increase production in this country, if we run into a financial crisis, then the people who will suffer most as a result of it will be those in the lowest level of incomes.
Mr. Manuel: When the hon. Gentleman talks about the responsibility of the
1988
trade union movement and says that if there is this increase it will wreck what the Chancellor is attempting to do, does he not recognise that the trade union movement is a democratic movement, and if the members decide to go for wage increases and carry that at the annual conference, then the officials will take the claim forward, and that can lead right through to industrial action?
Mr. Maudling: I have greater faith than the hon. Gentleman appears to have in the responsibility and statesmanship of the trade unions.
To sum up, I consider that this Budget breaks new ground because it uses the monetary weapon for the first time in conjunction with the weapon of physical controls; because it tackles the two main social and economic problems—the need for greater benefits for those whose need is the greatest, such as the pensioners; and the need to combine, at the same time, incentives to greater output with a continuation of the Welfare State.
It is perfectly true that by looking around at the figures we can produce examples—a number of examples—of people who will be worse off as the result of the Budget. The great question is not that. That is an important question, but the great question is whether this Budget will produce the solution to our economic crisis. If it does, all will benefit. If it does not, all will suffer.
6.12 p.m.
Mr. Douglas Houghton: The hon. Member for Barnet (Mr. Maudling) has addressed the Committee in his customarily agreeable manner. Towards the end of his speech he made a statement about the number of people in receipt of National Assistance today, which, with great respect, I think he will find is mistaken. I think he will find that before the old age pensions were increased in October, 1946, well over 30 per cent. of the old age pensioners were getting supplementary allowances. After the increase had been made, the percentage fell to just over 15 per cent. At the end of last December it was 18 per cent. Even if he is not mistaken about the position before the increase in pension rates in October, 1946, as I think he is, I think he will agree that the rise in the number receiving National Assistance between October, 1946, and today is not very large.

1989
However that may be, what surprises me is that hon. Members opposite feel they must refute our criticism that the Budget transfers purchasing power from the poor to the better-off. After all, as I understand the Budget, it is necessary to their case that that should be done.
Mr. Robert Boothby: The provision of incentives for the skilled worker involves some redistribution of the national income. Nobody denies that.
Mr. Houghton: That underlines the point which I am making—that it must be admitted by right hon. and hon. Gentlemen opposite that the Budget transfers purchasing power from the poor to the better-off. That must be so if they are to make their case for the Budget at all.
Mr. Boothby: But certainly not to the rich.
Mr. Houghton: What is the new password on the Benches opposite? Surely it is "realism." That is their new password.
Mr. Boothby: Quite right, too.
Mr. Houghton: Every speech and every article in support of the Budget talks of a return to a sense of realism. The Chancellor himself started it when, in his Budget statement, as reported in c. 1299 of the OFFICIAL REPORT, he said:
"Part of the object of this Budget is to restore a sense of reality to our personal as well as our national accounts."—[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1299.]
I want to ask hon. Gentlemen opposite, if a cut in the food subsidies is to restore reality, what does a new tax on a pair of shoes restore? If to make the cost of tea rise by 9d. a lb. by the summer is to restore a sense of reality, what does a rise in bus fares as a result of the still higher petrol tax restore? Last Saturday there was a cotton dress in a shop window at the economic, unsubsidised and untaxed price of 85s. 9d. Today, the "sense of realism" price is 93s. 10d. A man's suit, costing £12 9s. on Saturday, is £15 10s. 0d. at today's "sense of realism" price.
Are we not in danger of becoming hopelessly confused about this sense of realism, which cuts food subsidies, taxes the bus journey to work and even taxes
1990
the shoes of the man who cannot afford to ride and is compelled to walk? To add to his own confusion, the Chancellor reduced Income Tax, which is graduated according to ability to pay, and increased National Insurance contributions, which are not.
If, as the President of the Board of Trade said, the food subsidies
"did very much to disguise the realities of our world trading position from the people of this country."—[OFFICIAL REPORT. 13th March, 1952; Vol. 497, c. 1592.]—
then do not all taxes on petrol, clothing, household goods, motor cars, tobacco and beer mask the realities that many things are just as artificially dear as food has been artificially cheap? That point was stressed by my hon. Friend the Member for Gloucestershire, South (Mr. Crosland) in his speech on Thursday. I think we ought to hear from hon. Members opposite whether, in undertaking this course of realism, the Chancellor is trying to get the people of this country to consume more food and less tobacco and beer or less food as well as less tobacco and beer.
The crucial issue—at all events, the crucial social issue—seems to be the cut in food subsidies and its consequences and compensations. It is obvious that when the Chancellor is trying to give compensation for the withdrawal of subsidies, he has difficulty in reaching those who are neither within the scope of direct taxation nor in receipt of social benefits.
What of those who fall between the two? He has brought no relief in taxation to them. Indeed, it would have been impossible for him to do so. Nor has he created any new social service payment to meet their hardship. The Chancellor admitted that in his broadcast. He said:
"One can't help everyone directly. Those who don't pay tax are not helped by this"—
referring to the Income Tax concessions.
Many figures have been bandied about to show how many people will be worse off and to what degree, but there is, I think, one figure which cannot be disputed, and that is the number who are outside the scope of Income Tax altogether, as given by the latest available information. There would surely be no dispute as to whether they are better off or worse off as the result of the Budget.

1991
What are the figures according to the latest report of the Commissioners of Inland Revenue? The classification of incomes—before tax—by family circumstances in 1949–50 showed a total of over 20 million, which included more than 11 million married people. Of the 11 million married people, just over 4 million were totally relieved of tax by the operation of personal and other allowances—of the married couples without children, nearly 'one million; of the married couples with one child, 1,250,000; of the married couples with two children, just over 1,250,000; and of the married couples with three children, about 500,000.
All these were outside the scope of direct taxation, and could not be reached by the Chancellor's reliefs to the Income Tax payers. It may be that, owing to the rise in wages and incomes since the last available information, that figure would be smaller today, but there is no means of knowing whether it would be, or, if so, by how much; and we can take only the latest information available to us.
It is true that the families with two or more children are getting the benefit of the family allowances, but, when everything has been taken into account, I think it is now agreed on both sides of the Committee that those who are outside the scope of direct taxation and who have three children or less are worse off under the Budget than before. Several hon. Members have said that that kind of thing cannot be helped; that it may be a blind spot in the incidence of the new tax and especially of the steps of the graduated rates of tax. But if a blind spot, or any other defect, in the new system of taxation and the adjustment of total benefits leaves 4 million married couples worse off under the Budget than before, it surely cannot be said that that is merely incidental to the achievement of the greater purposes of the Budget.
I suggest to the Chancellor of the Exchequer that he would be much more convincing to us on this side of the Committee if he had decided to use some of his additional revenue, or devoted the saving on the cut in the food subsidies, to giving a family allowance for the first child. Surely he could have done that at the rate of 5s. a week, for example, at the cost of £68 million—less by £30 million
1992
the cost of what he is giving away to the Income Tax payers by the alteration in the graduated steps of tax alone.
But we know that to deal only with those who have been totally relieved of direct taxation in this context is not enough because many, while not wholly relieved, have been paying only a comparatively small amount of tax, and for many—I do not know how many, but for many—there will be a nice calculation of more or less which will put a very large number on the wrong side of the account.
I think it would also be agreed, despite what the hon. Gentleman the Member for Barnet has just said, and what other hon. Gentlemen on the other side of the Committee have said, that this Budget will not compensate retirement and ether pensioners—the widows, the sick, and the unemployed—for the higher cost of living which has already accumulated since the adjustments were last made, or for the further increases in the cost of living which are obviously pending under the Budget. To say that this Budget will compensate those who are less able to bear the impact of the higher prices caused by this Budget is to underestimate the needs of old age pensioners in present times.
Moreover, those old age pensioners will not get this relief, such as it is, in time to meet the higher cost of living which is now coming upon them After all, bread has gone up today. Bread and flour are now more expensive today than they were last Saturday. One could not get a loaf in London on Saturday afternoon because people had gone to buy bread against the rise in the price today.
Is it suggested that, even when this increase comes, it will come in time to save many old age pensioners from increasing hardship as prices are allowed to rise? I think we all remember the criticisms that came from hon. Members opposite last year when there was a delay of some months between the announcement of an intention to increase the pension rates and the actual application of the higher benefits to the retirement pensioners.
Mr. Maudling: The point I was making was that the additional cost to the old age pensioners and other pensioners incurred by the Budget will be more than covered by the benefit they receive from the

1993
Budget. That is the test hon. and right hon. Gentlemen should apply when they decide whether or not to support the Budget.
Mr. Houghton: I do not think the hon. Gentleman can get away with a proposition that, as from the date of the Budget statement, the cumulative rise in prices in the last few months can be scrubbed out and ignored, and that we start afresh from the Budget. That will not be accepted by the old age pensioners. I can assure the hon. Gentleman of that. These reliefs today are surely overdue, and would surely have been conceded by the present or any other Government, irrespective of any cut in the food subsidies, on a further stimulated rise in the cost of living.
I think another criticism of the Budget that hon. and right hon. Gentlemen on the opposite side must admit is that it enables the higher paid workers—in the middle and higher ranges of the Income Tax field—to push some of their burdens lower down. Already the general body of the workers, I think it must be admitted, have shifted part of the cost of re-armament from their shoulders on to the shoulders of the old age pensioners and others in receipt of social benefits. They have done it by higher claims upon reduced resources by wage increases. That is a trend that, I believe, will be given fresh impetus by this Budget. The mine workers have already taken the first steps.
I am the secretary of a trade union of 40,000 people. I am not going to anticipate, still less pre-judge, what they will have to say about the Budget, or whether they will decide to put in claims for higher wages to offset some of the consequences of the Budget, but I think that hon. Gentlemen on the other side will agree that, if that movement does not grow in strength and determination, the Government will be extremely fortunate, and so, indeed, will the nation, because there is no doubt that this fresh stimulus to demand wage increases will seriously upset, if fully realised, much of the Chancellor's intentions regarding the Budget.
My hon. Friend the Member for Stechford (Mr. Roy Jenkins) put his finger on the spot when he said that the Chancellor is either banking on restraint in making wage claims in conditions where it will be extremely difficult to exercise that re
1994
straint, or he is banking on the trade unions, on account of the employment or unemployment situation, having less industrial and political power than before.
This Budget contains a very obvious contradiction, and Lord Waverley, to whose article in the "Sunday Times" reference has already been made, alluded to it in what he said. He said:
"It is a paradox of this Budget that, at the same time as it applies rigorous measures to defend our external position, it promises a standard of living not generally lower, and in some cases higher, than at present."
Many hon. and right hon. Gentlemen have referred to what Lord Waverley describes as the "paradox resolved," because he says in the same article:
"The paradox is resolved by the incentive to increased effort which the Budget is deliberately designed to give."
Those who have read the reports of the speech of the Financial Secretary over the week-end will have seen that point made by him, too.
What are the incentives? What is all this about the incentives of the new taxation rate and the new Purchase Tax incentives? The curse of the D scheme is that the Chancellor has insisted on getting as much out of the new scheme in revenue as he got out of the old. It has now become a dangerous tax; and in the textile and clothing industries, which up to now have flourished in my constituency, it is a cruel tax. There can be no suggestion of incentives when this new tax will damp down home consumption further when unemployment is already being created by a falling off of demand in the home market.
Why did the Chancellor not relieve these difficulties of industry in connection with the export trade and secure the other benefits which it is expected will flow from the new scheme out of the proceeds of the Excess Profits Levy instead of extending the range of goods within the new tax?
Mr. Angus Maude: The hon. Gentleman might do my right hon. Friend the justice of remembering that the D scheme which he is now attacking follows the terms of the report of the Douglas Committee, which was set up by the Labour Government. The terms of reference of the Douglas Committee specifically stated that the total

1995
yield from Purchase Tax must remain the same.
Mr. Houghton: I thank the hon. Gentleman for drawing my attention to something I had not forgotten. I agree that the Douglas Committee was appointed to review this matter with the proviso in its terms of reference that the yield from the new scheme should not be materially less than the yield from the old. But that does not excuse the Chancellor from exercising his political judgment and responsibility in connection with the Douglas Report in these new circumstances.
There was nothing in the Douglas Report which impelled the Chancellor slavishly to follow its recommendations. The D line could be lifted further up over the whole range of commodities if the Chancellor were prepared to accept a smaller yield from the Purchase Tax. I ask the Committee, where is the sense or realism in putting up prices by taxation when sales are falling off and mills are going on short time?
If the Chancellor thinks that the incentives in this Budget lie in the field of direct taxation, I invite his attention to much that the trade unions are now saying about the Budget in relation to the depression of the standard of life of the workers. The Trades Union Congress have always disagreed with the popular belief about the disincentive effects of Pay-As-You-Earn, and in the recommendations they made to the Chancellor they proposed a rise in the standard rate of Income Tax.
Lord Waverley says, in his article in the "Sunday Times":
"If Mr. Butler's faith is justified then the incentives he has offered will increase productivity and therefore the sum total of our real wealth by far more than the cost to the Exchequer."
This Budget, then, is an act of faith. Or is it an act of faith healing? Certainly faith comes into it, and if that faith is not justified by events history will say that this has been a bad Budget because it has been an unsuccessful Budget.
Since the keynote of the Budget is a sense of realism, what about now acknowledging the fact that getting to and from work will be a major charge on the wage packet of many workers, and introducing an Income Tax relief, within
1996
reasonable limits, for the cost of daily travel to and from work? That would be an acknowledgment of some of the consequences of the rise in the petrol duty. Why has the Chancellor not extended to widowers who are compelled to employ housekeepers a corresponding relief to that given to married men? Why does the Chancellor persist in saying that the country cannot afford to grant equal pay to women workers in the public services and elsewhere because the cost would be prohibitive?
The payment of the rate for the job for women in the public services and elsewhere, the Chancellor says, must take its place with the restoration of cuts and charges on teeth and spectacles. The cost of equal pay would have been less, even if applied in full, than the odd £30 million out of the £230 million which the Chancellor has given away to the taxpayers. I suggest that in the re-distribution of purchasing power and Income Tax within the overall ceiling of home consumption, broadly the same as last year, the Chancellor has made some grave errors of psychology.
I want to conclude with a few other suggestions for bringing a sense of realism to those who sadly lack it at the present time. Every item of expenditure chargeable against tax on personal income or against taxable profits is "subsidised" to the amount of the tax relief. With that I am sure hon. and right hon. Gentlemen opposite will agree. This means that the net cost to the taxpayer of admissible deductions from Income Tax or profits for taxation purposes is half, or may be less than half, the actual expenditure. This encourages extravagant expenditure and the blurring of the lines which divide personal and business expenses.
There is plenty of evidence that in a number of directions there is a general lack of economy and prudence in the administration of business and personal affairs. I will mention a few. First, advertising for purely goodwill purposes. What do we see when we go about? All these advertisements for proprietary brands of petrol when there is not a gallon of proprietary petrol in the country. We see, too, all these advertisements which urge us to buy a motorcar of a particular make, and when we write to ask whether they can supply us with a motorcar as advertised they tell us that

1997
we may expect delivery 10 years from now. What about motorcars bought and run ostensibly for business use but devoted very largely to private use? I ask also about commercial entertainment of all kinds, and lavish expenses allowances to directors and executives.
Another suggestion to which I invite the attention of the Chancellor is the encouragement to extravagance which is caused by the the setting off of losses incurred in one business against the profits of another, or against other personal income. This is especially prevalent among men in business or in the professions high up the Surtax scale. A number of them wish to ensure for themselves a country hobby bringing with it food and plenty. Hon. Gentlemen opposite probably remember seeing a case reported in an evening newspaper in London only a few days ago, where large quantities of farm produce were going from the farm into the household—and probably distributed amongst friends and acquaintances—which for Income Tax purposes would probably be credited to the farm business at wholesale prices and not at retail prices—if they were credited at all.
Here are some suggestions for bringing a sense of realism to many of these "big noises" who can spend big money in this direction. All benefits in kind should be taken into account at their value to the recipient, including those below the director or £2,000 a year level. Entertaining and all voluntary expenditure should be disallowed as a charge against taxable profits. Capital allowances and running costs of a vehicle designed for use as a private car should not be allowed as a deduction from taxable profits unless granted a Class "C" licence.
Also there is need for writing into the new Finance Bill a Clause similar to Section 32 of the Finance Act, 1940. While, admittedly, that Section dealt with the Excess Profits Tax, it introduced a principle which I think, we want to see observed in business activities today. It said:
"In computing the profits … no deduction shall be allowed in respect of expenses in excess of the amount which the Commissioners consider reasonable and necessary, having regard to the requirements of the trade or business, and, in the case of directors' fees or other payments for services, to the actual services rendered by the person concerned."
1998
I think that would be a deterrent, although it does not put a complete weapon in the hands of the Inland Revenue, because business people would be exposed to the challenge of the Commissioners of Inland Revenue if there were items in their accounts which clearly showed that they had been extravagant or unreasonable in their expenditure in particular directions. I would certainly ask the Chancellor to consider some check to the practice of deliberately making farm losses in order to get the benefit of a set-off against other taxed income. I think that no more than half, if any, of farming losses incurred by those who are not bona fide farmers should be set off against highly-taxed income derived from other sources.
I finish up with some questions, none of which, so far as I can recall, has been answered in this debate, and with which, I think, many hon. Members on both sides of the Committee would wish to hear the Chancellor deal. From what date will the higher old age pensions apply? That, I think, is an important question. Will the new National Assistance scales begin at the same time? Will the non-contributory pensioner—that is the over-70 pensioner—be included this time? He was left out last time.
Will the Chancellor remove the current doubt as to whether he intends sickness, unemployment and widow's benefits to be outside the scope of his improvements? There has been some criticism in "The Times" on that subject. Will he kindly say whether he includes sickness, unemployment and widow's benefits in his proposed new scale of benefits under the social insurance scheme?
When will the higher National Insurance contributions date from? Will they be from the same date as the improved benefits, or from a different date? Will the new industrial injury benefits date from the same date as the higher war pensions, which, I believe, has been announced to take effect from early May?
When will retired civil servants, teachers, police and long-service pensioners get the modest increases which the Chancellor proposes to give—small enough in all conscience, as I think the Committee will agree? Finally, we should like to be assured that there will be no undue delay in giving this relief to people

