FINANCE BILL

HC Deb 13 July 1953 vol 517 cc1722-96

Order for Third Reading read.

3.35 p.m.

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

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

The House now enters upon the last lap of our discussions on the Finance Bill which it began three months ago less one day. The Third Reading of the Bill generally, and I think conventionally, has perhaps rather the character of a formal exercise than of a pitched battle. One of my hon. and learned Friends, in the course of professional practice at the Bar, was once told by a very eminent judge that in his argument he had said all, and more than all, that could be said on behalf of his client. I am inclined to think that all, and more than all, that can be said about the Finance Bill has already been said.

My right hon. Friend's proposals, which he opened in that memorable speech just three months ago, have been subjected to a very proper but very meticulous examination. Every Clause of the Bill has had justification demanded and I suggest to the House that that justification has been given. There is no doubt at all that, in accordance with our time-honoured and, I think, most admirable practice, my right hon. Friend's financial proposals for the year have been subjected to the real test of Parliamentary analysis. They have been through the fires of criticism, though I must say that they seem to have emerged a little brighter for that.

A good deal of the criticism which has been levelled at them has been of that rather agreeable character which starts on the basis that the proposals are so obviously good that my right hon. Friend is urged to go even further in the direction which they indicate. That, though it is a matter perhaps of judgment as to the extent to which they can be extended, none the less is a type of criticism which is sometimes not wholly disagreeable to the Government of the day.

The Bill has shown less physical change than most of its predecessors of recent years. It began with 33 Clauses and two Schedules and comes forward now for Third Reading with 35 Clauses and three Schedules, symbolising, perhaps, my right hon. Friend's success in combating inflation. Indeed, it is an interesting reflection that whereas last year's Bill was of such a size at this stage that Her Majesty's Stationery Office had to charge 4s. for it, hon. Members can purchase the present Bill for the much smaller sum of 1s. 3d., thereby again symbolising my right hon. Friend's success in the realm of prices.

None the less, I am very happy to concede that, during the debates, and as a result of suggestions made from one side of the House or the other, improvements have been made in the Bill. Indeed, hon. Members who have seen my right hon. Friend's conduct of two Finance Bills have noticed the full use that he makes of the Parliamentary process in improving his Measures. But, notwithstanding that, the main features remain, I think I can claim, substantially as they were expounded in the Budget speech.

There remains the conspicuous features of the solid reductions in the burden of direct taxation upon industry and the individual, the stimulus to investment of the restoration of initial allowances, the removal from both industry and the consumer of at least some of the burden of the Purchase Tax. Each and all of these are part of the process, which my right hon. Friend initiated last year, of working towards a more freely functioning and less heavily burdened economy, to a more competitive economy in which enterprise would not be denied opportunity nor hard work and hard thought their just reward.

These alleviations will still leave us, relative to our resources, the most heavily taxed nation in the world, a state of affairs which is inevitable while we simultaneously maintain a massive defence effort and maintain and improve our incomparable social services, but they do leave the burden less heavy than it was on the taxpayer, with a sense of movement towards freedom and opportunity, and a sense, too, that the Government of the day understand and sympathise with the very heavy burden which the British taxpayer has carried, all but uncomplainingly, for a good many years now.

This lightening of the load has been well and humanly spread. The reduction in the standard rate of Income Tax and in the rates of tax at each of the three reduced rates, has given some relief to every actual payer of Income Tax in the country—some 16½ million people—with, of course, a proportionately bigger relief in the tax burden at the bottom of the scale. The reduction of the standard rate of Income Tax has, at the same time, relieved industry of a burden of £45 million a year. The decision to bring the Excess Profits Levy to an end at the end of this year is a particular encouragement to the up and coming industries or the expanding concerns. The bringing back of the initial allowance will play its part in encouraging investment.

The widely-spread Purchase Tax reliefs which flow from the reduction of the three main rates will bring help in a direction in which it was not possible to bring it last year. Indeed, we have been attacked because some of this relief has gone on Purchase Tax at the highest rates, and, during the debate, it has been suggested that there was no justification for such a concession in the direction of what might be described as luxuries. No product is a luxury to the man who earns his living by making it, and many of the industries in this particular category are industries in which this country owes, and will continue to owe, a great deal to the skill and craftsmanship of workers, managers and designers. So far as the highest rates of Purchase Tax are concerned, some relief is brought to a number of our most ancient and our most skilful industries.

The consumer, equally, will benefit from the reductions which follow in the price of certain articles which he, or, in this context, perhaps more relevantly she, will buy. The human needs of many most admirable citizens are also helped by the increase in the limits for age relief from £500 to £600, while, at the other end of the age scale, the relief which was introduced on the Report stage and which flows from the doubling of the amount which apprentices can earn without depriving their parents of the child allowance, will bring a good deal of help to a considerable number of families.

At the same time, the increase in the allowance for dependent relatives, and in respect of a daughter who works at home, will again bring help to a good number of people who have found conditions difficult in recent years. That is why I say that, apart from the broad economic plan, not only have these reliefs been spread in the directions which we think will be of the greatest economic benefit to this nation, but steps have also been taken at one and the same time to try to give them in many directions in which hardship can be relieved.

On the more technical and complex part of the Bill, the House will recall the changes, many of them the result of the patient inquiries of the Radcliffe Commission or the Millard Tucker Committee, for relieving the various difficulties or inequities in our system of taxation, and, in particular, the examples which we have chosen in many cases are examples that will give some assistance to those of our adventurous fellow-citizens who trade abroad. For the farmers, there is again the welcome extension of the opportunity to use the herd basis when foot-and-mouth disease strikes their herds, and, at the same time, a very different section of the community—authors—have benefited from the proposal with respect to the spread of their taxation.

In the field of Entertainments Duty, my right hon. Friend has made a very helpful concession to those who play games themselves by the granting of the amateur concession in respect of Entertainments Duty, and, at this moment, if the climate of Manchester permits, a Test Match is being played under untaxed conditions. I put in that hypothetical climatic condition with due respect to that ancient and distinguished city.

Other points which mean a great deal to certain sections of the community are the provision, which has been advocated for many years, by which the contents of houses can be taken in settlement of death duties, as well as the houses themselves, and, similarly, helpful reliefs have been given by way of Stamp Duty to local authorities taking advantage, as so many appear to be, of their new freedom to borrow on the stock market, and, at the same time, to help the National Savings movement, to which this country owes so much, by freeing a good many of its documents from Stamp Duty.

In these smaller and more technical ways, the broad picture of my right hon. friend's proposals has been filled in, and although this Bill, in physical bulk, is slimmer than many of its predecessors, it is perhaps all the more athletic for that, and it is certainly the case that, apart from the major issues to which I have referred, a great deal of detailed care and attention has been given to particular, special and perhaps rather technical issues.

Just as the ornamentation of the façade of a great building can obscure the strength and clarity of the architectural plan, so I suppose these details can, unless they are treated as details, mask the clarity and the design of my right hon. Friend's proposals. These main proposals are based upon the fact that last year's measures, supported by the monetary policy of which my right hon. Friend resumed the use, have checked the conditions which required a certain aridity in our budgeting and enabled my right hon. Friend to proceed at this stage in a way calculated to reinvigorate our economy.

They take into account the fact that our economy is ultimately run by human beings with the human desire that their efforts shall bring to them and to their families increased rewards as their efforts increase and that, whatever the plans of theoretical economists may dictate, if one ignores that instinct to assist oneself and one's family, which is, of course, the dynamic in a free enterprise society, plans, however pretentious, will fail against that human element.

The proposals of my right hon. Friend take full account of that human element and take advantage of the conditions, to which his policy has worked, which have enabled these measures to be taken in this Bill towards both the stimulation and the freeing of our economy. They have taken into account the great danger, as many of us see it, of a period of exceptionally high taxation and excessive restrictionism too long prolonged, with the damage which such a state of affairs produces in damping down the spirit of initiative and enterprise without which our complex modern economic society will not work.

Therefore, having overcome many of the problems which necessitated a strict low diet, my right hon. Friend has, perhaps, enriched a little the national mixture and taken into account the need, not only in the abstract sense, to stimulate investment, but, in the very practical and human sense, the need to stimulate the taking of risks, the acceptance of extra responsibility and the doing, where opportunity offers, of extra tasks. The attraction of the central theme of the proposals of this Bill will be inadequate unless it takes into account the fact that it consists not only of nicely calculated economic measures, but of measures calculated to take into account that human and humane consideration without which the very best of economic planning will fail.

Mr. Anthony Crosland (Gloucestershire, South)

Hear, hear.

Mr. Boyd-Carpenter

I am delighted that the hon. Gentleman, after some years in the wilderness, has seen the error of his ways and has shown a becoming humanity which some of us on this side have not always been able to detect behind his sombre features.

But this Bill offers—and this is really its essential point—initiative and opportunity such as our people have not known for 14 years. It will succeed if that opportunity is taken. I believe that our people will take the opportunity which the greater freedom and the lightening of burdens that this Bill involves offers to them, and that if they take that opportunity this Bill will mark a not unimportant milestone on the path of our upward course to recovery.

3.52 p.m.

Mr. G. R. Mitchison (Kettering)

Neglecting, for the moment, some of the higher theology so persuasively expounded by the Financial Secretary, I agree with him on one point. This is a slim Budget in many senses of the word. I noticed in one of the newspapers this morning a picture of his right hon. Friend the Chancellor of the Exchequer, who was engaged with his right hon. Friend the Minister of Supply in a bargain sale of iron and steel, and I was amused to hear that this picture was reflected when the Financial Secretary told us that one of the main attractions of the Finance Bill was that one could buy the whole of it for 1s. 3d. There has been, as the caricature portrayed, a smashing reduction in prices.

I think that the Minister of Supply was very well advised to consult the Chancellor because the Chancellor is an expert in shop window dressing, and I find in this Finance Bill a number of perfectly obvious selling points. The first of them, of course, is the reduction of Income Tax. The next, I agree, is the reduction of Purchase Tax, and the third is initial allowances.

It required my astute and hon. Friend the Member for Gloucestershire, South (Mr. Crosland) to point out earlier in these proceedings that two of those concessions, and one other elsewhere in the Bill, were simply the withdrawal of measures which had been put on temporarily for the purposes of an exceedingly swift and heavy rearmament programme and that what, in fact, had happened was that as the rearmament programme became less swift, and, therefore, from year to year less heavy, it was no longer necessary to keep that exceptional taxation for that purpose. That, of course, applies to the 6d. on the Income Tax which was put on in 1951. I quite understand that in those circumstances, and having regard to that change, some lightening of the burden, some shifting of the load on the camel, as the Financial Secretary seemed to put it, was quite possible.

I shall not repeat at any great length what is so obvious about that method of doing it because it has been said several times already, but I want to point out that whatever one may say about this method of taking off some of the Income Tax burden, the results of so doing are, from the point of view of the ordinary man, perfectly obvious. I will take no exceptional example of people with exceptional incomes. I will simply take the most common case of all, the ordinary married man with an ordinary family which is statistically, I believe, somewhere about two children.

If such a man is getting £10 a week—and, after all, that is the kind of thing one has to consider—he benefits by exactly 1d. a week out of this reduction—4s. 4d. a year. Double the income, and he makes £10. Double it again to £2,000 a year, and he makes £30. Bring it up to £5,000 a year and he makes £100 out of this reduction. That shows quite clearly that this is not a matter of percentage, but a question of where the burden is to be lightened, and that the amount taken off the shoulders of the wage earner, even the skilled wage earner, by this concession is negligible.

The benefit derived by the man with a moderate income is moderate, but I need hardly say that in the case of the fortunate recipient of an astronomical income, the benefit conferred on him is an astronomical one. Let us leave him out for the minute and let us take the ordinary people in the country who are, after all, the bulk of the taxpayers. As far as they are concerned, there would have been at least two far better ways of disposing of this Income Tax concession of £89 million, and both have been suggested in the course of the discussions on this Bill.

One of them would have been to have raised even further the limit of income and thereby to have relieved a number of people at the bottom of the scale from paying Income Tax at all. These are the people who, the longer the Labour Government were in power, found their numbers increased by successive changes of that kind, and the people from whom, on the whole, it costs most to collect Income Tax, and whom, I should have thought, were quite clearly entitled to at least their fair share, and even more than their fair share, of whatever concession is given. I say more than their fair share, for the reason that if this was intended to be a Budget of incentive then it seems to me that the incentive to be obtained in that way would have been far greater and wider in its operation than anything which could have been done merely by altering the rate of tax.

Another method equally far more fruitful in its incentive effect would have been to increase the earned income allowance. That, again, was suggested in the course of our debates. It would have cost out of that £89 million—with a corresponding increase for small incomes—a little over £50 million, and I venture to think that the effect of it by way of incentive would have been far more direct and that its result would have been far more effective. At this stage of the Bill I cannot go further, obviously, into suggestions of that sort. I wish to say a few words about the other selling lines.

We have had a general reduction in all three rates of Purchase Tax and they seem to raise a question of principle—the Financial Secretary likes questions of principle—rather similar to that raised by the initial allowances. The effect of a general lowering of Purchase Tax is similar to the effect of a lowering of the rate of Income Tax in the respect I have just been discussing. It confers a benefit or gives an alleviation which is greater, the greater the sum involved. Consequently, to those who make few and humble purchases the advantage is less than to those who make many and more costly purchases.

This concession corresponds in the field of expenditure exactly with the concession in Income Tax. It reflects the same policy and the same view of life, and to the ordinary man it has exactly the same disadvantages. Instead of taking altogether out of the scope of Purchase Tax the ordinary and common things in use, as was done from time to time when the Labour Government were in power, the Chancellor has chosen the simpler method, and the better selling line, of a general lowering of Purchase Tax, and has conferred a benefit which is the more extensive the larger the expenditure.

How a relief of Purchase Tax in that form can be said to promote national economy, and the savings which I thought were as dear to Government supporters as they are dear to us, I absolutely fail to understand. It is easy in practice, effective as a piece of propaganda and exactly right as a selling line, but dead wrong in principle. It is unfair to the ordinary humble purchaser by comparison with those who happen to be able to afford to spend more. Here, again, is a simple sweeping change.

Now I come to the initial allowances. I do not forget what the effect of the change in the Income Tax is, as the Chancellor said: I shall have put some £45 million in the way of the undistributed profits of industry by way of relief of tax."—[OFFICIAL REPORT, 11th June, 1953; Vol. 516, c. 548.] That phrase is very interesting. That is one form of relief for companies. Another is the initial allowances. The first question I asked myself about the Income Tax relief, talking of companies is, "Do companies need that form of relief at the moment?" I doubt it. It will be welcome, as any relief of taxation is welcome, but that there is a shortage in undistributed profits is not borne out by the figures of cash returns and similar items, which, making allowance for loans and overdrafts, improved steadily during 1952. The indications are that they are growing at the moment, but the companies are being given £45 million relief of Income Tax. What will they do with it? What inducement is there for them to use that money in the way in which it ought to be used, to promote more investment?

I wish that more had been done by way of initial allowances. This is a halfhearted restoration as regards the largest group of initial allowances, that is, for plant and machinery. These are restored, but only at half the level at which they were taken off in 1951. We would rather that initial allowances were more discriminatory and not less. They are a discriminatory concession both as between buildings and plant and machinery, and as between plant and machinery and mining. The Government are asked to take one step further through the Finance Bill and deliberately to encourage the aims to which we used to hear lip service from hon. Gentlemen opposite, but from whom we have met with a sudden and unreasoning objection to discriminatory taxation.