1999
who are obviously now going to suffer increasing hardship as the days go by. The judgment on this Budget is that, in many respects, it is a bad Budget, an unfair Budget, ill-timed and ill-conceived.
6.45 p.m.
Mr. Godfrey Nicholson: Perhaps the hon. Member for Sowerby (Mr. Houghton) will forgive me if I do not follow him in great detail. The short answer to his speech, in so far as it does not consist of points more suitable for the Committee stage of the Finance Bill, was given by the hon. Member for Barnet (Mr. Maudling). The success of this Budget will stand to be judged by results. We are here today to hold a grand inquest on one of the gravest situations in which this nation has ever been found. This Budget, if it succeeds, will be hailed as a great Budget, and, as the hon. Member for Sowerby said, if it fails, it will stand condemned.
I think that the speech of the hon. Member for Sowerby and of many other non. Members opposite, by the pettifogging nature of their criticisms, are the best tributes which could be paid to the Chancellor. I do not think that the hon. Gentleman or his hon. Friends realise the vulnerable position in which they stand. When he talks about travel allowances, allowances for widows, and so on, which they never proposed while in power, do they realise that the very nature of this Budget, in so far as it is stringent and unpopular, is largely due to the plight which hon. Members opposite landed us in during six years of had administration?
I hope that the hon. Member for Sowerby will forgive me if I do not follow his speech further. I would rather try to make a serious contribution to one at least of the long-term problems which face this country. When I heard your predecessor in the Chair, Mr. Hopkin Morris, say that he had a list of between 70 to 80 Members who wished to speak, I resolved in courtesy to hon. Members who wish to speak, to make my remarks as short as possible—more telegraphic than philippic, so I shall be brief.
I am seriously disturbed at the apparent failure of the Chancellor and the Treasury to realise that one of the gravest long-term threats that confronts
2000
this country is that of shortage of capital in business and industry. Capital reserves are not only necessary in order to undertake capital expenditure, but are necessary to keep businesses running at all. At a time of rising prices, more and more capital is needed to finance ordinary daily and monthly trade. All businesses are losing their capital at a rapid rate. They are losing it by inflation and by the need for employing more capital in their ordinary business.
I tell the Chancellor this: within a very few years there will be a large series of bankruptcies in smaller and medium-sized businesses, not to speak of large ones, unless steps are taken to preserve capital in industry and to create more. I am sure that it is accepted on both sides of the Committee that whoever owns the capital, all wealth and all productivity depends upon capital for its creation and continued existence. From that point of view, I ask the Chancellor what is the reason for taxing profits placed to reserve.
I have always thought that one of the greatest acts of madness on the part of the Socialist Government was to tax money placed to reserve, and I must confess myself dumbfounded that a Conservative Chancellor should continue that policy. My right hon. Friend has shown great courage in other parts of the Budget, so I cannot presume to suppose that he is retaining this tax for fear of political unpopularity. I can only imagine that he and his advisers do not realise the deadly blow which they are dealing at British industry. It is inflationary and it is dangerous.
It is dangerous because it places the majority of businesses in this country in an increasingly difficult position. The hon. Member for Sowerby was, I believe, connected with the Inland Revenue. I am sure that the Inland Revenue will find that in all small and medium-sized businesses in every trade in the country the reserve position is becoming more and more difficult.
How many businesses in this country today are being run on overdrafts, which cannot be a healthy position? Already "risk" capital belongs to the past—it is impossible to find any. And I think that tomorrow, so to speak, it will be found that ordinary working capital is rapidly dwindling away in most of the businesses of this country. It seems to me that, in

2001
pursuing this foolish policy, as I must call it, the Chancellor is killing the goose that lays the golden egg.
It is right to say that at a time of danger and difficulty people may have to be taxed up to the hilt. Let us tax them as much as we think right, and as much as is necessary, but do not let us tax, cripple and kill the institutions which create the wealth when we should be raising the money from the individual. That is the most foolish, unsatisfactory and unbeneficial way of living on capital that can be imagined. I hope that the Chancellor will see reason before the Committee stage of the Finance Bill and, not only as a gesture, but as a material contribution to the prosperity of British industry, will remove the tax on profits placed to reserve.
Generally speaking, I consider that the time has come when the Conservative Party should make certain long-term declarations of belief. The first one that I would have the Conservative Party make is that it is the duty of every Government to foster the creation of capital and to preserve it. Secondly, I would have the Conservative Party declare its recognition of the fact that the primary factor in inflationary pressure is the undue share of the national income which is taken and spent in the form of central and local taxation. Thirdly, I would have the Conservative Party declare that its object in international policy is the creation of the largest possible free trade area.
In the absence of these declarations of long-term belief, I remain uneasy at the attitude of the Treasury and my right hon. Friend. I repeat that I hope the Chancellor will see his way to withdrawing the tax on profits placed to reserve before the Committee stage of the Finance Bill.
6.53 p.m.
Mr. A. Edward Davies: When the hon. Member for Farnham (Mr. Nicholson) attributed all the difficulties which confront us today to six years of Socialist rule he was scarcely doing us justice.
Mr. Nicholson: I did not do that.
Mr. Davies: I thought that the hon. Member attributed the difficult economic situation and the measures which are being taken in the Budget, if not entirely,
2002
at least to a great extent, to the work of the Socialist Government.
Mr. Nicholson: I said that criticism should not come from the Opposition and that hon. Members opposite must realise the large measure of responsibility which they bear.
Mr. Davies: That is saying the same thing in other words. It is not a fair charge. What the Chancellor set out to do, and what any Chancellor must set out to do in present circumstances, is to deal with the balance of payments position and try to increase production, and in so doing he has to utilise to the best advantage such resources as we have and must have all the nation working at full pace.
The Budget does not do that. It will create discord among the very people to whom we must look for the increased effort which is so necessary. I see nothing in the Budget to balance the dollar gap and deal with the sterling position. Indeed, some of us who are interested in the consumer goods industries in Lancashire and Staffordshire are very apprehensive about what happened at the recent Commonwealth Finance Ministers Conference.
The Chancellor has already been charged with not being very forthcoming in his report of what happened at the conference, but the practical upshot of it is that Australia is proposing to reduce her imports for the time being by no less than 50 per cent. This is an amazing thing at a time when some of our industries find it difficult to maintain their sales and their workers in employment. Surely it is no part of the new Tory gospel that a contraction of business will be good for our people.
I thought that the Australians had some sterling balances on which they might have drawn. Is it the policy that, whatever may be the result in terms of unemployment here, there must be a contraction of imports and, similarly, a contraction of exports because other countries follow the same process? I scarcely think that that is a sound argument.
We have heard a great deal about the effect of the food subsidies. The Secretary of State for the Colonies was in very deep water this afternoon. Even if he

2003
does not know, the Opposition know that these proposals will hit very hard millions of our people for whom there will be no compensation in the income tax or family allowance arrangements or any other arrangements which purport to set off the food subsidy cuts.
We know the Chancellor's difficulties. For a long time a school of thought has criticised the food subsidies scheme, and also the housing subsidy scheme, and has asked for even more far-reaching measures than the right hon. Gentleman has been prepared to accept, but from my knowledge of the agricultural and industrial workers and many other people whose earning capacity is limited to £5 or £6 a week, I can say that the Budget will come hard.
Let us consider the increase in the Bank rate. It has long been the policy of the Socialist Party to make money available to local authorities at nominal or low rates of interest for socially necessary work and consequently much progress has been made to overtake work which ought to have been done many years ago. Nowhere will the deleterious effects of this increase be more evident than in the case of housing.
Under the policy of Labour Chancellors, including my right hon. Friend the Member for Bishop Auckland (Mr. Dalton), people were able to borrow money from municipalities at 2, 2½ or 3 per cent. to build or buy a house. All hon. Members believe it to be a good policy that people should have houses of their own. That is part of the new Conservative idea of the property-owning democracy. We were told that it would be easier for people to acquire houses not only to rent but also to buy, but the practical upshot of the increase in the Bank rate is to make it largely impossible for ordinary working men to acquire houses of their own.
A man going to a building society or a municipality for a loan for housing will find that paying interest at 4¼ or 4½ per cent. is a very different proposition from paying interest at 3½ or 3¾ per cent. If he has to pay £40 a year in interest, and £40 a year to repay his capital over 15 or 20 years, and, as a result of the increase in the Bank rate, the rates rise for every local government service—whether it is education, transport, sanita-
2004
tion, or whatever it is, the cost is bound to rise—he will find it a different proposition.
This is a departure from the Local Government Act, 1945, which made it necessary for local authorities to go to the Public Works Loans Board to get money at reasonable rates of interest. The proposals in this Budget in that respect are going to hit the family seeking a home. The Secretary of State for the Colonies asked whether we believed that this was a drastic measure. I believe it is. If reports are true, he would have introduced more drastic measures, for he is in favour of an increase of even higher proportions in the Bank rate.
We were warned by some authorities that when the Chancellor raised the Bank rate some time ago, it was only the beginning. It will be very difficult not only for local authorities but for small families setting out to build houses of their own to be confronted with all extra charges in rates, transport, health services and clothing, because that will be the effect of the revised Purchase Tax—
Sir H. Williams: They are going down.
Mr. Davies: They are not going down; they are going up. The hon. Member will have heard my right hon. Friend deal with certain classes of suits and dresses that have gone up, and that is the short answer to that. We shall see in the next few weeks what are the practical results of these changes. It is inevitable that as a result of the rise in the Bank rate the financial position of every family in this country will be worse.
I hope that we shall not try to defend the position that we should make it more difficult for the worse-off section of the community by asking them to bear a heavy burden because the country is in a difficult financial position. There is no morality which can defend our taking it out of the worse-off sections of the community. I know a widow who gets no State pension. She has a couple of children and is in receipt of one family allowance. By the sweat of her own brow she keeps her children. Now she is to be saddled with 4s. 6d. a week extra, plus the insurance charge. It is true she will have 3s. extra family allowance, but she will have rising charges to meet. It is grossly unfair to impose further burdens upon such a person.

2005
There are many disabled persons, old age pensioners and residents in our industrial areas who are not able to do a 100 per cent. job, but in the present tight labour situation they are doing their best and we have encouraged them so to do. In our ordnance factories, for example, they are working for a few pounds a week. They do not pay any Income Tax because they do not qualify, but they will suffer under this re-arrangement of the food subsidies. We have no right to do that.
If it is thought that this Budget will have a psychological effect on the workers and cause them to do extra work in a time of great difficulty, then the calculations of the Government are all wrong. They have no conception of what is in the minds of the working-classes. The great trade union movement will be exercised about the conditions of the depressed workers. We are driving them on to margarine and shoddy standards once again and there will be—I do not want to stir up industrial strife—in a time of rising prices demands for more wages and great tension in industry instead of increased productivity, such as we had over the last six years and such as was hoped would continue in the future. I am afraid, however, that this Budget will lead to decreased productivity which all will regret.
There is in this party and, I believe, in the country generally some feeling whether we as a nation have not taken on too much. I do not speak as one belonging to any particular group, but the question arises whether, in the circumstances in which we find ourselves, we can carry through our re-armament programme at the rate we hope as well as maintain our civil economy on the level necessary to keep employment and productivity high.
I see no reason why, in difficult circumstances, we should not review the position. It will be disastrous if we find that shortages of steel and other scarce materials, or even of manpower, make it difficult for us to maintain our exports and, at the same time, carry through our defence programme. I loyally supported my party and the leader, but I did it on the basis that if the programme worked out in the manner I have indicated then we should see whether it was not possible to revise that programme. I hope that that will be done.
2006
The Chancellor should have another look at the measures he has proposed in the Budget, particularly those for the re-distribution of income and at the other aspect of it with which I have dealt in my speech. If he does so, I believe that he will be rendering this country a great service.
7.8 p.m.
Mr. Malcolm McCorquodale: I was interested in the way in which the hon. Member for Stoke-on-Trent, North (Mr. Edward Davies) described his party as being made up of groups. I wish that he had pursued that and told us more of these groups within the Labour Party. Perhaps wisely, he did not do so.
As many hon. Members want to speak I shall confine my remarks to one or two subjects. I am the first today to comment on the welcome reaction overseas to my right hon. Friend's Budget. There has been a chorus of approval from informed sources overseas. The proof of the pudding is in the eating—the £ sterling has already gained appreciably in confidence and in position in the markets of the world. That does not mean that we must in any way relax our efforts, but it is gratifying to us that the world appears to believe that we are in earnest in putting our house in order.
I wish to refer to two specific matters. Before I do so, might I comment on the food subsidies and the remarks made by the right hon. Member for Battersea, North (Mr. Jay), whom I endeavoured to interrupt and who so correctly informed me that I would have a chance to make my speech later on. His arguments centred on the fact that several lower paid workers would be 1s. 3d. per head worse off, owing to the reduction in the food subsidies of £160 million, if they cannot obtain other increases in their earnings. That is the gravamen of the charge of the right hon. Gentleman. To reach the figure of 1s. 3d., we do a simple arithmetical sum of dividing £160 million into the number of people in the country, and we find it worked out in the region of 1s. 3d. per head. The same point was made by the hon. Member for Stoke-on-Trent, North.
Mr. Edward Davies: Is the right hon. Gentleman taking any account of the rises which have already taken place, such as 31 per cent. in the 12 months ended last

2007
December in food prices, including 25 per cent. in the cost of potatoes alone?
Mr. McCorquodale: I am talking about food subsidies, which is the gravamen of the charge in this debate, and not about the general economic state of the country at the present time. That is really a pretty poor attack from the party opposite. What is the Socialist record in this matter? It was Sir Stafford Cripps, as my right hon. Friend has reminded the Committee, who, in his Budget in 1949, first started to cut the food subsidies. At the rates then ruling they would have gone up to £568 million a year, and they were reduced by the Socialist Chancellor to £410 million a year. It is rather interesting to note that the difference between those figures is almost identical with the cut which my right hon. Friend proposes to make.
Mr. Jay rose—
Mr. McCorquodale: No, I am not going to give way. The right hon. Gentleman would not give way to me, and I told him I thought he was quite right. I hope he will think that I am quite right in not giving way to him. Sir Stafford Cripps said in 1949:
"That just cannot go on. We must call a halt."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2085.]
He cut the food subsidies from the rate then reached by almost the identical figure by which my right hon. Friend now proposes to cut them. [HON. MEMBERS: "No."] If from £568 million down to £410 million is not almost the same as from £410 million to £250 million, I do not know what simple arithmetic is. [HON. MEMBERS: "Quite wrong."] The reason why right hon. Gentlemen opposite are touchy about this matter is that they did nothing to cushion the effect of the cut on the poorest people in the country.
Mr. Jay: That is a completely false statement of fact. I know that my locus standi for interrupting the right hon. Gentleman is not strong, but I must point out that Sir Stafford Cripps never made a cut of anything approaching that magnitude. The food subsidies never reached a level of £560 million or anything like it. That was merely the hypothetical figure of what they would have to be if there were to be no increases in food prices.
Mr. McCorquodale: I am very grateful to the right hon. Gentleman for his intervention, but it really will not wash. Sir Stafford Cripps said that if the food subsidies had not to be cut they would have to reach £568 million, so he cut them. In cutting them he did not cushion the severe blow to those who could not defend themselves. On the other hand, my right hon. Friend proposes to spend £80 million in cushioning the blow to those who cannot protect themselves. For that reason he is very much more to be congratulated upon the way in which he is handling this difficult problem than were hon. and right hon. Gentlemen opposite, for all their self-righteousness in this matter. The charges made from that Front Bench will simply not bear the slightest bit of investigation.
The fact of the matter is that the Socialist approach to this problem in the last six years, which has been one of levelling down and "the same shares for all," financed by crippling taxation, has failed. The present Chancellor of the Exchequer has been courageous enough, in a year of unparalleled difficulty, to take a different and better path. While cushioning the effects of austerity upon the poorest of the poor who cannot better their lot, he proposes to give positive incentive and encouragement by relieving taxation on those who are prepared to undertake extra efforts and to increase their output.
On this side of the Committee we have long been pressing that those who, by their extra effort, superior skill and higher output earn more for their country, should not only receive the proper reward for it but should be allowed to keep the major part of that reward. Who are likely to be among the people who will benefit chiefly by these proposals? First and foremost, it is that section of our industrial community which is more vital than any other at the present time, our workers who are skilled by hand and brain.
I am one of those who believe that, because of taxation, skill has not received in this country since the war its proper increment over unskilled work. We live by export; that is recognised on all hands. As industrialisation proceeds in country after country to which we used to export, our only chance of holding our own is by the superior quality of our products. Except for coal, we have no physical resources to fall back upon to maintain our