I take the view, and I hope I have a considerable amount of support for it, that this discriminatory taxation is the legitimate and proper weapon to be used in the national interest, especially at this time. After all, a Finance Bill of this sort is a bit of a gamble, and the future for the next year or two is highly uncertain. If concessions are to be made, they should be made specifically to encourage one or two of those things. This is the kind of thing that the Chancellor has been recommending the banks to do in the distribution of their advances; why should he not follow out his own precepts and use taxation for giving further encouragement?

I have in mind increased production in all sorts of ways, for example, in fuel-saving machinery. It is not increased production, in a sense, but it comes to the same thing. The same is true of mechanical handling and half-a-dozen other things. It is just the kind of thing to encourage companies to put their money into at the moment, and if we see that it is usefully done who shall say that it does not serve a good purpose?

What about exports? We have heard a lot about the distribution of initial allowances in that direction. Again, what about the Commonwealth and its development? Is it only lip-service that we should pay to it? Are we to throw away a chance when we have it, in these initial allowances, to give very great encouragement to the Commonwealth? These Budget concessions look very large when we are dealing with matters of initial allowances and capital investment which will' have to be on a very large scale, but what could be done in this country would not be enormous; yet it would be something. It would be valuable at a time when things are moving. The world is at the-stage when a helpful push here and there-might make a lot of difference to the future of our country and other countries which are bound up with us.

I have been dealing with some of the selling lines, but I should not like to leave this Finance Bill without one or two short and general comments about the rest of it. I have been looking through the various Clauses. First, I find in Clause 5, which has to do with the duty on trailers to motor cycles, in Clause 7 which gives-exemption from Entertainments Duty to amateur sports and entertainments, and in Clause 8, which exempts cricket matches from Entertainments Duty, three-instances of exactly the same fault. Theseare three cases in which the Government have gone just far enough to put themselves into a wholly untenable position-for the future and have not had the courage to go the whole way.

The case of the trailer is a small matter, but there is no rhyme or reason in lowering the duty on trailers attached to small cycles and refusing to do the same in the case of the larger cycles. We have discussed the duty on amateur entertainments very fully and I shall not repeat that discussion now but this is, as the Chancellor himself has fully and openly recognised, a case for a little generosity in the interests of the drama and opera conducted by amateurs. The Government have been too close on definitions. The Treasury mind has been in operation again. I hope that the Treasury heart, if the Chancellor keeps it, will have a go next year and complete the work that has been begun.

Then there is the exemption granted to cricket. I confess that I was a rather bad hand at cricket and not very good at quite a number of other games, but why this absurd distinction between one case and another? Why refuse, in the-case of other games, what is conceded in the case of one? The Government can argue about it, but when they are driven to say that the reason for it is that Commonwealth cricket, if I may so refer to it, is a different matter from Commonwealth rugby or Commonwealth some other game, they are driven to the kind of position which they are not going to hold for very long in this country.

I am quite certain that next year, the Chancellor, whether he likes it or not, will have to go a little further that way under the pressure of opinion from large numbers of people who are more concerned with our more plebeian games than cricket always is. I know that cricket appeals to almost everybody, but there is a strong case for many other games, not least for ordinary football.

Next, I take another group of Clauses and I come to another matter that really troubles me. They are a highly technical lot of Clauses and my hon. Friend the Member for Islington, East (Mr. E. Fletcher) in this respect, as also in connection with the film duty earlier in the Budget debates, made a very useful contribution, as I am sure the Government will acknowledge. Clauses 19 to 26 are tough eating. They took a lot of time to understand and I find that they are still very difficult. But my simple mind reaches one conclusion—that out of those eight Clauses only two are designed to stop loopholes and the other six consist of concessions.

That is not quite good enough. There are more loopholes than that and in stopping one of the loopholes we found a very curious position. It had been open for so long that it could not be stopped at once because a number of people were half way through the loophole and it would not be fair to them. The Government really must be careful of the reputation of the Tory Party. There are quite a number of people who think that the Tory Party are much more concerned with giving concessions than with stopping loopholes. This kind of thing will encourage that belief.

I ask for the Chancellor's sympathy in one respect. It is incredibly difficult for an Opposition, tied by the very proper rules of procedure in connection with finance, to do very much in this respect. It has to be done by the Government. If we wanted to limit expenses we should have to put an additional charge in the Finance Bill and we cannot do so. We are driven to all sorts of expedients to raise the matter as it ought to be raised.

It is up to the Chancellor and up to the Tory Party, with their somewhat unfortunate reputation in that respect, to have another look at this question of expenses and to remember that there are two types of people concerned. There is the man who is taxed on P.A.Y.E. and incurs what he regards as proper and necessary expenses and is not allowed them as the law stands, and there is the man who is allowed to make very considerable deductions and sometimes, I understand, makes even more considerable ones on his own from his earnings or from the earnings of a company with which he is concerned under Schedule D

These seem to me to be matters of great importance. All that one can say at this stage is that a couple of long stops in the whole of this rather large cricket team are not very much. I hope that the Chancellor will have a rather fatter Budget in form next year, if he is to provide for this matter properly. I agree that two long stops are rather an unusual allowance in cricket, but in a Finance Bill we should have many more. The Budget is certainly a good selling line. It is not for me, at the moment, to say how far the taking of risks of the sort involved in the Budget was justified or not. That would involve an inadmissible discussion of what had happened to stocks, what was the world background and a whole host of things that have been discussed already.

If, having pushed aside for the moment the head salesman or his assistant, with their wealth of language and a certain persuasiveness, one turns to the real root of the matter, one finds at the end that this is a soft Budget, a soft Budget in a Tory way because its concessions are, in the main, in favour of the fairly prosperous. It declines to use the fiscal weapon to give a direction as to the way in which investment ought to go, particularly in the matter of initial allowances, and, lastly, it is slow either to go the whole way in the small matters that I have mentioned or, in the last resort, to be assiduous and searching in stopping gaps in taxation and expenditure which we all know still exist.

4.20 p.m.

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

The hon. and learned Member for Kettering (Mr. Mitchison) referred to the standing of the Conservative Party in the country. I can well understand his concern in that matter at the present time. He did not see fit to pay a tribute—and perhaps this is understandable, sitting where he does—to my right hon. Friend the Chancellor of the Exchequer for the extraordinary difference in conditions today compared with what they were a year ago when we were discussing the Third Reading of the Finance Bill and when a run on the £ was not considered to be out of the question. The £ abroad now has a degree of confidence which has not existed for a long time.

I remember once being told that Charles James Fox said of one of Nelson's victories that the advantage to the country was so great that even though it enhanced the credit of William Pitt it must be welcomed. I think those sentiments are probably reflected in the feelings of the right hon. Member for Leeds, South (Mr. Gaitskell) today. That is perhaps how he feels about my right hon. Friend the Chancellor.

I think both of us agree that the Finance Bill is the principal instrument by which the Government carry out their economic planning. It is its job to see that there is a balance between the demand for goods and the supply of them so that we do not get either a glut with all the unemployment and poverty which inevitably follow or an inflation, which could so entirely dislocate the economy of the country.

This Government has a very much harder job in these days than any Government has had before. Before 1914, our resources abroad were so enormous that we were able for each of the five years preceding 1914 to invest abroad £200 million and to invest at home a further £150 million—vast sums when we think what prices were in those days. After the war we were assured of our necessary raw materials by gifts and loans from the United States and elsewhere. Now we can only get those raw materials which are absolutely essential to us by earning them abroad—

Mr. Speaker

I would remind the House that we are now on the Third Reading of the Bill, and these wider economic considerations, though of great interest, are out of place on the Third Reading.

Mr. Spearman

With all respect, Mr. Speaker, I thought that one of the principal themes of the Finance Bill related to how we can expand our exports. I was, therefore, coming to some tentative criticisms of the Finance Bill inasmuch as it did that. I was going to say that last year we had a substantial balance of, I think, just under £300 million, but that that was to a considerable extent composed of aid and the economy in financing stocks in the pipeline due to the reduced price of imports.

I think that the best authority which I can quote as to how successful the Finance Bill is in achieving its object during the current year is the "Bulletin for Industry," which says: It will not be known with any precision until later how the United Kingdom current account has been progressing this year, but the latest figures leave no doubt that more exports are needed and that they will be difficult to get. I am inclined to guess that at present we are running only about level, and I think that that gives cause for anxiety whether this Finance Bill has been as stern in restricting consumption as is necessary in the present circumstances. Imports are now higher than they have ever been in this country before, except for a brief period during the third quarter of 1951. Our exports are not showing that buoyancy that we all want them to have and which we hope this Finance Bill will bring about. Mr. Speaker, if it is out of order to talk about exports and imports, I shall find it hard to make my speech. May I take it that that is your ruling, Sir?

Mr. Speaker

I am sorry to have that effect upon the hon. Member, but on the Third Reading of a Bill we are confined to what is in the Bill. If the hon. Member finds something in the Bill which enables him to make the sort of observation he desires on exports and imports, that will be in order. I find myself in some difficulty in connecting what the hon. Member has been saying with what is in the Bill.

Mr. Spearman

Then I must cut out a great deal of what I was going to say, and merely say this. I think it is absolutely vital that either we should increase our income by selling more abroad or decrease our expenditure by spending less at home. It certainly would not be in order on the Third Reading to make constructive suggestions how that should be carried out, but we did have a long discussion on Clause 34, so I think I would not be out of order in referring to the monetary weapon. That was most effective last year, but I suggest to my right hon. Friend that he should make more use of that at the present time.

I am not suggesting that my right hon. Friend should raise the Bank rate. I think that might be necessary at a later date, but I suggest that he should instruct the banks to reduce the amount of credit available, because in that way I believe he will discourage manufacturers from unnecessarily stocking up and I believe, also, that it is the most effective way of sifting the sort of investment that we have. I know that the right hon. Member for Leeds, South believes it would be far better to do it by direction, but I suggest that the sifting of a high interest rate is a more effective weapon than for the Government to plan what they think best; certainly, Government plans for investment have proved singularly ineffective in recent years. But the monetary weapon must not bear too great a responsibility, and it is vital to have a reduction of expenditure.

This is obviously not an occasion on which I can expand on what expenditure can best be cut, but I would say that there is almost nothing which would not be worthwhile sacrificing rather than running into a crisis of such a kind that we should have heavy unemployment. I do not predict that a crisis is certain to come, or that it is imminent, but I do say that there is a danger of a balance of payments crisis, and indeed I think my right hon. Friend in his speeches has continually shown that though he is very naturally gratified, he is certainly not satisfied with the present situation. I believe that the present rate of imports, which is rising so fast, can only be justified if we have the confidence of selling more abroad, which does not seem to me to be altogether reasonable today.

Hon. Members, wherever they sit in this House, if they are sensible people— and in spite of anything that may be said of us I think that most of are fairly sensible—tend to magnify their differences when they talk in the Chamber, to an extent which is out of all proportion to what those differences are when they discuss them outside in that good fellowship which is absolutely vital if Parliamentary government is to prosper. It can be of no consolation to any party if we should ever have a really disastrous crisis. It cannot be a consolation that one party is embarrassed to anyone in any party that has the nation's interest at heart.

The Government can precipitate a crisis by extravagance, or by not taking the proper measures but I believe there is a limit to what the Government can do by legislation or by administration. It is only with the co-operation of the whole country that we can face the enormous difficulties involved in maintaining the present standard of living, when we consider how dependent we are on imports.

Wherever we sit in this House—on one side or the other; on the Front Bench or on the back benches—between us, we represent the whole country. It is our job to be in touch with our constituents and, as best we can, to give them a lead, which some do in a big way and others of us in only a very small way. So the question of our balance of payments and our prosperity is the responsibility of us all. If the risk of difficulties ahead is not probable, it is at any rate appreciable, and the steps that could be taken with comparative ease today might be taken only with intolerable difficulty a year ahead.

4.33 p.m.

Mr. Douglas Houghton (Sowerby)

I am sure that we all sympathise with the hon. Member for Scarborough and Whitby (Mr. Spearman), in his attempt to keep his remarks within the rules of order on the Third Reading of this Bill. I do, at any rate, because I had a similar difficulty a year or two ago. At some time or other—and whether or not this is a suitable moment is a matter of opinion—we shall want to see whether the Bill and its proposals are achieving the purpose which the Chancellor hoped for when he introduced the Budget three months ago.

The key word of his speech was "boost". He said that he wanted to give the whole nation a boost and provide that incentive, encouragement and enthusiasm which we all realise is indispensable to the economic progress we all desire to make. A little later in the year it may be more suitable to have a stocktaking in order to see how the nation is doing, after we have had an opportunity of putting these proposals to a little longer test. The great number of "Pay-As-You-Earners" had that boost only a week or two ago, when they had their tax holiday—the accumulative reliefs which date back from the beginning of the financial year.

The hon. Member for Scarborough and Whitby said he thought we tended to magnify our differences in this House. That may be so. I notice that the hon. Member for Devizes (Mr. Hollis) has been writing on a similar theme in the "Observer," over the weekend. But this is the debating Chamber of our Parliament. This is where everything has to be raised to a political level, where differences must be sharpened so that people shall know them for what they are, and where we have to have the clash of opinion between honest and sincere men and women that is the very foundation of our system of Parliamentary government.

It is from the course of debates and the replies to speeches and criticisms that the public put things in what they conceive to be the right proportion, and I do not think that we are doing any disservice to the cause to which we all subscribe. We are all anxious that the country shall recover from its economic difficulties, and that a period of stability and prosperity shall be achieved, though we have different methods of approach to the problem and different remedies for it.

When the hon. Member reproached my hon. and learned Friend, the Member for Kettering (Mr. Mitchison) for not having paid a tribute to the Chancellor, I wondered why it should be necessary, having regard to the earlier part of the speech of the Financial Secretary, who, quite evidently, thinks that his right hon. Friend is "the cat's whiskers." The opening part of his speech was a long testimonial to his right hon. Friend. I fully expected him to begin by saying, "Mr. Speaker, to whom it may concern, I certify that my right hon. Friend the Chancellor of the Exchequer has now introduced two Finance Bills," and so on, and continue his fulsome praise of his right hon. Friend.

He said, "Here is my right hon. Friend, the great Finance Bill slimmer; the great anti-inflationist." He claimed credit for much to which his right hon. Friend is not entitled, and it seemed to me that when he referred to the repeal of the Excess Profits Levy he might have indulged in a few reflections on what happened last year. What has happened to the pledge of the Prime Minister, who said that this special form of taxation should be levied or the fortuitous profits of the rearmament period? Last year we had this elaborate superstructure of the Excess Profits Levy, which was intended to carry out that pledge. I would describe the levy as a fiscal Coronation stand.

Major Sir Guy Lloyd (Renfrew, East)

On a point of order. Is it in order to refer to an excess profits tax in any way, seeing that it is not in the Bill?

Mr. Mitchison

Am I wrong in thinking that Clause 27 of the Bill deals with the termination and amendment of the Excess Profits Levy?

Mr. G. R. Howard (St. Ives)

Does not Clause 27 deal with the offensive question of the Isles of Scilly?

Mr. Deputy-Speaker (Sir Charles MacAndrew)

We are not discussing the Isles of Scilly at the moment. The hon. Member for Sowerby (Mr. Houghton) is quite in order.