2009
high standard of living. Our one and only great asset to maintain that position is the superior skill of our people.
To become skilled, taking "skilled" in the technical sense of the word, demands long and exacting training and apprenticeship. Unless the extra value of skill is recognised and rewarded, the supply of men and women prepared to undergo sacrifices to make themselves skilled will dry up. Even today, when we hear talk about unemployment, there is a very serious shortage, amounting to many tens of thousands, in the skilled ranks of industry. The proposed Income Tax reliefs will give a very definite financial encouragement to young men and women who wish to become skilled in the professions which they adopt. Let no one grudge this. It is on the skill of the skilled operatives that the employment of the semi-skilled and the unskilled largely depends. The skilled operative is the lynch-pin of employment.
I hail this Budget as the first post-war recognition of the supreme value to us of skill and of the skilled workers in this country at the present time. I trust that when our economic position further improves, as I believe it will under these proposals, the skilled administrator, salesman, executive and organiser will in due course receive recognition, in the way that was described by my right hon. Friend the Member for Blackburn, West (Mr. Assheton), when he talked about "the work provider."
Nobody likes excess profits taxes, because many industries escape who should pay and many others pay who should escape, but industry will bear this levy at the present time, with its limited objective and limited period. I should like to make one suggestion regarding it. My right hon. Friend the Chancellor wishes above all to increase exports, so he ought to relieve the export trades of the Excess Profits Levy. This could easily be done without any difficulty if turnover were taken as the criterion. It is the turnover of our export trade which is of value in this community. If I might have the attention for one moment of our Front Bench—[HON. MEMBERS: "Hear hear."]—and equally if I might have the attention of the Opposition Front Bench—I should like to make a suggestion.
I believe that a firm having a turnover of 75 per cent. in the home trade
2010
and 25 per cent. in export trade should bear the Excess Profits Levy only up to 75 per cent. of its turnover. Similarly, if it has 50 per cent. turnover in the home trade, it should pay half the Excess Profits Levy paid by a competitor which does the whole of its business in the home trade.
Mr. Boothby: Does my right hon. Friend include those British-owned companies operating, say, in Malaya and exporting tin and rubber?
Mr. McCorquodale: So long as export is taking place from this country that can be arranged, but in the case of firms engaged in the entrepôt trade—
Mr. Boothby: Producing.
Mr. McCorquodale:—from one country outside this island to another country also outside, it would be difficult to apply. So far as exports from this country are concerned, it would be simple to give some such incentive to those filling export orders. It would have a psychological effect, outweighing enormously the few million pounds which it might cost the Chancellor.
I am most grateful to my right hon. Friend in regard to two other concessions which I have been urging for a long time and which we ought to have done long ago. In 1941 I supported an Amendment to the Finance Bill to relieve from Estate Duty those killed on active service in time of war. The other one affects my constituency largely, namely horse-racing, which will now bear a slightly less tax to the comfort of many of my friends in Epsom. In conclusion, I applaud the Chancellor on a brave and hopeful Budget. I am glad it has had a favourable reception, not only in this country but throughout the civilised world.
7.22 p.m.
Mr. R. Ewart: The right hon. Gentleman the Member for Epsom (Mr. McCorquodale) said at the beginning of his remarks that informed opinion abroad was delighted at the Budget because it stabilised the position of the £. Let me tell him that there are informed people in my constituency who are alarmed at the Budget because of the reduction in the value of the £ which it means to them.

2011
They are the people about whom we have been talking all the afternoon—those in the lower wage groups. There are millions of them whom this Budget does not help but upon whom it places a real hardship. I have been to my constituency this week-end talking to shipyard workers, dockers, building trade workers, and civil engineering employees. These are the people who cannot look forward to 52 weeks' employment each year. They are subject to seasonal fluctuations and are unemployed for a good part of the winter because of in clement weather. Their average wage over 12 months does not represent their basic wage of roughly £5 15s. a week.
As the hon. Member for Croydon, East (Sir H. Williams), said this afternoon, they are not concerned with the benefits given to the rich. They are concerned with the position of industry. The man with a wife and one child, having £6 or less a week, has no relief whatever and has to meet increased food prices and an increased National Insurance contribution amounting together to over 5s. a week. Yet the craftsman in the same industry, with a wife and child, who may be earning £14 a week, gets relief of 10s. a week which permits him to offset the same increased charges. That is where the inequality is being felt, and that is where the Chancellor has presented to the trade union movement a serious problem.
Throughout the last five or six years employers in the shipbuilding and engineering industries, led by Sir Alexander Ramsey, have been arguing that there should not be an increase in wages because there has not been an increase in the cost of living or because various Chancellors of the Exchequer have been advocating wage restraint. The people in the engineering groups, including the shipyard workers, have had recourse to compulsory arbitration more than once in the last five or six years because of the attitude of the employers.
What is the position now? The Chancellor would be wise to consult the responsible trade unions before he implements the measures announced in his Budget speech. He would be wise to ask the trade unions what effect the Budget will have on the lower paid wage earner who is to get no relief and who
2012
is to have his standard of living reduced by about 5s. a week. What effect will that have when his case is presented to the employers? A case for increases cannot be presented only for the lower paid workers because everybody, on this side of the Committee at any rate, knows that our wage structure is delicately balanced. We know that an increase for the lower paid worker, to offset the effect of this Budget on him, would upset the whole of our delicate structure of wage differentials.
Because of the lack of knowledge on the Front Bench opposite of the impact of the decision that has been taken, we shall have wholesale applications for wage increases. We shall have unrest and disturbance in industry, and the trade unions will now be charged with the responsibility of attempting to right the wrong that has been done by the Chancellor. This is a serious matter. The Chancellor should consult the trade unions, before he introduces the Finance Bill, about the serious rupture that will be occasioned to the economy of this country by his action, and which must be averted.
It has been said this afternoon by various hon. and right hon. Gentlemen opposite that it is nonsense to talk about no relief being given at the lower end of the wage scale. The right hon. Gentleman the Member for Aldershot (Mr. Lyttelton) got himself into a terrible muddle at the beginning of his speech, arguing that we were wrong. Later, he instanced selected industries, such as the mining and chemical industries, where it is true to say fairly high wages are being paid. But we cannot strike the average at 166s. a week because where there is an average of 166s. a week there are also 200s. a week and 120s. a week.
It cannot just be written off like that. I believe it was the "Daily Express" which said this morning that the right hon. Member was riding on the downward side of the political escalator. Well, he rode it fairly rapidly in his speech this afternoon, and the warnings which have been given by this side ought to be heeded.
I want to spend a few minutes dealing with the effect of the Budget on other sections of the community. We have been told by the hon. Member for Barnet (Mr. Maudling), that the people who are worse

2013
off—that is, the old-age pensioner, the unemployed, the sick and the person receiving National Assistance—will reap the benefits. Today, I asked a Question to which I received a written answer. I asked how many people in Sunderland who were in receipt of these benefits were receiving supplementary allowances from the Assistance Board. The answer was that of the town's population of 180,000, including the fringe in the administrative area of the Assistance Board, 7,500 people were receiving from the Board allowances additional to their old-age pensions, and so forth.
The right hon. Member for Epsom tried to argue that the old-age pensioner was getting quite a good deal through the Budget.
Mr. McCorquodale: I did not say that the old-age pensioner was getting quite a good deal. I said that my right hon. Friend was cushioning the blow to the old-age pensioner. He told us that the extra payment to the old-age pensioner and to those on National Assistance will assist them to meet these charges.
Mr. Ewart: But how does the Chancellor do it? He said on Budget day:
"I come now to the National Insurance scheme, which circumstances of today would call us in any case to revise. We are already pledged to consider the needs of old age pensioners."—[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1301.]
When was the pledge made? It was made to my constituents by the Chancellor of the Exchequer in October, during the time of the General Election. He came to us and said that if the Conservative Party were returned to power they would do something for the old-age pensioner, something over and above that which had been done in the preceding July. That was his pledge.
Since July of last year, the 50s. basic pension for two people has been devalued by at least 2s. 6d. The cushioning effect, in which the right hon. Member for Epsom takes so much pride, of the 4s. increase is actually a reduction of ls. 6d. on the debit side. We have had a 2s. 6d. increase in the cost of living since July and there is to be a further 3s. increase at gradual stages. The old-age pensioner is to get an additional 4s. a week, which is 1s. 6d. less than the amount that is due to him in common justice. That is what is called
2014
"cushioning" the effect of the increased cost of living to the old-age pensioner.
There is no mention in the Chancellor's statement about the person who is in receipt of sickness benefit or is unemployed, and no mention about the amount of the increase in the National Assistance rates. The right hon. Gentleman says merely that he expects the Assistance Board will come forward with proposals. He does not intimate what those proposals will be, but he says that we are to tax by 7½d. a week every contributor to meet the increases in old-age pensions which are envisaged in the Budget. We have had no statement that any provision has been made, either by the increased contribution or by any other means, to give an increase to the 42s. a week couple who are living on sickness benefit.
Mr. Maude: If the hon. Member does the calculation, he will find that an increase of 7½d. in contribution is far more than adequate to deal with the retirement pension. Obviously, it must include all the other cases which he has mentioned.
Mr. Ewart: The Chancellor specifically said:
"If I take account of the saving of National Assistance on the one hand and of the loss of Income Tax on the contributions on the other, the change involves a burden on the budget and the Insurance Fund taken together of about £10 million a year …." —[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1302.]
He made no reference whatever to the cost of increased sickness benefit or unemployment benefit.
Mr. McCorquodale: The Chancellor of the Exchequer was challenged by Members opposite on this subject and he nodded to show that those were taken into consideration.
Mr. Ewart: We are, surely, entitled to know what are the proposals. When are they to come? The Chancellor says that his right hon. Friend the Minister of National Insurance will confer with the trade unions on this matter and that they will consider the proposal for an increase of 7½d. in the contribution. He anticipates that a decision about an increase will be made in June. What is the old-age pensioner to do until June, with food prices rising, as they are? What are the 7,500 people in my constituency who are in receipt of National Assistance pay-

2015
ments to eke out a miserable existence, to do until June?
Furthermore, has the Chancellor anything in mind when he increases the payment to the industrially injured workman under the insurance scheme by 10s. a week, for the workman who is injured and in receipt of workmen's compensation? Is his position to remain unchanged? These groups comprise millions of people whose cost of living will be reduced by the implementation of the Budget.
This is a typically traditional Tory Budget. How could we expect anything else? Right hon. and hon. Gentlemen opposite are not in contact with working-class life, opinion or aspirations. How can we expect, therefore, that any but the better off, as always has been the case, will get the relief and the benefit under Tory administration, while the poorest will have to bear the heaviest part of the burden?
7.38 p.m.
Mr. Robert Boothby: To the hon. Member for Sunderland, South (Mr. Ewart), I should like just to say that we must have had some contact with the workers at the General Election, because it is clear from the figures that many of them voted for us. If they had not done so, we should not be sitting on this side. We can therefore claim to have had at least some contact—
Mr. Charles Pannell: A nodding acquaintance.
Mr. Boothby:—and we are likely to have some contact with them in the future. The contact will be very good for us, because, curiously enough, although the Opposition have made the very best of a bad case, the Budget is popular in the country. It is going down very well. [Interruption.] Yes, even the Gallup Poll says so. It is very disconcerting for hon. Members opposite I know, but there it is: the Budget is popular.
Why is it popular? It gets us out of the rut we have been in for the last six years. It gives fresh hope to a lot of people. It gives incentives to hard work, skill and enterprise; and they are overdue.
2016
The right hon. Member for Battersea, North (Mr. Jay), said that the motto of the Chancellor was, "To them that hath shall be given." That is not quite true. It is, "To them that earn shall be given"; and that, I think, is very good and right. I think the skilled workers of this country deserve it, and I agree with my right hon. Friend the Member for Epsom (Mr. McCorquodale) and wish that it had been extended to some of the managerial classes as well. More benefits should be earned by hard work. On the whole, reliefs have been given to those who need them most. We cannot have absolutely meticulous justice, but rough justice has been done—[An HON. MEMBER: "Very rough"]—and the reliefs will be welcomed. The Chancellor has skilfully designed the reliefs to go to people who need them most, above all the family allowances and old age pensions.
So far as the wider issues of the Budget are concerned, the reduction in food subsidies, the rise in the Bank rate—which has not met with much opposition from any quarter—and the retained surplus of more than £500 million, were all designed to do one thing—to restore confidence in the £. All one can say is that up to date they have succeeded in doing so, and certainly the £ is stronger today than it was when the Budget was introduced. If the £ were to go, the whole structure of finance in this country would go with it, and the standard of living in this country would fall with a crash.
The main criticisms levelled have been, first and in one breath, that it is an inflationary Budget and a deflationary Budget. I think they more or less cancel each other out. I expect there will be some demands for higher wages, and I cannot see why those demands should not be met, provided they are accompanied by increased production, which it is the main object of these proposals for increased allowances on earned incomes to achieve. The object of these increases is to increase the total national income—to increase the size of the cake to be divided—and if that is done the standard of life for everyone will obviously be raised.
The second main criticism is that the Budget favours the rich at the expense of the poor, and I repeat that if we are to give rewards for hard work and skill that must involve some redistribution of incomes in so far as skilled workers re

2017
ceive direct benefits at the hands of the State.
The final criticism of any substance is that too much emphasis has been laid on the restriction of investment, and too little on a further reduction in consumption. I thought the answer to this was very clearly and well given in the speech of the hon. Member for Gloucestershire, South (Mr. Crosland). He came to the conclusion that, on the whole, the Chancellor was right in maintaining consumption at last year's level and in imposing a severe restriction on capital investment during the forthcoming year. I think that is true, although we must always bear in mind the dangers of restricting investment, which really means the modernisation of industry, for any great length of time. Ultimately, if we allowed our great exporting industries to fall behind, it would be fatal. Nevertheless, as the hon. Member for Gloucestershire, South, said in an extremely able speech, we are cutting capital investment from a very high level, and can afford to do so—indeed we must do so—in the present crisis.
I now come to what in my view is the one blot on this Budget; and it is a good sized blot. The Excess Profits Levy, as it is called, is a very bad tax in its present form, and I believe hon. Members on both sides of the Committee will agree. It bears a horrible resemblance to a thing I remember in 1937 called N.D.C. The present Minister of State for Economic Affairs was partially responsible for getting that chucked out on the Committee stage of the Finance Bill, with some aid from the right hon. and learned Gentleman the leader of the Liberal Party, the Prime Minister, Viscount Bracken and myself. It was that quintet of hon. Members in those days who led the campaign for the rejection of the N.D.C.—[Laughter.] Hon. Members may laugh, but we got rid of it. We got rid of it because it would not stand up to the arguments brought against it, above all those contained in a celebrated speech by the present Prime Minister from which, if I had time, I would quote extracts.
The tax in its present form puts a premium on inefficiency and stagnation in industry. Three standard years are taken, 1947, 1948 and 1949. Supposing there is a British company in Malaya producing tin, rubber or what have you,
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which in 1947 was practically destroyed and was making a loss. In 1948 it might be breaking even, and in 1949 it might be making a profit of 15 or 20 per cent. In the last year or two perhaps that profit has risen to 30 per cent. or 40 per cent. It is on these expanding companies that we must depend a great deal for our balance of payments in the future; and on them the full weight of this tax will fall.
The tax on marginal profits is raised to 80 per cent. while that on average profits is actually reduced. That means that a company which has just been jogging along gains, but the company which has shown enterprise and energy will suffer under this crushing impost. What is the use of providing incentives for workers and at the same time giving this direct disincentive to managements?
I know that the Minister of State for Economic Affairs must agree with this. He knows that this tax is an absolutely rotten tax, and I hope he will make sure that it is drastically amended, or withdrawn altogether. If the right hon. Gentleman wants another £100 million from industry I will give him a hint as to how to get it. Put an extra tax, which will amount to about 15 per cent. on the distributed profits of industry as a whole. That is a fair and sensible way of doing it. I make that suggestion to him with every confidence in his ability to get it carried out.
I do not want to give the impression that I am critical of this Budget. I have not praised it so much as I might, since everyone else has done so. Because I have concentrated on what I regard as a blot, it does not mean that I am dissatisfied with the Budget as a whole, especially as I am sure that the blot will be erased through the influence of the Minister of State for Economic Affairs.
I come now to the crux of the economic problem confronting the country, which really no Budget as such can solve or even deal with. That is the question of whether this country is to pay its way in the world and, if so, how? I read, sombrely and morosely yesterday a speech I made six years ago in the American Loan debate; and I was really appalled at the extent to which the apprehensions I then ventured to express to the House have been realised. All, without exception, are being realised with every

2019
day that passes. The free world outside the dollar area is at the moment being driven relentlessly into bankruptcy, and that is reflected in the alarming gold reserve position revealed by the Chancellor in his Budget statement.
Why has this happened? I think we must face up to it on both sides of the Committee. It has happened because the whole balance of world trade has been completely upset by the existence of the Iron Curtain in the East and the policy of the United States in the West. Those are the two things which are at the moment destroying the balance of world trade and making it absolutely useless to talk about free convertibility. All is governed by the fact that the dominant economic Power in the free world is the greatest producer and seller of goods.
The policy of the United States remains what it has been for the past 30 years; to sell more goods than she will buy herself. I am not blaming anyone, and not blaming the United States. I am merely stating facts. Here is the root cause of a world economic malady for which repudiated loans and gold purchases, a rise in the price of gold, Lend-Lease and Marshall Aid have each in turn been only palliatives. I think the time has come when we should seek a radical remedy.
It is quite impossible for the currency of the world's biggest seller of goods to do the same job as the currency of the world's biggest buyer of goods. Yet the United States, and not only the United States but quite a lot of people in this country, including at least two chairmen of our big banks, share this view. They still persist in trying to get back to an international economic system which was based on the currency of the world's biggest buyer of goods, and which worked for that reason alone. It worked well in the 19th century, when we imported goods freely all over the world and invested our surplus capital all over the world. But the United States are not doing either of these things; and we must find another system which does work.
A great deal of the trouble from which we are suffering is that we have persisted in trying to operate a system no longer valid in the modern world. Even Lady Rhys Williams, a prominent Liberal as well as a good economist, has said:
2020
"The phoney free trade which America preaches to others, and will not herself allow, is dead; and it is better to face the fact."
My right hon. Friend the Member for Blackburn, West (Mr. Assheton), made a very interesting speech in this debate. But he did say that we must make the £ convertible quickly. My hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) apparently agrees with him. Well, we tried that in 1947. My hon. Friend the Member for Scarborough and Whitby was all for it then. I was not. I am on the record about this. On 31st July, 1947, I said:
"We are now financing the world dollar deficit … The convertibility of sterling is imposing upon us an unbearable burden, which we are simply not capable of carrying … All these arrangements will be very short-lived. They will have to be abandoned."—[OFFICIAL REPORT, 31st July, 1947; Vol. 441, c. 764–5–6.]
The Financial Secretary to the Treasury did not agree with me; The hon. Member for Chesterfield (Mr. Benson) did not agree with me; and my hon. Friend the Member for Scarborough and Whitby did not agree with me. But convertibility lasted for only five frightening weeks, during which the whole American loan was washed away. I do not want to go through that experience again in a hurry.
Are we any better off at this moment than we were then, with a substantial current deficit to the dollar area, short-term liabilities to the sterling area amounting to £4,700 million, an estimated export surplus—as yet unachieved—of only £100 million, and no reserves? Are we in any better position to talk about convertibility? Is the world shortage of dollars any less?
Mr. A. C. M. Spearman rose—
Mr. Boothby: No, I will not let my hon. Friend interrupt me at this point, because I am in full swing. The world shortage of dollars is more acute today than it was at that time, and there is absolutely no justification for attempting to restore convertibility with the dollar at the present time. It can only lead to another disaster.
Mr. Spearman: I only wished to ask my hon. Friend if he does not think that there is now a more able administration than there was then?
Mr. Boothby: It is a very much more able administration now, I grant that

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point. But I doubt if even the ability of this administration could carry this country through that. With the prevailing economic disequilibrium in the world and its symptom, the dollar shortage, it is absolutely impossible for any other currency with a world-wide circulation to retain its value if it is made freely convertible with the dollar. Not only the tariff wall, but the whole structure of the American economy, including the price support programmes, make it impossible to repay interest on loans, or to settle debts with the United States in terms of goods. How else can they be settled? We have to find some other way, and I suggest we ought to start looking for it now.
The President of the Board of Trade said on Thursday:
"The real need is to increase our exports to the dollar area, above all to Canada and the United States."—[OFFICIAL REPORT, 13th March, 1952; Vol. 497, c. 1601.]
But they are falling. The right hon. Member for Huyton (Mr. H. Wilson) gave figures. They have fallen from 18.26 per cent. of the total in 1950 to 16.97 per cent. last year, and to 14.87 per cent. in the fourth quarter of last year. That is the fall in our exports to the dollar area alone. But it is not only in the dollar area. The really alarming thing about our present situation is that the free world, outside the dollar area, has embarked on competitive national import cuts which, if persisted in, can only lead to total disaster. First France, then us, then Australia. What happens, if this continues, to a country dependent for its existence on imports of food and raw materials? France could at least live; but we cannot even live.
My hon. Friend the Member for Bury and Radcliffe (Mr. W. Fletcher) said, truly, that the problem confronting this country is no longer how to produce, but how to sell, and where to sell. That is the point. I have my own solution, which will not take me three minutes now to explain, because I can summarise it. I believe that the only solution lies in a really determined effort to build up a trading area in the free world, outside the dollar area, in which we can all breathe and live. I believe that area should be based on the present sterling area; but I do not think that the sterling area, in isolation, is big enough or powerful enough. Nor do I think that the area
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represented by the European Payments Union can stand in isolation on its own feet. Both the sterling area and the European Payments Union are today in great jeopardy, facing bankruptcy. Yet the economies of the two are, in the main, complementary.
I believe that if we could build up a trading area out of Western Europe and the sterling area, with the raw materials of the one and the industrial productivity of the other, we could get through. But, of course, it must involve the total abandonment of the obsolete doctrines of nondiscrimination in trade, and of free convertibility with the dollar in the measurable future.
Mr. Ivor Owen Thomas: Would it not also necessarily involve either the total abandonment or the drastic reorganisation of the present fiscal structure of the whole area of the countries involved?
Mr. Boothby: It would involve an extension of the whole preferential system. It would also involve an effective strategic control over the economy of the area as a whole. At the sterling area conference the Commonwealth countries were unfortunately not prepared to surrender any national economic sovereignty at all. But there are some minimum requirements. As my right hon. Friend the Member for Blackburn, West, pointed out, and I agree, we ought really to have a central bank for the area to co-ordinate national monetary and credit policies. That is really desirable, if we could get the other countries to agree. We failed at the last sterling conference, and we must try again.
Not only that, but we must have a dollar pool which will at least restrict dollar imports to the level of our joint dollar income. Otherwise there can be no hope of achieving any kind of balance in the economy of the free world as a whole.
I think, and I am sure that the right hon. Member for Leeds, South, will agree with me, that the problem of the sterling balances in London must also be tackled and faced seriously. Clearly it was not faced at the London Conference; and indeed it has never been faced since the war. I agree with the hon. Member for Gloucestershire, South, that we cannot afford to allow the sterling

2023
balances to run down by means of unrequited exports from this country to the sterling area at the rate we have been doing. And we ought to come to a clear understanding with the rest of the sterling area that the rate at which we can release these balances must in future depend on our trading surplus; and that we cannot go on having this large surplus with the sterling area and a heavy deficit with the dollar area.
The Commonwealth comes first. But I do not believe that the Commonwealth alone can do it. I believe that we need close economic links between the Commonwealth and Western Europe; and I believe that this country, of all countries, is the one to establish the links between these two areas.
Hon. Gentlemen opposite may say—and they may well say—"Do you really think this can be done; how do you think it can be done? This is a Utopian plan." I reply: "What is the alternative?" I really do not see any alternative. The outlook for the trade of the free world is absolutely terrifying. I see these markets closing down. As my hon. Friend the Member for Bury and Radcliffe said, referring to Sir Edward Grey's remark about the lights going out all over Europe, the whole trade of the free world is gradually closing in on us. For a country like ours, whose trade is air, the prospect is extremely alarming. My right hon. Friend knows my views on this question. I ask him only to say whether the matter is being studied; and whether some action cannot be taken soon, because there is no doubt that this last conference was a bitter disappointment, and we must make a fresh start before it is too late.
8.1 p.m.
Mr. F. Blackburn: I shall try to be brief, because I know that many hon. Members wish to make a contribution to this debate. I hope that the hon. Member for Aberdeenshire, East (Mr. Boothby), will forgive me if I do not follow him in detail in his most interesting speech. There are certain specific points which I wish to make and unless I make them now I shall be taking up more time than is my due. I would commend to his hon. and right hon. Friends many of the remarks he made. If an hon. Member on this side of the Committee had made
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some of those remarks about America we should have been accused of being anti-American.
The first point I want to make links up to some extent with what the hon. Gentleman said. I want to refer to the action, taken by Australia and to be careful in what I say that, without knowing the full facts, I do not in any way condemn Australia. The right hon. Gentleman the Secretary of State for the Colonies gave some figures this afternoon, but he did not give very much information. We all know that Australia is in difficulties, but the important point is that this action has been taken two months after the conference of the sterling area countries. Surely it was known in January of this year what action Australia was likely to take.
When we have not got the full facts there is a danger that we might make comments which are harmful. I appeal to the Chancellor of the Exchequer to give us much more information than we have had so far about the January conference. The statement which was made about it was not good enough. How can we judge whether the decisions made are likely to solve the problems of the sterling area?
It may have been noted that some of my hon. Friends and myself have put down a Motion asking for the recall of the sterling area conference. It might be a good thing if, during this time of severe economic crises, we had a permanent high level committee of the Commonwealth and sterling area countries to deal with the problems which confront us.
I have raised the question of Australia because of the effect it will have upon a most important industry in my constituency—the cotton industry. I believe the actions which have been taken will mean a loss to that industry of a market worth about £26 million a year. Already, as everyone knows, there is a serious recession in the cotton industry. The figures which are published do not give the full picture of the seriousness of the position in the trade, because not only have we unemployment and underemployment but have also concealed unemployment.
This country owes a great deal to the textile industry. A large part of our past

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prosperity has been built upon it. While we do not look to the Government to solve the problems for us, we expect them to make the conditions necessary so that the industry might have a chance to solve the problems for itself. This is a most serious matter. Unless something is done now we might well see the end of the cotton industry. During the past few years we have built up again in that industry a feeling of confidence among the workers and the people that the industry was likely to continue to be prosperous. If we have a long period of serious unemployment we shall never again get the confidence of the workers.
I should like to comment on the effect which the increase in the Bank rate will have. I hope that the right hon. Gentleman the Member for Blackburn, West (Mr. Assheton), will not mind if I quote something which he said about the Bank rate last week. It appears to sum up, to some extent, Conservative thought on the subject. He said:
"What are some of the reasons for raising the Bank rate? To begin with, it restricts borrowing, it restricts investment and it frees capital goods which would have been bought by people at home, for the export market. It has a tendency to make manufacturers and others reduce stocks. A great many people have been carrying stocks which are rather too big. Once those stocks are released, there is a tendency for prices to come down, and I have no doubt that my hon. Friends and hon. Gentlemen opposite would like to see that happen."—[OFFICIAL REPORT, 12th March, 1952; Vol. 497, c. 1417.]
Yes, we should like to see prices come down, but we do not want prices to come down at the cost of bankruptcy for the manufacturers and unemployment for the workers. I hope that when the Chancellor replies to the debate he will make clear his intentions on the subject of unemployment pay and sickness benefit. It is true that when the question was raised this afternoon the Chancellor nodded as if he meant that they had to be increased, but he made no specific statement in his Budget speech. I should be pleased if he would clear up that point.
It would not be in order for me to devote the whole of my speech to the textile industry and to go into great detail. I merely call attention to the seriousness of the position. It is no use having an answer such as that given by the President of the Board of Trade, who said that the best cure was an increase in world markets. It is like telling a starving
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man who has no prospect of food that if only he had a good meal he would be all right. We want something more than that. We want special action to be taken by the Government.
If credit is restricted too much in this industry then I am sure that many manufacturers, particularly the small men, will go out of existence. I wish to make a suggestion to the Chancellor. I congratulate him upon having the courage to take Purchase Tax off protective clothing used for industrial purposes. That is something which, I agree, should have been done long ago. I suggest that, to help the cotton industry in its present difficulties, he should remove Purchase Tax, if only for a temporary period, from cotton goods. I think that the life of the industry is of far more importance than the revenue which he would receive at the present time.
Turning to another industry of considerable importance in my own constituency—the glove industry—and the effect which the new D scheme is likely to have upon it, I do not think that merely by adopting the D scheme the Chancellor has solved all his problems. He has created a good many more and I think that the adoption of the scheme in its entirety with the proposed D levels has been done far too hastily. Before his statement about 95 per cent. of the gloves were tax free. Under the D scheme, practically 100 per cent. of the gloves will pay tax.
Fabric and knitted gloves over 3s. a pair will pay 33⅓ per cent.; leather gloves over 12s. will pay 33⅓ per cent., and gloves with fur backs, over 12s. a pair, will pay 100 per cent. No figures in the Utility scheme maximum prices were as low as the new D figures. The Chancellor did say that he expected that approximately half of the commodities would be tax-free under the D scheme. That is not the case with gloves. Let us note, too, that the figure is the wholesale price and not the manufacturer's price. It is the fur-backed glove trade which will suffer most because, under the old scheme, Utility gloves were 25s. a pair, manufacturers' price. On a wholesale price of 30s. fur-backed gloves will now bear a tax of 18s. per pair.
There is a great fear that there will be a good deal of foreign competition. We know that the cheaper hand-knitted

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and crocheted gloves from China, Hong Kong and Italy will be coming in, and it will be very difficult for our own manufacturers to compete, with Purchase Tax at its present level. I do hope that the Chancellor will look into this matter of the glove trade because it is one of the sections which is being very badly hit by the effect of the D scheme and the low level at which the D prices have been placed.
Practically every speaker in the debate has referred to the incidence of the food subsidies and their effect upon the poorest people. I have not been able to make up my mind whether the Conservative Party is going back on another of its promises or whether it considers it has now solved the problem of the increase in the cost of living. Last week an hon. Member opposite quoted something from the Conservative election manifesto of 1950. I should like to bring him a little more up to date in Conservative literature and quote from the manifesto of the Conservative Party in 1951, signed by the present Prime Minister:
"Food subsidies cannot be radically changed in present circumstances, but later we hope to simplify the system."
If £210 million is not a radical change, we must ask the Conservative Party to write us a new dictionary, explaining exactly what the word means to them.
Let me quote, again, something which was said by the right hon. Member for Battersea, North (Mr. Jay) this afternoon, when he did not quite complete the quotation and was asked to give the next sentence. My only excuse for quoting this again is that I will give the next sentence of that quotation, which is from "Britain Strong and Free":
"In present circumstances, when we are facing severe financial and economic difficulties and while we are engaged in a full-scale attack on the cost of living, it would clearly not only be unwise but impossible to make any radical change. As we make some progress in our fight"—
this is the next sentence which my right hon. Friend did not quote:
"to reduce the cost of living, and as economic circumstances permit, we hope gradually to recast our social and fiscal policy upon simpler lines."
It says that no radical change will be made, "when we are engaged upon a full-scale attack upon the cost of living."
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Does this mean that the Conservative Party are going back on one more of their election pledges, or do they consider that they have now solved this problem of the rise in the cost of living?
One hon. Member opposite shook his head when I mentioned the figure of £210 million, but surely that is the actual figure the Chancellor of the Exchequer gave us. The right hon. Gentleman said that it would be £160 million, but he told us that he had taken into account another £50 million in relation to prices which had already increased or were likely to increase in the near future. Therefore, there is an increase of £210 million which consumers have to pay. We are told that the old-age pensions have been increased. I think that right hon. and hon. Members opposite will agree that whether or not there had been any reduction in the food subsidies, they would have done something for the old-age pensioners.
As a matter of fact, some weeks ago I anticipated the Chancellor's Budget and gave him credit for it. I had a deputation from the old-age pensioners and I said, "I think we are fairly safe. I think the Chancellor will give some concession to the old-age pensioners when he produces his Budget." He has. He has given with one hand and taken away with the other—and what he has taken away is more than he has given, because the small increase which is promised to them is really not good enough. It only meets the increase in the cost of living since the last increase was given to them last July and it must be a very serious struggle for the old-age pensioners at the present time, in face of the continued rise in the cost of living.
Let me refer to the question whether the poorest section of the community is being hard hit. I want to deal with a very large section of the community which was not paying Income Tax in the past—and that includes millions of people. I want to look at the position from the point of view of the effect upon them of the increase in food prices of 1s. 6d. a week and the increased family allowance of 3s., because the increase of 3s. is to counteract the increase in the food prices.
These people do not come within the Income Tax range at all. The single person will be 1s. 6d. per week worse off, and I am not taking into account the fact that he is having to contribute

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another 7½d. per week in National Insurance. The single person will be ls. 6d. per week worse off; the married man will be 3s. a week worse off. It may be said that 1s. 6d. a week or 3s. a week is not a very large amount; but I should like to remind hon. and right hon. Members opposite that these are very serious increases to many people.
Again, a widow with one child will be 3s. a week worse off; a married man with one child will be 4s. 6d. a week worse off; a married man with two children will be 3s. a week worse off; a married man with three children will be 1s. 6d. a week worse off; and when we get to the married man with four children, he breaks even. I am referring only to the effect of the reduction in the food subsidies and the counteracting effect of the increase in family allowances. I have not taken any other items into account.
To say that there is equality of sacrifice in the Budget is, therefore, nonsense, as should become increasingly apparent to right hon. and hon. Gentlemen as the months go by. When it was stated that this was a clever Budget, one word was omitted from the description—the word "Tory." It is a clever Tory Budget. It gave great joy to hon. Gentlemen behind the Chancellor—and I must say that they have not had much opportunity for joy since last November. But I think they will find, as the months go by, that their joy was a little premature.
8.21 p.m.
Mr. Douglas Marshall: I hope the hon. Member for Stalybridge and Hyde (Mr. Blackburn) will forgive me if I use almost the same words as those with which he began his speech. I have certain specific points to which I want to refer, there is very little time, and I hope he will forgive me if I do not follow his speech.
I have listened to nearly every speech made since the beginning of the Budget debate, and it seems to me that there is one thing which possibly would command the unanimous agreement of both sides of the Committee—that this is a Budget with a new design. The strange thing is that hon. Members opposite appear to be surprised that there is such a thing as a new design. They seem rather bewildered by the fact that this has not been a Budget which has tried to out-Socialist the Socialists.
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The policy behind the design of the Budget has been to offer the carrot wherever we can in order that we may get maximum production in this country, so as to meet the dangers which beset us. In offering the carrot, certain differences may appear to be unfair, and they may indeed be justified by the fact that unless we achieve the required productivity we cannot continue the form of life which hon. Members on both sides of the Committee wish to see.
Mr. Blackburn: Surely the hon. Gentleman will agree that the class of people I have mentioned get no incentive to increase production.
Mr. Marshall: I hope the hon. Gentleman will forgive me if I do not follow him, for I want to continue my argument. The second point which surprises me is that many speeches from hon. Members opposite suggest that they have forgotten that they themselves expected this to be a hard Budget and that they themselves recognised the vital issues which are at stake. Yet they are surprised that anyone should suffer as a result of the Budget. I do not think hon. Members opposite have taken sufficient notice of the monetary policy which is, and I think needs to be, a hard policy. The point we should all remember is that a great part of the inflationary pressure will be creamed off by the fact that about £400 million more will be required this year to purchase the same amount of consumer goods as were bought last year. In my opinion, the spending spree which has been going on throughout the world, and not just in this country, is over.
Turning to the reserves which are left, I suggest that there is desperately little room left for mistakes to be made. We can no longer afford to make any mistakes at all. The reserves fell by £547 million, and at the end of the year they stood at £835 million. Furthermore, the Chancellor told us that during February we were running out at the rate of 63 million dollars a week. To a point, there is a certain amount of a gamble about this Budget—and the gamble is that Butler believes in Britain. That is the gamble he is taking.
There are certain small matters to which I want to refer briefly. They have been mentioned frequently, and some of them give me real pleasure. For a long