Mr. Houghton

This Bill proposes to discontinue the Excess Profits Levy at the end of this year. Last year it was written into the Finance Bill at great length and with great complexity. Presumably the pledge to tax the fortuitous profits of the rearmament period has now been fulfilled. It did not last very long and it has now been brought to an end. Not only is the Excess Profits Levy to be withdrawn but the Profits Tax is to remain undisturbed—and the Profits Tax was adjusted last year to the introduction of the Excess Profits Levy.

But the matter goes even further, because this Bill proposes to reduce the standard rate of Income Tax by 6d. in the £. Last year, the Excess Profits Levy was introduced to tax the fortuitous profits of the rearmament period, but within 12 months we have a Bill which proposes to dismantle that E.P.L., to leave the adjusted Profits Tax where it is and to reduce the standard rate of Income Tax to 6d. in the £. That seems a strange way of taxing the fortuitous profits of the rearmament period—a period which is still with us for, as I said at an earlier stage in the debates on this Bill, this year the whole of the proceeds from Income Tax will go to meet the cost of rearmament. We are thus still in a period of very heavy expenditure on armaments.

The Financial Secretary referred with some pride to the concessions made in respect of the dependent daughter and of apprentices, but the Chancellor of the Exchequer completely overlooked the dependent daughter—she was the Cinderella of his proposals—when he introduced the Bill. It needed a reminder from these benches that the small allowance of £25 a year to the father who relied upon the services of a dependent daughter had remained untouched for something like 25 years. The Chancellor could find no escape from accepting Amendments moved from these benches to increase that allowance from the modest sum of £25 to the almost modest sum of £40.

What is the story about the apprentices? Last year we hammered on the question of the earnings of apprentices under the rules for child allowances, with the result that the meagre limit of £13 was raised to £26. On further consideration, the right hon. Gentleman now proposes to increase it to £52. Of course, we must not exaggerate either the effect or the cost of these two concessions. I do not think the cost was mentioned earlier, but it is unlikely to be very great, because when I proposed that the age of a single woman or widow for the purposes of age relief should be reduced from 65 to 60, that proposal was rejected by the Economic Secretary on the ground that it would cost £2 million or £3 million.

I can only conclude that the two concessions for which the Financial Secretary gave no credit to my hon. Friends were not giving very much away. Nevertheless, we are glad to see both these concessions and we certainly think that the position of the apprentices will have to be further considered in relation to the whole scope of child allowances.

That brings me to the sort of cloud which hangs over all proposals for Income Tax changes and reliefs at present—the Royal Commission, which has been such a constant standby to right hon. and hon. Members opposite when we have been making proposals for concessions or alterations in the rules affecting Income Tax charges or reliefs. The right hon. Gentleman may have kept the Finance Bill within these small proportions this year, but I wonder what will happen when he has before him the report of the Royal Commission. Will he then be able to keep the Bill within such small proportions?

I do not know whether it is an appropriate suggestion to make, but the time may be suitable, when the Royal Commission reports, for a sub-division of our legislation between the taxing Clauses of the Finance Bill and the administrative Clauses of the Finance Bill. There might be a case for reverting, if only temporarily, to a very old idea of the Taxes Management Act, so that we may be able to discuss much about administration which the Royal Commission will undoubtedly recommend and which it may be inconvenient to include with many other things at the time of the Finance Bill.

In the course of reminiscences by permanent civil servants, I have heard that very frequently quite justifiable and, indeed, quite urgent matters are pushed out of the Finance Bill at the last moment, or even at the first moment, because the Chancellor of the Exchequer must necessarily keep the Bill within the scope of reasonable Parliamentary time. It may assist if many changes which we put on the Order Paper, and others which may follow as a result of the report of the Royal Commission, can be debated at a time separate from the Parliamentary time for the Finance Bill itself, when there is always considerable pressure. I throw out that suggestion in a helpful and cooperative spirit, as the hon. Member for Scarborough and Whitby would wish, because I think it may be for the convenience of both sides of the House.

The Financial Secretary referred more than once to the burden of taxation, and there is no right hon. or hon. Member in this House who can put so much weight and feeling into the word "burden." It gives the impression that there is something crushing, something bearing down upon us, something from which the whole nation is struggling to free itself. I think that occasionally we ought to pause and ask ourselves what we are taxing for. All those who have the benefits of the National Health Service must realise that taxation pays for it. All those who have the benefit of family allowances must realise that the money comes from taxation.

If it is the will of the nation not only to have national security in the form of adequate defences but also, as I am sure it is, a very wide range of social services and a very high degree of social security, then, quite obviously, taxation must be heavy. I think it is a mistake in such circumstances to go on repeating the word "burden" in relation to taxation when, in a large measure, it is really a redistribution of the national income in accordance with the will of the nation so as to give our people a better standard of life, to succour the aged and the sick and to see that our children are properly cared for, well fed, properly clothed, well educated and equipped for the tasks of life. If we could get our taxation into a proper perspective, I think we should hear less of the word "burden."

My life has been spent either in or alongside the system of direct taxation. There used to be an old Radical and Socialist doctrine that direct taxation adjusted to ability to pay was the fairest method of getting the revenue required. It took into account not only the income but the family and domestic circumstances of the taxpayer. There is no doubt that our Income Tax system is very finely adjusted indeed to the variations of domestic responsibilities and to income and charges on income. Here, in this Bill, we are giving further concessions, introducing further refinements to make our Income Tax system more equitable.

But we see what troubles we have with other taxes, the Purchase Tax, the Entertainments Duty, when industries complain that taxation is frustrating their efforts towards recovery, that it operates unfairly as between one branch of industry and another. I really do believe the relationship between direct and indirect taxation is one which needs much closer study. I fully appreciate that the Chancellor's problem this year was that even if he had wished to go further in reducing the Purchase Tax he was bound to take account of the problem of taxed stocks, of which we have heard a great deal in our debates; but, certainly, I think there is a moral in all the debates we have had on this year's Bill and also last year's, and it is that, on the whole, it is better to give reliefs to indirect taxation rather than direct taxation if we are trying to maintain an equitable system of taxation in these difficult times.

I want to conclude with a reference to the long debates we have had on the question of avoidance, expenses, allowances, and the like. As my hon. and learned Friend the Member for Kettering said, because of the rules of order we had to put on the Notice Paper Amendments to the Bill which were unsatisfactory from our point of view and were obviously open to serious criticism from the benches opposite, but that was the only way we could provide a peg on which to hang a discussion of what is undoubtedly a very important matter, and one which has an effect on the minds of people outside, who are led to believe that taxation should be doing a certain job, which quite visibly in many ways it is failing to do.

Questions are asked, "If taxation is as heavy as they say how is it that people can do this and that? How is it they can throw a party which costs, we are told in the gossip columns, £5,000? Why has not Income Tax and Surtax taken away this surplus money which is being spent in riotous living?" Those are questions that are asked by ordinary working folk. Quite naturally, any matter which is engaging their minds in that way is a fit and serious subject for discussion in this House.

I agree with the Financial Secretary when he says that through close administration many remedies of these avoidances and leakages can be found. The Inland Revenue Department is not as yet properly equipped to deal with the mounting pace and detail of attempts to avoid tax. After all, if one can get a bit of tax free income it is worth a great deal more than the equivalent amount of taxed income. That is what is at the root of this problem. Everybody, not only directors of companies but workers as well, those who have a five-day week and work on Saturday mornings for rewards that are not taxed—everybody is seeking to see whether he can get some form of untaxed income, untaxed money or services.

It is very important, in considering this Bill, that we should ask ourselves whether it contains the necessary remedies through administration or safeguards to prevent this kind of abuse going on. I trust, therefore, that when we consider the financial proposals another year we may have before us the recommendations of the Royal Commission, which will undoubtedly, I should say, have something to say about all this, and a notable omission from this Bill may then be remedied.

Mr. Deputy-Speaker

We cannot discuss the Royal Commission now, but only what is in the Bill.

Mr. Houghton

I am in just the same difficulty as was the hon. Member for Scarborough and Whitby. He took the opportunity of bringing his speech to a rather speedy conclusion after he was ruled out of order. I propose to do the same, but I do wish to stress the fact that until there is closer administration or until there are additional statutory powers put into the hands of the Administration there will be a great deal about the administration of our Income Tax system which will give rise to serious questioning and a good deal of discontent. This Bill does not provide for that, and I hope that on another occasion we may discuss a Bill that does.

4.57 p.m.

Mr. Ralph Assheton (Blackburn, West)

It is always a pleasure to follow the hon. Member for Sowerby (Mr. Houghton) in a debate on finance, because he knows a great deal about taxation and he looks at the problems of taxation with the eye of an expert. I have only a few remarks to make today. Before I make them, I should like to take the opportunity, if I may, of congratulating the Chancellor on the skill with which he steered this Bill through the Committee stage, and of congratulating the Financial Secretary and the Economic Secretary on the help which they gave to the Committee and to him.

In spite of some welcome reductions in taxation, taxation is still at a very high level. I do not think anybody can deny that we are still spending too much and still collecting too much revenue. There is an extremely interesting article to which I should like to refer in this month's edition of "Lloyd's Bank Review." It is by Professor Tress, of Bristol University, and if there are any hon. Members who have not read that article I would advise them to do so. He refers to the weight of taxation, and it is interesting to see that the total revenue collected in this country in 1951 was 32 per cent. of the gross national product as against 17 per cent. before the war. Canada collected 24 per cent. as against 20 per cent. before the war. It shows how very markedly high is the level of our expenditure, higher, in fact, than that of any other country in the world.

If it is the case that our revenue is very high—and I am bound to admit that with such enormous expenditure our revenue has to be high—what Professor Tress suggests is that we look at the engine of finance, and he says: The engine of public finance, though it works surprisingly well, has probably more affinities with the productions of Mr. Emmet than it has with those of Sir Frank Whittle. What I want to suggest to the House today is that we want something more jet propelled than we have at the present time. We are working with an age old machine. Mind you, it is a very good machine at doing the job of collecting money. It collects an enormous amount of money with remarkable success, but for all that I think that the hon. Member for Sowerby will recognise that our methods are not yet perfect. We want a jet propelled machine. If we are to compete in the world I think that we must get some of our heavy taxes very much reduced. I think that the Chancellor has a great opportunity to reform our finances. A great Chancellor of the Exchequer of 100 years ago, whom my right hon. Friend much admires, Sir Robert Peel, made some great changes in our financial system, and I hope that the present Chancellor will do so, too.

The officials at the Board of Inland Revenue and the Board of Customs and Excise are, of course, bound to say, "Stick to the old taxes—an old tax is a good tax." I agree that there is a great deal of sense in that. Anyone who has had anything to do with designing a new tax knows that very well. But, for all that, taxation appropriate in the days when I was born is not necessarily appropriate today. When I was born, in the early years of this century—the Chancellor of the Exchequer was also born in the early years of this century—Government expenditure in this country was £4 per head. Today, it is £86 per head. It is obvious that the methods used for collecting enough revenue when taxation was £4 a head are not necessarily the appropriate methods when expenditure is £86 per head.

The Income Tax to which the hon. Member for Sowerby (Mr. Houghton) is so attached, and rightly so because it is the basis of OUT system—I am talking about Pay-as-you-earn, Income Tax and Surtax—is very high and the hon. Member for Sowerby has been telling us that there is a great deal of avoidance and that he hopes that there will be other methods designed to catch up on evasion. He told us that that avoidance ran all through the community. It is not only restricted to directors, as we sometimes hear from the other side of the House, but as the hon. Member said, one of the most common forms of avoidance of tax is by people who pay P.A.Y.E. and work at another job and do not pay tax on that work. There are numerous ways of avoiding tax.

We all know that it is going on and that it is not fair. Why has this happened? It has happened because the whole level of Income Tax is too high. While we have a level of Income Tax as high as it is, we are bound to get avoidance and evasion. I think that any Income Tax over 7s. or 7s. 6d. in the £ is much too high, and I think that any system of taxation which takes away as much as 19s. in the £ on some parts of a man's income is crazy. The very highest level, I should have thought, should be about 15s. Otherwise, we are limiting enterprise and the risks which people are willing to take with their money.

Another great objection to high Income Tax, pointed out by the right hon. Member for Battersea, North (Mr. Jay), is that it does not take sufficient account of the responsibilities of the individual, as at present designed. He thinks—and I think that there is a great deal to be said for it—that the family man pays too much in relation to the bachelor. There are all sorts of ways of looking at it. The right hon. Gentleman and I are both family men. Perhaps we take one view and bachelors take another view. There is no doubt that when the rate of taxation is so high it is more important to take account of the personal responsibilities of individuals.

To do that we have to make the whole thing too complicated. It is complicated enough already and every time we try to adjust Income Tax to the responsibilities of the individual, we add new complications, and every new complication makes it more and more difficult for the Board of Inland Revenue to administer the tax. When we look at the Finance Bill, we find that Income Tax, Profits Tax and Surtax take up a good deal of it and that Customs Tax and Purchase Tax take up practically all the rest.

Let us come to the other side of the machine for collecting taxes. I have never been a lover of Purchase Tax as we now have it. I have expressed my opinion about that more than once. If we look at the methods of other countries, I think that we may well find that they have advanced a good way beyond us in taxation of that sort. Our Purchase Tax is rather clumsy. If we look at Germany, Canada, Italy, France, Belgium, Holland or Norway, which all have various systems of taxation on commodities or turnover tax, I think that in some cases their systems are better adjusted to the needs of today than is our system here.

In Canada, for instance, there is a tax on sales, but it is sufficiently enlightened not to tax either food or clothing. I think that it would interest the House if I read a short comment by Professor Tress on that point. He criticises very fully all the objections to taxes on com-modies, indirect taxes of all sorts, and says: A system of commodity taxes, in other words, takes on many of the characteristics of an income tax, but with two distinctive merits which have lately come to be very important. First, though the system can be made roughly progressive, as is, rather clumsily, the British Purchase Tax, and, more elegantly the Canadian general sales tax which exempts food and clothing—it does not involve a penal treatment of marginal earnings as does the income tax. Secondly, and more important, it allows savings to be exempted from taxation. Any system of taxation which bases its collection of revenue purely on what a man earns militates against saving, whereas a system which takes heed of what he spends works in favour of saving. That is a point which is not always fully appreciated. We shall have heavy taxation in this country for the rest of our lifetime, and the hon. Member for Sowerby mentioned, quite rightly, many of the things which we need to spend money on and for which taxes have to be raised. I think that all taxation is bad, and I am sure that all Members of this House think so, too, but defeat by an enemy, poverty, ignorance and crime are all worse, and we have to deal with them and raise a great deal of revenue to do so.

My plea to the Chancellor today is to look at the whole system of taxation afresh, not to be too much governed by what we have done in the past, to remember that it is easier to raise taxes when we want £4 per head instead of £86 per head and not to be inhibited from looking at new systems and methods of taxation because, although that may be difficult at the start, there may come a time when we shall recognise that it has been a good thing to make a change.

5.8 p.m.

Mr. Frederick Mulley (Sheffield, Park)

I hope that the right hon. Member for Blackburn, West (Mr. Assheton) will forgive me if I do not follow him very far in his arguments because I have not his aptitude for skating on thin ice, and it has been my unfortunate experience in the past to follow a number of hon. Gentlemen who have had a little dispute with the Chair and, in endeavouring to follow up their arguments, I have incurred the Chair's most serious displeasure.