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time I have been fighting on this issue of protective clothing and the decision to abolish or lower the tax on rubber boots and protective clothing is one for which I am grateful. Hon. Members have mentioned the effect in industry and agriculture, but I do not think anybody has mentioned the fact that this decision will also benefit the fishing industry.
I was delighted to hear that the earned income relief has been raised although, like many other hon. Members, I should have liked to have seen it higher still and reaching to higher levels of income. I was equally delighted to hear my right hon. Friend say that in his view high taxation is in itself inflationary. There has been a great deal of controversy about that point, and I was glad to hear him state his view.
One point which worries me exceedingly arises from the D scheme. If we turn to the Douglas Report and look at the last page, it says, at the top:
"It perhaps offers least assistance to the production of high quality goods."
I think the scheme will do a great deal of damage to the shoe industry, for instance. I have been going into the matter with people who know very much more about it than I do, and I think the Committee should be mindful of the fact that Britain's shoe exports increased by 50 per cent. from 1949 to 1951. A similar tax, many years ago, crippled the French shoe industry. One of the experts in that industry has written to me, and I do not think I could possibly do better than read one of the paragraphs from his letter, if hon. Members will permit me. I think this describes the position:
"Finally, the degrading effects of Purchase Tax will go far wider in their social and psychological effect than the mere degrading of a particular product or the loss of an export reputation and market. I am convinced that in this modern world, where productivity is stimulated by the zest and pep people get out of life, if you degrade and lower the design and quality of a product so you damage the efforts that we are all making towards improving industrial productivity."
I do trust that when I send these papers to the President of the Board of Trade he will have another look at that particular matter.
The next specific point I want to mention, that has not, I think, been mentioned in this debate before, is that
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of the creation of new wealth within the United Kingdom. It is my belief—and I have spoken on this matter many times in the years I have been a Member—that there still lies hid in our hills wealth which, so far, we have not touched. I am referring in particular to tin and wolfram. That tin and that wolfram will not be tapped and found by new ventures unless we adjust the taxation methods for those ventures. I am so glad the Chancellor of the Exchequer has come in and can hear this case. Unless we can adapt our taxation to something like the form of the taxation method applied in Canada, we shall not get those products from our earth.
I ask my right hon. Friend to look at this matter because, for some reason which I do not know, I have always found the Treasury not very easy in agreeing to this particular point, but, when all is said and done, if my right hon. Friend gave that relief for new companies and new ventures only—that is, the companies that so far have not started—and if he thus stimulated them to get that wealth out of the soil for the benefit of ourselves in this country, he ultimately would benefit; whereas, by not giving them that incentive, he stands to gain nothing at all. So I do sincerely trust that he will once more look at that particular matter.
The third point I want to put to the Chancellor is a more difficult one. Indeed, I do not even specially ask that he should give consideration to it in this Budget. I do, however, ask him to turn it over in his mind before next year. In order to give an incentive to saving, which hon. Members on the opposite side of the Committee and on this all want to promote, will my right hon. Friend consider what would be the cost of giving an earned income relief to the first £250 from savings, irrespective of the income of the man?
Now I come to the general point I want to make. Whatever hon. Members may think of this Budget, whether they oppose it, as is the usual habit of those in Opposition, or whether they support it, as is the usual habit of Government supporters, the Budget itself is designed for two things: first of all, to take account immediately of our present situation; and second, to promote productivity. Apart from that, the Budget in itself is certainly

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not going to solve our real problems. Restrictions and the rest are but palliatives.
The only method by which we can maintain our 50 million people here is to address ourselves ultimately to expansion here at home and in the Empire, and particularly in the latter. One of the things we should never forget in this Committee or elsewhere is that, whereas the population of the world is increasing, I believe, by about 12 per cent., the productivity of food supplies of that part of the world outside the Iron Curtain is only 9 per cent. Unless we can get that necessary expansion of productivity, in a few years from now we shall be facing even further difficulties.
I say, therefore, to the Chancellor that, in my view, the salvation of us here at home, which, after all, affects the whole world besides, lies in the development of Empire. The Chancellor, I think, already has mentioned, as certainly others of my right hon. Friends have, that in the last three years Malaya and Ceylon have earned more United States dollars than the total exports of the United Kingdom.
I think it is right that the British Commonwealth of Nations has two million square miles of land more than the United States of America and the U.S.S.R. have put together. Moreover, we have a population of 200 million more than the United States and the U.S.S.R. put together. The Colonial Secretary said today that, although he had had connections and business with our Empire for many years, he had never realised how vast were the possibilities which lay before us until he became Colonial Secretary.
In my view, in this way and in this way alone can we make a titanic effort in order to get over our difficulties. I say this to the Chancellor and relate it to the Budget for this reason. I do not believe that the method of the State from time to time putting forward grandiose schemes is the right method to deal with this operation. I believe that the adventure, the knowledge and the ability that lie latent in our race here at home can take charge if the Chancellor could give the necessary incentives to those people to develop.
Sir R. Acland indicated dissent.
Mr. Marshall: The hon. Gentleman shakes his head. Although it may be
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guesswork, I think I know what is in his mind. I want to see a vast number of pilot schemes started so that people who know what they want to do can demonstrate whether it is practicable, and thus win for us in the future what they have won in the past.
Sir R. Acland: If the hon. Gentleman examined the problem of developing backward areas, he would pretty soon reach the conclusion that it cannot be touched by private enterprise unless first the Government will go in and lay the foundation with massive Government grants. It cannot be done on a 4 per cent. basis.
Mr. Marshall: I am afraid I can by no means agree wholly with the hon. Gentleman. Certainly in certain cases there will be aid. I, like him, have had an opportunity of seeing part of this development, and I know what is in his mind. I say, first give the incentives so that the pilot scheme is started. If after that more Empire help is ultimately needed, that is another matter. The one thing we do not want to do is suddenly to burst forth with huge schemes before having tried it out in a pilot fashion, and private enterprise is far better at pilot schemes than any State.
My time is nearly up, and I say this to the Chancellor in conclusion. I have said that I believe the Budget is designed principally to get greater productivity. I also believe that we cannot surmount our problems without expansion, and by that I mean expansion within the Empire. With the different modern inventions that we are likely to have within the next few years in the fields of foodstuffs and science, I believe it will be possible for the House and for the nation to go forward with the idea that in this period of our life we can ultimately expand so that our people can not just maintain our standard of life but progress further. I believe that for the first time we have in this Budget seen the first stage in the new design for the creation of wealth.
8.39 p.m.
Mr. Hugh Dalton: I believe that this is a bad Budget, and I think that that will be increasingly the judgment of the country. It is in any case a badly battered Budget after the three days debate in this Committee. The more we examine the implications of the

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Budget, the more we probe it, the worse it appears. On Thursday my hon. and right hon. Friends will vote against a number of the Budget Resolutions on Report; and we shall, of course, develop our criticisms in detail when the Finance Bill is in Committee.
Tonight, the debate is hung upon the one Resolution, not yet accepted, which merely provides that it is expedient to amend the law. We shall not vote against that. I hope that the right hon. Gentleman, when he replies, will finally clear up the doubt which has haunted our discussions throughout these three days, regarding the cuts in sterling imports, following the recent Commonwealth Finance Ministers' Conference. I do not wish myself to spend very long on this, but I do ask that a reply should be given by the Chancellor, after the rather confused statements of the President of the Board of Trade on Wednesday and of the Colonial Secretary today, so that we can understand quite clearly the position both as regard the Australian cuts in sterling imports, which have given us such great concern, and any other cuts of sterling imports which may be coming.
Do let us have an answer to the very simple question put by my right hon. Friend the Member for Leeds, South (Mr. Gaitskell): Was it, or was it not, agreed at the conference that there should be discrimination against non-sterling imports? That is a very simple question. The Colonial Secretary told us that the matter was discussed. We assumed that, but he did not say whether the simple principle of Commonwealth unity and cooperation had been accepted, and I hope that the right hon. Gentleman will be able to give an affirmative answer.
Surely Her Majesty's Ministers will have urged upon the other representatives at this conference the extreme importance at this time of developing sterling area trade and Commonwealth trade, and will have impressed upon them, not only from the United Kingdom point of view, but also from the Commonwealth point of view this principle, that such import cuts as take place shall be primarily directed against imports from outside the sterling area. Lord Beaverbrook's crusader is still in chains. Cannot the right hon. Gentleman do
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something to lighten his burden and revive the hopes, of which we have heard so much in the past, of a United Commonwealth policy?
I pass from that to what I consider the two most sinister aspects of the Budget statement. The first relates to dear money and higher rates of interest, and the second to the food subsidy cuts. It is upon those two matters that I propose to concentrate most of what I have to say tonight. In regard to the rates of interest, I feel that the Chancellor should be prepared tonight to give us an up-to-date estimate of what the cost of the interest burden on the National Debt will be this year, in view of the latest developments, with which we are all acquainted.
In the Financial Statement, it is suggested that the cost of the National Debt will be up by £40 million, from £535 million to £575 million, which is a very large sum of money even now. I think that it is quite clear, following on the increase in the Bank rate, that this is a very considerable under-estimate. I myself intervened when the Minister of State for Economic Affairs was speaking to ask him whether he could not give us some better and later estimate, but the right hon. Gentleman was not very responsive. I asked him whether he could give us an estimate as to the extent to which the rise in the Bank rate would raise the cost of the floating debt, and the Minister of State replied:
"No, Sir … we do not know at present at what rate the tenders will settle down."
He went on to say:
"But, as we have a large surplus which we are devoting to insuring a counter-inflationary effect, we are convinced that the counter-inflationary effect of a rise in the Bank rate will give much better value for money than the use of the same amount of a surplus for that purpose."—[OFFICIAL REPORT, 12th March, 1952; Vol. 497, c. 1499.]
which considerable number of words, I take it, boil down to saying, "I do not know, and anyhow it does not matter, because we have a surplus."
I hope the Chancellor will be able to improve on that tonight, because, if my right hon. Friend the Member for Leeds, South, is correct—and this is a simple question of arithmetic—the recent rise in the Treasury bill rate, if the Bank rate is maintained at the present level throughout

2037
the year, and excluding the possibility of further increases, would mean a further increase of £75 million a year in the cost of the Floating Debt alone on top of the increase of £30 million a year due to the first raising of the Bank rate.
That makes an increase of £150 million a year for the floating debt alone, which is an enormous figure. If that is not right, I hope the Chancellor will correct me. I have asked him a question, and I hope we get a better answer from him than we had from the Minister of State for Economic Affairs.
As for the rest of the debt, the right hon. Gentleman is fortunate in that in the very near future there are no major maturities for longer-term debt, but, even so, if we run forward till the end of 1955, there are £3,000 million of debt other than the floating debt maturing before the end of that year. If that has all to be re-financed at the present rate of 4½ per cent., at which record low level the British national credit now stands.
That will mean an additional charge, over and above the additional charge for the floating debt of £70 million a year, and, therefore, the total increase in the interest charge will be running up to £175 million a year in the aggregate by the end of 1955, assuming that the present dear money policy is maintained. I hope that the Chancellor will give us a serious and considered statement about this.
Dear money, operating through the Bank rate, spreads all along the line right through our economic life. It affects the rates at which local authorities can borrow. I do not know whether the arrangement between the right hon. Gentleman and the Minister of Housing and Local Government holds good indefinitely in the sense that each time the raising of the rates of interest of the Public Works Loan Board increases the burden on the local authorities, his right hon. Friend will be allowed to increase the housing subsidy. Perhaps we could know whether any such arrangement has been made.
Even in the way it has hitherto been adjusted, it has involved an additional burden on the ratepayers in their share of the subsidy—it will mean an additional heavier burden on the local authorities which will be reflected either in the local rates or in the rents of tenants of council houses. Further, under the Small Dwellings
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Acquisition Act the cost of acquiring houses will go up. The building societies, after having been a little hesitant in the beginning, are now all raising their rates, including in many cases the rates, according to their contracts on existing mortgages and not merely on new mortgages.
Rates on bank advances to all customers are going up. Rates on bank advances to small businesses are going up. On hire purchase, too, no doubt. The rates on mortgages of the Agricultural Mortgage Corporation are going up, and this will put a great burden on efforts to increase agricultural productivity. Small businesses—many of them excellent businesses—will undoubtedly be under very grave disabilities by reason of the raising of the rate of interest. The effect of the increase in the rate of interest runs right through the economic system.
All along the line the moneylender gains and the borrower of money loses, and all productive effort is correspondingly discouraged by the higher burden on production. As has been emphasised by several of my hon. Friends, this is a most clumsy and indiscriminate way of damping down any redundant or unnecessary forms of production or economic activity. It smites them all equally; it is non-discrimination of the worst kind.
I am afraid that we must conclude from the adoption of this dear money policy, and, almost, from the tones of delight in which we are told that a most drastic step has been taken in putting up the Bank rate from 2½ per cent. to 4 per cent., that again, for the shaping of national policy, the bankers are in the saddle. This time they have got the right hon. Gentleman on the leading rein, because we have nationalised the Bank of England and now he is responsible for the Bank rate.
I do not know if hon. Members have read the memoirs of Sir P. J. Grigg. If not, they will find them exceedingly interesting. He relates how, when the present Prime Minister was Chancellor of the Exchequer, and when he was private secretary to the present Prime Minister, Mr. Montagu Norman said that he proposed to raise the Bank rate. The then Chancellor of the Exchequer was opposed to such a step, but the Governor of the Bank of England said, "It is my decision, and that is all there is to it."

2039
He went away and raised the Bank rate, and it took some weeks for Sir P. J. Grigg to re-establish any kind of personal relationship between the Chancellor of the Exchequer and the Governor of the Bank of England. No such alibi is available to the right hon. Gentleman. We have nationalised the Bank of England and put him in charge of it. On all major decisions he must take full blame for anything which, in this field, goes wrong.
This same dear money policy was pursued in the inter-war years which tell the tragic story of deflation, unemployment, wage cuts, the lowering of human standards and living conditions. All that was part of the tragic history of this country then, and it looks to me as though this Government, if unchecked, will be repeating the tragic history of those times.
But there will be much stronger resistance now to the consequences of any such moneylenders' policy. The trade union movement is much stronger now than it was then, the Labour Party is much stronger now than it was then, and the understanding of the general public is much keener now than then. I say that if this policy is persisted in, and begins to bear the bitter fruits of the inter-war years, it will soon bring an end to the life and moral status of this Government.
My name has been associated with the policy of cheap money, and it is, therefore, perhaps not inappropriate that I should say a word or two on that subject. In the years immediately following the war the cheap money policy was a great help to many important elements in the nation, in the difficult period of transition from war to peace. The local authorities in the war blitzed cities were able to borrow at 2½ per cent. to begin the rebuilding of the ruins Hitler made.
That low rate of interest will go on being paid on those loans until this century is at an end, whatever the right hon. Gentleman does now. He cannot take away from those local authorities the benefits they got when the cheap money policy was being pursued. Those low rates will run on to the end of the period of these loans.
The beginning of the revival of the Development Areas was financed at 2½
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per cent. In South Wales, in Durham, in Scotland and along the West Cumbrian coast, there were areas blitzed not by war but by the Tories in times of peace. Many local authorities all over the country started to build new housing estates at 2½ per cent.
I would remind my Scottish friends that the Scottish Hydro-Electric Board was enabled to finance at 2½ per cent. many of its enterprises in the Highlands, which I hope and believe will transform the whole social framework and life of those beautiful but, in the past, much neglected areas. I minimised the moneylenders' tribute on the taxpayer, the ratepayer and the producer. And I believe that I did right.
The matter has been personalised to the extent that a certain public security is called affectionately by my name. All those Chancellors of the Exchequer whose names are associated with some particular security—we shall all go down to history together—[An HON. MEMBER: "They are going down."] If the hon. Gentleman will allow me I will myself put the point that he is putting much better in my own way. Thus, Goschen's old Consols, Neville Chamberlain's 3½ per cent. War Loan, and the stock affectionately called after me, all go up and down together. That is in the nature of the Stock Exchange. They have all gone down under this Government, and I hope they will all go up under another Government. They all move together. [An HON. MEMBER: "No."] But they do. All these undated stocks move together. I checked it up in the last number of the "Economist," and I can give hon. Gentlemen opposite the reference.
I wish to pay a tribute to the late Mr. Neville Chamberlain, who carried through in 1932, that great conversion operation whereby the nation's credit was raised from 5 per cent to 3½ per cent. The Chamberlain 3½ per cent. War Loan stock is as much entitled to be called "Chamberlains" as the 2½ per cent. Treasury stock, is entitled to be called "Daltons." That was the major conversion operation of our time and one of the most important steps along the road to still cheaper money.
I was very sorry to observe last week that on the Stock Exchange "Chamberlains" touched an all-time low, under this Government. How are the