I also hope that the right hon. Gentleman for Blackburn, West will excuse me if I do not follow on his argument. I hope I have my topography right as I believe that there is nowhere in the country where west and east are so far apart as in Blackburn. Concerning his remarks about Purchase Tax, it appears that an armed truce might be arrived at on this subject. I shall be interested to learn how this coalition between east and west develops. I thought that it was the general view of the right hon. Member that taxation got money out of the taxpayer rather too quietly at the present time, and I was surprised that he suggested that speedier ways of extracting money from the taxpayer might be looked at by the Chancellor.

One cannot talk about the taxation side of the national income and expenditure account without thinking of the expenditure side. I shall not pursue that line of argument, but anyone can get up anywhere and say that they are against high taxation and that they think taxes are iniquitous, because none of us really likes paying taxes at all. However, I would remind hon. Gentlemen opposite that, despite the present high rates of taxation, there are many people in the country who would like the opportunity of paying Income Tax and many would like the opportunity of paying a little more Income Tax by virtue of having higher incomes. I hope that before we have much more nonsense talked about high taxation this point will be borne in mind.

I am sorry that the Chancellor of the Exchequer has left us for the moment. I was about to congratulate him on having reached the last stages of what I regard as a very romantic Finance Bill. I say "romantic" for two reasons; first, because it was designed to woo the electors, and, second, in the French sense, because, as a distinguished Frenchman once said, only English people can be romantic because they have not the logic to follow their romance to its logical conclusion. This is a romantic Finance Bill because, on many issues, the Chancellor has not followed his romance to its logical conclusion.

Since we have already had some testimonials, it is only right and proper that I should pay a testimonial to the Financial Secretary. We know that the Chancellor has been busy in other directions and that it has fallen to the Financial Secretary to conduct a good deal of the detailed discussion in Committee. I should like to pay him a sincere compliment upon his contributions. We have often been very disappointed about the content of his speeches, but we have derived very much pleasure from their form. It is a long time in the history of our finance debates since "No" has been said with such eloquence, such elegant language and such polished periods.

Not since the days of the great Mr. Gladstone himself have we had such a magnificent "no" presented with such consistency from the Dispatch Box. In many a dull moment during the Committee stage—let us be frank, there were dull moments—we were often enlivened by the speculation, when the Financial Secretary entered a particularly complicated sentence, whether he would marry the right noun with the right verb. As far as my recollection serves me, he did so every time. While we hope that the Financial Secretary will continue to emulate the late Mr. Gladstone's use of language in our debates, I hope he will also acquire some of the great ex-Chancellor's financial and economic acumen.

Mr. Gladstone must have turned in his grave when he heard, if he did, this year's Budget, because never can a surplus have been frittered away more than this surplus has been by the present Chancellor of the Exchequer. In case I should be subject to attack from one of my hon. Friends who made one or two hilarious interventions during the Committee stage, I should explain that I am not using "fritter away" in the sense in which it was used by a learned counsel of the Chancery Bar who referred on a certain occasion to an estate being frittered away on the beneficiaries when a lawsuit which was expected to last some months, to the great enrichment of the Bar, no doubt, was settled out of court on the first day.

I use "fritter away" in the Gladstonian sense that there has been no attempt to cut down the cost of administration of the taxes by ending one tax altogether rather than by taking little snippets and pieces from a great number of taxes. Nowhere is this better illustrated than in the Clauses dealing with Purchase Tax. It would have been much more sensible to cut out Purchase Tax entirely in some cases—the Financial Secretary will appreciate that I should put knives, forks and spoons very high on such a list—and to leave it where it was, on, say, motor-cars and radio sets. I shall not develop this argument now, because we went into the subject at some length during the Committee stage, but I hope that I have at least convinced the Financial Secretary—I am not sure whether I have convinced the Economic Secretary—that knives, forks and spoons are necessities and not merely amenities. I hope that that is now the official Treasury view and that, as a consequence, we can expect some action in that direction.

I must enter a reservation about the testimonial that I gave the Financial Secretary for his general conduct of the debate. It relates to his reply to the suggested reduction of Purchase Tax upon articles made by craftsmen, in particular those made by the silversmiths of Sheffield. He was not as convincing as he often is when he said it was not possible to make some discrimination.

I rate the Financial Secretary's intelligence high enough to know that he must have remained unconvinced by his own argument. Therefore, I hope that, under the powers contained in Clause 11, there will be some reconsideration of Purchase Tax as it affects the cutlery and the silver industries. I hope the Financial Secretary will re-read that speech. His speeches will stand re-reading. I often wonder whether it is his custom to read them in his bath in the mornings, and I wonder if he chuckles over some thrust of wit or congratulates himself upon the grammatical niceties of a full-page sentence.

I also thought that he was not at his best when he was dealing with the issue of sidecars on motor-cycles in relation to Clause 5. Having regard to the Treasury's great desire to consult, and to consult at great length, everybody and anybody on matters relating to the Income Tax law, I hope that between now and January, when the Clause has effect, the hon. Gentleman will have a word with the odd motor-cyclist or two he may meet when he is in his constituency, and with the appropriate motorcycling organisations, and pay a visit to the Road Research Department of the Department of Scientific and Industrial Research and get its views on this very important matter.

I do not want to go into greater detail about the Clauses, but it is appropriate to say a word about the effect of the Clauses together and their consequences on the economy. In particular, we were very surprised during the Committee stage to learn that the Government have no interest in the individual performance of various industries. We were told that the Government do not intend to use fiscal devices to further the economic interests of the country. It surprises us that the output and exports from the motor car industry and the provision of building materials should be of such little interest to the Treasury under the control of the present Chancellor of the Exchequer. Even at this late stage, I ask him to repudiate the very strange advice that the Economic Secretary gave the Committee on that occasion.

Some reference has already been made to profits and to the passing away of the Excess Profits Levy. Since I ventured to pay what I hope has been taken as a sincere tribute to the Financial Secretary upon his speeches in the debate, it is only right that I should say that I regard the reply of the Chancellor to the debate on that Clause as one of the masterpieces of Parliamentary debate. I would recommend any hon. Member who might be given that rather unenviable task of producing a pocket HANSARD in the future to make a note of that reply as an example of Parliamentary debate at its best.

It is only fair to say with what great sincerity the Chancellor of the Exchequer repeated the arguments that we brought last year against the Excess Profits Levy and threw them back at us. He did it with much greater eloquence than we can command, and that is why it is important that we should persuade the Treasury, because there seems to be a year's time lag between what we say on these benches and those views becoming the official point of view from the Government Benches.

Although we admired the Chancellor's reply we cannot be satisfied with its substance. Whether it was by accident or by design, the fact is that the Excess Profits Levy and Profits Tax showed a fall last year of £64 million as compared with the year before. The fall was from £379 million to £315 million, and when Clause 27 of this Bill becomes effective there will be a further drop of £100 million in the amount of revenue contributed from profits.

While, of course, hon. Gentlemen opposite may derive satisfaction from that, we do not see why so much relief should be given to industry and in this particular way, having regard to the general economic situation. We hope that the Chancellor may refer to this matter when he replies, and tell us what proposal he has in mind for increasing the Profits Tax, which was reduced to make way for the Excess Profits Levy. As my hon. Friend the Member for Sowerby (Mr. Houghton) said, this reduction in the total incidence of Profits Tax is an addition to the £45 million that the companies get as a result of the 6d. fall in the standard rate of Income Tax.

Some hon. Members opposite argue that the standard rate of Income Tax reduction is a way to encourage industry by producing an incentive, increasing investment and boosting our export trade. In reply, I would use the argument which they have used in the past—and will no doubt use in the future—against the principle of food subsidies. Relief by virtue of a reduction in the standard rate goes to companies that are not making a contribution to the national economy, to people who are draining labour away from more essential and productive purposes and to the stagnant companies as well as to those that are expanding.

The only difference between the argument I am now employing and the argument about the food subsidies is that the cost of the food subsidies to those who get them and do not need them is more than the subsidy itself, and helps to pay for the benefits to those who are in need of that particular kind of subsidy. I would ask hon. Gentlemen opposite to think about that as a fair comparison between the food subsidies, which I know they do not like, and the reduced standard rate of Income Tax in industry, which I know they approve.

Finally, I want to follow up the remark made by the hon. Member for Scarborough and Whitby (Mr. Spearman) at the beginning of the debate. How do these proposals compare with those of last year, and what are their consequences for our economy? The hon. Member for Scarborough and Whitby took a very apt illustration when he referred to what Charles James Fox remarked about a great victory. He said that he would applaud it although it meant giving credit to William Pitt. We on this side of the House are equally glad, that, temporarily at any rate, the balance of payments position is much easier. But I would say that the present Chancellor's contribution to its improvement is perhaps rather less than William Pitt's contribution to the winning of the Battle of Trafalgar. In the battle of the balance of payments the outstanding fact—the Nelson—has been the favourable turn in the terms of trade.

I am sure that the Chancellor would be the first to say that he would not personally take for himself or for the Government full credit for the change in the balance of payments and the external payments position. We want to consolidate the improved international, economic position. Some of the criticism that we have brought against this Bill is directed to that end. We have made many suggestions at different stages of the Bill on Purchase Tax, initial allowances and so on, because we think that the object of the Finance Bill should be the increasing of our ability to compete abroad and planning the best use of our national resources.

I think it would be in order to make one final remark on the question of the cost of living, because the Financial Secretary, who, I know, is a master of the rules of order, did refer in his opening remarks to the contributions to the cost of living of this Budget, but he neglected to say by what percentage it would affect the Interim Index of Retail Prices. He referred to the fall in the price of the published Finance Bill this year as compared with last year, from 4s. to 1s. 3d., and I think it is particularly noteworthy because that is the most substantial fall in price that this Government have been able to achieve.

It is in the field of the cost of living that ordinary men and women expect something more than they have so far got. I appreciate that the Financial Secretary did not wish to make a very strong point of the slimness of the Bill as compared with last year, but I would remind him that the ordinary man and woman has to think whether he or she can afford 1½d. for an evening paper—[Laughter.] A number of families in my constituency have had to give up either their morning or evening paper and have entered into a pooling arrangement with neighbours because the cost of living has hit them so very hard.

To put this Budget in perspective, the £64 million which has been dropped in Profits Tax this year would be just about the figure to give the old age pensioners another 6s. per week. We hope that when these matters come to be considered further and greater attention will be paid to those whose needs are very real indeed. We know that the Chancellor possesses undoubted political wisdom, and I hope that next year, when he opens his Budget, it will be tempered with a little more social justice than it was this year.

5.28 p.m.

Mr. G. R. Howard (St. Ives)

I am sure that my hon. Friends would wish to agree with the hon. Member for Park (Mr. Mulley) in paying well-deserved compliments to my right hon. Friend the Chancellor, and to my hon. Friend the Financial Secretary to the Treasury. In general, I should like to do the same, but, in particular, I fear there is one point on which it is impossible for me to congratulate either of them. I would have hesitated to intervene once again at this late stage but for the fact that today I received a letter from one who is extremely highly versed in tax matters and has had very considerable experience of the Isles of Scilly.

His first point is that the mechanics of this collection are going to be extremely difficult. The Tax Commissioners may call a meeting of appellants at a certain time that may be agreed to by the people on the Islands, but then it is possible that the weather may deteriorate thereby isolating the people on the off Islands, who may not be able to get to St. Mary's for anything up to a week. I suppose the Commissioners would have to stay over there waiting for these people to come or they would have to make another trip which we would have to pay for.

As my correspondent says in this letter: The Revenue little realise what a rod for their own backs they are about to make in respect of the P.A.Y.E. aspect of the matter. And the average collection, I believe, will be very small; also, the problem will be a very confused one.

I hope that my right hon. Friend will correct an extremely unfortunate impression going about in West Cornwall which was made when he said that certain representations had been made by the flower growers on the mainland. To quote again from this letter: I do deplore the apparent pursuit of a scapegoat which recent editions of 'The Cornish-man' have revealed. It seems to me so silly and so damaging to the interests of the communities both on the Mainland and the Islands to suggest that any particular person or bodies of persons are directly responsible for the taxation proposals which have so suddenly appeared. I do wish that it were in your power to publish in 'The Cornishman' and the 'Western Morning News' an authoritative denial, with the consent of Mr. Butler, that he has in no way been influenced by representations from any local quarters. I am quite sure personally that that would constitute a statement of fact, but some readers of our local Press must be feeling bewildered. As my right hon. Friend already knows, responsible opinion speaking for those local growers has already denied that they made any representations so it is important to correct that impression.

The next point is the question of the steamer. As the writer says: The Steamship Company position, of course, will be a difficult one until they get their new Boat unless Mr. Butler can persuade the House "— it falls to my unfortunate lot to try to persuade the House— to leave their taxation basis as it is until, at any rate the new Ship arrives. I much fear that the taxation will dry up a lot of the money which otherwise the Company might have received from the inhabitants towards the necessary provision of fresh Share Capital which will be wanted. I asked during the Committee stage whether the collection would be worth while, and I have given additional facts and figures to my right hon. Friend which I hope may persuade him that it is not so worth while as he thought at first. I am given to understand that those outside the P.A.Y.E. payments who may be assessed for tax will be less than 100. At this late hour, therefore, I want to suggest the following points, bearing in mind what my hon. Friend said in his eloquent and polished English at the opening of this debate, that this Budget is calculated to take into account the human problem. I hope it is not too late for my right hon. Friend to take into account the human problem in the case of the Isles of Scilly.

My hon. Friend also made great play with the word "burden." I therefore ask the Chancellor to do four things. First, could he consider some form of delay so that these people can get used to the idea of taxation? [Laughter.] It may seem a strange idea to hon. Members who laugh, but to the islanders it will mean the full burden in one go, whereas other people have had quite a period of years in which to get used to it. There is also this point, which is by no means a laughing matter to the people concerned. The small grower who has budgeted for certain automatic equipment to help him in the cultivation of his land on the assumption that he would not pay tax will find his calculations upset when suddenly faced with taxation. Delay would greatly facilitate the operation of the new scheme.

Secondly, if there cannot be delay, will my right hon. Friend consider special treatment for the steamer, because I must emphasise that this steamer has been paid for and maintained by the people themselves, with no question of a subsidy, unlike other heavily subsidised services mentioned during the Committee stage. Thirdly, could some consideration be given to raising the basic rate below which tax is not payable, bearing in mind the special tax on living in these islands?

Finally, could the Chancellor consider these matters on the spot? It would be most valuable if he, or one of his secretaries, could meet the islanders. Contrary to what many hon. Members may think, I guarantee that he would have a good time. Though he might get a certain amount of straight talk, he would get first-hand information, which some of us think is rather more important than Whitehall information, which I fear at times may be rather misleading and not altogether accurate. If, as a result of these suggestions or this visit, he could consider during the next year whether his action is altogether just and fair as well as logical, he might be able to make adjustments so that the way of life and the economy of those islands may not be upset.

5.39 p.m.

Mr. Anthony Crosland (Gloucestershire, South)

The hon. Member for St. Ives (Mr. G. R. Howard) has spoken of the bewilderment which the action of the Chancellor has caused in the Scilly Islands. The hon. Gentleman has not only proved his case but demonstrated the superior intelligence of the Scilly islanders over the mainland population, because I can assure him that the actions of the Chancellor will cause increasing bewilderment, starting from the Scilly Islands and gradually spreading over all this country.