2041
mighty fallen. How has the national credit declined since the last Government went out of office. Looking, as I do each week, at the "Economist," I found that "Chamberlains" last week yielded just over 4½ per cent., £4 11s. 1d., whereas "Daltons" yielded just under 4½ per cent., £4 8s. 6d., so even on the Stock Exchange and even under a Tory Government, and even against the background of history, my credit stands a little higher than that of the late Mr. Chamberlain.
Mr. Dudley Williams: Would the right hon. Gentleman tell us the level at which "Daltons" were standing when his Government left office, and what they were issued at? That will be an index of the decline of the credit of the country since the right hon. Gentleman was Chancellor.
Mr. Dalton: All the stocks I am dealing with were issued at par—"Chamberlains," "Daltons," and "Goschens"—but these are statistical matters which can be understood by any hon. Member who cares to study them. I am merely making the point that when the national credit declines, all Government securities of a comparable sort, such as undated stocks, all decline together. They have all been declining since the last General Election.
I pass from this point to consider the second major matter, namely, the food subsidy cuts, linked with the tax changes which the right hon. Gentleman is proposing. The food subsidy cuts are a stupidity, an injustice and a breach of promise. Much has been said about Lord Woolton. I leave him to his own private thoughts. I say no more about him tonight. But my attention has been drawn only today to some "Daily Notes" issued to Conservative speakers at the last General Election. One in particular was issued on 16th October, containing a quotation from a speech made by the Chancellor of the Exchequer himself, at North Berwick on 12th October. This is what the right hon. Gentleman said, and this is what was relayed all round the country to help Conservative candidates:
"In present circumstances, while we fight and strive to reduce the cost of living, we shall maintain the food subsidies."
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The right hon. Gentleman said that. [HON. MEMBERS: "Shame."] He went on:
"We have no means test in mind."
And what about this next bit?
"We simply want to ensure that those whose needs are greatest get the most help."
We will check that principle also in a moment. I hope I have not taken the right hon. Gentleman unawares. It was only put into my hands today, but it is an interesting incident, so I hope he will be able to say something about it when he replies. We must not leave Lord Woolton too lonely.
Apart from breach of promise, I submit that the food subsidy cuts are stupid, because they will merely give an upward twist to the wage spiral. They will certainly set off a further round of wage claims which cannot legitimately be resisted by any body of employers. Thereby the cost of living will be pushed up still higher.
Not merely by increasing food prices, which come directly from the subsidy cut, but also in so far as the heavier wage bill will inevitably react upon the price of the product made by the wage earner in any industry, there will be a general rise in the cost of living, and that, in addition to all its other objectionable features, will also handicap still further the British export drive. The export trade therefore will be seriously handicapped as a result of what the right hon. Gentleman has done.
Mr. Spencer Summers: While dealing with that point, would the right hon. Gentleman, for our benefit, distinguish between his criticism of the move made now and his support for precisely the same method when Sir Stafford Cripps was Chancellor?
Mr. Dalton: I do not recall that Sir Stafford Cripps ever cut the food subsidies by £160 million.
Mr. Summers: In view of the fact that the statement that I have just made is questioned, if the right hon. Gentleman will look it up he will see that precisely the same method was used by Sir Stafford Cripps to bring the subsidies down to £410 million.
Mr. Dalton: What we are criticising, and what I am characterising as stupid and unjust, is this severe cut in the total sum paid in food subsidies.
Mr. Summers rose—
Mr. Dalton: I am seeking to answer the point raised by the hon. Gentleman. There is no record of any such policy at any time during the life of the Labour Government, under any of the three Chancellors who held office. There have, of course, been discussions as to how high the subsidy total should rise—[HON. MEMBERS: "Oh!"] Well, but rising is one thing and falling is another. 'We are discussing here a brutal cut, and the hon. Gentleman is quibbling if he suggests that there is anything in common between this policy and discussions at about what level the subsidies might be stabilised, or as to exactly what items should be included in the subsidy bill, such as agricultural fertilisers, and so on. If the hon. Gentleman does not see the difference between those two now, I am afraid that I shall never persuade him.
Mr. Summers rose—
Mr. Dalton: No, I have given way twice to the hon. Gentleman, and if he does not leave the Chamber—but apparently he has decided to do so.
I hope that for the rest of the Committee it is not difficult to draw a distinction between a reduction of £160 million in one year and slight increases of the order of £10 or £12 million. [HON. MEMBERS: "Nonsense."] We know that there is an inclination to say farewell to arithmetic in the present Government. The Minister of State for Economic Affairs has almost bidden all arithmetic farewell, but even so—
Sir A. Salter rose—
Mr. Dalton: I quoted the right hon. Gentleman before he had come in. I would have been glad had he been here, but I think that I should now be allowed to proceed with what further observations I have to make.
The food subsidy cuts are stupid and they are also unjust They will fall hardest on the poorest people, but will mean very little indeed to the well-to-do. We are now told that a revised figure has been given of 1s. 2½d., as against 1s. 6d. a week, of the burden which the cuts will impose upon consumers of rationed foods. To most of the beneficiaries under the Income Tax reliefs this makes practically no difference, but already, this very day,
2044
the price of a loaf of bread has gone up by 1½d. None of the blessings have come home yet to roost, but every working woman who has to buy four loaves—many have to buy more for larger families—will have had to pay an additional 6d. today.
The food subsidies have been a stabilising factor so far as prices are concerned, and an equalising factor so far as standards of life are concerned. It was a stabilising factor, even if we did not succeed in holding prices absolutely steady—[Laughter.] We did for the first two years of the policy. At any rate, we held prices a great deal steadier than they will be now when this foundation is ripped away. There will now be a sharp uprush of prices, as will very soon be manifested. Relatively speaking, they have been a stabilising factor, and that is now being diminished just when it was most needed.
Secondly, the food subsidies have been an equalising factor because they have given the same to all—not most to the rich and least to the poor, like the Income Tax reliefs—but the same to all. These cuts in the food subsidies, combined with the Income Tax reliefs, even when we take account of increased family allowances, will work out most unjustly.
The proof of all this is to be found in the Financial Statement with which the Chancellor has furnished us. I have not time now to give a long list of numerical illustrations, but the Chancellor of the Exchequer himself said in his Budget speech that by the food subsidies
"We subsidise everyone, whether in need of help or not. In our statement of policy we said that we subsidised Cabinet Ministers."—[OFFICIAL REPORT, 11th March, 1952; Vol. 497, c. 1299.]
But the Income Tax relief does not subsidise everyone, and therein lies its great injustice.
It does not subsidise those many millions of people who, as a result of a series of Labour Budgets giving relief to the poorer Income Tax payers—sometimes by raising the personal allowances, sometimes by increasing the earned income relief, sometimes by increasing the child allowances—have been exempted from Income Tax altogether by successive Labour Chancellors of the Exchequer. These get no relief whatever from the tax reliefs, but they still pay more for food.

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These reliefs that the right hon. Gentleman is giving in Income Tax are open to just the same objections which he put as against the food subsidies: they subsidise Cabinet Ministers and they subsidise other relatively well-to-do people far more than anything which such people will lose, whether it is 1s. 2½d. or 1s. 6d., through the abolition of so large a part of the food subsidies.
That is why many of my hon. and right hon. Friends have said—and we maintain that evidence has been given for it; it is a simple matter of arithmetic which can easily be got out of the Chancellor's own tables—that, taken together, the food subsidies cut and the Income Tax reliefs make the rich richer and the poor poorer. To use a word sometimes used by the protagonists of orthodox financial policies, an emotive word, designed to create an unfavourable impression, this is one more "distortion" of the economic system and of the distribution of wealth, so that the rich receive more and the poor less even than that which they had before.
Of the other proposed tax changes I shall not speak tonight. [HON. MEMBERS: "Why?"] Because I have an agreement with the right hon. Gentleman to get him up at a quarter past nine. I shall have plenty to say of the other changes another time and we shall certainly speak of them when we come to the Committee stage of the Finance Bill. But I will say a word, in passing, on the Excess Profits Levy. I think that that is a demagogic device designed to create in the minds of the simpler electors the idea that the Tory Party were against the profiteers.
It is not only a demagogic device, but, as has been well argued in this debate, a disincentive demagogic device which will discourage just those people whom we should wish to encourage, many of them quite unconnected with armaments altogether, and will encourage people like the brewers, who have made no advance since 1949. We will see whether we can persuade the Chancellor to find some more effective method of doing what is, we are sure, a good thing to do, namely, to get another £100 million in a full year from the taxation of profits, but it may be that we can suggest better ways of doing it than are now proposed.
The Budget statement has this curious characteristic, among others: its consequences must lead on the one hand to inflation of costs, for the reasons I have
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given, such as the wage increases which will surely come and, on the other hand, presents a sure prospect of further deflation of demand. Unemployment is already rising—it rose again last month. The number of people working short time has greatly increased and the number of people working overtime has greatly diminished.
The total purchasing power being received by workers on present wage and overtime rates is, therefore, diminishing. Deflation of demand is setting in. It already affects a number of consumer goods industries and may well spread wider and wider if this policy continues. This inflation of costs and deflation of demand is a most unhappy and, I hope, exceptional combination as far as the future is concerned. I hope that before long we shall be able to reverse both these trends.
This is an unjust Budget. I believe that, when it is clearly understood—and we shall see that it is clearly understood—throughout the country, when the simple arithmetic of what is going on is clearly understood, the Government will have a very rude shock.
I say this finally. The Chancellor of the Exchequer has spoken in moving language of the great and urgent need to do something to stem the loss of gold and dollars but I say that his Budget, whatever else may be said about it, makes no effective contribution at all to solving this the most urgent of all our problems, the problem of righting our overseas trade balance and stemming the flowing away of our gold reserves. Although we shall not vote tonight—for the reasons I have given—we promise the right hon. Gentleman a very warm reception on the further stages of this Measure.
9.15 p.m.
The Chancellor of the Exchequer (Mr. R. A. Butler): The Committee will be glad to hear that the reception of the Budget abroad has, in general, been good. Markets overseas have shown increased confidence in sterling, and that is my first answer to the right hon. Member for Bishop Auckland (Mr. Dalton) who used extravagant language that this Budget had made no contribution at all to confidence in sterling and to the balance of payments problem. He has only to look at the news from abroad, which we can all read for ourselves, to see that the £

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has risen in comparison with the dollar and that the Budget has already had an effect on confidence.
I do not claim, and the Committee would not expect me to claim, that in these early days we can draw any final conclusion; though, as it is one of our chief aims to maintain confidence in our currency with its wide international use, it is gratifying to find that the atmosphere is a good deal more favourable than when I rose on Tuesday last. I will not stress that point too much, but I am sure I carry the Committee with me—though I may not carry them for the whole of my speech—in saying it is our earnest prayer and hope that we can maintain the confidence in our currency, and in sterling, and, so far as possible, solve our balance of payments problem.
To introduce a more agreeably controversial atmosphere, I find that at home right hon. Gentlemen opposite have widely divergent views. In fact, it is impossible to answer the debate in view of the many facets or arguments posed from hon. Members opposite. The right hon. Member for Battersea, North (Mr. Jay), writing in the "Daily Herald," says that this is the first actively and openly inflationary Budget since the war. The right hon. Member for Leeds, South (Mr. Gaitskell), said that the high interest rates might easily lead us into a serious deflationary spiral. The Secretary of the Labour Party, speaking at Nottingham on Saturday, said that the Budget was
"a deliberately deflationary act as we had between the wars to stimulate unemployment."
It is in the midst of these contradictions and exaggerations—[HON. MEMBERS: "No"]—that I would refer to that absolutely reliable test of public opinion, the Gallup Poll, which reveals that 62 per cent. regard the Budget as being fair and satisfactory and 41 per cent. of Labour voters think so too. It is against that atmosphere and in response to the rather flaccid arguments advanced by right hon. and hon. Members opposite that I address myself to one or two serious considerations.
Let me turn first to this question of inflation and deflation. The strategy of the Budget has been criticised by two very different schools. The right hon. Member for Leeds, South, has distinguished himself by having both these
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arguments in the same speech. It is first said that the Budget is not deflationary enough, and that I should have cut consumption down rather than left it unchanged. Second, it is said that I have been too deflationary, partly because the Bank rate is likely to work in this direction and partly because of the unfortunate reduction in her imports by Australia which might have the result of thwarting our exports and making the position more difficult in these Islands.
I wish at the outset to address myself quite seriously to these queries which have been raised by right hon. and hon. Gentlemen opposite. In my view, these criticisms from both wings show that my judgment in assessing the Budget as I did was about right. They also show how hard it is—and I say this in all humility—to reach a correct decision in this difficult field. Here I refer to the speech of the hon. Member for Gloucestershire, South (Mr. Crosland), which I feel that most of us will either have read or heard with interest.
The hon. Member said that the method of economic forecasting should not be spurned and derided. I should like to say to him, to my critics in the more intellectual financial Press and to the Committee as a whole that I can assure them that my conclusions were reached after making full use of the whole machinery of economic forecasting that is available to any Chancellor of the Exchequer and was, indeed, available to my predecessors when they were in office.
I should like to pay tribute to the high quality of the advice which I considered and finally adopted. Anybody who has had to study a matter from that angle realises the intense complexity of the economic situation against which a judgment has to be made. My own opinion, after considering the very detailed economic data given to me, is that the advice given to me is rather ahead of a good many of the journals and critics of this country.
I have been advised that there is much more danger of deflation and the possibility of unemployment and of difficulty in the world in general than some of the more lively economic critics outside this Committee imagine. It is against that background that I deliberately took a serious and, I believe, responsible decision, which I sincerely

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hope that economic events will prove to be correct, that I should do quite sufficient if, taking account of the deflationary effect, I carried forward a surplus of approximately £500 million into the coming year. I believe that if I had added to that surplus by further taxation I should have adopted what would probably have been a too deflationary act.
I would just remind the Committee of the way I reached this decision—and this will assist Professor Pigou who has been referred to in this debate and who comes from my university and not from the university of the hon. Member for Gloucestershire, South whom I will answer in more detail in due course. I would only assist him and other economic critics by pointing out that when I made up my sum I first made certain allowances for changes and improvement in our invisible exports, then in the terms of trade, and finally I took account of reduced imports for stockbuilding; and I came to the conclusion that the reductions in imports, after taking account of the deduction on the general programming, apart from physical imports, would mean that we should have £150 million less account to take of imports for use at home at 1951–52 prices.
I then said that we wanted to find another £50 million for exports, and this gave a total reduction of £200 million as the reduced amount of resources available, to which I added some £200 million extra for the requirements of defence this year. I am putting this very shortly as I wish to get on to some of the more exciting matter in my remarks. I hope to find the total of £400 million as follows: some £250 million from increased production—and much of my calculations depend upon us achieving that production—£50 million from a reduction in resources on Government expenditure, and over £100 million from reduction in home investment, entailing a diversion of plant and machinery from civil investment to export.
On these assumptions, which are the result of weeks, literally, of calculation by the experts, whom I have at my disposal, I came to the conclusion that it would give us a balance in our economy if we succeed in expanding our exports and increasing our production. But I must remind the Committee that if we do not succeed there will be disinflation, as it has been called by one of my predecessors,
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and consequent unemployment greater than any of us would wish to see.
It is, therefore I think, wise of me not to have added to the surplus, to have carried forward a bigger surplus and caused a bigger possible deflation than we may get if we fail in the programmes I have put forward. That, I think, indicates the atmosphere in which I took this responsible decision. All I can say is that, if I have been criticised, I think I would rather be where I am than if I had taken an alternative course.
Mr. Gaitskell: Before the right hon. Gentleman leaves that part of his speech, may I first of all assure him that I did not say that I thought consumption should be further reduced. What I did was to contrast the right hon. Gentleman's decision that consumption should not be changed—which I do not challenge—with the earlier statements and measures taken by the Government.
May I ask him once again, the question I put to him in the course of my speech? In view of the fact that consumption is to remain unaltered, and in view of the fact that import reductions, together with reductions in the supplies of metal consumer goods to the home market are to take place, are we to assume that this will be balanced by an increase in consumption of other things at home, particularly textiles? Can the right hon. Gentleman give us some assurance on that?
Mr. Butler: Having taken the advice of the hon. Member for Gloucestershire, South, I will not give an immediate answer to this very astute and deep question but will consult those economic sources from which I have had so much assistance and give the right hon. Gentleman and the Committee an answer in due course.
There is evidence that unemployment is rising, and this had roots long before this Government even took office. Some of the consumption industries are undoubtedly facing a very difficult time. They must expect the further difficulties in their export markets to which I have referred. Some adjustment in these industries is therefore inevitable, whether by change in the character of their production or in their volume of employment; but in my judgment we are setting these consumption industries quite

2051
a big enough task now, without depressing the home demand for their products still further.
I have been asked why I have been kinder to home consumption than to civil investment. I have been accused of raiding the capital of industry. Successive Chancellors have attempted in some way or another to limit civil investment. I am taking the steps I am taking, including the monetary steps, in order that we can push some of the products of engineering into exports. It has been said that this Budget bears no relationship to the balance of payments problem. We have included in our statements, hitherto, the absolute necessity, as we have expressed it, for pushing engineering products into exports, because we know the consumer industries cannot export to outside countries as much as we would like them to do.
No one wants to cut home investment if it can possibly be avoided. It would be much better to get more exports by increasing plant and machinery, but, having regard to the supplies of steel which are likely, we could not avoid the investment cuts, since without them there would not have been enough for home and export together. Had we tried to avoid this by further cuts in home consumption, we could not have managed to sell abroad the products thus set free.
So it will be seen that in the general strategy which has been criticised the Budget is designed to see that these readjustments take place in the interest of our export trade and that we keep our consumer demand approximately as it is, in order to avoid the maximum of dislocation, waste, and unemployment. The Budget has been designed to hold the balance even between inflation on the one hand and deflation and unemployment on the other. Both are evils and both must, if possible, be avoided.
Now I come to the relationship of the Budget to the external situation. The Budget seeks to fortify sterling by the use of the Bank rate and in other ways—to stimulate exports of textiles and engineering goods, to give incentives to production, to reduce the burden of Government expenditure and to meet the hardest needs of the community.
First, let me take the Bank rate. The first action we took in this field, last
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November, has been fully justified. The net deposits at the clearing banks have fallen since then by £280 million and they are now about £140 million less than they were a year ago. Some reduction is usual at this time of the year, but this is much larger than normal. Moreover, the level of advances has been virtually stable; it increased by only £8 million, as compared with an increase of nearly £100 million in the corresponding period 12 months ago. Therefore, we think this move has been justified.
In raising the Bank rate, we set out to convince the world of our determination to maintain the strength of the currency, and in order to do this we had to take decisive steps to reduce the demand for investment at home. There is no doubt at all, from the improvement of sterling since the Budget speech, that the Budget and the rise in the Bank rate have had a marked effect upon the speculative movement, and there has been considerable covering of that position.
In the second place, this rise in the Bank rate and the other measures taken make credit more difficult and more expensive for foreign borrowers. This has also proved to be a necessary step to strengthen sterling. The rise in the Bank rate was also designed to make lender and borrower more cautious and to slow down the internal demand for that very type of investment which can be most readily sold in our markets abroad.
The right hon. Gentleman asked the Treasury bill rate and the cost. The bill rate for Treasury bills, which was running at about 1 per cent. or slightly over, rose to about 2¼ per cent., or slightly over, on Friday. This was to be expected. It is naturally disagreeable for the Exchequer to find as a borrower that it has to pay higher rates, but I am afraid I cannot give the right hon. Gentleman an accurate estimation of what the cost of this extra borrowing is likely to be. To begin with, the market has not settled down, and it would be foolish to try to give an exact figure on the results of one week.
It is impossible to foresee accurately what the cost will be. Hon. and right hon. Gentlemen opposite may protest, if they so desire, but I am not in a position to forecast now. When I am in a position to give a reliable forecast I will certainly attempt to do so. But even if the Government have to pay more for borrowing,

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the disadvantage will be more than offset by the benefit to the whole economy of the more realistic form of monetary policy. It is impossible to say at what rate the long-term borrowing will settle down.
The right hon. Member for Bishop Auckland asked about the bankers' ramp and the moneylenders' charter, which I see he was writing about in the Sunday Press and which he mentioned again today.
Mr. Dalton: I did not say the bankers' ramp.
Mr. Butler: The right hon. Gentleman spoke of the moneylenders' charter, which is equally disagreeable and untrue. The right hon. Gentleman prided himself that "Daltons," "Goschens" and "Chamberlains," and other shares, were, as he seemed to think, in quite a satisfactory position. I can only remind him that the National Insurance Fund lost about £50 million in "Daltons," and I think the evils of cheap money are worse than any evils of dear money that we can possibly foresee.
The right hon. Member for Blackburn, West (Mr. Assheton), who made so able and helpful a speech in the debate, said that the answer to the point that the Banks and other financial bodies will profit by the rise in the Bank rate is, of course, quite easy to give. On one side of their account they may obtain additional revenue, but on the other side they have to meet the cost, the Committee must remember, of higher deposit rates; and, in particular, the possible capital loss in their portfolios, particularly on the short- and medium-term securities they hold. In particular, the discount market will have suffered, and may suffer, a sharp temporary loss. If it is any consolation to the right hon. Gentleman, I can tell him that in raising the Bank rate I am no more popular in City circles than I seem to be in his mind, but I am doing it only for the national good as, indeed, I think the City realises is my intention.
The right hon. Gentleman asked a question about the Public Works Loan Board. The Committee will remember that in February the rate was raised to 4¼ per cent. It is not the intention of the Government to make any change at present in the rates currently charged by the
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Board. It is far too early to see the effect of the increased Bank rate on the market and particularly on long-term rates and, therefore, I propose to make no prophesy about that matter or to give any answer today about the satisfactorily arranged inter-relationship which has taken place between the housing subsidies and the rates charged. Now, there has been one further criticism of the Bank rate, and that is that it is indiscriminate. My answer to that is that it is not nearly so indiscriminate as inflation, and we believe that by the use of this monetary weapon we can do something to check the dangers of inflation.
But I believe that it is mainly in failures to deal with the external position, so as to enable us to purchase raw materials, that the danger to employment chiefly lies. Therefore, for a few minutes I want to turn to the external situation, with particular reference to the questions which have been put from that side of the Committee about the Conference of the Finance Ministers of the Commonwealth. Naturally, the debate has been concerned mostly with the specific proposals which I made in my Budget, but I hope that no Member of the Committee will overlook, as, indeed, the right hon. Gentleman the Member for Battersea, North, did not overlook, the importance and the gravity of the statement which I made about our reserves.
I say this with all seriousness to the Committee, because our happiness in the future is entirely involved in this. A continued fall in our reserves is the only single factor in the whole economic picture which can bring not only the sterling area but many other countries as well to economic disaster, and the important question which must be in the mind of anyone, especially of anyone endowed with the responsibilities which I have at the present time, is, by what methods and how soon we can start on the essential task of rebuilding our reserves? On these reserves a trade of about £10,000 million is conducted annually, and it is not, therefore, surprising, that there are considerable fluctuations.
It is quite clear that, whatever the future holds, we must be going through a period of continuing and grave anxiety, and we must be ready for any action which may prove necessary. It is also

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clear that we must seek to ensure in the future that our system reacts to any worsening of the economic climate outside much more speedily than it has done in the past. Unless it does so, there is no doubt that the sterling area, and the sterling system as we know it, cannot survive in their present form.
As I have said already, it is my hope that the effect of the Budget, combined with the results of the Commonwealth Finance Ministers' Conference, will be to make such quick reactions easier, as a result of closer consultation between the members of the Commonwealth.
The right hon. Gentleman the Member for Leeds, South, interrupted on Thursday last and referred to the responsibility of the President of the Board of Trade and myself for what he rather hastily, I think, described as the failure of this Commonwealth Conference. Well, all I can say is that when we came to power we inherited a very big deficit of no less than £1,450 million a year to the non-sterling world in the sterling area as a whole, and there was every prospect, when we came into power, of the disastrous loss of the reserves continuing for a long way into the future.
I cannot regard it—and I do not believe that any sensible Member of the Committee can regard it—as a failure that, despite the effect which the Australian Government have had upon our own trade in what some hon. Members described as unrequited exports, definite steps have been taken to ensure that the whole sterling area should be in balance with the rest of the world, at the latest, inside of 1952. That, I sincerely hope, will be the result of the Conference and of all that we have been through.
When the right hon. Gentleman the Member for Bishop Auckland asks if there was any understanding that one sterling area country could cut imports from another, I say definitely, no. All aspects of this matter were considered, but we had no idea that that would necessarily develop as a result of our Conference, and the fact that Australia has been obliged to take this action can be attributed only to the severe economic state in which she has found herself in her economy. I would remind the right hon. Member for Leeds, South, that it is extremely dangerous in this matter to
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question the absolute autonomy or right of independence of thought or action of any member of the sterling Commonwealth, and I think it most important that no word should be used in this Committee in criticism of another friendly Government in the Commonwealth.
I can only advise hon. and right hon. Gentlemen—and I say this in all seriousness—to read the statement which I understand is being made today—of which I have seen only an advanced version—by the Prime Minister of Australia giving the reasons for the action which his Government was obliged to take. I certainly feel that all hon. Members, including right hon. Gentlemen opposite, will be only too ready to accept an explanation given in the spirit in which I am sure it will be given by the Prime Minister of Australia himself.
I come now to the more domestic aspect of our Budget proposals, and this lands me right in the middle of our own domestic politics. I say first that, in judging whether this Budget is fair or not—and I believe that ordinary opinion considers that it was the intention of the Chancellor and the Government to be fair to all sections—it is essential to look at this Budget as one. For instance—and I do not wish to spend very much time on it—there has been practically no mention, except by the right hon. Gentleman and one or two others, including my hon. Friend the Member for Barnet (Mr. Maudling), of the Excess Profits Levy.
Now this Excess Profits Levy is a very heavy tax on industry, and has been criticised as such in industry and in serious journals who are interested in these aspects of the question. It must not be forgotten by hon. Gentlemen opposite, when they try to assess whether this Budget has been fair to all sections of the community, that there is no doubt, if we take account of the Excess Profits Levy, that it will impose this extra £100 million additional burden, and that in the long-run increased taxes on industry fall on the shoulders of the ordinary shareholders, who for the most part are to be found in the middle and upper income groups.
There is no doubt that this imposition of the Excess Profits Levy will be followed, or at any rate should be followed, by a sane policy of dividend limitation, and the effect of that is bound

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to affect some of those groups which right hon. Gentlemen opposite consider have not been faithfully dealt with in this Budget. I draw this to the attention of all those who have been interested in dividend limitation, in the question of profits, and in the question of fairness, including the Trades Union Congress themselves.
There must not only be a restraint in dividend giving. There must also be a restraint in demand for wages. I have listened carefully to all the arguments put forward in the course of this debate. I do not in any way wish to interfere with the liberty of organised labour to negotiate, or with the responsible people whose task may indeed have been made even more responsible by certain things which have recently happened, but I do say that restraint on all sides must be a feature of our economic life at the present time.
We have shown in this Government, by our decision to submit through the Minister of National Insurance to a discussion with both sides of industry, that we believe that we can obtain the greatest possible advice from the Trades Union Congress and from industrial leaders in framing the final plans, which the Minister of National Insurance will eventually put before this House. That indicates our desire to work with the unions in the difficult problems which are facing them.
I now come to the major issue which has been debated in this Committee already, and which was put by the right hon. Gentleman in the latter part of his speech: namely, the decision to cut the food subsidies. The right hon. Gentleman referred to previous steps which have been taken under Socialist administrations to deal with food subsidies. He used the expression that only a slight increase of £10 million to £12 million had previously been undertaken. I think that the right hon. Gentleman must have forgotten the decision announced and formulated by Sir Stafford Cripps, whom we all respect on 6th April, 1949, when, in fact, he cut the food subsidies by more than £100 million—£80 million to begin with, and nearly £11 million in respect of certain steps which he took in regard to tea, and £22 million which he took in regard to sugar. This cut was made and promulgated by a Socialist Chancellor of the Exchequer.
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I cannot remember a howl and scream arising from that side of the Committee when this was honourably undertaken by one of my predecessors, and I will go further and remind him—before the right hon. Gentleman rises—and remind the Committee, that at that time Sir Stafford Cripps announced rises in the cost of food—cheese 4d. a lb., meat 4d. a lb., margarine 1d. a lb., butter 2d. a lb. To cover the increased cost of that, there was a large cut in the subsidies which he felt it honourably necessary to make.
I used that example just to show that Sir Stafford Cripps in absolute honour cut the subsidies without a scream and howl from hon. Members opposite, and, what is much more important, without the myriad of concessions which I have deliberately made throughout the social fabric, and which I shall now detail to the Committee.
Mr. Jay: I am sure that the right hon. Gentleman would not wish to falsify the facts. He is inadvertently doing so. I was at the Treasury at that time, and Sir Stafford Cripps never made a cut of anything approaching £100 million in the food subsidies. What the right hon. Gentleman is doing, no doubt by mistake, is to take a higher figure of over £500 million, which the food subsidies never achieved, and is then giving the figure for the subsequent year, which was much less. There was never a cut—I am sure that the right hon. Gentleman would not want to mislead the House. There was never a cut—[Interruption.] We must get the facts right. I do not think that the right hon. Gentleman wants to misrepresent the facts. No such cut of that magnitude was ever made and the increase in prices resulted in the placing of a ceiling, not in the reduction of the subsidies.
Mr. Butler: Any hon. or right hon. Member can, first of all, remember that I mentioned this in my Budget speech. I mentioned the occasion, and I am now simply giving the details. The date is the 6th April, 1949. Any hon. Member can turn to the columns of HANSARD and see the reduction was £568 million to £485 million, see the figure of £80 million, and then can see the figure of £11 million in respect of tea and £22 million in respect of sugar.
Mr. Jay rose—
The Chairman: If the Chancellor does not give way, the right hon. Gentleman must resume his seat.
Mr. Jay: On a point of order. As the right hon. Gentleman is now directly, by his mention of the figure of £568 million—
The Chairman: I cannot see where the point of order is leading.
Hon. Members: Wait for it.
Mr. Jay: I want to put a point of order. As the right hon. Gentleman has directly falsified the facts—
Hon. Members: Oh.
The Chairman: I cannot allow that.
Hon. Members: Withdraw.
Mr. Butler: May I say quite calmly to the Committee that the sole point that I am making is to refer hon. and right hon. Members opposite to the published HANSARD? There they can see exactly the cuts which were made. Sir Stafford Cripps—[Interruption.]
The Chairman: Order. Many hon. Members wish to hear the debate.
Mr. Butler: It is not much to make a fuss about. No one respects Sir Stafford Cripps more than I do.
Mr. Gaitskell rose—
Mr. Butler: I cannot give way again. The facts are as set out in HANSARD. A reduction was made in the food subsidies.
Mr. Gaitskell rose—
Mr. Butler: I do not know how I can get the situation right to suit the right hon. Gentleman.
Mr. Gaitskell: I am much obliged to the right hon. Gentleman for giving way. Will he agree that the £568 million of which he speaks was the level to which the subsidies would have risen if no ceiling had been fixed?
Mr. Butler: I am very glad to make that clear. [HON. MEMBERS: "With-draw."] Hon. Members are quite unreasonable. I have the highest regard for the honour of Sir Stafford Cripps. I was drawing attention to the action which he took. It resulted in a severe increase
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in the price of food. It was a very courageous political act. He was bringing the ceiling down, as I said in my Budget speech.
I was saying that that cut was not accompanied by any of the concessions that we have made in this Budget. We are making a considerably greater cut and are reducing the ceiling to £250 million. I want to make it absolutely clear that we have deliberately made allowances by the increase in public assistance scales and insurance benefits.
Here I wish to reply to the hon. Member for Sowerby (Mr. Houghton) and tell him when the benefits will come into force. Our proposal to increase insurance benefits covers all benefits, sickness and unemployment, as well as the pension rate. As we have said, we also intend to increase disability and industrial injury benefits, and, as the Committee knows, we have also deliberately increased family allowances.
To answer the hon. Member for Sowerby, the Minister of Pensions has already announced that the increase in the disablement allowances will be paid from the beginning of May. The increase in the National Assistance payments will be made as quickly as possible as soon as the Government have received the recommendations of the Assistance Board and the necessary Regulations have secured the approval of Parliament.
The other payments will require legislation, and my right hon. Friend the Minister of National Insurance will introduce a Bill as soon as he has completed his consultation with both sides of industry. Hon. Members will realise that last year it took a certain time to introduce the increase then made in retirement pensions since the review of some millions of benefits in current payment is a formidable undertaking.
We expect the revised payments for family allowances and social insurance benefits all to come into force by the end of September. We may be able to start some before others; for example, sickness benefits and unemployment benefits. We shall leave the increase in contributions until all the main benefit rates have been started. In regard to P.A.Y.E. and the incentives scheme the refunds will be made the first pay day after 8th June, and the general increases will take place from that date.
Mr. Monslow: The right hon. Gentleman talks about the incentive scheme. Let us take the case of a man with £7 a week. If he gets an extra £1 a week at the present rate of taxation he will get 15s. Under the Chancellor's incentive scheme he will get 15s. 3½d.
Mr. Butler: I do not think it is quite as simple as that. I listened to the hon. Member and I do not think things are quite so bad as he makes out, nor are they as bad as was suggested by the right hon. Gentleman the Member for Battersea, North when he made out that 70 per cent. of the wages earners of this country would be worse off. The figures I have here indicate that it will more likely be exactly the opposite way round to what the right hon. Gentleman said.
Leaving aside these rather difficult details of financial calculations, which we can all make or remake—the right hon. Gentleman the Member for Leeds, South ignored at one stage of his calculations the family allowances, which is a very relevant point—I would only remind the Committee that there are about 20 million people with incomes above the Income Tax exemption limit of £135. If we count in the wives and children and dependants of these people, they cover a very large part of our population. Of these 20 million, at least 16 million are at present paying Income Tax. Every one of these 16 million will receive some measure of Income Tax relief under the Budget, and no less than two million of them will be exempt from tax altogether.
Of the four million who are not liable to Income Tax and who cannot, therefore, receive any Income Tax relief, two million are married people with two or more children, and who will, therefore, benefit from the increase we propose in the family allowances. Nearly a million of the remainder are single people, mainly boys and girls with incomes between £135 a year and £3 a week. The number of people who receive no benefit under the Budget to set off against the increased price they will have to pay for food is, therefore, very small indeed.
I have never said, and I do not think anyone in this Committee should claim,
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that after making these calculations and this statement there will be no one who will suffer. I am quite ready to believe there are several people and several families who will suffer, but I will just look for the last few minutes of the time at my disposal at the Income Tax reliefs.
Seventy per cent. of the benefits of the Income Tax relief will go to the benefit of income of less than £15 a week and no less than 75 per cent. of incomes of less than £2,000 a year. Therefore, it is not true to say that we are piling on a great deal of benefit at the top of the scales.
I think it is quite a good thing for the Committee to remember that when the right hon. Gentleman the Member for Bishop Auckland introduced his reductions in Income Tax on a figure of over £2,000, the profit made was no less than £98, and when Sir Stafford Cripps introduced his scheme the figure on over £2,000 was £86, whereas the figure in my scheme is only £54. I fail to see why a Tory Chancellor should be blackguarded by hon. Members opposite for helping the rich when two Socialist Chancellors did it much better before him.
These are some of the arguments which we and the country shall no doubt discuss one with another over the coming weeks. I will ask hon. Members to realise that in framing this Budget, as my hon. Friend the Member for Bodmin (Mr. D. Marshall) said, we have a new design, but we have the oldest tradition in the world, namely, care for those whose need is greatest, encouragement to those who work hard and those who work overtime to increase production and exports, and to save the £.
Question put, and agreed to.
Resolved,
That it is expedient to amend the law with respect to the National Debt and the public revenue, and to make further provision in connection with finance, so, however, that this resolution shall not extend to giving any relief from purchase tax otherwise than by making the same provision for chargeable goods of whatever description or by reducing the first, second or third rate of the tax generally for all goods to which that rate applies.
Resolution to be reported Tomorrow.
Committee to sit again Tomorrow.