There can have been few occasions when a Budget and a Budget speech have met with such adulatory speeches and such an adulatory reception from hon. Members opposite. We have had speech after speech, both today, on Second Reading and throughout the Committee stage, referring to this wonderful Budget representing a completely new departure in our financial affairs. The Chancellor has been portrayed again and again as a vast, benign, omniscient, father-figure with his finger on the pulse of the nation's life, being consistently sensitive to the human element, and so on.

If we analyse the cause of all this extraordinary adulation of the Chancellor from his own side of the House, it lies partly in the secret of his personality and the speeches he has made but, so far as the Budget is concerned, it lies in one single act and one act alone. It is that this Budget, in contrast to most of its predecessors, introduces a substantial net decrease in taxation. It is for this that the Chancellor and the Treasury bench have taken so much credit.

I should like to repeat what my hon. and learned Friend the Member for Kettering (Mr. Mitchison) referred to earlier and to insist that the taxes which the Chancellor has felt himself able to remit in this Budget were almost all imposed with one purpose alone in mind, to pay for a swift three-year rearmament programme. The 6d. on the Income Tax which has been taken off was imposed by my right hon. Friend when he was Chancellor to pay for rearmament in 1951. The Excess Profits Levy, the abolition of which is now foreshadowed, was imposed for one reason only, rearmament. A large number of the Purchase Tax reductions now being made are also reductions against increases imposed in 1951 for one purpose alone, rearmament.

The reason why the Chancellor is able to make these substantial remissions is simply the decision, no doubt a wise one, to spread the rearmament programme over a greater number of years than was envisaged initially. Any Labour Chancellor, representing a Government which had taken a similar decision about rearmament, would also this year have been in a position to make remissions of taxation to an equivalent extent. So that the fact that the Budget reduces taxation, unlike most of its predecessors, is not a fact for which the Chancellor can take any credit. It is a fact which follows inevitably from the decision about the length and speed of the rearmament programme.

That is not to say that because we on this side accept that cuts in taxation this year are possible and are justified, we approve of the particular cuts that have been made. This point has been made again and again from this side of the House, and I shall not go into it again myself, but the fact that we object—[Interruption.] The hon. Member for Croydon, East (Sir H. Williams) has not been here very much during the last month, but that does not stop him interrupting from time to time. Nevertheless—

Sir Herbert Williams (Croydon, East)

rose—

Mr. Crosland

May I finish this?

Sir H. Williams

Certainly.

Mr. Crosland

The point has been consistently and ably made again and again from this side of the House that, given the fact that this degree of tax remission was possible, we on this side would have preferred it to have been made in a very different way.

Sir H. Williams

I thought the hon. Member would have been pleased that he had succeeded in attracting rather more Conservative listeners than listeners on his own side of the House, who seem very bored.

Mr. Crosland

No doubt, if the hon. Member speaks later, he will not bore the House, but whether he will instruct them is a rather different question.

In connection with the question of the level of taxation as a whole, I should like to refer to one very interesting matter about which the right hon. Member for Blackburn, West (Mr. Assheton) has spoken. It was alarming to us to find once again, even on the last day of the Finance Bill debates, a divergence opening out between the right hon. Gentleman and his right hon. Friend the Chancellor of the Exchequer. The right hon. Member for Blackburn, West said this afternoon, in the course of an interesting speech—I apologise for having missed its first few minutes—that since we should be faced for as far ahead as we could see with a very serious tax burden, it was only sensible for us to look around and see whether we could not find new methods of taxation which would have less damaging effects than, in his view, our existing methods have.

One of the suggestions which the right hon. Gentleman made in this connection, and which interested me very much, was a change in the basis of assessment from income to expenditure. Why I was interested to hear him throw this out as a possibility is because, as he well knows, it is a suggestion that has been constantly made in the history of fiscal discussions in this country. Speaking from memory, it was first put forward, I believe, by John Stuart Mill, and has been made both in evidence to various committees on taxation and by a number of independent fiscal experts.

We had a debate only two months ago as to whether this proposal should be considered by the present Royal Commission on Taxation. I am sorry that the Chancellor of the Exchequer gave a ruling, which we on this side challenged, although without success, that this particular form of taxation could not be considered by the Royal Commission. I hope that if the right hon. Member for Blackburn, West has any influence with his right hon. Friend, he might persuade him to reverse that ruling, so that this extremely important suggestion might, at any rate, be considered. Whether it is a good one or a bad one, I have no idea, but I am certain that it is an important one.

The main point which I wish again briefly to bring to the attention of the House is one which has been mentioned several times during recent days from this side of the House but which is so important that it will bear reiteration. That is, the extremely alarming trend of the movement of labour at the present time, which throws doubt on the basic assumption on which the Budget was based. It is extremely disturbing to find that month after month since the beginning of the year, labour has been moving out of the engineering and metal manufacturing industries and into the service industries, the distributive trades and such like occupations. [An HON. MEMBER: "And into the mines."] Not in the coal mines in any substantial numbers during the last six months. It has been only on a very small scale.

This movement of labour is the reverse of what, presumably, the Chancellor wants. It is certainly the reverse of the movement which we on this side of the House desire to see. It means that the present trend of our economic affairs, so far as the movement of labour is concerned, is completely in the wrong direction. I implore the Chancellor of the Exchequer very seriously to bear this fact in mind and to use whatever influence he has on economic policy between this year's Budget and the next to correct this tendency.

The Financial Secretary to the Treasury, whose speeches have already been deservedly praised for their grammatical distinction by my hon. Friend the Member for Sheffield, Park (Mr. Mulley), said at the end of his speech this afternoon that this year's Budget marked a not unimportant milestone on the way to some desirable goal, the location of which for the moment I forget. What a "not unimportant milestone" is, I cannot imagine. The common sense attitude to milestones is that one milestone must by definition be exactly as important as another. Nevertheless, assuming that one can speak of some milestones as being more important than other milestones, apparently this Budget is a not unimportant milestone on the road to somewhere.

We on this side think, on the contrary, that this Budget is a distinctly important milestone in a direction which disturbs us very much. At any rate, I conclude with the hope that when the Chancellor of the Exchequer introduces his Budget next year, he will not try to intensify the speed with which he is moving in the present direction but will consider the very important necessity of a change in direction altogether.

5.51 p.m.

Major W. J. Anstruther-Gray (Berwick and East Lothian)

When my hon. Friend the Financial Secretary to the Treasury opened the debate this afternoon with an admirable speech, he said that all and more than all had been said already about the Budget. In spite of that, however, we have heard a good many more words today, starting with the hon. and learned Member for Kettering (Mr. Mitchison), who made one suggestion which appeals to me. The hon. and learned Member referred to fuel saving appliances and said that there was room for budgetary concessions in order to promote the development of such economic appliances. I reinforce that suggestion to my right hon. Friend the Chancellor of the Exchequer, especially in view of the announcement at Question time today that we must revert once again to the unhappy practice of buying coal from overseas.

I think it would be true to say that in the country as a whole, this year's Budget will be remembered as the Budget in which, with deference to my hon. Friend the Member for St. Ives (Mr. G. R. Howard), who represents the Isles of Scilly, nobody has been taxed any more and everybody has been relieved. This is the first time in about 15 years that anyone can say such a thing of a Budget introduced into this House.

The hon. Member for Sowerby (Mr. Houghton) talked about "boost." It is a very good thing to give people a boost, and if we can cheer up the country, so much the better. The combined effect of taking 6d. off the Income Tax and also reducing the Purchase Tax by 25 per cent. had a very encouraging effect upon everybody in every walk of life. That view may be taken whether one regards the Budget as a single entity or, as I prefer to hope that it may be, as one of a series of like Budgets continuing in the same good way from this year to next and, perhaps, the following year too.

These two concessions which the Budget makes are steps towards meeting the two big problems that worry the country today. Those problems are how to increase production, and how to check the rise in the cost of living. The reduction in taxation will undoubtedly have the effect of making firms and individuals more enterprising. When attention is drawn to the fact that the lower-scale wage earners are already so free of direct taxation that they will not derive much benefit from the reduction of 6d. in the Income Tax, I remind the House that there are also the middle and higher scales of wage earners, who are all human beings, and that a little bit of incentive has a very good effect upon everybody. I believe the result of the sixpenny reduction will be a noteworthy increase in production.

I consider that the 25 per cent. cut in Purchase Tax will go towards checking the rise in the cost of living, which I regard as one of the key problems of the day. It may be more, it may be the key problem of a decade. The rise in the cost of living is at the root of the great danger to our competitive capacity in world markets. The rise is responsible for all the many wage claims that are threatening our costs of production figures. The iron and steel workers have put forward a claim. We know how dangerous is the position for shipbuilding on the Clyde.

Now the railwaymen have a claim in. All this is based on the rise in the cost of living, and of course it goes to increase the rise in the cost of transport and everything. I feel that the Chancellor, in cutting Purchase Tax by 25 per cent., is taking a deliberate step which, however far it goes—we hope that next year it will go further—is certainly aimed at stopping the rise in the cost of living.

Turning from basic points to a comparatively small one—the taxation of cinemas—following the Budget debates in the last few weeks it seemed to me that the case for a reduction was made most strongly and was the case which the Chancellor found it, in his heart, most difficult to meet. I readily appreciate that the arguments the Chancellor deployed in that debate—especially if I may read one or two of his words—was that in so far as the Exchequer preys on an industry, it does not prey on the cinema industry more than on some others. I wish to quote one or two figures for the benefit of the hon. Member for Sowerby (Mr. Houghton), who is not here at the moment, and who talked in derisory terms about our complaints of the burden of taxation.

Let us take the case of beer. The average price of a pint is 1s. 4d. and the average duty is 8½ d., so there we have a 53 per cent. tax. The price of a packet of cigarettes is 3s. 7d. and the public may like to know that the duty is 2s. 9d., a percentage of 77. I do not smoke so that does not crush me, but I call that a crushing burden. A box of matches costs 2d., and the duty on a packet of a dozen boxes is 1s. 1d. I like the word which the Chancellor used when he called that an "extortion" of 55 per cent. The cost of petrol is 4s. 6d. per gallon, and the duty is 2s. 6d., which make a proportion of 55 per cent. If one requires figures to demonstrate how severe a burden of taxation the people of this country are suffering today, those figures provide it. If we desire encouragement towards economy in the public mind just consider how each of these affects each other.

I finish as I began. Even if I run the risk of being laughed at, like the Financial Secretary, for lavishing high praise on the Chancellor, I say that the Chancellor has done a really good bit of work for his country in the Budget which he has introduced, and I give him my sincere congratulations.

5.59 p.m.

Lieut-Colonel Marcos Lipton (Brixton)

I wish to draw attention to what I think is an exaggerated concession made by this Finance Bill. I call it exaggerated because, when I raised the matter with the Financial Secretary in the form of a Question a short time ago, he attached much more importance to it than should be attached to what I believe to be a paltry concession.

In Clause 10 of the Bill there is a provision which puts into effect paragraph 6 of the Second Schedule which exempts from Purchase Tax the London type of taxi-cab. Hitherto, Purchase Tax has been charged on those cabs at 66⅔ per cent., which raised the cash price of a new cab by £472 to £1,319 until the Chancellor announced in his Budget that he had decided to give complete exemption from Purchase Tax as from 15th April, 1953.

It was, unfortunately, not possible for me to take part in the Second Reading on the Finance Bill, but it happens that the hon. Member for Dorset, North (Mr. Crouch) said in the debate that taxi drivers would appreciate this announcement, which would enable them to earn a better living than they had been able to earn for some months past.

At this point HANSARD inserts the word "Interruption" in brackets, whereupon the hon. Member for Dorset, North went on to say—as I was the person responsible for this unspecified interruption— The hon. and gallant Member for Brixton (Lieut-Colonel Lipton) seems very dissatisfied, but he has no real ground for complaint."—[OFFICIAL REPORT, 14th April. 1953; Vol. 514, c. 111.] I propose, in the few minutes I shall speak, to amplify the very sapient comment I made, which was recorded merely as "Interruption", but which, I think, substantiates the argument I am trying to put forward.

New taxi-cabs in London on which Purchase Tax has been paid since 1949 now represent 60 per cent. of the total of the London taxi-cab fleet, which at present amounts to 5,300. Sixty per cent. of the new cabs running on the streets of London today have been penalised by virtue of the fact that the people who have advanced the money for the purchase of those cabs have laid out capital for improving the service and only at this late stage has the Chancellor announced a concession. The Runciman Report, which investigated the service, made it quite clear that under present economic and fiscal conditions, the decline in the number of cabs plying for hire is likely to continue until there ceases to be an effective taxi-cab service in London. In the last two years the number of taxi-cabs plying for hire has declined from 6,800 to 5,300, a 25 per cent. reduction.

Mr. Deputy-Speaker

On the Third Reading, we cannot go into detail on taxi-cabs.

Lieut-Colonel Lipton

I would point out, Mr. Deputy-Speaker, that Clause 10 (1) puts into effect paragraph 6 of the Second Schedule which exempts from Purchase Tax the London type of taxi-cab and I am addressing my comments to that particular provision of this Bill, the Third Reading of which we are discussing. I take it, Mr. Deputy-Speaker, that we are entitled, on Third Reading, to criticise what appears in the Bill and I am trying to stress the inadequacy of the concession contained in the Bill.

The Chancellor said little in explanation of this concession and it may well be that hon. Members, as well as the general public, have gained the impression that the relief provided will be of great benefit to the trade, and that taxi-cab owners and drivers are grateful for this concession. I argue that it is a paltry concession because on 23rd April, in reply to a Question from me, the Financial Secretary announced that the sales of new cabs had virtually ceased. In the year ending 31st March last Purchase Tax was paid on only 47 new cabs compared with 698 and 960 respectively in the two preceding years. The value of the concession is, therefore, the Purchase tax which would have been paid on 40 or 50 new cabs and which would amount to about £22,000

This concession has no value to those interested in providing a reasonably good taxi service in London. Cab owners who have paid Purchase Tax receive no relief, and it is not surprising that they complain of the bad treatment they have received at the hands of the Chancellor of the Exchequer. It is true that the complete withdrawal of the Purchase Tax will represent a saving of ½d. a mile, but it will not affect 60 per cent. of the cabs now operating. We are in the lamentable position that, notwithstanding this concession, London is the only capital city in the world where the taxi-cab service cannot pay its way, largely due to the inadequate and tardy consideration of the problem by the Chancellor of the Exchequer.

Not only is the problem one about which taxi-cab owners have strong views, but the cab section of the Transport and General Workers' Union have drawn attention to the dangerous situation now prevailing. It means that the trade is drifting to disaster and for that reason the entry of further new drivers cannot be justified. I wished to make clear that the concession about which the Financial Secretary recently boasted in the House is regarded as completely inadequate by those people to whom he considers it is providing some benefit.

6.5 p.m.

Sir William Darling (Edinburgh, South)

This is indeed an ungrateful world. If the City of Edinburgh had received a concession of £22,500 in Purchase Tax on its taxis it would have rejoiced and been exceeding glad. But such is the cupidity of representatives of this voracious trade in the County of London that nothing satisfies them. I beg the Chancellor not to make any attempt in the future to propitiate the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) and those who think with him. I am of the opinion that, far from giving advantages to London, the disadvantages under which Londoners at present suffer should be increased, though that has nothing to do with this Bill, but—

Mr. Deputy-Speaker

As this has nothing to do with this Bill I hope the hon. Member will not pursue the subject. If he does, he will be out of order.

Sir W. Darling

If I am permitted to say so, it may well be an evil that the Chancellor has made life in London less expensive than it was, when the object of all wise politicians should be to make life in London more difficult and more expensive and thus reduce the enormity of the burden imposed on the rest of the country by the presence of 15 million people in this part of the island.

At any rate, I am right in pointing out the ingratitude of the hon. and gallant Member for Brixton, but I am glad to say that it is not the characteristic of his hon. Friends who have spoken. The hon. Member for Sowerby (Mr. Houghton) has invented a new slogan to tell the people of this country—"Taxation is worth while; rejoice and be exceeding glad for great is your taxation." That is a livelier and a happier expression of what, I am sure, is not generally a very popular opinion.

I wish to make a few observations on the subject of Purchase Tax. I see the difficulty of my right hon. Friend in connection with this impost which he inherited. It is a clutter of inequalities which he will find difficulty in getting rid of finally by his next Budget. He is aware that the ad valorem method of taxation is easier to handle. I am reinforced in my view by the observations of the hon. Member for Gloucestershire, South (Mr. Crosland). I take the view that Income Tax and Profits Tax are taxes upon success and ability. Those persons who have made a profit are punished. I share the view of the hon. Member for Gloucestershire, South that there should be a tax on consumption and then all the difficulties and problems associated with Income Tax would disappear.

If I am a greedy man I should pay according to the measure of my greed. If I consume a larger proportion of the social product in the form of elaborate parties, or if I purchase an expensive motor car, I should pay accordingly. But to tax me because I am the one person who has made a profit when 99 others have failed is both uneconomic and unwise. Let us tax people on their consumption and by that method we shall be able to develop direct taxation to a far larger extent than it is imposed today.

My hon. and gallant Friend the Member for Berwick and East Lothian (Major Anstruther-Gray) referred to the tax upon cigarettes and whisky and many other desirable things. I favour voluntary taxation. If I wish I may buy a packet of cigarettes and pay 3s. 7d. for them and give 2s. 9½d. in the form of tax to the Revenue. If I deny myself, if I become a stoic and say I shall have no cigarettes, I save the tax. That is voluntary taxation. I was delighted to learn that this was commended by that well-known Socialist philosopher and political economist John Stuart Mill himself—

Lieut.-Colonel Lipton

He was not a Socialist.

Sir W. Darling

I said a great Socialist philosopher. He is acclaimed by the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell), a former Chancellor of the Exchequer who would have embraced him, and I am glad to see he had a direct affinity with the trade union movement of which the hon. and gallant Gentleman was such a distinguished supporter. I cannot claim to have known about John Stuart Mill favouring direct taxation, but I can assure the House that it is the practice in the U.S.S.R. to tax in this way. Obviously there is no Profits Tax in the U.S.S.R. because there are no profits. But the way in which their vast revenues are raised is by direct taxation. Everyone pays direct taxation, and it is an excellent system, though I know the hon. Member for Sowerby would deplore the passing of an archaic form of imposition which has given him and his colleagues an interesting and profitable occupation over many years.

I would pursue a system of taxation on the great distributive organisations of our country. The shops and sellers of merchandise of all kinds would collect the tax, as they have been collecting it in the form of P.A.Y.E. This would eliminate an expensive, costly and inquisitorial machine. I know I am very nearly out of order, but I have very nearly finished. Having said these words, I would join in the many congratulations to the Chancellor. Somebody somewhat grudgingly said that my right hon. Friend had been fortunate that the terms of trade had turned in his favour. Perhaps they did, but I recollect what Robert Browning said: … sudden the worst turns the best to the brave. The Chancellor of the Exchequer in the face of crisis was a brave man. He is entitled to the rewards of bravery.

6.10 p.m.

Mr. Norman Cole (Bedfordshire, South)

The hon. and gallant Member for Brixton (Lieut.-Colonel Lipton) has put up a good case against his own party, who were in power up to two years ago. He was grudging in his thanks to the Chancellor for the rebate in Purchase Tax in respect of London taxi-cabs. The whole burden of his complaint was that it was too little and too late. He might argue that with those of his party who did not bring in the concession up to October, 1951—the end of six years of Socialism. If it is late now I would point out that it should have been done by those who had power earlier.

The hon. Member for Sowerby (Mr. Houghton) seems to have a conflict in his mind about the "burden" of Income Tax generally. He referred to the remarks of my hon. Friend the Financial Secretary and to his use of the word "burden." The hon. Member for Sowerby said that in his view taxation was not a burden, but a method of distribution of people's money—especially other people's money. At the end of his speech he made the wise and shrewd comment that we must bear in mind that a piece of untaxed income is very different from a piece of taxed income. If that comment does not lay emphasis upon the burden of taxation, I do not know what does.

Whether or not the hon. Member for Sowerby and others think that taxation is a burden, the public always has thought, and will continue to think, that any form of tax is a burden upon daily life. I hope that my right hon. Friend will carry on with his campaign of reducing the standard rate of Income Tax until it is cut down to common sense proportions. When we reach those proportions a new day will dawn for the prosperity and happiness of the people.

I wish to refer specially to the Purchase Tax concessions. Without going into detail I want to impress upon my right hon. Friend that he should not give up this difficult fight in his effort to help those who have to bear the burden of the Purchase Tax concessions which are made to the public generally. I refer to the retailers. None of us knows exactly how he can find a solution—whether it be through the schemes suggested by the National Chamber of Trade, by means of a sales tax as suggested by my hon. Friend the Member for Edinburgh, South (Sir W. Darling) or whatever it may be.

The distributive traders of the country, whose duty and privilege it is to pass the goods from the manufacturer to the people who buy, are entitled to the fairest possible deal in this respect. I still believe that a solution can be found. I hope that the fight will not be given up. I recommend to my right hon. Friend the suggestion of my right hon. Friend the Member for Blackburn, West (Mr. Assheton) which was made during the Committee stage when, I believe, not too much notice was taken of it. He suggested that a committee of two or three people, charged with the task of finding a solution within three months, might well be set up. I think that might go some way towards solving this difficult problem.

Whatever the solution may be I hope that the suggestions put forward by the National Chamber of Trade, by hon. Members and others will continue to receive every consideration and that, at least, the retailers will feel that the Government are doing what they can to give everyone a fair deal. A pertinent remark in the Hutton Report says that Purchase Tax remissions help every section of the community, except the retailer who does not gain anything.

On a further point, I ask the Chancellor to give his attention to the question of including more garments in the range of the D Scheme. I refer to hats, which are made in my constituency and which are not made of knitted materials. Hon. Members may not know that hats made of knitted materials are subject to an 8s. D line, whereas those made of other materials attract ordinary Purchase Tax at the rate of 25 per cent. Those of non-knitted materials are made in my constituency and as a result it has been suggested to me that consideration should be given to the matter. Representations have been made to the Chancellor, and I hope that he will make an investigation.

There has been much carping by hon. Members opposite about the effects of the 6d. concession on Income Tax. It is true that in some respects those who do not pay Income Tax cannot gain from such a concession, but, on reflection, hon. Members will agree that any country which seeks prosperity, which seeks to move forward in the competitive markets of the world, cannot fail to gain by a continuous diminution in the standard rate of Income Tax.

I hope that we shall not be led astray by any philosophical ideas that this is a method of distribution of income or a system of discrimination. The fact remains that if we can have a reasonable standard rate of tax all, from the richest to the poorest, will gain from the prosperity which will ensue. I commend my right hon. Friend, both in this respect and others, for producing a Finance Bill which gives a hostage for the future and which rests for its strength and success upon the hard work and co-operation of our people.

6.18 p.m.

Mr. Hugh Gaitskell (Leeds, South)

This is the twelfth day, if one includes the Second Reading, on which we have discussed this year's Finance Bill. Taking the Committee and Report stages, on which we spent ten days, on all days but one we went beyond the normal time and ended, by a strange coincidence, at 11.30 p.m. Therefore, we have perhaps had a less intensive period of discussion than on some occasions, but it has been quite a long one.

Our policy on the Opposition side has been not to waste time on trivialities, but to concentrate our Amendments—and, therefore, so far as we could effect them, the debates—upon the subjects which we felt were of greatest interest to the Committee or to the House, or on subjects—they do not always coincide—which we believed to be of the greatest importance.

The Government have been wise in keeping out of these proceedings the influence of the Patronage Secretary. On the whole, they have given us a reasonable amount of time. Once or twice there was a slight panic on the Government side and an attempt to go rather faster than the Opposition wanted, but, wisely, better counsels prevailed and so we were able to complete our discussions without anything like an all-night Sitting.

It is true that the Bill was less controversial than last year's Measure. This year it did not contain elaborate provisions for imposing an Excess Profits Levy, but a very simple provision for abolishing an Excess Profits Levy. That is something we all accept far more easily. It did not contain an elaborate new scheme for Purchase Tax—the D Scheme—but it contained proposals for remissions.

At the same time, the Bill contains a number of grave weaknesses to which I will refer in a moment. However, this is an occasion—one of those rare occasions—when it is permissible, and indeed almost conventional, to pay tributes and give compliments to hon. Members other than maiden speakers. I propose to follow the tradition and to say a few personal words.

First of all, I should like to express my appreciation to my hon. Friends who have done such a lot on the Opposition side to frame Amendments and to see that they are properly discussed. It is not always very easy for the Opposition, without the assistance which the Government have, to frame Amendments as they should be framed, but I think that a tribute is due to my hon. and learned Friend the Member for Kettering (Mr. Mitchison), my hon. Friend the Member for Islington, East (Mr. E. Fletcher), and my right hon. and learned Friend the Member for Neepsend (Sir F. Soskice) for all that they have done both this year and the previous year.

If anyone has any doubts about the competence of my right hon. and learned Friend as a Parliamentary draftsman, I would commend to him the new Clause in connection with companies which my right hon. and learned Friend drafted. If the drafting was judged, as it is so often, mainly on the length of the sentences, undoubtedly this was an extraordinary fine piece of drafting. There were, I think, only two commas in something like 20 lines, and no full stops; obviously, a most remarkable piece of work.

I should also like to commend my hon. Friends who have taken so much of the burden of the debate—my hon. Friends the Members for Sowerby (Mr. Houghton), Gloucestershire, South (Mr. Crosland), Edmonton (Mr. Albu) and Sheffield, Park (Mr. Mulley). It is always invidious to single people out, but I think the House will agree that they have spoken on many occasions with real knowledge and very much to the point on the various subjects under discussion. Finally, I express my thanks to my right hon. Friend the Member for Battersea, North (Mr. Jay) who tirelessly followed the whole course of our discussions, as he did when he held the office of Financial Secretary, and who has been extremely successful and convincing in his speeches.

As for the Government, my hon. Friend the Member for Sheffield, Park has already paid the Financial Secretary some compliments, which we all endorse. He certainly has done a good job. He has worked very hard, and most of his replies have shown a very careful study of the official brief, although the language in which they have been presented has been much better than that of the briefs. He, also, was fully carrying out his responsibilities in praising his right hon. Friend the Chancellor when he endorsed the expression, used by my hon. Friend the Member for Sowerby, that the Chancellor was "the cat's whiskers."

I should also like to express our appreciation to the Economic Secretary, whose replies have always been courteous, clear and patient. We have not always found ourselves in agreement, but I am bound to say to the Financial Secretary that, while I give him high marks for style, I should mark his economic papers a little lower—and he cannot get away with making rude remarks about the examiners—whereas I should mark the papers of the Economic Secretary, as befits the title of his office, much higher.

As for the Chancellor himself, he has been much pre-occupied—and we all understand the reasons—with other things, but he has taken quite a considerable part in our debates, and has always spoken on major issues. He certainly has been patient, and considerate of the wishes and convenience of hon. Members of the Committee and of the House generally. We can all agree in our appreciation of his efforts, and can only hope that he will continue to be successful in resisting all attempts to limit the time allotted to the Finance Bill. In that way, we can have proper discussion, with the collaboration and help of the Opposition, which will always be forthcoming, and we shall have another successful series of debates.

I am only sorry that we have not had the interventions of the right hon. Gentleman the Minister of Materials this year. We have all missed him, and we are also sorry that the learned Solicitor-General has not taken a larger part, because, when the Solicitor-General gets up to speak, there is a rustle of excitement on these benches and a keen appreciation that here is an opportunity, which might not be presented if some other Front Bench batsman were put in, to take a few wickets. We are sorry that he was not put in more frequently to enliven our proceedings.

I now turn to the Bill itself, and I will begin with the Entertainments Duty. I remember some years ago, when I was Minister of Fuel and Power, having some correspondence with the then Conservative Member for Ashford, Mr. E. P. Smith, who was concerned about the petrol ration, and was not satisfied with the treatment which some constituent was receiving. In his reply to me, he said that I used a Euclidian argument. I pointed out to him that administration was almost entirely a matter of drawing lines in the right places, and, therefore, it was quite proper that I should use a Euclidian argument.

Entertainments Duty is a very good example. What we have to ask ourselves is whether the lines are drawn in the right places at the moment. I have no doubt of the answer; they are not. The present position cannot possibly be held. It is quite out of the question that, having exempted cricket from Entertainments Duty, everything else should remain in. I do not see the Third Division football clubs, however wealthy some First Division clubs may be, tolerating this quite unjust situation.

There is another aspect of Entertainments Duty which is equally untenable, and that is the present situation in regard to the amateur concession. We proposed, during the Committee stage of the Bill, some further concessions to amateur dramatic and operatic societies. I am not concerned with those today, but I am concerned with something which has been drawn to my attention recently. There is complete obscurity as to whether or not certain games that are played in the north of England, and, in the case of Scotland, the Highland Games, where prizes of a fairly substantial character are won attract Entertainments Duty. My hon. Friend the Member for Midlothian and Peebles (Mr. Pryde) did not succeed in getting any reply from the Government on this. I do not know whether the Chancellor is in a position to give that reply, but I hope he is, because here is another rather similar case which actually only reached me this morning.

The House will be interested to know that it concerns the game of table tennis. I have received a letter, the whole of which I will not read, from the Leeds and District Table Tennis League, in which they tell me that the League holds annually various individual championships, confined, as they put it, to "our own registered players." The letter goes on: The players winning the various events are presented with a trophy which is held for one year only, and also a small miniature cup which is retained by the player. The finals of these events are held at a hall in the centre of the City, and to cover the cost of the hall, trophies, etc., a charge is made for admission to these finals. An application for exemption from Entertainments Duty was made to the Customs and Excise (Leeds), but after four weeks' deliberations we were informed that, as 'the League cannot be regarded as established and conducted for the furtherance of amateur sport, exemption from Entertainments Duty must be refused'. I find that a very surprising decision. I do not imagine that the Chancellor could possibly throw any light on it at the moment, but I do ask him, in lieu of the Parliamentary Question that I should otherwise put down, whether he will investigate this case; will he make clear that a League of this kind, which, according to the officers who have written to me, is "established for the promotion and furtherance of table tennis in Leeds, and is not conducted or established for profit," is to be treated as having amateur status; otherwise, we are in an impossible position.

I can hardly think of a stronger case than one which came to my knowledge only this morning, and I feel that, if we are not to get into great difficulty in the administration of this taxation, a great deal of care will be needed. I hope that the Chancellor will give the matter his personal attention and see that we do not have ridiculous decisions such as the one I have quoted.