FINANCE (MONEY)
Resolution reported,
That it is expedient to authorise—

(a) the issue out of the Consolidated Fund of the sum of five hundred and seventy-five million pounds for the permanent annual charge for the National Debt for the current financial year, instead of the sum of three hundred and fifty-five million pounds; and

(b) the payment out of moneys provided by Parliament of any expenses of the Commissioners of Customs and Excise in paying for samples taken in connection with purchase tax.

Resolution agreed to.

EUROPEAN VOLUNTEER WORKERS, BRADFORD (TUBERCULOSIS)
Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Redmayne.]
10.1 p.m.
Mr. W. J. Taylor: After the long and controversial debate which has just concluded, I wish to draw the attention of the House to a matter which is giving very serious concern to my constituents, to public bodies and to medical authorities in the City of Bradford. I refer to the high incidence of tuberculosis among European volunteer workers in and about the city.
This matter has been given considerable publicity in the last few months, many resolutions have been passed and much Press comment has been made. The Bradford Trades Council, at their meeting on 24th May, 1951, passed a resolution expressing their deep concern at the increase in tuberculosis in the city and district, and in particular made reference to the very high rate at which tuberculosis was making itself apparent among the European volunteer workers in the area.
The Trades Council passed a resolution at that meeting calling upon the Yorkshire Federation of Trades Councils to initiate a campaign to combat the disease. The medical authorities in the area whose duty it is to look into these matters reported that their difficulties were increased by the fact that tuberculosis was being virtually imported into the district.
It is right that I should say what these European volunteer workers consist of.
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It is estimated that there are 8,000 of them in the city and suburbs. They come from a great variety of European countries. There are among them Latvians, Esthonians, Lithuanians, Poles and Czechs, also Ukranians, Yugoslavs, White Russians, Italians and Austrians. I am anxious that my action in raising this matter on the Adjournment should not be taken as in any way an attack upon aliens. They came to this country when there was a great shortage of labour, or they found themselves here at the end of the war. They have helped to fill and man our industries which were very short of labour.
All the reports which I have had about their work and their conduct indicate that they have proved themselves to be good workers and good citizens. In short, they have done a good job in this country and have helped us along the way to recovery. They now feel secure in their new employment, in their new surroundings, and in their new life after the bitter memories of poverty and suffering which they brought with them.
These people arrived in this country in one or two different ways. Some found themselves here at the end of the war as a result of having served in the Polish Army. Others came under the Ministry of Labour European Volunteer Workers' Scheme. Others came by private arrangement with prospective employers. The fourth class came as refugees. Perhaps there was only a small number of the last named.
In raising this matter, I am concerned with the medical standard required of immigrants entering this country. Under the Ministry of Labour scheme all workers are examined before being accepted for employment here. Under the private arrangements made with employers, however, the onus for the fitness of the immigrant seeking to enter this country rests with the employer. Over and above all this, all foreigners coming here, whether European volunteer workers or not, are liable under the, Aliens Act, 1920, to medical examination by the immigration authorities at the ports.
It is this medical examination of immigrants at the ports that I want to see tightened up. All the evidence appears to point to the fact that many persons have been admitted to this country suffering from active tuberculosis. This fact

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came to light in Bradford in quite a regular way through the normal inquiries which the chest physicians make from time to time in that city. In February, 1951, an investigation was undertaken by the senior chest physician for the city. As a result of the report which he made following that investigation, the Medical Officer of Health was asked by the Tuberculosis Sub-Committee of the Bradford "A" Group of Hospitals to press the Ministry of Health for stricter medical screening of European volunteer workers entering the country.
During the investigations the chest physicians at the Bradford Chest Clinic found a high incidence of active tubercular disease among foreign workers sent to the clinic by general practitioners and hospitals. The Medical Officer of Health reported in these words:
"It is regrettable to have to record that there are many infectious cases in their own homes in most unsatisfactory conditions, sometimes occupying the same room and even the same bed as susceptible children."
It is a fact that the bad housing conditions in Bradford have been a contributory factor to this unfortunate state of affairs. It is also a fact that the introduction of the National Health Service divorced the preventive from the curative service. The management of the hospitals had been transferred to the Leeds Regional Hospital Board, and a large waiting list was in existence for admission to sanatoria.
I ought to mention that the City of Bradford has a very unfortunate record in post-war housing. For some years after the war, Bradford did not compare favourably so far as housebuilding was concerned with any city of comparable size. I am glad to be able to record that as the result of the policy of my right hon. Friend the Minister of Local Government and Housing, the situation is now improving. There is no doubt, however, that the introduction of a large number of aliens into the district has aggravated the housing problem. After all, 8,000 aliens in one area is a very large number to bring in.
The figures produced by the medical authorities showed that there was a higher incidence of pulmonary tuberculosis out of all proportion to that in the normal population. A member of the Hospitals Committee said:
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"We are doing everything we can to deal with our own patients. Our sanatoria are full, and yet we are importing patients from abroad."
Following those remarks in public, the Ministry of Health instituted a local inquiry and the Ministry's inspectors visited the city.
Mr. Jack Jones: The hon. Member has already said that the Ministry of Labour examined the mass of those who came in under the two particular schemes. It would be interesting to know who was responsible for the bringing in without adequate supervision of these people, particularly domestic servants, and so on.
Mr. Taylor: I have indicated how and under what arrangements these people came in, either under the official scheme or under the private scheme, or found themselves here at the end of the war. It is not possible to break down the figures to show the number of active cases in each class, but if the hon. Member will be patient I think I shall be able to indicate where, I feel, the trouble lies and how it should be put right.
In reply to Questions in the House on 19th April, 1951, the Minister of Health gave figures for pulmonary tuberculosis among foreign workers in the City of Bradford as having risen from nil in 1947 to 10.4 per cent. of all notifications in the city in 1950. The Minister further stated that he was examining with other Ministers concerned how he could avoid any immigrants entering the country with the active disease. He indicated that it was virtually impossible by way of answering a Member across the Floor at Question time, to give the full information which it might be felt was necessary. The whole object of my raising the matter on the Adjournment is to inquire of the hon. Lady the Parliamentary Secretary to the Ministry of Health, who is to reply, whether anything towards a solution of the problem has been done since I put my Questions in the House.
The figures are very interesting. Early last year, of 225 cases sent to the Tuberculosis Officer of the Corporation, 52 were found to be positive and 21 were suspect: and in the latter part of last year, 29 other active cases were added to the list. These figures were a very great shock to the city, to the public and to me.
This may interest the hon. Member for Rotherham (Mr. Jack Jones). Half the

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positive cases to which I have referred were European volunteer workers who had come in either under the official scheme or under private arrangements, and the others were ex-prisoners of war or ex-members of the Polish Army.
What is more alarming than the local figures is the thought that perhaps what is happening in Bradford may be happening elsewhere. The mass radiography survey of 1946 revealed that there was an incidence of 0.4 per 1,000 patients examined who had the active disease. In 1950 that figure had risen to 1 per 1,000 examined; that is more than double the rate of incidence in a period of four years.
The history of the 57 cases I have mentioned is very interesting. All their movements have been traced and there is medical evidence in my file to show that at least 11 cases had the active disease on entering this country, that one reported to the chest clinic for an artificial pneumothorax refill within 14 days of arrival and that this was induced in Germany six months before that person's arrival in this country.
Four other cases gave history of previous treatment in a sanatorium. In one case the doctors were informed that there had been recent injections treatment for tuberculosis and in two other cases there was evidence of recent pleural effusion and in one case evidence of dry pleurisy.
The facts and figures and all the circumstances of this very complete survey were submitted to the Ministry investigator by the senior chest physician of the City of Bradford in the presence of the medical officer of health and a medical representative of the Leeds Regional Hospitals Board. It was stated when these facts were pointed out to the Ministry that all European volunteer workers here under the official scheme—this again applies to the question raised by the hon. Member for Rotherham—were X-rayed before admission.
I have several suggestions to make for the alterations in the procedure for medical examination of emigrants at the ports and in doing so I would like to press for the implementation of the resolution of November, 1950, of the General Tuberculosis Council, which read as follows:
"That a letter be sent to the Secretaries of the Ministry of Health and the Ministry of
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Labour asking that the procedure for the medical examination of immigrants be altered to provide (1) that X-ray photographs taken in the country of origin should be read by doctors of consultant rank in this country and (2) that a large X-ray photograph should accompany each emigrant and (3) that unless these regulations be complied with the person be not allowed to land."
I believe that in other countries the standard of these medical examinations of immigrants is very strict indeed. In Canada the examination is by Canadian doctors, or approved doctors, prior to sailing. The Aliens Order, 1920, says that entry of a prospective immigrant suffering from tuberculosis to this country is forbidden, but I am not satisfied that the examination is sufficiently strict and the evidence I have produced sustains this.
In conclusion, I seek an assurance from the hon. Lady that steps are being taken to tighten the regulations governing medical inspection of immigrants. In doing so I wish to reiterate that my only anxiety in raising this matter is to protect the health of our own people; particularly those constituents of mine who have to work in the closely confined atmosphere of the textile mills, and who run the risk, not only of contracting infection themselves, but of carrying it to their families. I feel that if as a result of this short debate we can establish medical examination conditions which will preclude any risk whatever so far as medical science can provide, our time will not have been wasted.
10.20 p.m.
Mr. George Craddock: I wish to thank the hon. Member for Bradford, North (Mr. W. J. Taylor) for having introduced this matter. I understand that, arising out of war conditions, we agreed to take into this country so many Poles and other people who were without homes. Last year I put a Question to the Minister and was amazed to receive the reply that only the particular person coming to work and not his family were examined before entering the country.
It seems astonishing to me that of a whole family only the person who comes here to work is examined before they enter the country. If only for that reason I am delighted that the hon. Member has raised this matter, and I wish him every success in his efforts.
10.22 p.m.
Mr. Jack Jones: I rise to congratulate the Member for Bradford, North (Mr. W. J. Taylor) for raising this very important issue and also to congratulate the Parliamentary Secretary to the Ministry of Health, who is to reply, as I understand that it is her birthday today. In the midst of all our political acrimony we would wish her all that she would wish herself on such an auspicious occasion.
The hon. Member for Bradford, North, has raised a very vital question and I hope the hon. Lady will be able to assure the House that some effort is made to ensure that conditions are similar for those who come into the country under official schemes, and who are examined at the point of departure and arrival, and those who come in under private domestic service schemes.
It would appear that there are a number of loop-holes which are utilised by people in Bradford to obtain domestic servants. Some of these people who come into the country under such schemes have married the sons or daughters of Britons, and have created something of a menace in many parts of this country, including places like Bolton.
10.23 p.m.
The Parliamentary Secretary to the Ministry of Health (Miss Patricia Hornsby-Smith): I wish to thank the hon. Members who have raised very interesting points on this important subject and also, if I may, I would thank the hon. Member for Rotherham (Mr. J. Jones) for his felicitations on another matter.
Hon. Members will be aware of the Government policy of strengthening the labour force and bringing in foreign workers under officially sponsored schemes. I think it is true that in the early years there was no check on the health of those coming into the country and, having regard to the conditions during the war and the privations which many of those workers suffered, there was a higher than average incidence of T.B. among them.
As a result of the findings when those workers arrived here, action was taken in association with the Ministry of Labour and National Service in June, 1948, whereby all newcomers arriving under official arrangements would be
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X-rayed and examined at the transit camp on the Continent before coming to this country. I think it fair to say that the incidence of T.B. has been remarkably lower since this check was instituted.
Looking at the figures for Bradford, which we have obtained from the records of the medical officers of health, of 50 E.V.W.s found to be suffering from T.B. in Bradford, 41 of them came to this country before 1948 and before the check was instituted. It is also not certain that all of them had it before that time. Indeed, there may have been some who contracted it since they came here.
It may do much to dispel some of the alarm which may unwittingly have been engendered by some of the remarks made this evening if I give an analysis of all foreign workers who have come over to Bradford and who have been found to be suffering from tuberculosis. In the four years, 1948, 1949, 1950 and 1951, there have been 73 foreign workers certified as suffering from pulmonary tuberculosis. They fall into four categories—ex-prisoners of war and former members of the Polish Armed Forces, 13; persons on a Ministry of Labour permit coming in for specific jobs, three; cases which cannot now be traced and classified, seven; and E.V.W.s sponsored by the M.O.L. schemes, 50, of whom 41 came in before the checks were made.
Of the first category of 13—the ex-prisoners of war and members of the Polish Armed Forces—I think it will be accepted that in providing post-war resettlement for them it was not feasible to make asylum conditional on medical examination. That is an instance which is not likely to be repeated. The number of those cases will not grow. Of the E.V.W.s, 41 came before the institution of the check and only nine afterwards. All workers are now checked in camps in Europe before being allowed to come here.
The main part of the debate has centred around those who came in on individual Ministry of Labour permits without being checked. I think it is fair to point out that the total in four years in Bradford is only three. I should not like to be exaggerated so that it spread alarm in the bon. Member's constituency. The matter was fully considered by our predecessors at the Ministry and, following

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the Question by the hon. Member for Bradford, North (Mr. W. J. Taylor), we have had further consultations with the aliens department of the Home Office and with the Ministry of Labour on the points raised by the hon. Gentleman in his supplementaries to that Question.
We were anxious to decide whether it would be possible to take special steps about every individual foreigner who comes into this country to take up employment of any kind. Under both the present Government and under our predecessors at the Ministry the closest consultations have taken place. We have come to the conclusion that it is impossible to carry out such a medical inspection at the port because the facilities there are inadequate for the purpose of ascertaining whether or not the immigrant is suffering from tuberculosis. They cannot there make a full diagnosis of tuberculosis which in some cases may be symptomless and which calls for specialist clinical investigation. It is, therefore, outside the scope of port medical inspection.
The other point suggested by the hon. Member was that we should make incoming aliens produce evidence at the port of entry that they are free from any form of tuberculosis. After consultation, we have come to the conclusion that such a measure is not practical. It would involve medical and administrative organisation out of all proportion to the extent of the risk which it is intended to prevent.
It is a very easy matter when all these people are in a central transit camp with an X-ray unit on the spot—when there are large numbers of people being moved as the E.V.W.s were—to make the full investigations. But we have not found it practicable to provide for each new person coming in to be treated in this fashion.
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There is further the deterrent effect on the foreign workers voluntarily seeking employment in this country—employment which the Ministry of Labour and National Service has decided they shall be allowed to take up—if we did insist on a medical examination prior to their coming here.
I should like to reiterate that in four years the number has been only three. In Bradford, in particular, this matter was a legacy of a post-war period, when they gave not only asylum to members of the Polish Resettlement Corps, ex-prisoners of war but also took in many European volunteer workers. If one ignores the 13 prisoners of war and members of the Polish Armed Forces and the 41 who came before 1948 without a check, then in four years there have been 19 cases amongst foreign workers coming into Bradford.
The hon. Member also raised the question of housing, which he will appreciate is a matter for another Department. Viewed against the marked improvement in the general situation regarding tuberculosis, the substantial fall in mortality reflected in Bradford's figures, the progress in early diagnosis and treatment and the reduction in the waiting lists, I can assure hon. Members that we are alive to this problem and are doing our utmost.
In conclusion, I would say that in Bradford deaths from respiratory tuberculosis have fallen from 47 per thousand in 1946 to 35 per thousand in 1950. That city's record compares very favourably with that for the rest of the country.
The Question having been proposed after Ten o'Clock, and the debate having continued for half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at Twenty-nine Minutes to Eleven o'Clock.