I am sorry that the hon. Member for Chelmsford (Mr. Ashton) has not intervened. I saw him sitting on the third bench—and later on the fourth—and I fully expected, in view of the influence which he exercised on behalf of cricket last year, that he would have been getting up and asking the Chancellor to do something for football. But no, there he is still sitting silently, though having returned to his normal place on the second bench. I still hope that he will speak privately to the Chancellor on all this, not forgetting table tennis.

I pass now to the Purchase Tax. I do not propose to rehearse our arguments once more, because they are, I believe, rather familiar, and can be summarised as follows. We believe that the right way to handle this tax is slowly and gradually as the budgetary situation permits, to exempt more and more of the more necessary items in it, and gradually to convert it into more and more of a luxury tax. The Financial Secretary, replying I think, by implication to that argument, said this afternoon that, after all, nothing is a luxury to those who make it. That is one of those rather superficial comments which do not bear very much examination.

I do not know—if I dare refer to a mink coat after what the Lord Chief Justice had to say about them—what the girls in the fur trade really think. Are they really supposed to believe that mink coats are not luxuries for them? Of course they are. I do not doubt that what the hon. Gentleman meant was that the girls were interested in their employment. That, of course, is true, but the Financial Secretary's way of putting it is very misleading.

The implication of his argument in favour of reducing Purchase Tax on these luxury articles is that one must not have any change in employment at all. In other words, if people are employed in producing luxuries, they must be allowed to go on producing luxuries no matter what the situation of the country may be, whether we can afford them or not, or whether those people would be better employed producing something which they themselves could consume. In these enlightened days that is an extraordinary point of view which I hope the Chancellor will repudiate despite the polite remarks which the Financial Secretary has made about him.

I come now to the rather wider issues—the initial allowances, the interest on the National Debt and Income Tax so far as it affects companies, all of them, of course, touched on in different Clauses of the Bill. I think we are generally agreed about the need for a higher rate of fixed investment in this country and for improving the quality and quantity of the machinery with which our workers produce. We know that such an increase in investment is not only necessary because of its bearing upon productivity, but also that higher productivity itself is more than ever necessary if we are to hold our position in the increasingly competitive export markets. That, therefore, is common ground.

On this matter of investment, the attitude of the Labour Government was to encourage investment, so far as resources permitted, and to control it partly by selective credit control and partly by building licences and in other ways, and, at the same time, by a budgetary policy which was admittedly unpopular in many quarters and which involved large Budget surpluses, to slow down consumption and to prevent the inflation which might otherwise have developed; to this one might also add the initial allowances which were, of course, specifically introduced for the purpose of encouraging investment.

These initial allowances were, of course, only suspended in 1951 because of the defence programme and because it became necessary, in order to get rearmament going quickly, to make some cut in fixed investments. That situation is happily now past, and we are all agreed on the need once again to get the expansion. But what is the Government's policy, as exposed in this Bill? First of all, there is a higher rate of interest. It involves a higher charge on the Treasury of some £65 million in this year as compared with the position before the new monetary policy was introduced.

That, obviously, will certainly not encourage investment. On the contrary, higher rates of interest are bound to have a discouraging effect on investment, though I admit that it is a matter for argument just how serious that is. Psychologically, the effect of a higher Bank rate is that it creates uncertainty, and just at the moment when we ought to be encouraging expenditure on equipment we are, in fact, retaining an instrument in force which is discouraging in that respect.

There has been some restoration of the initial allowances, but, as we believe, an inadequate restoration. Though I do not want to repeat the arguments, we still feel that the Government's attitude is extremely difficult to understand. We do not understand why they have not returned to the 40 per cent. initial allowances which were in existence before the defence programme began. The Government point to the fact—and here I come to the third matter to which I referred a moment ago—that they are reducing company taxation. But the trouble there is that there is no guarantee at all that the cut in company taxation through the reduction in the standard rate of Income Tax and through the eventual diminution in the Profits Tax—which benefit will come later—will, in fact, lead to any increase in investment at all.

Finally, of course, the Government have encouraged an increase in consumption. I must say that the general effect of the whole budgetary policy, as explained at the time of the Budget itself and during the debates on this Finance Bill, seems far more likely to give encouragement to consumption than to investment. My hon. Friend the Member for Gloucestershire, South has several times referred to the alarming developments in the distribution of manpower as between different industries. I will give the Chancellor these additional figures which cover a longer period than that to which my hon. Friend was referring.

In the 18 months from the middle of 1950 to the end of 1951—broadly speaking, the last 18 months of the Labour Government—there was an increase in manpower in engineering, chemicals, vehicles and metals amounting to 250,000 people. Since then, there has been a reduction of 50,000. I see that the Chancellor is querying the relevance of this. It is extremely relevant. The efforts made by the right hon. Gentleman in this Finance Bill to expand investment show a great need for that, but they also show that as far as the present trends are concerned they are moving in the opposite direction.

All this, no doubt, is superficially—I will not say satisfactory—reassuring so long as we have this quite remarkably favourable external situation of continuously improving terms of trade which, as I ventured to suggest this week-end, will bring a further benefit to the balance of payments this year, if they remain at the same level, of another £300 million. But how much longer is that to last?

In considering the Bill, we have to ask what is necessary when the favourable position no longer continues. The hon. Member for Scarborough and Whitby (Mr. Spearman), who was unfortunate in his brush with the Chair, began by praising the Chancellor for the greater state of confidence which exists today. He wanted me to use the words which were used about William Pitt, but he really would have taken them out of my mouth had he been allowed to go on with his speech, because, as he proceeded, it became perfectly clear—and I regret that he did not do better with the Chair for this reason—that he took the gloomiest view of the situation and was clearly going to make an attack on the Government for the total inadequacy of their policy, from which he will understand why I do not use the words used about William Pitt.

Mr. Spearman

I ask the right hon. hon. Gentleman not to misrepresent me. I was not speaking about the past, but about the future.

Mr. Gaitskell

Any Government that is worth its salt has to think about the future. It was clear that the hon. Gentleman was most dissatisfied with the policy as it is at the moment.

I turn, finally, to the other aspects of the Income Tax and Surtax changes. I do not propose to rehearse the arguments which we have been through so many times about the fairness or otherwise of these reliefs. They cannot, of course, as a matter of equity between different classes, possibly be justified. It is out of the question to justify the giving of £22 million to nine million taxpayers below £500 a year, and exactly the same sum to 270,000 taxpayers with over £2,000 a year, one class actually gaining 1s. per week on the average and the other gaining an average of 32s. 6d. per week.

The Government pretend that it is necessary to give people incentives. I have never been much impressed with the argument that we have to do so in order to encourage investment and to increase work. But even if there were something in that argument we could not ignore the wider consequences of a policy of continually assisting the people who are the most prosperous in the community. One has to remember these concessions against the background of the very substantial food prices which people have to pay nowadays.

I know that the Chancellor will say, "After all, I made concessions last year of various kinds." It would be quite out of the question for me to go into them. The plain fact is that the rise in food prices particularly, especially when they have not been compensated so far as the lower incomes are concerned, are bound to hit most severely those people who spend a higher proportion of their incomes on food. That is what is happening.

It may be possible that the Government will find themselves in a position to remove rationing before long because prices have gone up so much, and there will no doubt be a lot of rejoicing in some quarters about it, but, fundamentally, it will be done simply at the expense of the poorest people who can no longer afford to buy. That is a policy which we cannot possibly accept.

When one considers these tax adjustments with the food price considerations we cannot ignore the problem of wages and the repercussions which are likely or possible in that connection. There is some considerable risk that the Government, whose policy has been one of deliberately putting up the cost of living—the hon. and gallant Member for Berwick and East Lothian (Major Anstruther-Gray) spoke of the rise in the cost of living as the really difficult problem—may put it up still further by their food subsidy policy in a way which really hurts the poorest people in the country.

Major Anstruither-Gray

The cost of living has not risen nearly so fast under the present Government as it did under the Administration with which the right hon. Gentleman was associated.

Mr. Gaitskell

In the last year of the Labour Government we were faced with a very rapid rise in world prices, but the present Government have had the benefit of falling world prices. Nevertheless, they have put up the cost of food by cutting the subsidies. It is no good blaming anybody else if, as the result of this policy, there is a difficult wage situation. The Government must blame themselves.

I must mention, in passing, the speech made by the right hon. Member for Blackburn, West (Mr. Assheton) because it was rather a surprise. I was delighted to hear him supporting the views which we have put forward about a tax upon expenditure. I only wish that he had been present when we raised that matter with the Financial Secretary and pressed that the whole subject should be discussed by the Royal Commission on Taxation. I would say to the hon. Member for Edinburgh, South (Sir W. Darling) that he should read over that debate, when I am sure he will find much instruction in it. He will find that the proposal for an expenditure tax was for a progressive tax on expenditure, that is to say, that the rate of tax would rise as expenditure increased. Whether he will approve of that I do not know.

In passing judgment on this Finance Bill we have to remember its whole background. There is undoubtedly, for the moment, an exceptionally favourable external situation. I very much doubt, in all sincerity, whether this extraordinary situation where an American boom is combined with a fall in commodity prices is likely to last. I think that we shall be faced either with more difficulties in the export trade or with rising import prices; one or the other. I suspect the former.

We have in the circumstances to ask how we can prepare ourselves for the more difficult times that I suspect are ahead. The real gravamen of the charge against the Government is that they fail, in this Budget, to stimulate a higher rate of investment and therefore, a higher rate of productivity. They have done nothing to improve and better relations in industry. Here, we cannot but emphasise that all those who talk of giving incentives by reducing taxation on the higher incomes must be asked to bear in mind the consequences in industry of a policy of that kind.

We cannot just say, "We must give Surtax payers more incentives. Look at the higher rates of tax they pay." If we do that, we are not giving incentives to those who, after all, are, in the last resort, much worse off, even allowing for the higher level of taxation. We are, above all, not creating, but doing just the opposite, that sense of fair play and acceptance of rewards as rewards for merit which I personally regard as so vital.

The Government's policy has been one of taking the smooth and easy way. The Financial Secretary did not say why the Government had made these concessions but it is because industry was depressed. If that was the reason for the concessions we say that, while granting, in view of the depressed state of industry, that some stimulus was necessary, in so far as it was a stimulus to consumption it should have gone to those who needed help most, and in so far as it was a stimulus to investment it should have been far more precise, specific and effective. It is on those grounds that we feel that the Bill, which has now been so thoroughly and fully discussed, will not achieve the aims which the Government hope it will achieve.

6.47 p.m.

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

I shall not follow the right hon. Gentleman the Member for Leeds, South (Mr. Gaitskell) into the more detailed praise which he was thoughtful enough to shower round about him. I think that in referring to several of those who have taken part in our debates he was fulfilling an old tradition.

One satisfaction that the Government have derived from the debates on the Finance Bill, and which I have derived personally, is that we have fulfilled the ordinary constitutional tradition in the House of Commons that hon. Members should have the opportunity, unbridled, to discuss the taxes, and to put forward the points of view of their constituents and their own economic and financial theories, and that we have also got the Bill through in a reasonable time. In these days that is not a bad achievement, if I may put it modestly. The Opposition have put their case with pertinacity and have occupied, I can assure the right hon. Gentleman, quite enough of the Government's time. No doubt the Leader of the House and the Patronage Secretary feel more strongly on this point than I do.

Hon. and right hon. Gentlemen on both sides of the House have made many notable constributions in the course of our debate. The right hon. Gentleman paid a tribute to the Financial Secretary and the Economic Secretary. It might seem that the right hon. Gentleman has some access to the official briefs, because he said that the Financial Secretary had followed the official briefs with embellishments. I cannot suppose that the right hon. Gentleman really has any access to them. He must have been working on the assumption that the official briefs are the same under this Government as they were under the late Administration.

Let me assure him that in every way they are much vivified and also completely different in content, because we now have a bright-eyed service supporting a go-ahead Administration on lines of progress designed to help the country in the future, and not on the lines of austerity, restriction and closing down which were so much a feature of the Administration supported by the right hon. Gentleman. Therefore, the Financial Secretary has had little difficulty, aided by the excellent service, the "silent service" to whom we may not even refer in praise on an occasion like this.

My hon. Friend has put forward the Government's case with great clarity and has done a great deal of hard work. No Chancellor could possibly have had two better Ministers to help him with the Finance Bill than the present Financial Secretary and the Economic Secretary to the Treasury. They have taken a great deal of the burden off me and I have depended enormously upon them both. I will not enter into the discussion as to who is the better economist; they are both probably better than I am.

Questions have been raised in this debate about the Entertainments Duty which has caused a good deal of excitement. I understand that cricket is being played with more skill and energy than ever before. I paid a short visit to Lord's, where I greatly admired the manner in which Mr. Watson played with a straight bat. That has taught me a great deal for the future in standing up to the bowling of right hon. and hon. Members opposite.

The hon. and learned Member for Kettering (Mr. Mitchison), who has done so much, I understand, to draft the Amendments of the party opposite, referred to the need for long stops to avoid evasion of taxes, which was a subject raised this afternoon. I cannot understand this conception of a side which requires endless long stops. Her Majesty's Government have a good wicket-keeper and no long stops. That is the manner in which we stop evasion of taxes.

I regret very much the rather wild statements which have been made about the evasion of taxes. Indeed, they have been made from both sides of the House on previous occasions. Taking up what the right hon. Gentleman the Member for Leeds, South said about the need to create the right spirit in the working population of the country, it would be really disastrous if the conception got about that there was a great deal of tax evasion. Frankly, there is not.

There are abuses and, if it is any consolation to hon. Members, every attention is being paid to the debates on Report and in Committee on this subject. We are fortified in our ability to pay some attention to the matter because the debate on the Report stage was almost a replica of the speeches and arguments heard during the Committee stage. To that extent repetition has been very valuable and has forced the subject home to our minds whether we like it or not. I should like to say definitely, now, that the Revenue, backed by Ministers, will certainly take every step necessary where any form of tax evasion is taking place.

The right hon. Gentleman the Member for Leeds, South referred to the exemption of games in the Highlands and similar problems on the borderline of amateur status. It was also referred to by one or two of my hon. Friends who represent constituencies in the Highlands. Customs have not yet reached a final opinion and perhaps the right hon. Gentleman or his hon. Friends would watch the matter with a view to an answer to a Parliamentary Question. I thank the right hon. Gentleman for not putting down a Question on table tennis in Leeds and I will investigate the decision to which he drew my attention.

There is another matter which is not a point of detail, but one of great importance. It was raised by my hon. Friend the Member for St. Ives (Mr. G. R. Howard). I was sorry that he was not able to develop his case on behalf of the Scilly islanders, or Scillonians, on the Report stage of the Bill. He has managed to put his case again, however, with the same energy as he has put it before. I cannot go back on any statement of mine to which he has referred this afternoon, because I would not have made the statement unless I had a reason in making it, but the decision was not taken on any petty basis or because one or two people mentioned it. It was taken for an abstract reason, the reason that it is extremely difficult to separate one set of potential taxpayers from others in the United Kingdom as a whole.

I have thought long and earnestly about the many statements which my hon. Friend has so conscientiously made to us about the islanders. I have thought about the question of delay, but I have come to the conclusion that a further deferment of the application of this Bill when it becomes an Act would hardly materially benefit the islands, since I must be quite frank and say that the decision has been taken to submit the islanders to the operation of the Income Tax laws like anybody else.

I should like to point out to my hon. Friend, however, that no one will start paying Income Tax because of Clause 29 until April of next year and that no Profits Tax will become due before 1954–55. So that means that there will be an element of delay and, while I think it unlikely, I hope that his constituents will become accustomed to the idea. I have also considered the other alleviations to which my hon. Friend referred, and, in particular, help for the transport service of the islands. I went into the matter fully and compared their situation with the other islands and with the problem which we have had, for example, in Northern Ireland.

While I realise that the islands have their own particular difficulties in transport I am afraid that I cannot give any guarantee of special Government help. I will say that any Government will watch particular problems like this or any other when they are brought to notice. My hon. Friend may be satisfied that he has now made such a strong case in our debates that in future the needs of his constituents will be very much in the mind of the Government of the day.

My hon. Friend raised the question of the basis of the tax and asked if I could alter it. Frankly, I hope and believe that the burden of the tax will not fall very heavily on the working population. As I pointed out in the previous debate, the tax may be only just over £1 a year for people drawing quite a large sum a week—above the normal for the islands. Therefore, I do not think that the incidence on the working population will be very great. I also stress that where the tax is levied it will be within the capabilities of those who are assessed to pay it. They will, at any rate, realise that they are paying for the very heavy burdens which we in the United Kingdom are bearing today. Meanwhile, we on the mainland will have sympathy for the islanders' very gallant struggle against Nature. Again, I pay tribute to my hon. Friend for the manner in which he has put their case.

The next point raised in the debate referred to Purchase Tax. The right hon. Gentleman the Member for Leeds, South wonders whether girls who make mink coats regard them as luxuries. I am quite sure that they do, but they also regard their employment not as a luxury but as a right. What interests me particularly in this discussion about luxury trades is the fact that some of the most important of these, such as the silversmith trade, have in them some of the best craftsmen and craftswomen which our country still possesses. The right hon. Gentleman the Member for Leeds, South asked whether we believed in change of employment into vital work. Of course we do, but we also believe in the retention of employment for our craftsmen, and we believe that one generation should pass to another the craft of its ancestors. Today, that power of craftsmanship is, alas, too infrequent among our working population.

As the hon. and learned Member for Kettering said the point is, of course, that we could not easily hold the tax at its previous very high rate at the present time. It was neither a good manoeuvre from the point of view of Customs nor good for the industries concerned. The hon. Member for Sheffield, Park (Mr. Mulley) and other hon. Members representing constituencies where the trades affected are carried on have been to see us and have told us that the tax was doing positive harm to industry. It was in that spirit that I decided to make the general reduction which I made. In fact, I will turn the tables on the hon. and learned Member for Kettering, because it would have been a very much more popular task to pick out certain things and extract them from the Purchase Tax altogether, but I do not believe that, in the end, that would have been the more patriotic course for the industries concerned or for the country.

The right hon. Member for Leeds, South raised various rather more important economic questions arising out of the subject of manpower. I was in some difficulty, because I belong to rather an old generation which believes that on a Finance Bill one is only allowed to discuss what is in the Bill, and in that connection I regret having missed the latter half of the speech of my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman). But I feel I must now refer as shortly as I can to many of the arguments which have since been raised and which range over the wide economic front. I promise that I shall be very short on this subject, simply answering what has been raised and not attempting to make a great economic speech.

The first point that the right hon. Gentleman raised was that of manpower. It is true that, latterly, there have been certain tendencies to go back into the consumer goods industries and into distribution. The tendency to continue the increase in the number of coal miners, for example, is not as great as it was when the Government assumed office. In this connection, I should like to say that the need for the production of more coal is one of the vital elements in our future prosperity, and that should be borne in mind by everyone of us, without giving lectures to anybody; it should be borne in mind that that is vital to our future prosperity.

The right hon. Gentleman then said that one of the chief sources of blame against the Government and against this Bill was that they had not increased production. I do not know whether I am overstating his case, but I think he was inclined to be critical on this matter of production. I can say this. It is at present too early to say what the effect of the Budget is likely to be in the long-term. Economics is a somewhat difficult science, but things come through in the end. One can positively see cause and effect.

Now, as a result of the Budget and the spirit created by the Budget, we can see that production has continued to expand. In January and February it was about the same as in 1951. In March and April it was about 2 per cent. higher than in the equivalent months, and the provisional figure for May is about 3 per cent. above the May, 1951, level. I purposely prefaced these remarks with the modest statement that it is not possible to tell the effect for some time to come. It will at least be satisfactory to the House to know that there has been an increase in production and that this trend is definitely being maintained at the present time. That shows that we are making some progress.

Mr. Gaitskell

Could the right hon. Gentleman say whether there has been an increase in the production and investment industries—engineering, and so on?

Mr. Butler

I cannot go into details, but I am just coming to the question of investment.

Before I come to that question, however, I want to tell the House that this afternoon the Board of Trade published the latest trade figures giving the import-export picture, and while we can take satisfaction from the fact that United Kingdom exports to North America in June were at a new record level of £30.5 million, and while exports to Canada were again chiefly responsible for the high figures, with a total of £16.1 million—slightly higher than the April figure—while those are most comforting improvements, the general trade position is as yet not satisfactory if we are to maintain the impetus which we so much need. In particular, it is necessary to encourage to the best of our ability in every way possible, which would be quite outside the scope of this Bill, the expansion of our export trade throughout the world.

This is a statement which I wanted to make in the course of the Third Reading. While our production figures are better, we still have the great anxiety of pushing our exports to the maximum of our ability if we are to see the thing through in the way we all want. The import figure is not quite so high as it was last month, as will be seen in the statement published tomorrow. It still remains reasonable, but it is the failure to get enough exports that is really the serious aspect.

The right hon. Gentleman went on to the question of investment. As he knows, owing to the need to concentrate on defence and exports, when this Government first came in, there was a limitation on certain types of investment, but we are now doing our best to encourage investment in all the sectors where it is really necessary, including the nationalised industries sector. I believe that the coal industry is a case where more will obviously be valuable. At any rate, this is the trend in our policy at present, and we are, at the same time, backing that policy with the policy of bringing back the initial allowances which are included as part of the Finance Bill this year.

Several hon. Members asked why, and whether, we could not obtain more by a 40 per cent. initial allowance. The answer to that is that I could not afford to carry more expense forward to the Budget for next year and the year after than I have already done, and I believe that the 20 per cent. which we have suggested will be of very definite help in the present situation. Of course, it would be possible, as an economic purist—and I am not too bad a one really—to say that the initial allowance is not an actual figure on the Budget but is a form of saving which goes into industry and is, therefore, a good investment in that way. Nevertheless, we have to have some regard for revenue figures, and I must remind the House that we are carrying forward this sum for the initial allowances; we are carrying forward a year and a half hence the loss which we shall have on the Excess Profits Levy, and we must have some regard to the revenue figures as they will look in the months and years to come.

While I think it is possible at present to take a more cheering view of our economy, it is essential that there should be a bigger drive for exports. I think the revenue figures—that is, the ordinary Budget figures—can and will look well if we follow the advice of my right hon. Friend the Member for Blackburn, West (Mr. Assheton) and economise wherever we possibly can, be as careful of the public money as we can possibly be, and have a great drive for greater production and increase the national income.

If the national income takes its normal trend and is increased, then we can carry the present revenue outlook, we can carry the general situation, we can carry the defence burden, as long as it does not grow to an extent which puts it out of court, and we can carry our great social service programme, of which we are all so justly proud. But it all depends on increasing the national income and on greater production. We must reflect that in this period American aid will be tailing off, and it is the aim of every healthy person in this country to regain our economic independence and all that it means.

I conclude with these remarks. The case has again been brought up that perhaps this Finance Bill was not fair to this or that section. The answer is that for 15 million to 16 million persons, excluding their actual families, who are involved in Income Tax, it is not too bad at all. The hon. and learned Member for Kettering said that some people only get a few shillings relief. It has always been the fate of a Chancellor of the Exchequer, whether it be Sir Stafford Cripps, who often complained of this, or others, that when one has already relieved some people of tax one cannot relieve them again; and, having relieved a large number of workers in the last Budget, I cannot do it again. Indeed, in the last Budget about 2 million were taken out of tax. The same thing goes for the hon. Member for Sheffield, Park with respect to the old age pensioners. We did our best in the last Budget. Their case is ever before us, and we shall always have sympathy for their very great difficulties.

The fact is that as long as taxation went on at its previous level, the United Kingdom could not pull through to better times. We have taken the first step in relieving taxation. Whether we can continue along this path is entirely in the hands of industry and the country. I trust that they will respond to the invitation they have been given. If they do, the efforts we are all making together will indeed be worth while.

7.10 p.m.

Mr. Cyril Osborne (Louth)

It is with some diffidence and a great deal of nervousness that I attempt to address the House this evening. I have sat here throughout the debate and I had hoped that I should have the good fortune to catch the eye of the Chair previously. I would remind hon. Members who may feel a little annoyed that I am speaking after the Chancellor has finished, that the question of the national Exchequer, the raising of national taxes and the taxation of the people has been a great fight throughout our constitutional history. Back benchers have not been put down, even by the Crown, in the days of the Stuarts and the Tudors, let alone by the Chief Whips of the parties.

It is because I feel so strongly about this matter that I want to make my protest. The right hon. Member for Leeds, South (Mr. Gaitskell) said that he hoped the Chancellor would not restrict discussion on the Finance Bill. I should like to ask him why he got up an hour before he was due and so shut out some hon. Members on this side of the House. Was it because his own back benchers had dried up and he had no one else to support him?

He talked about the difficulties we had to face in the export trade. Throughout the whole of this debate those difficulties have been insufficiently stressed. I believe, as my hon. Friend the Member for Scarborough and Whitby (Mr. Spearman) said, that we are faced with a much graver situation than most of us realise. In that connection, I want to make one or two observations on Clause 12, which has to do with the standard rate of Income Tax. That is the heart of the whole Bill.

Whilst 6d. off the standard rate is a good start, it is not going to provide anything like the amount of incentive that the Chancellor hopes for, nor will it provide enough incentive to get us out of our trouble. From my experience in industry, I suggest that the men who are running it regard 9s. in the £ as still far too high a rate. I suggest that we should reduce it to 5s. in the £. At the rate of 6d. off each year this will take eight years.

In his recent book, "We Too Can Prosper," Mr. Graham Hutton suggested that the key to our prosperity lies in management. Whatever are the other factors that will help to increase production, the management factor is the supreme one. I put it to the Chancellor that he will not get increased efficiency, either in the nationalised or the privately owned sector of industry, unless management is considerably better. He will not get considerably increased production while Income Tax is at the rate of 9s. in the £ and Surtax remains at 10s. in the £.

If he is to get the best results from management he must pay men for their ability, skill, and willingness to carry responsibility. It is upon the high salaries in the management group that his heavy taxation falls so savagely. I suggest that in considering his future Budgets—assuming that he is not transferred to No. 10 before the next one comes around—he will have to take a good deal more off Income Tax than he has begun taking off here.

I ask him to think of direct rather than indirect taxation in considering any reduction in the future. I am certain that any hon. Member—on either side of the House—who has anything to do with industry knows that it is almost impossible to get men to work overtime if, as a result, they have to pay more and more Income Tax. If we are to have the increased production which is so necessary for our survival, somehow or other the Chancellor must find a way by which overtime is not taxed. Any trade union leader of experience will agree with this, and any industrialist knows it full well.

Men will not work that extra Saturday in the factory if they know that half of what they earn will be taken in taxation. Whilst a reduction of 6d. in the £ is a good start, it does not begin to touch the fringe of the problem. The Chancellor must give his attention to relieving not only the top executives of the direct taxation which they have to bear, but also to relieving the artisan and the skilled worker, who are today earning, on an average, between £10 and £12 a week. If those men are to be encouraged to come into the factories and do the extra work their overtime must be free of Income Tax.

I want the Chancellor to produce a scheme that will relieve all men earning under £1,000 a year from direct taxation. No doubt the Chancellor has read the first article in this week's "Economist." I am sorry he is scowling; I assure him that it is a very good one. It asks one or two pertinent questions about the greater productivity in America than in this country, and why the Americans get more productivity. The Chancellor has said that this Bill is an incentive to production. We are told that American industrial productivity is from two to five times greater than ours. The question is, why—and will this Budget help to raise our productivity to their level?

The article in the "Economist" says: The real question to ask is not why we do not produce more but why we do not want to produce more. I suggest that the answer is that it does not pay a man at any level to produce more because, either at the bench level or the management level, the more he produces the harder he has to work—and the harder he has to work for the Chancellor. Both on behalf of the technical men and the management, I say that men are tired of working just for the Chancellor. They want to work a little more for themselves.

The "Economist" says: The real secret of American productivity is that American society is imbued through and through with the desirability, the Tightness, the morality of production. Men serve God in America, in all seriousness and sincerity, through striving for economic efficiency. I understand that that is what the Chancellor wants his Budget to achieve here but, so far, it will not do so. The "Economist" goes on: But in Britain, if any moral feeling at all survives about economic matters, it is usually a vague suspicion that economic success is reprehensible and unworthy. From this difference in attitudes everything else follows. The Chancellor should give his mind to this question. Hon. Members on both sides of the House, so many times, have given voice to the suspicion that success in economic affairs is something to be ashamed of, whereas in America it is something to be proud of. Until we get another point of view on this matter I cannot see that the prosperity which the Chancellor expects will come to this country.

There is one other aspect with which I want to deal. It is a point of view which has been put forward by hon. Members on both sides of the House. I do not think there is any denying the Opposition's claim that Clause 12 provides more incentive to the rich than to the poor. There is no denying that, as an incentive factor, the Budget gives more incentive to those who have than to those who have not. It seems to me that there is only one moral justification for Clause 12—that those in the management group for whom I have been pleading, and who I think ought to have even more encouragement, must give a great deal more under Clause 12 than they have in the past so to increase the national product that those who get nothing under Clause 12 may benefit through increased productivity.

Mr. Butler

I do not want to disturb my hon. Friend's argument, but what does he mean by "giving"? Is it not a case of restoring to people their own money?

Mr. Osborne

I agree that it is restoring to people their own money, but from a social and moral point of view it is difficult for me, at any rate, to justify allowing a great deal more to go to the West End if the East End suffers thereby.

I can see no argument against that, and what I am saying to the Chancellor is this: if we are to justify Clause 12, which I support fully—indeed I ask for more under Clause 12—we can do so only if he will appeal to those in management and to those who already have a large slice of the national cake so to increase the national productivity that the unfortunate people who get nothing under Clause 12 will, through the social services, get a bigger cut of a bigger national cake. We cannot justify Clause 12 and the reduction of direct taxation unless we can say to our poorer constituents that, as a result, the national productivity will so increase that they in turn will get a bigger share than they would get if this step were not taken.

I am certain that no matter how good the management in the economic machine, unless we can carry the industrial worker with us we shall not get 100 per cent. production. We shall not get the full support of the industrial workers unless they feel that what we are doing is normally right and just. It is useless to blink this point. If I were poor, as once I was, I should not accept it unless I were convinced that it was right.

As the Chancellor is likely to be Prime Minister of this country, I ask him to bend his energies in future to telling the country that he is not merely giving a little extra to those who already have a lot but at the same time is appealing to those who carry responsibility to increase the efficiency of our economic machine so that the have-nots will get a greater share than they have had in the past. If he does that, I am sure he will have the whole country behind him, but if he does not, then there is a great deal more in what the Opposition have said than many on this side of the House have been prepared to acknowledge.

Question put, and agreed to.

Bill accordingly read the Third time, and passed.